Although the new completion date is nearly four years away, FRA Administrator Ron Batory said in a Feb. 19, 2019 letter to CHSRA that his agency “has determined that CHSRA will not complete the project by 2022.” Making its case that “the CHSRA has materially failed to comply with the Agreement,” the FRA found 40 reports by the state agency to be either delinquent or inadequate, noting that they had failed to take corrective action.
While those grant funds have not yet been delivered to the state, a separate statement from the U.S. Department of Transportation issued the same day said the Department “is actively exploring every legal option to seek the return from California of $2.5 billion in Federal funds FRA previously granted for this now-defunct project.”
What is the likelihood that California will have to forfeit $3.5 billion?
The FRA appears to be making a case for breach of contract on the part of the rail authority, law professor Leslie Jacobs told Sacramento’s KCRA-TV. Yet, the attempted claw-back and cancellation of the two grants is highly unusual and is likely to face both a long administrative process within the federal government as well as challenges in federal court.
The administration appears to be keying on a line in Gov. Gavin Newsom’s State of the State address: “Right now, there simply isn’t a path to get from Sacramento to San Diego, let alone from San Francisco to LA. I wish there were.” If the state were giving up on the full project, that would violate the terms under which the $2.5 billion American Recovery and Reinvestment Act grant was awarded.
Fox Business reported that an attorney and member of the Republican National Committee, Harmeet Dhillon, believes that President Donald Trump is “within his rights” to attempt to recover the $2.5 billion already delivered and spent by CHSRA. “The governor of California announced that the project that the money was given for is no longer going to be built as such,” she said.
Newsom continued to say in his address that work would be completed between Bakersfield and Merced, and that required environmental work would go forward while the state looked for more federal and private funds. He has since made clear that the state intends to someday complete the full project.
CHSRA’s latest projections estimate the cost of completing construction of the line from San Francisco to Anaheim at $77 to $98 billion. That does not include the route to either Sacramento or San Diego.
Just to complete the Central Valley segment, the only portion under construction, would take $10.6 to $12.2 billion. That would finish the line from Bakersfield to Madera, but would not reach Merced. Those costs do not include the acquisition of trainsets needed to operate the line.
CHSRA has already spent the $2.5 billion ARRA grant on the Central Valley segment, potentially putting it in a hole if the FRA takes back those funds. While the two sides fight it out, the specter of losing funds already spent and promised could force the state to dip into other monies or further delay the project.
