Can Gavin Newsom put California high-speed rail back on track? It may be up to Trump

It’s survived cost overruns, lengthy delays and a public scolding from the new governor. Now California’s controversial high-speed rail project faces what may be its toughest test yet: presidential opposition.

The Trump administration is threatening to rescind as much as $3.5 billion in make-or-break federal grants to the California High-Speed Rail Authority. The state has been counting on those dollars to complete the initial phase of the bullet-train project through the San Joaquin Valley.

The announcement doesn’t mean an immediate halt to the massive project. Work continued near Highway 99 in Fresno this week, as it has since 2015, and state officials said they are confident they can address the concerns raised Tuesday by the Trump administration when it announced it was withdrawing funding.

But what happens if the state loses the money? Can California keep its bullet-train dream alive in the face of growing resistance from President Donald Trump, who tweeted that the project is a “failure?” How much of the project can be constructed if the federal government makes good on the Trump administration’s threat and takes back its money?

High-Speed Rail Authority CEO Brian Kelly, in a statement emailed to The Sacramento Bee, said the state is preparing “a comprehensive response” to the federal government by March 5, the deadline imposed by the Federal Railroad Administration. “We remain committed to delivering high-speed rail and its many economic, environmental, and mobility benefits to Californians.”

For now, the Rail Authority’s financial figures suggest the state has enough money to continue construction into 2020 and perhaps beyond, even if the federal stalemate continues. The authority has about $2.2 billion cash on hand from state Proposition 1A bond funds and cap-and-trade greenhouse-gas revenues. Its budget calls for about $1 billion to be spent by the end of the fiscal year in June.

On Tuesday, the Railroad Administration said it won’t deliver a crucial $928.6 million grant that was scheduled to arrive in California in the 2020-21 fiscal year. The feds also warned California they are looking into legal options to claw back another $2.5 billion in federal funds the state has already spent on the project.

All of that federal funding had been included in the $10.7 billion budget for building phase one of the project, running through the San Joaquin Valley, from Bakersfield to Madera.

High-speed rail has been burdened with problems for years, and last fall the State Auditor in a scathing report warned the High-Speed Rail Authority it was in danger of losing its federal grants because it was proceeding too slowly. The auditor said the rail project must “double the rate” of Valley construction to meet a December 2022 deadline imposed by the feds. At current rates, the Valley segment won’t be done until 2027, the auditor said.

The issue came to a head when Gov. Gavin Newsom proposed scaling the project back during his State of the State address. Newsom broke from the aggressive approach favored by his predecessor, Jerry Brown, saying the state doesn’t have the money it needs to extend the line to San Jose, the so-called the Valley to Valley connection.

Instead, Newsom wants to focus on getting trains running between Merced and Bakersfield, a distance of 171 miles. That represents an extension of the original Madera-to-Bakersfield plan and would almost certainly add several billion dollars to the current budget of $10.7 billion for the Valley segment.

Newsom said he wasn’t abandoning the rest of the project, but Trump’s administration seized on the speech to declare that California was deviating from its original stance of building a statewide bullet train. The Federal Railroad Administration said the funds were granted with the idea of building a system that would “connect San Francisco in the north and Los Angeles and Anaheim in the south.”

It also said it has been warning California all along that it was missing deadlines that are built into the grants.

“FRA has regularly communicated its concerns to CHSRA staff and leadership about repeated failures to submit various deliverables in a timely manner and the overall progress of the program,” the federal agency said in an email to The Bee.

If the money disappears, rail advocate Paul Dyson said he fears the project could grind to a halt.

“There’s always other sources of money,” said Dyson, president of RailPAC, a statewide passenger advocacy group. “Whether politically they can do it is another matter .... If the governor is less than enthusiastic, how would he expect other people to get on board and provide other funding?”

But Elizabeth Goldstein Alexis, of Californians Advocating Responsible Rail Design, said the state still has plenty of money to finish the Valley line, even if the federal money disappears.

She said there’s more than $4 billion in Prop 1A money available, including dollars that haven’t been allocated to the High-Speed Rail Authority by the Legislature. In addition, the state has been allocating 25 percent of its cap-and-trade funds annually to the project. That could yield between $7 billion and $18 billion by 2030, the year the cap-and-trade program expires. The program requires carbon polluters to buy credits for the right to emit greenhouse gases.

Trump’s potential contract termination “doesn’t kill the project at all,” Alexis said. “You have other money in the bank you can use.”

State officials acknowledge, though, that they are treading a political minefield with an administration headed by a president who has shown repeated disdain for California. State leaders in turn have fought Trump legally and verbally on numerous fronts.

State Sen. Jim Beall, a High-Speed Rail Authority board member, said the federal threat would be an easy issue to resolve under normal circumstances. “From a contract compliance standpoint, we can answer their concerns on all issues raised,” he said. “All that stuff gets worked out with sit-down meetings.”

But Trump has tweeted repeatedly in recent weeks that the state’s high-speed rail project is a disaster and a waste, and demanding the state give money back. “So, whether they would still not give us the $929 million remains to be seen,” Beall said. “That’s on the president. That’s political.”

Newsom called the Railroad Administration’s letter retribution for the state’s opposition to a Trump emergency declaration to build a border wall. “We won’t sit idly by,” Newsom tweeted. “This is California’s money, and we are going to fight for it.”

Rail officials said they are working on a project update report this spring that may include new numbers. Beall, who heads the Senate transportation committee, announced he will hold an oversight hearing in late March where he said he wants every aspect of the project aired. “Let’s have a hearing to review the project, listen to the experts, and lets do the best thing for the project.”

Tony Bizjak has been reporting for The Bee for 30 years. He covers transportation, housing and development and previously was the paper’s City Hall beat reporter.