Does California owe the federal government billions from its canceled rail project?
Posted February 14, 2019 4:00 p.m. EST
CNN — California Democratic Gov. Gavin Newsom announced plans this week to scrap the state's high-speed rail line from San Francisco to Los Angeles, saying it would cost too much and take too long. The most recent estimates said the project would cost a total of $77 billion and not be finished until 2033.
The timing is noteworthy given the current debate around the recently proposed Green New Deal that Democrats have championed as a way to fight climate change and overhaul the US economy and transportation system. The plan, without getting into specifics, leans heavily into the notion that high-speed rail could go a long way toward reducing the country's carbon footprint.
Republicans who had already spent the past few days criticizing the plan as impractical seized on Newsom's announcement as further evidence that high speed rail is a bad idea.
President Donald Trump tweeted Wednesday evening that California now owed the federal government $3.5 billion for the canceled project. "We want that money back now," he wrote. "Whole project is a 'green' disaster!"
Newsom replied in kind, saying that the money was already earmarked for California. "We're building high-speed rail," the governor tweeted. "This is CA's money, allocated by Congress for this project. We're not giving it back."
Who's right? First, the facts.
The American Recovery and Reinvestment Act of 2009 provided a federal grant of $2.553 billion for the project and the Consolidated Appropriations Act for the fiscal year 2010 gave a grant of $929 million for the project. It's from these two numbers that Trump derives his $3.5 billion he argues California owes the federal government.
But these grants came with agreements, and so far California has not abandoned those agreements, meaning it's under no obligation -- yet -- to give that money back.
When would California owe the federal government?
Not for a few years, if ever. According to a California State Auditor report from November 2018, "violating the grant agreements could require the Authority to repay this $3.5 billion in federal grant funds," $2.6 billion of which has already been spent.
So what's in those agreements?
The agreements pertaining to both grants require California High-Speed Rail Authority to complete a high-speed train track for the "initial central valley section," a 120-mile stretch from Madera County to Kern County by the end of December 2022.
One key point: The agreement does not require the California High-Speed Rail Authority to build trains for the track.
So, if California decided simply to build out this segment of the high-speed rail track, under the agreements no money would be owed back to the federal government; even if no trains were built for the track. "Those [trains] were going to be purchased in the next big segment that goes from Shafter to San Jose," said Jeff Davis, a senior fellow at the Eno Center for Transportation.
If California fails to complete this section of track by the end of 2022, they would presumably request another amendment to the agreement from the Federal Railroad Administration.
"At that point, theoretically, FRA could deny that request and ask for the $3.5 billion back," Davis says. "But that depends on who is in the White House and running [the Department of Transportation] in December 2022 and just what kind of hardball they really want to play."