California Transit Agreement Terminated; State Files Complaint

The battle lines have been drawn. Millions of dollars of funding for a high-speed rail system in California have been nixed by the Trump administration, and state officials are livid.

Last Thursday, the Federal Railroad Administration (FRA) issued a notice stating that “after careful consideration,” FRA was terminating a federal fiscal year (FY) 2010 cooperative agreement with the California High-Speed Rail Authority (CHSRA) and will deobligate almost $930 million in funding under that agreement. The notice confirms a previous FRA statement in March in which FRA intended to terminate the agreement. “FRA finds that CHSRA has repeatedly failed to comply with the terms of the FY 2010 agreement and has failed to make reasonable progress on the project,” the FRA notice explains. “Additionally, California has abandoned its original vision of a high-speed passenger rail service connecting San Francisco and Los Angeles, which was essential to its application for FRA grant funding. FRA continues to consider all options regarding the return of $2.5 billion in American Recovery and Reinvestment Act (ARRA) funds awarded to CHSRA.”

In a 25-page letter to CHSRA, FRA Administrator Ronald Batory provided more details as to why it was terminating the funding. “CHSRA consistently and repeatedly failed in its management and delivery of the project, and in meeting the terms and conditions of the agreement, all of which constitute violations of the agreement,” the letter states. “Despite extensive guidance from FRA, CHSRA was unable to prepare and submit fundamental project delivery documents (e.g., budgets, funding contribution plans and project management plans). CHSRA' s inability to track and report near-term milestones shows that CHSRA is likewise unable to forecast accurately a long-term schedule and costs for the project. Further, after almost a decade, CHSRA has not demonstrated the ability to complete the project, let alone to deliver it by the end of 2022, as the agreement requires.”

The letter adds that after spending more than $2.5 billion in federal funds under the award, California “has scaled back its vision, all but abandoning any foreseeable plan to construct the statewide high-speed rail system.” “The dramatically reduced scope of California' s current plan for its high-speed rail system is simply not consistent with the project as CHSRA proposed in its applications for federal financial assistance on the project. For these reasons, and those set forth in this decision, FRA has determined to terminate the agreement, effective today, and will deobligate the associated funds,” the letter concluded.

According to local reports, the CHSRA now has filed a 20-page complaint in response against the Department of Transportation in the U.S. District Court, accusing the administration of "playing politics with a decision that contradicts federal regulations and makes faulty allegations about the project’s lack of progress." The complaint further states that the termination was made “in violation of [DOT’s] own procedures and policies, was arbitrary and capricious, an abuse of discretion, and contrary to law, and threatens to wreak significant economic damage on the Central Valley and the state.”

We’ll have to wait to see what the final result will be in this issue, but it undoubtedly will hinder transit efforts in California for years. We’ll be keeping a close eye on this over time to see what happens next.

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