California Legislature on Verge of Securing HSR’s Future
For five and a half years now, since California voters passed Prop 1A, the California High Speed Rail Authority has been searching for the rest of the money they needed to build the project. In 2009 it looked like the federal government would be the answer, and President Barack Obama gave $8 billion for HSR around the country as a downpayment.
But in 2010 the Republicans seized power in the House and have blocked any new funding for HSR – while trying to stop states from spending the stimulus money they were already given. This threw future federal funding in doubt, and without that, it threw the future of the California HSR project into doubt.
In turn, that led HSR opponents in California to attack the project in court, scoring a victory last fall when a Sacramento Superior Court judge said the Prop 1A bonds couldn’t be sold because the state lacked a financing plan for the rest of the route – thanks to Congressional Republican opposition.
So for the project to proceed, California has to go it alone, not relying on new federal money. The cap-and-trade funds are the key. And today we’ve learned that Governor Jerry Brown and state legislative leaders have reached a deal that gives 25% of the cap-and-trade funds to high speed rail:
Gov. Jerry Brown and Democratic legislative leaders have agreed to a proposal to use 25 percent of future cap-and-trade revenue – money polluters pay to offset carbon emissions – to provide ongoing funding for construction of California’s high-speed rail project, according to part of a budget deal legislators will consider Thursday, sources said.
That 25% is less than the 33% the Governor had proposed, but it’s almost surely a number that will make him happy. Senator Darrell Steinberg’s office has estimated the state could make as much as $3 billion to $5 billion a year soon on cap-and-trade auctions. That means HSR could see $750 million to $1.25 billion a year.
And that in turn is certainly enough for the state to borrow against, whether via a revenue bond or a federal RRIF loan, to help finance construction of the Initial Operating Segment from Merced to Los Angeles (or, less likely, Bakersfield to the Bay Area).
The deal will be voted on no later than Sunday, which is the constitutional deadline to pass a budget. I don’t expect there to be any changes; once leadership negotiates a budget deal the rest of the troops fall in line.
So this is perhaps the best news California HSR has had in over five years. Once this budget passes, the lingering questions about the project’s financial future will, in part, be answered. There’s still more money to be found to finish the whole route from LA to SF. But once an Initial Operating Segment is opened, private money can come in as well, which helps close the remaining gap.
This is huge and exciting news. Kudos to the Governor and the Legislature in getting this done!