Reports that Democrats in the state legislature are looking to redirect funds for high-speed rail from the Central Valley to Los Angeles and the Bay Area should be welcome by anyone who believes in rational transportation spending. But any revised rail plan should be carefully vetted and, ideally, put back in front of the electorate.
“Assembly Democrats see greater public value in improving passenger rail from Burbank to Anaheim, relieving congestion on the busy Interstate 5 corridor before the 2028 Summer Olympics in Los Angeles and putting additional money into San Francisco commuter rail,” the Los Angeles Times recently reported.
Democrats want to finish the 119-mile rail segment under construction in the Central Valley but would indefinitely defer extensions to Merced and Bakersfield. They would also put on hold electrification of the initial operating segment, meaning that the line would be served by diesel trains going around 135 miles per hour rather than the 220 mph originally promised. In this scenario, the remaining bond money would be shifted to rail projects in Southern California and the Bay Area.
“I can’t stand by and watch billions of dollars being spent in the hopes of future ridership in the Central Valley, while there is thirst for faster and better train service in Orange and Los Angeles counties,” Assemblyman Tom Daly, D-Anaheim, said.
While it would be wiser to spend transportation funding on adding highway capacity and bus rapid transit, we recognize that these options are non-starters for the high-speed rail bond money and current legislature: That money is destined for rail, but lawmakers should have voters weigh in on the next steps and spending of the bond money.
In 2008, voters approved a $9.95 billion bond measure for an electrified high-speed rail system guaranteed to go from San Francisco to Los Angeles in two hours and 40 minutes or less. Since then a series of costly blunders have prompted multiple governors, the state legislature and the California High-Speed Rail Authority (CHSRA) to make major changes to the voter-approved proposition. While some modifications to the plan were understandable reactions to its rising costs and the lack of private investment, the combined effect has been to vastly underdeliver on what was sold to voters.
As of July, $5.96 billion of the original bond remained unissued. There is no credible plan for funding and building the complete high-speed system, so it is hard to argue that today’s bond proceeds would be funding the project that voters ratified in 2008. While this latest idea from Democrats is correct —it would be more cost-effective to improve commuter rail service along highly-populated, congested travel corridors than to continue with high-speed rail in the Central Valley—it’s not what taxpayers approved in 2008. And if bonds are issued without a solid legal foundation, they run the risk of being invalidated.
Several municipal bonds issued in California during the 19th century were struck down by courts, leaving bondholders unable to collect interest and principal. More recently, pension obligation bonds in Puerto Rico were invalidated on the grounds that their issuance violated the commonwealth’s constitution. And recently in Illinois, John Tillman, CEO of the Illinois Policy Institute, a conservative think tank, sued the state because he claims the issuance of $14 billion worth of bonds violated the state constitution.
It’s reasonable to wonder if the risk of invalidation is worthy of public concern. After all, if a bond is struck down, investors take the biggest hit as the government gets to keep the principal and stop paying interest. But municipal and state bonds have long been considered safe investments by investors and are a critical source of funding for California and its local governments. Invalidation of a prominent California bond could disrupt the entire municipal bond market. Investors would worry whether other bonds could be canceled and think twice before making future bond investments.
Rather than tempt fate, lawmakers could best serve Californians by fully reformulating the state’s rail plan, having it reviewed by independent analysts and then putting any bond funding for state rail projects on the ballot for voter approval.
This column was originally published in the Orange County Register.