FRA May Face Challenges in High Speed Rail Funding Play

Questions over Trump administration’s authority over that of past Congresses persist.

  • The Federal Railroad Administration (FRA) earlier this week announced that would cancel $929 million in federal grants yet to be paid for California’s High-Speed Rail project
  • The body says California failed to comply with the grant terms
  • Gavin Newsom asserts that the money belongs to California, and not the federal government

The Trump administration may well find it difficult to stop the advancement of high speed rail in California.

The Federal Railroad Administration (FRA) earlier this week announced that would cancel $929 million in federal grants yet to be paid for the project, as well as pursue “every legal option” at its disposal to get the state to return $2.5 billion in grant funding for what it describes as a “now defunct project.”

FRA Administrator Ronald Batory in a letter to Gov. Gavin Newsom asserted that the state authority responsible for delivering the project has “materially failed” to comply with the terms of the agreement, and has not made reasonable progress on the project after having been awarded the grant in 2009. Those terms include completion of the following by December 2022:

  • Secure environmental approvals for the phase-1 alignment between San Francisco and Anaheim
  • Complete construction on the 119-mile stretch from Madera to the outskirts of Bakersfield.
  • Complete the realignment of State Route (SR) 99 from Clinton Avenue to Ashlan Avenue, through Fresno.

The authority as a condition of the grant had also been obliged to spend $2.55 billion in stimulus funds by September 2017.

California High Speed Rail Authority (CHSRA) CEO  Brian Kelly said that the agency is preparing a comprehensive response that will be delivered to the FRA by a requested March 5 deadline .

“We remain committed to delivering high-speed rail and its many economic, environmental, and mobility benefits to Californians,” Kelly said.

Jumping the gun

FRA’s assertion comes as CHSRA has already met or is in the process of fulfilling many the conditions outlined for the grant.

California HSR in its November 2018 project summary indicated that it is currently on schedule to receive environmental approvals for the project prior to December 2022 due date. The report also notes that the State Route 99 project is proceeding ahead of the deadline. A ribbon-cutting ceremony to open the project is currently scheduled for February 15, 2019.

What’s more, the construction of a 119-mile from Madera to the area north of Bakersfield is already proceeding. CHSR has awarded design-build contracts for Construction Package 1 (Tutor Perini/Zachry Parsons JV), Construction Package 2-3 (Dragados/Flatiron), and Construction Package 4 (Ferrovial-Agroman, US Corp and Griffith Company). The authority was also able to spend the $2.55 billion from the American Recovery and Reinvestment Act of 2008, which the FRA is now trying to recoup.

The FRA has a history of taking procurement bodies to task for delays or cost overruns. The authority in 2018 withheld roughly $744 million in funding for the Hawaii Authority for Rapid Transit’s (HART) proposed $8.3 billion high-speed rail project due to multiple delays and cost overruns. But industry attorneys say that the FRA is now in uncharted territory.

One industry attorney maintained that there has not in recent memory been an instance in which the federal government has attempted to claw back grant money following its award.

There are also questions as to whether the administration has the authority to cancel the grant as the money had been appropriated in past Congresses.

“I’m not sure what the legal basis, if any, is for the administration to say it is cancelling grants, or if that is even possible at this point,” another industry attorney told Icons of Infrastructure

This is not to say that there have not issues with the procurement. CHSR in March 2018 released a revised business plan that pushed the project delivery date back by four years, as well as increased costs (See Figure 1).

Figure 1 – Source: California High Speed Rail Authority


“This is CA’s money, allocated by Congress for this project. We’re not giving it back.”
–California Gov. Gavin Newsom


But the project has not been cancelled. California Gov. Gavin Newsom earlier this month only limited the project to the 119-mile stretch of the Central Valley linking Bakersfield and Merced in the short term. He noted that CHSR will work to complete Phase 1 of the project, as well as continue to seek public and private sector financing in order to deliver $1.2 billion in “bookend” commuter rail line projects in the San Francisco Bay Area and Southern California, so they can eventually be incorporated into a statewide high-speed rail system.

The lion’s share of the financing will reportedly come from Proposition 1A bond funds. California’s cap-and-trade greenhouse gas emission auctions will provide an additional $113 million for the projects. However, many of the details have been obscured by what has turned into a political squabble between President Trump and Gov. Newsom.

“California has been forced to cancel the massive bullet train project after having spent and wasted many billions of dollars,” Trump on 13 February tweeted. “They owe the Federal Government three and a half billion dollars. We want that money back now. Whole project is a ‘green’ disaster!”

“This is CA’s money, allocated by Congress for this project,” Newsom responded. “We’re not giving it back.”

Newsom, according to reports, asserted that the decision to cancel the grant was retaliation for a lawsuit brought by California and 15 other states to stop construction of a wall along the US-Mexico border.

USDOT, of which FRA is a part, did not immediately respond to questions regarding the move or its prospects for success.

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