Federal officials likely won't budge from using stimulus funds to begin building California's high-speed rail system in the central San Joaquin Valley, despite a stinging condemnation issued two weeks ago by state analysts over the route choice.
In a letter Wednesday to the California High-Speed Rail Authority, federal Transportation Department Undersecretary Roy Kienitz restated his agency's commitment to start construction of the proposed 800-mile system with a 130-mile stretch from near Chowchilla to just north of Bakersfield.
The Kienitz letter also draws a line in the Valley's sandy soil between the federal government and the state Legislative Analyst's Office over the initial construction section and the money needed to build it.
One point of contention is the billions of dollars in matching funds that the federal government is counting on from California. California voters approved Proposition 1A, a $9 billion bond measure, in 2008 to help finance construction of the system.
In a May 10 report, the LAO suggested withholding that money – unless the Obama administration considers changing the route or easing spending requirements.
On Wednesday, Kienitz said that could kill the whole project. In his letter, he wrote that the route and deadlines are not up for debate, and California will only get about $3.5 billion in grants from the Federal Railroad Administration if it makes good on its pledge of about $2.75 billion more from the state bond measure.
"Withholding these matching funds would put California's high-speed rail project in serious jeopardy," Kienitz wrote.
Eric Thronson, the policy analyst who wrote the LAO report, said Wednesday he is not so sure that is true.
"If we require the authority to renegotiate with the Federal Railroad Administration or else they won't get their [state bond] funds, maybe the High-Speed Rail Authority and the Federal Railroad Administration might have a different perspective on where to start," Thronson said. "There's no law that says we can't start somewhere else."
The LAO report urged that construction begin not in the Valley, but in Los Angeles or the San Francisco Bay Area.
It's not clear how much traction the LAO report has among lawmakers in Sacramento. The office is an independent, nonpartisan agency that typically examines state budgets, legislation and ballot measures to evaluate their effects. Its role is advisory.
Even supporters of high-speed rail say the report raised valid issues concerning the authority's management, lack of a firm financial plan and reliance on consultants.
But Assembly Member Cathleen Galgiani, the Livingston Democrat who wrote Prop. 1A, said the recommendations to change the route or push deadlines back would kill the project if they are adopted.
The federal government "has made it perfectly clear that we will be building in the Central Valley or they will take their dollars back," Galgiani said.
Galgiani said the authority worked closely for more than two years with federal officials, engineers and other rail experts to determine where to start building the system.
"The LAO wants the Legislature to set criteria for choosing where to start building, but legislators already did that when they put Prop. 1A on the ballot," Galgiani said. "What this looks like is that perhaps the LAO doesn't like the outcome, so they want another legislature to change the rules to affect a different outcome."
The state's rail authority, meanwhile, is in the middle. It must satisfy not only the legislators who ultimately will have to sign off on budgets, business plans and bonds, but also the federal agencies that are putting up the bulk of the money available so far.
Within days after the LAO's scathing report May 10, the authority found itself on the hot seat when a state Senate subcommittee directed it to seek waivers from the federal conditions.
Authority officials raised the issues with Kienitz when he was in Sacramento last week, said Jeffrey Barker, the authority's deputy director. At that time, Kienitz said the terms were firm.
The authority's chief executive, Roelof van Ark, asked the department to clarify it in writing.
"We are eager to work with the Legislature to make California's high-speed rail project a reality," Barker said, "while keeping in mind that the federal government is our planning and funding partner."
Nearly all of the federal high-speed rail funds awarded to California so far come with strings requiring construction to begin in the Valley by the fall of 2012 and be completed by late 2017. Kienitz said his agency lacks the authority to change the deadlines by which the federal funds must be committed and spent.
Kienitz said the Valley offers an opportunity to complete construction more quickly than other, more densely populated parts of the state and set the stage for extending the line to both the north and south.
"We view the Central Valley as a logical place to begin building the core line to connect the San Francisco Bay Area with the Los Angeles Basin," Kienitz wrote. "We believe the decision to begin there was and remains a wise one."
And the deadlines are set, he wrote.
Kienitz wrote that because federal stimulus money is intended to provide an immediate boost to the economy, "deadlines are necessary to ensure that Recovery Act funds are used with all due speed." The Transportation Department "has no administrative authority to change this deadline, and do not believe it is prudent to assume Congress will change it."
Supporters in the Valley – where potential employment from high-speed rail construction, maintenance and operations represent an economic golden goose – were buoyed by the Kienitz letter.
"There's no question, it's more than encouraging," said Fresno County Supervisor Henry R. Perea. "It makes the green light even greener that construction will begin in the Valley next year."