High-Speed Rail

Appeals court approves bond sale for high-speed rail

A state appellate court has cleared the way for the sale of bonds for California's controversial high-speed rail project, overturning a lower-court ruling.

But in making its ruling late Thursday afternoon, the 3rd District Court of Appeal in Sacramento said it sees other looming legal questions for high-speed rail -- most raised in lawsuits by Kings County plaintiffs.

Appellate Justices Vance W. Raye, Ronald B. Robie and M. Kathleen Butz ordered Sacramento County Superior Court Judge Michael Kenny to OK the issuance of bonds from Proposition 1A, the $9.9 billion high-speed rail bond measure approved by California voters in 2008.

Kenny had ruled in November that the state's High-Speed Passenger Train Finance Committee -- a five-member panel of the state treasurer, finance director, controller, transportation secretary and chairman of the California High-Speed Rail Authority -- authorized the issuance of bonds without any substantial evidence that it was "necessary or desirable" to issue the bonds immediately.

The justices also ordered Kenny to vacate his November ruling in one part of a lawsuit filed by Kings County farmer John Tos, Hanford resident Aaron Fukuda and the Kings County Board of Supervisors that the rail authority's funding plan failed to comply with Prop. 1A requirements. Kenny had ruled that the law required the financing plan to identify all of the money necessary to complete the initial operating section of the proposed bullet-train line between Merced and the San Fernando Valley, and also fell short of requirements for environmental certification of the entire Merced-San Fernando Valley segment before any construction could commence.

The rail agency had appealed both of Kenny's rulings, initially asking the state Supreme Court to hear the cases. The Supreme Court, in turn, referred the issues to the appellate court.

"We welcome the court's ruling," rail authority board chairman Dan Richard said in a written statement Thursday evening. "The high-speed rail authority has always been committed to building a modern high-speed rail system that will connect the state, precisely as the voters called for when they passed Proposition 1A."

Stuart Flashman, an Oakland attorney representing Tos, Fukuda and Kings County in their lawsuit against the rail agency, said he was "obviously disappointed" by the justices' decision.

"This ruling is a message to California voters that you shouldn't trust what you see on the ballot," Flashman said. "What you see is not necessarily what you're going to get."

The appeals court said that "substantial legal questions loom in the trial court as to whether the high-speed rail project the California High-Speed Rail Authority seeks to build is the project approved by voters in 2008." Those questions are at the heart of the second part of the Tos/Fukuda/Kings County lawsuit, which is expected to be heard by Kenny late this year.

But, the justices added, "contrary to the trial court's determination, the High-Speed Passenger Train Finance Committee properly found that issuance of the bonds for the project was necessary or desirable."

In ordering Kenny to vacate his ruling that the authority's preliminary financing was deficient, the appeals court said the plan "was intended to provide guidance to the Legislature in acting on the Authority's appropriation request (in mid-2012). Because the Legislature appropriated bond proceeds following receipt of the preliminary funding plan approved by the Authority, the preliminary funding plan has served its purpose."

The ruling represents the second legal victory in a week for the rail program at the appellate level. On July 24, a different three-judge panel from the 3rd District ruled in the rail authority's favor and upheld Kenny's approval of an environmental impact report that selected the Pacheco Pass between Gilroy and Los Banos as the preferred corridor for high-speed trains between the Bay Area and the San Joaquin Valley. The San Francisco Peninsula communities of Atherton and Palo Alto had challenged Kenny's approval of environmental work for the Bay Area-to-Central Valley section of the rail line.

The remaining portion of the Tos/Fukuda/Kings County lawsuit focuses on whether the statewide high-speed rail project between the Bay Area and the Los Angeles basin, by way of the San Joaquin Valley, can comply operationally with several key criteria of Prop. 1A.

Questions raised by the lawsuit include:

After a case management conference last week, Flashman said he expected that Kenny will hold a hearing on the case -- and not a trial -- sometime late this year.

Several other lawsuits remain pending against the rail authority over its environmental certification and approval in May of the rail system's Fresno-Bakersfield route. Those suits, all in Sacramento County Superior Court, are challenging the rail agency under the California Environmental Quality Act.