California bullet train project wins major court victory

In a victory for California’s bullet train project, an appellate court Thursday overturned a lower court ruling that found the state had failed to comply with the law in developing a funding plan for the $68-billion line between Los Angeles and San Francisco.

The decision lifts a significant cloud that hung over the California High-Speed Rail Authority’s ability to move the project ahead over the next several years, when it plans to start construction of a 130-mile segment of track in the Central Valley and accelerate planning on a 40-mile section from Burbank to Palmdale.

But the ruling, issued by the 3rd District Court of Appeal, explicitly warned that “substantial legal questions loom” about whether the project is consistent with what voters approved in a $9-billion bond in 2008. Important financial and environmental matters remain to be clarified by the state in a future report, the appellate court said. A number of other lawsuits challenging the project also are pending.

The likelihood of a state victory in Thursday’s decision was foreshadowed in May, when the three justices appeared skeptical about the plaintiff’s positions during oral arguments. Nonetheless, state officials were clearly pleased with the 3-0 decision.

“We welcome the court’s ruling,” said authority board Chairman Dan Richard. “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” in the 2008 bond election.

The new ruling, which an attorney for some plaintiffs said may be appealed, sets aside a decision last year by Sacramento County Superior Court Judge Michael Kenny, who found that the state failed to meet legal requirements of the bond measure because it failed to identify all the funds needed to complete a first usable segment and did not have all of the environmental clearances needed. The lower court judge said voter-approved bond funds could not be spent until the plan was redone, even though the Legislature had already appropriated money from the approved bonds.

The three-member panel found that state law required two funding plans: an initial one that did not have to meet all of the voter-imposed requirements and was mainly intended to help the Legislature decide whether to appropriate money for the project, and another that would meet all of the legal requirements. That second plan, which has not yet been developed, must be filed before the state actually spends any bond money.

In another part of its ruling, the appeals panel also reversed a separate Kenny decision that found the state failed to follow proper procedures in approving the sale of the bonds. Kenny had ruled that the state failed to establish that the bonds were “necessary or desirable.”

The appellate court decision, which does not become final for 30 days, sends the matter back to Superior Court and orders Kenny to enter a judgment that allows the authority to issue the rail bonds. The ruling could help free up billions of dollars in state funding for the project, but the rail authority already is in a better financial position than when Kenny issued his initial ruling last November.

At that time, the state was tapping federal grants to fund its contractors and needed to access some cash to comply with grant requirements that it match the federal dollars with state money. The only significant pot of money at that time was the bond funds.

But in recent months, the Legislature appropriated $250 million in funds from fees that businesses pay for producing greenhouse gases, so-called cap-and-trade revenue. In addition, the Legislature allocated 25% of all future funds from the program to the rail effort.

Thursday’s decision was a blow to opponents of the project who believed the lower-court ruling gave them a good chance to substantially change or stop the bullet train.

“The authority violated its duties under the ballot measure,” said Stuart Flashman, one of the plaintiff attorneys. “This means you can put something on the ballot and ignore what it says later.”

ralph.vartabedian@latimes.com

dan.weikel@latimes.com