A California appeals court on Friday put on hold a potentially crippling legal order by a Superior Court judge against the California high-speed rail project and said it would hold a review of the matter.
The lower court's decision had essentially prevented rail officials from issuing any bonds to pay for the project, forcing them to rely on federal grants just as they are preparing to start construction of a line that would eventually run from Los Angeles to San Francisco.
The action by the 3rd District Court of Appeal does not reverse the lower court decision, but it could give rail officials some hope that they can escape a legal situation that could jeopardize the project.
In a brief announcement, the appeals court said it was granting the California High-Speed Rail Authority's request for a fast-track review of a decision by Sacramento County Superior Court Judge Michael Kenny, in which he ruled that the state had violated safeguards established in a 2008 bond act and did not have the right to issue any more bonds. A second decision by Kenny found that the state failed to follow proper procedures in issuing the bonds and that ruling will also be reviewed by the appeals court.
That Kenny decision asserted that the state had failed to create a plan that identified all of the sources of money it would use to build an initial operating segment and complete all environmental reviews before starting construction. Those requirements were set down in the bond act.
An actual order to rescind the funding plan that failed to meet state law was issued last month by Kenny. The appeals court stayed that order but did not reverse the earlier decisions that the order was based on.
"This is definitely a positive development for the state," said H.D. Palmer, a spokesman for the Department of Finance. "The appeals court could have let the lower court ruling stand."
The state is still restricted from issuing bonds. The appeals court asked the original plaintiffs, Kings County and two farmers, to file a brief by March 17 and the state to respond within 15 days.
The timing of any decision is important. The state needs to soon issue bonds to fund construction of the first 130 miles of the system, which will cost an estimated $6 billion. Construction is supposed to start by July. The state is relying on portions of $3.2 billion in federal grants, though it must begin using its own funds by April, according to a congressional attorney who testified at a recent hearing in Washington.