The California High-Speed Rail Authority (“Authority”) had a major setback on Friday when Sacramento County Superior Court Judge Michael Kenny ruled that the Authority had “abused its discretion by approving a funding plan that did not comply with the requirements of [Proposition 1A]” and failed to identify “sources of funds that were more than merely theoretically possible.”    

Proposition 1A, which voters passed in 2008, requires the Authority to identify the funding for the entire first segment of the high-speed rail project and clear all environmental review prior to commencing construction.  Last summer, lawmakers authorized selling $2.6 billion in state bonds for construction of the first segment, the 130 miles from Madera to Fresno, and allowed the state to tap $3.3 billion in federal matching funds.  During the hearing, the Authority argued that it had complied with Proposition 1A because the requirements only apply to the construction of the first 130-mile segment.

However, Judge Kenny ruled that the plain language of Proposition 1A indicates that financing and environmental clearances should be completed for the initial operating segment, the 290 miles from Merced to the San Fernando Valley, which is estimated to cost between $24 billion and $31 billion.  Furthermore, the Authority has only received environmental approval for the first 28-mile section of the first segment, which the judge held does not satisfy the requirement under Proposition 1A.

The decision by Judge Kenny was a result of a lawsuit filed in 2011 by Central Valley landowners and the Kings County Board of Supervisors.  The judge will hold a second hearing to determine the remedy and whether there shall be any penalties assessed against the Authority.  A date for the second hearing has not yet been set.