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Two GOP bills seek to redirect federal funds from California high-speed rail project

Key Points
  • The Trump administration is demanding federal funds back from California's high-speed rail project, and two GOP lawmakers from California have proposed redirecting the money.
  • A bill introduced by House Minority Leader Kevin McCarthy would "repurpose" about $3.5 billion worth of federal funds for the rail system to water infrastructure projects.
  • A second piece of legislation, by Rep. Doug LaMalfa, requires that rail funds go instead to "important freight and highway projects."
  • A group of mostly California Democratic members of Congress sent a letter this week to Transportation Secretary Elaine Chao and warned that "attempting to claw back funding already lawfully spent would be unjustified and harmful."
In this handout image provided by the California High-Speed Rail Authority, Construction of the Cedar Viaduct seen from the Golden State Boulevard to west of State Route 99 on July 13, 2017 in Fresno, California.
California High-Speed Rail Authority | Getty Images

Two House bills introduced this month by Republicans from California seek to redirect federal funds from the state's high-speed rail project and use the money for other purposes. The Trump administration in February demanded funds back from the controversial project, which has been plagued by cost overruns and delays.

A bill introduced by House Minority Leader Kevin McCarthy would "repurpose" about $3.5 billion worth of federal funds for the rail system to water infrastructure projects to help the state cope with future droughts. A second piece of legislation, dubbed the "High-Speed Refund Act" and introduced by Rep. Doug LaMalfa, requires that any funds the Transportation Department provided to the high-speed rail development go instead to "important freight and highway projects."

"The California high-speed rail project is a boondoggle that California and American taxpayers must move on from," McCarthy said earlier this month. "Since its inception, the project's costs have ballooned while oversight and accountability within the California High-Speed Rail Authority has been nonexistent."

Last month, Gov. Gavin Newsom during his State of the State address said construction of the planned high-speed rail from the San Francisco Bay Area to Los Angeles will "cost too much and take too long."

Yet Newsom in the Feb. 12 remarks stopped short of calling for a full halt of the massive project, saying: "I am not interested in sending $3.5 billion in federal funding that was allocated to this project back to Donald Trump." The governor ordered "new transparency measures" on the rail project and approved going ahead with part of the rail link — a 119-mile stretch in the Central Valley between Merced and Bakersfield.

Wasting little time, President Donald Trump weighed in on Newsom's reduction of the high-speed rail project in a tweet Feb. 13: "We want that money back now," the president wrote, calling the planned bullet train "a 'green' disaster!"

The Trump administration formally notified the state last month that the Federal Railway Administration is seeking return of $2.5 billion in funds for what it termed "this now-defunct project." The U.S. government also announced it intends to terminate the grant of another $929 million in funding, claiming the state's high-speed rail agency failed to stay in compliance under terms of the Obama-era grant agreement.

Earlier this month, California sent a letter to FRA and rebutted the federal government's assertion that the state was out of compliance.

"We have not heard back from the federal government yet," Melissa Figueroa, a spokesperson for the California State Transportation Agency, told CNBC on Thursday.

Dream vs. reality: A rendering of California's high-speed rail project that is supposed to connect San Francisco and Los Angeles
Source: California High-Speed Rail Authority

An FRA spokesperson, who didn't wish to be identified, said Thursday via email the federal agency was still reviewing the state's position on the matter but had no further comment.

A group of mostly California Democratic members of Congress sent a letter Wednesday to U.S. Transportation Secretary Elaine Chao urging her to "work constructively with the state to identify and remedy" concerns it may have about the performance of the state's high-speed rail agency.

"Cancelling the Department's commitment to fulfill the outstanding legal obligations and attempting to claw back funding already lawfully spent would be unjustified and harmful," the letter stated.

Meantime, Figueroa said California is moving forward to get environmental clearance of the entire project from San Francisco to Southern California.

To date, the state has dispatched nearly 2,700 workers to construction sites for the rail system and has more than 20 active construction sites, according to state officials. The 2018 business plan projecting the baseline cost of the nearly 520-mile rail system soared 20 percent from two years earlier and indicated the cost could rise to nearly $100 billion.

A decade ago, California voters approved a ballot measure authorizing nearly $10 billion in bond money for the construction of the high-speed rail system. The original cost of the project in 2008 was estimated at $33 billion.

A project update report is due out in early May and is expected to provide more information on the high-speed rail's funding situation. The state has already spent roughly $5.2 billion, including the $2.5 billion in federal funds received during the Obama administration.

"We're making progress," insisted Figueroa. She said there is "dedicated funding for the project" and funds to complete the Bakersfield-to-Merced section will be discussed in the May report.