California sells $600 million in bonds for high-speed rail project
SACRAMENTO - California sold $600 million in bonds Tuesday to help pay for its high-speed rail project even as lawmakers and Gov. Gavin Newsom acknowledge challenges to completing the line between Los Angeles and San Francisco.
The bond money is a key source of funding for the troubled project, which has been beset by cost overruns and delays. Voters approved $10 billion in bonds in 2008 and the state routinely sells them. The entire project is estimated to cost $77 billion.
"Today's funding announcement is a continued sign of progress to keep our transformative high-speed rail initiative moving forward in California," Democratic Sen. Jim Beall of San Jose said in a statement.
Wells Fargo and Jefferies, LLC, purchased the bonds, state Treasurer Fiona Ma said.
The bond sale came ahead of a Senate hearing about how the state should move forward. It was the first public hearing since Newsom signaled changes to the project. But his administration provided few new details, saying those would come in an update to the Legislature on May 1.
"Let there be no doubt, (Newsom) supports high-speed rail in California," said Lenny Mendonca, the governor's appointee to lead the board overseeing the project.
Newsom in his state of state speech said there wasn't a path for the project as planned and said he will instead focus immediately on completing and expanding a line through the Central Valley, adding about 50 miles (80 kilometers) of track to a line already under construction rather than going west toward the San Francisco Bay Area.
But he also said he'd continue environmental work on the full line and seek private money to eventually build the full train. Lawmakers said they're still seeking clarity on Newsom's vision for the project.
The project's funding challenges were at the center of Tuesday's hearing.
Beyond bonds, the project gets money from the federal government and the state's cap and trade program, which raises money through credits to emit carbon. The Trump administration recently threatened to withhold or rescind roughly $3.5 billion in federal money, a move that would put the project further in jeopardy.
The state would need at least $50 billion more to meet the funding plan.
"The inspiring vision of high-speed rail, replete with dramatic pictures of speeding gold and blue trains but presented in advance of a credible financing plan is now meeting reality," said Lou Thompson, head of a peer review group. "Action by the Legislature is badly needed."
Thompson and Helen Kerstein of the Legislative Analyst's Office said lawmakers need to decide if they'll provide more money or change the project, potentially by finishing the high-speed line in the Central Valley and connecting it to Los Angeles and San Francisco using existing train and commuter services.
Senators also said the high-speed rail authority hasn't been spending money or building as fast as it needs to ahead of 2022 deadlines.
Construction slowed down through the winter months amid rain but an uptick is expected soon, said Joe Hedges, the chief operating officer of the project.
Hedges and other rail officials said the federal government has also slowed down progress because it has not completed required environmental reviews.