Calif. High-Speed Rail's Bond Sales Can Proceed: Court of Appeal - California Case Law
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Calif. High-Speed Rail's Bond Sales Can Proceed: Court of Appeal

In 2008, California voters approved Proposition 1A, authorizing the sale of bonds to fund a high-speed train that would run from Sacramento to Los Angeles. Ever since, the project has stalled due to lawsuits filed by everyone from the ever-present Howard Jarvis Taxpayers Association to Central Valley farmers who object to rights of way through their land.

Opponents of the bullet train breathed some relief in 2013 when a Sacramento County Superior Court judge found the California High Speed Rail Authority's plan to sell bonds didn't comply with legal requirements and ordered signed contracts for construction to be rescinded.

But on July 31, it was the opponents' turn to sulk: The Third District Court of Appeal in Sacramento reversed the Superior Court decision, allowing the rail project to proceed. This is a dense opinion, so we're going to try to run down the basics.

Proposition 1A

Proposition 1A authorized the sale of bonds to finance the rail project, subject to certain requirements. For example, the bonds themselves can't be used for more than 50 percent of the total cost of construction for each segment of the rail system. The law also requires the High Speed Rail Authority to come up with a concrete plan for funding the rail system before construction can begin.

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Your Standard of Review Is Bad, and You Should Feel Bad

The trial court concluded that the High Speed Rail Authority's Finance Committee didn't provide "substantial evidence in the record" to support its request to have $8 billion in bonds validated, allowing them to be issued and sold. The Third District Court of Appeal reversed, perplexed that the trial court would impose a standard of evidence normally reserved for legislative appropriations.

An agency's determination will be reversed "only if the action taken is so palpably unreasonable and arbitrary as to show an abuse of discretion as a matter of law." Under this standard, the Finance Committee adequately supported its request to have the bonds validated for sale.

Nevertheless, the opponents argued that the court should adopt the substantial evidence standard in this case because... well, just because. (OK, that was a low blow: Really, it was because the Finance Committee shouldn't have such wide discretion, they said. But the Court of Appeal could find no reason why the Committee shouldn't have such wide discretion.)

Simmer Down!

The Court of Appeal also took some time out from its busy day to observe that this project was in the really, really, really preliminary stages. To the extent the opponents were concerned about project creep in the use of bonds, the Court of Appeal told them to calm down; the state hasn't even issued the bonds yet.

Finally, the court declined to make the High Speed Rail Authority redo its funding plan just because the plan wasn't incredibly super-specific about all its funding sources. "Geez, give the guys a break," the Court of Appeal said (though using more words than that). "This is a preliminary report. If you want to complain, wait for the final report. Gosh!" (Again, using more words than that.)

And so, the Third District Court of Appeal vacated the trial court decision, meaning the bond sale can go ahead and we can be on our way to a high-speed rail -- sometime this century.

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