The Federal Railroad Administration (FRA) announced that it intends to cancel $929 million in federal grant funds that were to be paid for the California High-Speed Rail project envisioned to connect the L.A. Basin to the San Francisco Bay Area. In addition, the U.S. DOT is actively exploring every legal option to seek the return from California of $2.5 billion in federal funds FRA previously granted for the project.

In its letter, the FRA said that the California High-Speed Rail Authority (CHSRA) “materially failed to comply with the terms for the agreement and has failed to make reasonable progress on the project, significantly endangering substantial performance.”

The FRA said its determination was based on many factors, including that the CHSRA failed to achieve the state contribution rates described in its quarterly Funding Contribution Plan; that based on CHSRA board reports, the project will not be completed by 2022, which is the end of the agreement’s period of performance; that CHSRA has failed to submit required critical grant deliverables to demonstrate the agency is effectively managing delivery of the project; and that based on findings from FRA’s oversight and monitoring, CHSRA has failed to take the appropriate corrective actions to ensure delivery of the project.  

Last week, California Gov. Gavin Newsom said that he wants to scale back the state’s beleaguered high-speed rail project, focusing for now only on the Central Valley segment between Merced and Bakersfield.

“I know that some critics will say this is a ‘train to nowhere.’ But that’s wrong and offensive,” he said during his State of the State address. “The people of the Central Valley endure the worst air pollution in America as well as some of the longest commutes. And they have suffered too many years of neglect from policymakers here in Sacramento. They deserve better.”

Addressing that decision, the letter said the state’s plan to significantly change the high-speed rail system further concerned the FRA because of the CHSRA’s past performance, adding that the change in initial vision “frustrates the purpose for which federal funding was awarded.”

The FRA is giving the CHSRA until March 5 to submit supporting information that the CHSRA has satisfied its commitments and obligations under the agreement; is making reasonable progress to deliver the project; and that the Governor’s announcement does not constitute a fundamental change in the purpose of the overall project for which the Federal funding was awarded.