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California, federal government feud over $3.5 billion meant for high-speed rail 'boondoggle'

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State's liberal governor announced he was scaling back the project, but he still expected the full amount of federal funding

California High Speed Rail Authority via Getty Images

The U.S. Department of Transportation's Federal Railroad Administration announced Tuesday that it plans to cancel $928,620,000 that it had promised to California for the construction of a high-speed rail project and that it wants to recuperate previous grants to the project worth $2.5 billion.

The announcement came a week after the state's liberal governor declared that he was canceling much of the project due to cost.

What are the details?

On Feb. 12, California Gov. Gavin Newsom, a Democrat, announced that he was cancelling most of a planned high-speed rail project because it would "cost too much" and "take too long" to be feasible.

Originally, the rail line was supposed to connect Los Angeles and San Francisco. Instead, now the only portion that will still be built will connect Bakersfield to Merced — less than half the distance, according to Google Maps. Newsom also said that the project had suffered from "too little oversight and not enough transparency."

However, Newsom's admissions during that announcement may have cost his state nearly $1 billion in promised federal funding — and $2.5 billion the state has already received.

In a letter addressed to California High Speed Rail Authority CEO Brian Kelly, FRA Administrator Ronald Batory said that the FRA "has determined that CHSRA has materially failed to comply with the terms of the Agreement and has failed to make reasonable progress on the Project (as defined in the Agreement), significantly endangering substantial performance."

The letter specifically cited Newsom's announcement, saying that decision to significantly scale down the project "frustrates the purpose for which Federal funding was awarded." It also pointed out that the state fell short of the amount it was expected to contribute. In one month alone state contributions were more than $100 million less than it had promised.

The letter told Kelly that he could contest this decision if he had evidence that CHRSA had lived up to its obligations, had made "reasonable progress" on the high-speed rail project, or if he could prove that Newsom's "announcement does not constitute a fundamental change in the purpose of the overall project for which Federal funding was awarded."

Batory said that the federal government also wants to recover $2.5 billion it had already paid to the state for the original project and will explore "all available legal options" to do so.

What did the governor say?

Newsom fired back, saying that the announcement from the FRA was based on politics and not about his decision to scale back the project.

"It's no coincidence that the Administration's threat comes 24 hours after California led 16 states in challenging the President's farcical 'national emergency,'" he said on Tuesday. "The President even tied the two issues together in a tweet this morning. This is clear political retribution by President Trump, and we won't sit idly by. This is California's money, and we are going to fight for it."

The day before this announcement California and 15 other states had filed a lawsuit against President Donald Trump's declaration of a national emergency. Trump declared the emergency in order to get funding for his border wall that Congress had denied him.

In a tweet Tuesday morning, Trump criticized the states that filed the suit, singling out "California, the state that has wasted billions of dollars on their out of control Fast Train with no hopes of completion."

The White House denied that the decision to cancel the funding was politically motivated, calling the project a "boondoggle" that "costs too much and will never be constructed as planned."

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