The Trump administration announced this week that it was canceling nearly $1 billion in grant money for California’s now-defunct high-speed rail project — and President Donald Trump is coming for the other $2.5 billion.
The $2.5 billion has already been spent — but California has failed to deliver the high-speed rail (on time, or at all) as promised.
Therefore, the Trump administration argues, the state has to repay federal taxpayers.
The Los Angeles Times quoted Stanford law professor David Freeman Engstrom, a Stanford law professor, describing Trump’s effort as a “nuclear option.”
The practice of recovering money after a breach of contract, while common in the private sector, was virtually unheard of in government, he explained.
“There is a reluctance to penalize misspending by local government agencies. … Almost never do those violations result in terminations, in part because federal agencies are set up to distribute money, not take it back, and they also lack funding for strict grant enforcement,” the Times added.
Last week, newly-inaugurated California Governor Gavin Newsom announced in his “State of the State” address that the “bullet train” would no longer be built between Los Angeles and San Francisco because it “would cost too much and, respectfully, would take too long.”
Newsom said the state would still build a portion of the high-speed rail project in the Central Valley in an effort to hold onto the federal funds that President Barack Obama’s administration had allocated to the project: “I am not interested in sending $3.5 billion in federal funding that was allocated to this project back to Donald Trump, Newsom told legislators in the State Capitol in Sacramento.
But President Trump objected, demanding on Twitter: “California has been forced to cancel the massive bullet train project after having spent and wasted many billions of dollars. They owe the Federal Government three and a half billion dollars. We want that money back now. Whole project is a “green” disaster!” Newsom responded: “This is CA’s money, allocated by Congress for this project. We’re not giving it back.” He also taunted the president, accusing him of “desperately searching for some wall $$,” referring to Trump’s barrier on the U.S.-Mexico border.
That did not impress the president. On Tuesday, the Federal Railroad Administration of the U.S. Department of Transportation wrote to California’s High-Speed Rail Authority, informing it that it had breached the terms of its contract with the federal government and that $928,620,000 would therefore no longer be available to the project.
Newsom objected, again: “This is California’s money.” He also claimed Trump was taking revenge for California’s leading role in filing a federal lawsuit against Trump’s national emergency declaration to build the “wall.”
But that may not matter.
The state had grown accustomed to leniency: the Obama administration modified the terms of the deal between the federal government and the state several times, because it was ideologically committed to high-speed rail.
For example, in “the final hours of the Obama administration” in January 2017, the Los Angeles Times reported at the time, Obama extended the deadline for the high-speed rail project from 2018 to 2022, so that California might still access the nearly $1 billion in transportation funds that the Trump administration is now “de-obligating.”
Trump is somewhat indifferent to high-speed rail: he favors infrastructure spending, but wants to see the projects built.
And as a world-famous developer, he knows the rules of the game: deliver the project, or pay up.
Legally California may have no choice.