Gavin Newsom Moves Away From Jerry Brown’s Public-Works Ambitions

(Bloomberg) -- In his first State of the State speech, an avenue for airing lofty goals, California Governor Gavin Newsom showed he won’t simply sign off on his predecessor’s expensive public works projects as he moves toward his own priorities.

The Democrat who took office last month indicated Tuesday that he was scaling back California’s ambitious $77 billion high-speed rail project linking Los Angeles and San Francisco by focusing on getting one segment completed. He also said he wants to shrink plans to build twin 30-mile long tunnels aimed at buttressing the water system down to one.

Gavin Newsom Moves Away From Jerry Brown’s Public-Works Ambitions

The decisions come as Newsom, 51, pivots the state away from the goals of former Governor Jerry Brown, who had championed the massive infrastructure projects -- and contrasts with the objectives of liberal lawmakers in Washington who are pushing transportation overhauls as a key aspect of fighting climate change.

Bond investors had worried that Newsom wouldn’t hold the line on spending as well as Brown, whom they credit with helping to stabilize the finances of the boom-and-bust state. The new governor is showing he won’t reflexively continue Brown’s costly holdovers.

Still, Newsom will be tested on how he would fund programs he campaigned on, such as early childhood development and affordable housing, should revenue continue to fall short of his projections. The state collected 9 percent less in revenue in January than he expected in his budget for the next fiscal year.

Gavin Newsom Moves Away From Jerry Brown’s Public-Works Ambitions

"He has scaled back these two projects, but he has a large social agenda," said Dora Lee, vice president at Belle Haven Investments. "This could be a precursor to finding revenue sources" for it.

Too Costly

In his speech to lawmakers, Newsom said the high-speed rail line had become too expensive. He proposed finishing roughly 120 miles of track already under construction in the Central Valley, a mostly rural agricultural interior region, and link it to other parts of the state.

Originally, backers envisioned an 800-mile network, with trains speeding as fast as 220 miles per hour, making it one of the largest, and most costly, public works projects in recent U.S. history. But since $10 billion of bonds were approved by voters more than a decade ago to jump-start the line, it’s been roiled by political controversy and escalating expenses. Only about one in five likely voters view high-speed rail as high priority, according to a poll released in December by the Public Policy Institute of California.

"Right now, there simply isn’t a path to get from Sacramento to San Diego, let alone from San Francisco to L.A," Newsom said in his speech.

Newsom did leave open the possibility that the system could one day be completed by saying he would continue some of the preliminary work on the entire line and by seeking more federal and private funding.

He was much more clear on the tunnels: He wants just one. The tunnels are intended to carry Sacramento River water to southern California, home to about two-thirds of the state’s population. The highway-wide tubes would replace pumps in the Sacramento-San Joaquin River Delta that risk drawing saltwater from San Francisco Bay, threatening the freshwater supply and ravaging wetlands.

The tunnel system had been estimated to cost $17 billion. Some area farmers, residents and environmentalists oppose it for the expense, effect on local economies and potential watershed damage.

Scaling back both projects shows that Newsom "is being more realistic" about the state’s revenue, Lee said.

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