California to Still Sell High-Speed Rail Bonds Despite Governor’s Pullback

(Bloomberg) -- California will continue to sell bonds for a high-speed rail system even though Governor Gavin Newsom has announced he’s scaling back the ambitious project to a line linking two interior cities in the state’s agricultural region.

Newsom Tuesday said it had become too costly to build out the entire network linking Los Angeles and San Francisco. Instead, officials will focus on completing one segment between Merced and Bakersfield in the Central Valley. Some of the preliminary work for the full system and related projects also would continue.

The state has sold $3.3 billion of the $9.95 billion of debt that voters authorized in 2008, said H.D. Palmer, a spokesman for Newsom’s finance department.

"The balance of the unissued bonds will still be sold to finish up the Central Valley segment as well as for the bookend projects that were already appropriated," Palmer said by email.

In 2008, the state agency managing the project estimated that the high-speed rail network would cost $33 billion to build -- a cost that has ballooned to $77 billion a decade later.

In its most recent plan, the authority also said that the majority of the Merced-to-Bakersfield segment would cost $10.6 billion. Revenue, including from California’s cap-and-trade pollution credits program, will be available through 2030 to help finance construction, and an updated cost projection will be released in the coming months, spokeswoman Annie Parker said by email.

Carl DeMaio, a Republican who’s planning a 2020 ballot measure to defund the project entirely, said voters wouldn’t have expected a decade ago that all they’re getting is a train in the Central Valley instead of linking two major cities.

"The reality is that the voters were duped," he said.

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