SACRAMENTO -- A judge's decision this week to block the state's access to billions of dollars in bonds it needs to build a bullet train also threatens the only other pot of money California has to finance the project -- $3.3 billion from Uncle Sam.
Just a few days ago, the state's High-Speed Rail Authority believed it had $8.6 billion in state bond proceeds and $3.3 billion in federal money to begin construction this spring on the rail line's first stretch of track in the Central Valley.
But now the authority's ability to spend any of those crucial funds to push the controversial bullet train project forward is highly uncertain.
"The rulings raise so many questions about whether this project still makes financial sense," said Joe Nation, a public finance professor at Stanford University who called it a "moment of truth" for California.
"This could turn into a real nightmare," he added.
Even before Monday's stunning rulings by Sacramento County Superior Court Judge Michael Kenny, the project had been mocked as a "train to nowhere" because the state had only enough funding to build about 120 miles of track, from the Fresno-Madera area to the northern outskirts of Bakersfield.
The $8.6 billion in voter-approved state bonds and the $3.3 billion in federal funds represent less than one-fifth of the money needed for the $68.4 billion project. But because of Monday's rulings and the possibility that federal funding could be pulled back, the money "in hand" could ultimately become pocket change.
The state has already spent more than $700 million on engineering and planning costs from bonds approved by California voters in 2008. But according to an agreement the state signed with the Federal Railroad Administration, the federal government can yank the $3.3 billion it has committed to the project and even force the state to repay $397 million in federal money spent on planning, engineering and administrative costs.
The federal funding hasn't been nixed yet, but it could be for a number of reasons outlined in the agreement. They include a failure of the state to produce matching funds -- something that would be impossible to do if Kenny's rulings prevent the state from issuing bonds.
The grant agreement includes these provisions to protect federal taxpayers from investing in projects that encounter unexpected challenges such as this week's court rulings, said Kevin Thompson, a spokesman for the U.S. Department of Transportation.
Lisa Marie Alley, a spokeswoman for the state rail authority, said the group's federal funding is not at risk and that the authority is "using federal funding right now for the project." But she could not explain how the group would comply with the judge's orders or continue to fulfill the obligations of the federal grant agreement.
Dan Richard, the authority's board chairman, has said simply that the group is charting its next steps. Authority spokesman Bob Magnuson said Richard was with family on the East Coast and unavailable for comment because of the Thanksgiving holiday.
But San Francisco attorney Michael Brady -- who represents Kings County and two of its residents in the lawsuit that sparked Monday's controversial rulings -- called the latest mix of legal and federal mandates "a crisis point" for the authority.
"A reasonable manager of federal money would look at the judge's rulings, realize it's virtually impossible for the authority to comply and say, 'We can't allow our money to be spent down a rat hole,'" Brady said.
Some Bay Area officials are also worried about whether the judge's rulings will scuttle plans to electrify Caltrain's tracks from San Jose to San Francisco.
Since the bullet train is supposed to share its Peninsula tracks with Caltrain, the Legislature allocated $705 million of bond proceeds to upgrade the tracks to get rid of Caltrain's diesel engines. But that funding is now also threatened.
To comply with the rulings, the authority must identify a source for $25 billion in additional funds needed to complete the 520-mile rail line, which is supposed to shuttle riders from San Francisco to Los Angeles in 2 hours and 40 minutes.
So how will the authority get the money?
To date, no private investors have expressed interest in funding the largest public works project in the state's history. And it's unlikely the state or federal government would be willing to foot even larger bills, Nation, of Stanford, and other public finance experts say.
While financial support for high-speed rail remains in limbo, political support from the state's top Democrats remains strong.
Evan Westrup, a spokesman for Gov. Jerry Brown, called talk of the project's demise "wild, hasty speculation," and state Senate and Assembly leaders remain committed to the project.
"Any project of this magnitude is a magnet for legal hurdles," said Steven Maviglio, a spokesman for Assembly Speaker John Perez. "The speaker believes the project should and will continue to move forward."
Nick Cronenwett, a spokesman for Senate President Pro Tem Darrell Steinberg, said his boss still strongly supports the bullet train because it will spur high-wage job creation, economic development and enhance the environment.
"California high-speed rail still has a long way to go," Cronenwett said. "And this is one chapter in that story."
But in an interview this week with Bloomberg News, California Lt. Gov. Gavin Newsom, a longtime supporter of the bullet train, said the state is "losing public opinion" about the viability of the project. He said state officials "need to make a strong case now" that the project is good for California's future.
Months before Monday's rulings, a poll conducted by the University of Southern California and the Los Angeles Times found 55 percent of voters want another chance to vote on high-speed rail. And if they got that chance, 59 percent of voters said they would vote it down this time, the poll said.
State Sen. Andy Vidak, R-Hanford, has pledged to introduce legislation in January that would put the project back on the ballot.
Santa Clara County Supervisor Joe Simitian had been a staunch proponent of the high-speed rail project while serving in the Legislature. Looming, unanswered questions about how the state would pay for the train, however, ultimately led Simitian to vote against the train.
"High-speed rail is a vision I shared," he said, "but I was not asked to vote on a concept. I was asked to vote on a plan that I believe is flawed."
Contact Jessica Calefati at 916-441-2101.