Substantial legal questions loom in the trial court as to whether the high-speed rail project the California High-Speed Rail Authority (Authority) seeks to build is the project approved by the voters in 2008. Substantial financial and environmental questions remain to be answered by the Authority in the final funding plan the voters required for each corridor or usable segment of the project. (Sts. & Hy. Code, § 2704.08, subd. (d).)
1. Contrary to the trial court's determination, the High-Speed Passenger Train Finance Committee properly found that issuance of bonds for the project was necessary or desirable.
2. The preliminary section 2704.08, subdivision (c) funding plan was intended to provide guidance to the Legislature in acting on the Authority's appropriation request. Because the Legislature appropriated bond proceeds following receipt of the preliminary funding plan approved by the Authority, the preliminary funding plan has served its purpose. A writ of mandamus will not lie to compel the idle act of rescinding and redoing it.
We therefore will issue a peremptory writ of mandate directing the trial court to enter judgment validating the authorization of the bond issuance for purposes of the 2008 voter-approved Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century (Bond Act). (§ 2704 et seq.; see § 2704.04, subd. (a).) Further challenges by real parties in interest to the use of bond proceeds are premature. The writ will also compel the trial court to vacate its rulings requiring the Authority to perform the idle act of redoing the preliminary section 2704.08, subdivision (c) funding plan after the Legislature appropriated the bond funds.
On November 4, 2008, the voters of California passed Proposition 1A, the Bond Act, "to initiate the construction of a high-speed train system that
The Bond Act sets forth specific criteria for the bond proceeds as well as for the design and capacity of the system. For instance, no more than $950 million of bond proceeds can be used for non-high-speed rail connectivity with high-speed rail lines. (§ 2704.095.) High-speed rail, the Act provides, will feature electric trains capable of operating at speeds of 200 miles per hour or greater, guaranteed maximum travel times between major destinations, and achievable operating headway (time between successive trains) of five minutes or less. (§ 2704.09, subds. (a), (b) & (c).)
The Authority is the administrative body with primary responsibility for overseeing the planning and construction of the high-speed rail system. (§ 2704.01, subd. (b); Pub. Util. Code, § 185020.) The Authority is subject to the terms of the financing program set forth in article 2 and the fiscal provisions set forth in article 3 of the Bond Act. (§§ 2704.04 et seq., 2704.10 et seq.) The Argument in favor of Proposition 1A promised the voters: "Proposition 1A will protect taxpayer interests. [¶] • Public oversight and detailed independent review of financing plans. [¶] • Matching private and federal funding to be identified BEFORE state bond funds are spent. [¶] • 90% of the bond funds to be spent on system construction, not more studies, plans, and engineering activities." (Voter Information Guide, Gen. Elec. (Nov. 4, 2008) argument in favor of Prop. 1A, p. 6.)
The Bond Act incorporates by reference the State General Obligation Bond Law, Government Code section 16720 et seq. (Bond Law), which provides a uniform procedure for authorizing the issuance, sale, and repayment of general obligation bonds on behalf of the state. (§ 2704.11.) The Bond Act designates the Authority to act as the "board" for purposes of all Bond Law procedures (§ 2704.12, subd. (b)), including the authority to request that the "[c]ommittee" authorize the issuance of bonds (Gov. Code, § 16722, subd. (d)). The Bond Act also creates a High-Speed Passenger Train Finance Committee (Finance Committee) to serve in the same capacity as the
Section 2704.08 is at the heart of the writ proceeding now before us. Pursuant to subdivision (a) of section 2704.08, the bond proceeds cannot be used for more than 50 percent of the total cost of construction for each usable segment or corridor. "Corridor," as used in the Bond Act, is "a portion of the high-speed train system as described in Section 2704.04" (§ 2704.01, term (f)),
Section 2704.08, subdivision (c) provides as follows: "(c)(1) No later than 90 days prior to the submittal to the Legislature and the Governor of the initial request for appropriation of proceeds of bonds authorized by this chapter for any eligible capital costs on each corridor, or usable segment thereof ... the authority shall have approved and submitted to the Director of Finance, the peer review group established pursuant to Section 185035 of the
"(2) The plan shall include, identify, or certify to all of the following:
"(A) The corridor, or usable segment thereof, in which the authority is proposing to invest bond proceeds.
"(B) A description of the expected terms and conditions associated with any lease agreement or franchise agreement proposed to be entered into by the authority and any other party for the construction or operation of passenger train service along the corridor or usable segment thereof.
"(C) The estimated full cost of constructing the corridor or usable segment thereof, including an estimate of cost escalation during construction and appropriate reserves for contingencies.
"(D) The sources of all funds to be invested in the corridor, or usable segment thereof, and the anticipated time of receipt of those funds based on expected commitments, authorizations, agreements, allocations, or other means.
"(E) The projected ridership and operating revenue estimate based on projected high-speed passenger train operations on the corridor or usable segment.
"(F) All known or foreseeable risks associated with the construction and operation of high-speed passenger train service along the corridor or usable segment thereof and the process and actions the authority will undertake to manage those risks.
"(G) Construction of the corridor or usable segment thereof can be completed as proposed in the plan.
"(H) The corridor or usable segment thereof would be suitable and ready for high-speed train operation.
"(I) One or more passenger service providers can begin using the tracks or stations for passenger train service.
"(J) The planned passenger service by the authority in the corridor or usable segment thereof will not require a local, state, or federal operating subsidy.
Section 2704.08, subdivision (d) requires a final, preexpenditure funding plan as follows: "Prior to committing any proceeds of bonds described in paragraph (1) of subdivision (b) of Section 2704.04 for expenditure for construction and real property and equipment acquisition on each corridor, or usable segment thereof, other than for costs described in subdivision (g), the authority shall have approved and concurrently submitted to the Director of Finance and the Chairperson of the Joint Legislative Budget Committee the following: (1) a detailed funding plan for that corridor or usable segment thereof that (A) identifies the corridor or usable segment thereof, and the estimated full cost of constructing the corridor or usable segment thereof, (B) identifies the sources of all funds to be used and anticipates time of receipt thereof based on offered commitments by private parties, and authorizations, allocations, or other assurances received from governmental agencies, (C) includes a projected ridership and operating revenue report, (D) includes a construction cost projection including estimates of cost escalation during construction and appropriate reserves for contingencies, (E) includes a report describing any material changes from the plan submitted pursuant to subdivision (c) for this corridor or usable segment thereof, and (F) describes the terms and conditions associated with any agreement proposed to be entered into by the authority and any other party for the construction or operation of passenger train service along the corridor or usable segment thereof; and (2) a report or reports, prepared by one or more financial services firms, financial consulting firms, or other consultants, independent of any parties, other than the authority, involved in funding or constructing the high-speed train system, indicating that (A) construction of the corridor or usable segment thereof can be completed as proposed in the plan submitted pursuant to paragraph (1), (B) if so completed, the corridor or usable segment thereof would be suitable and ready for high-speed train operation, (C) upon completion, one or more passenger service providers can begin using the tracks or stations for passenger train service, (D) the planned passenger train service to be provided by the authority, or pursuant to its authority, will not require operating subsidy, and (E) an assessment of risk and the risk mitigation strategies proposed to be employed. The Director of Finance shall review the plan within 60 days of its submission by the authority and, after receiving any communication from the Joint Legislative Budget Committee, if the director finds that the plan is likely to be successfully implemented as proposed, the authority may enter into commitments to expend bond funds that are subject to this subdivision and accept offered commitments from private parties."
The peer review group plays another significant role in providing financial oversight and monitoring the feasibility of the Authority's plans. Public Utilities Code section 185035 provides, in relevant part: "(a) The authority shall establish an independent peer review group for the purpose of reviewing the planning, engineering, financing, and other elements of the authority's plans and issuing an analysis of appropriateness and accuracy of the authority's assumptions and an analysis of the viability of the authority's financing plan, including the funding plan for each corridor required pursuant to subdivision (b) of Section 2704.08 of the Streets and Highways Code. [¶] ... [¶] (c) The peer review group shall evaluate the authority's funding plans and prepare its independent judgment as to the feasibility and reasonableness of the plans, appropriateness of assumptions, analyses, and estimates, and any other observations or evaluations it deems necessary."
The Authority is also required to "prepare, publish, adopt, and submit to the Legislature, not later than January 1, 2012, and every two years thereafter, a business plan. At least 60 days prior to the publication of the plan, the authority shall publish a draft business plan for public review and comment. The draft plan shall also be submitted to the Senate Committee on Transportation and Housing, the Assembly Committee on Transportation, the Senate Committee on Budget and Fiscal Review, and the Assembly Committee on Budget." (Pub. Util. Code, § 185033, former subd. (a), as amended by Stats. 2009, ch. 618, § 1.) "The business plan shall identify all of the following: the type of service the authority anticipates it will develop, such as local, express, commuter, regional, or interregional; a description of the primary benefits the
The Authority certified the preliminary funding plan two days after issuing the "Draft 2012 Business Plan" (draft business plan). The draft business plan identified the "corridor, or usable segment thereof," as one of two alternative initial operating sections (IOS): IOS-North, a usable segment of approximately 290 miles from Bakersfield in the south to San Jose in the north, or IOS-South, an alternative usable segment of approximately 300 miles from Merced in the north to the San Fernando Valley in the south. To the consternation of the peer review group, the preliminary funding plan expressly incorporated the draft business plan and proposed an investment of $2,684,000,000 in bonds authorized under Proposition 1A, the amount needed to supplement the $3,316,000,000 in federal funds awarded for construction of the initial construction section (ICS), a 130-mile conventional rail portion of the system. Because of the stringent 60-day deadline to complete its assessment of the preliminary funding plan, the peer review group was put "in the position of reaching findings and conclusions on the Funding Plan based upon the content of a foundational Business Plan document that is still in draft form." (See Pub. Util. Code, § 185035.)
On November 14, 2011, John Tos, Aaron Fukuda, and County of Kings (the Tos real parties in interest) filed their initial complaint for declaratory relief, injunctive relief, and for relief pursuant to Code of Civil Procedure section 526a and the private attorney general doctrine (Tos action), alleging, among other things, that the preliminary funding plan violated the Bond Act. On December 13, 2011, the complaint was amended to add a cause of action seeking relief in the form of a writ of mandamus/prohibition. On January 3, 2012, the peer review group submitted a report to the Legislature outlining weaknesses in the preliminary funding plan and draft business plan, and offering a number of suggestions to improve the viability of the high-speed rail project.
On April 17, 2012, the Legislative Analyst's office (LAO) issued a report providing a negative critique of the revised business plan for the Legislature. The report states: "In April 2012, the [Authority] released its most recent business plan that estimates the cost of constructing the first phase of the high-speed train project at $68 billion. However, the [Authority] only has secured about $9 billion in voter approved bond funds and $3.5 billion in federal funds. Thus, the availability of future funding to construct the system is highly uncertain." (LAO, The 2012-13 Budget: Funding Requests for High-Speed Rail (Apr. 17, 2012) p. 1.) Thus, the LAO concludes: "We find that [the Authority] has not provided sufficient detail and justification to the Legislature regarding its plan to build a high-speed train system. Specifically, funding for the project remains highly speculative and important details have not been sorted out. We recommend the Legislature not approve the Governor's various budget proposals to provide additional funding for the project. However, we recommend that some minimal funding be provided to continue planning efforts that are currently underway." (Ibid.)
On July 18, 2012, nearly four years after adoption of the Bond Act and after extensive studies, planning, public hearings, and debate, the Legislature enacted Senate Bill No. 1029 (2011-2012 Reg. Sess.) (Stats. 2012, ch. 152), thereby appropriating state funds and federal grants for high-speed rail as follows:
A total of $819,333,000 "for capital improvement projects to intercity and commuter rail lines and urban rail systems that provide direct connectivity to the highspeed train system and its facilities ...." (Stats. 2012, ch. 152, §§ 1, 2.)
"Bookend" funding of $1.1 billion "for expenditure for state operations, local assistance, or capital outlay ...." (Stats. 2012, ch. 152, § 3.)
A total of $204,173,000 "[f]or capital outlay, High-Speed Rail Authority, payable from the High-Speed Passenger Train Bond Fund ...." (Stats. 2012, ch. 152, §§ 5, 7.)
To acquire and build the IOS, $3,240,676,000, payable from the Federal Trust Fund. (Stats. 2012, ch. 152, § 8.)
To acquire and build the IOS, $2,609,076,000, payable from the High-Speed Passenger Train Bond Fund. (Stats. 2012, ch. 152, § 9.)
As will be described in further detail, post, the Legislature itself enforced the rigid reporting provisions of section 2704.08, subdivision (c), part of the Bond Act, by requiring the Authority to submit additional reports and obtain additional approvals before the funds appropriated could be encumbered. (Stats. 2012, ch. 152, § 3.)
On March 18, 2013, the Authority adopted resolution # HSRA 13-03 requesting the Finance Committee "to authorize issuance of bonds and commercial paper notes under the Bond Act to provide funds for the projects as authorized in sections 2704.04 and 2704.06 of the California Streets and Highways Code in the aggregate principal amount of $8,599,715,000." That same day, the Finance Committee, consistent with section 2704.13, adopted resolution IX (2013) declaring that it was necessary and desirable "to authorize the issuance hereunder of $8,599,715,000 in [the] principal amount (the `Authorized Amount') of general obligation bonds (the `Bonds') and other obligations pursuant to this Resolution to carry out the purposes" of the Bond Act.
If our arithmetic is correct, therefore, in 2012 the Legislature appropriated a total of $4,732,582,000 in Bond Act funds and $3,289,030,000 from the Federal Trust Fund to finance high-speed rail in California. Of the $8,021,609,000 total funds appropriated by the Legislature, approximately $6.1 billion was appropriated to finance IOS-South. In 2013 the Authority requested, and the Finance Committee authorized, the issuance of bonds under the Bond Act in the aggregate principal amount of $8,599,715,000.
The following day, March 19, 2013, the Authority and the Finance Committee filed a validation action to obtain a judgment validating the bonds so they could be sold on the capital markets. (Code Civ. Proc., § 860 et seq.; Gov. Code, § 17700.) John Tos, Aaron Fukuda, County of Kings, Howard Jarvis Taxpayers Association, Kings County Water District, Citizens for
The trial court bifurcated the writ of mandate issues from the other remedies the Tos real parties in interest sought in the Tos action. Over time, the Tos real parties in interest had amended their complaint several times, with the operative allegations contained in the second amended complaint, which set forth 12 sweeping causes of action. However, at the first hearing on May 31, 2013, the scope of the petition for a writ of mandamus was narrowed to two deficiencies in the preliminary funding plan, which are at issue before us in this appeal.
First, the Tos real parties in interest allege that it will cost at least an additional $20 billion to complete the last 170 miles of the 300-mile usable segment, and contrary to the mandatory terms of Proposition 1A, the sources of these funds have not been identified and committed. (§ 2704.08, subd. (c)(2)(D) ["(2) The [preliminary funding] plan shall include, identify, or certify to all of the following: [¶] ... [¶] (D) The sources of all funds to be invested in the corridor, or usable segment thereof, and the anticipated time of receipt of those funds based on expected commitments, authorizations, agreements, allocations, or other means."].)
Second, the Tos real parties in interest complain that the Authority failed to obtain the necessary environmental clearances before approving the preliminary funding plan. (§ 2704.08, subd. (c)(2)(K) ["(2) The [preliminary funding] plan shall include, identify, or certify to all of the following: [¶] ... [¶] (K) The Authority has completed all necessary project level environmental clearances necessary to proceed to construction."].) "[The Tos real parties in interest] specifically allege that the environmental review process required by Proposition 1A is far from complete, it is in its infancy with respect to the section between Fresno and Bakersfield. In addition, major environmental litigation has just been filed in the Central Valley challenging the adequacy of some of the environmental studies. Additionally, [the Tos real parties in interest] allege that the environmental clearances necessary for defendants to commence construction of the Central Valley project have not been obtained from the U.S. Corps of Engineers, the U.S. Fish and Wildlife Service, and the San Joaquin Valley Air Pollution Control District."
On August 16, 2013, the trial court issued a 15-page ruling explaining that the preliminary funding plan submitted by the Authority to the Legislature did not comply with the Bond Act. (§ 2704.08, subd. (c)(2)(D) & (K).)
The trial court quoted at some length from the draft business plan, rather than the revised business plan. The court noted the draft business plan explicitly stated "that funds for construction of the remainder of the IOS would be identified at a later time (`not later than 2015')" and "candidly acknowledged that committed funding for construction of the IOS in the years 2015 to 2021 `is not fully identified', and that `the mix, timing, and amount of federal funding for later sections of the [high-speed rail] is not known at this time." The court concluded, "This language demonstrates that the funding plan failed to comply with the statute, because it simply did not identify funds available for the completion of the entire IOS."
Rejecting arguments lodged by the Attorney General construing the statute to allow completion of all environmental clearances before construction rather than before the preliminary funding plan is approved, the trial court held: "Subsection (K), on its face, requires the Authority to certify that it has completed all necessary project level environmental clearances necessary to proceed to construction. As the language from the funding plan quoted above demonstrates, the plan does not address project level environmental clearances for the entire IOS at all, but only addresses the ICS. Moreover, the funding plan explicitly states that project level environmental clearances have not yet been completed even for the ICS. It is therefore manifest that the funding plan does not comply with the plain language of the statute."
Although the trial court found the preliminary funding plan was deficient, the court remained uncertain whether a writ of mandate would lie to compel the Authority to rescind it in light of its conclusion that a writ would not issue to invalidate the legislative appropriation both on substantive and procedural grounds.
Procedurally, the court pointed out that the Tos real parties in interest did not seek invalidation of the legislative appropriation in the second amended complaint and raised the issue for the first time in their reply brief. The court subscribed to the general rule that, in fairness to petitioners, arguments raised for the first time in reply would not be considered.
If, as the trial court found, the appropriation was not subject to challenge, the question posed is whether a writ of mandate to rescind the preliminary funding plan would have any real and practical effect. The court asked for supplemental briefing to determine whether the writ could invalidate any subsequent approvals by the Authority or any of the other petitioners. If so, the court intimated that a writ might offer a real and practical benefit.
A second hearing was held on November 8, 2013, and the court issued its second ruling on November 25, 2013. The trial court issued a writ of mandate directing the Authority to rescind its approval of the November 3, 2011, preliminary funding plan because "the preparation and approval of a detailed funding plan that complies with all of the requirements of Streets and Highways Code section 2704.08[, subdivision] (c) is a necessary prerequisite for the preparation and approval of a second detailed funding plan under subdivision (d) of the statute, which in turn is a necessary prerequisite to the Authority's expenditure of any bond proceeds for construction or real property and equipment acquisition, other than for costs described in subdivision (g)." Thus, the trial court concluded, the writ would have a real and practical effect.
The court, however, denied the Tos real parties in interest the many other remedies they sought. It refused to issue a writ to invalidate any subsequent approvals made by the Authority in reliance on the November 3, 2011, preliminary funding plan, including contracts with the Department of Transportation and Tutor-Perini-Parsons, because there was insufficient evidence the Authority, in utilizing federal grant money, had violated any of the limitations set by Proposition 1A and the contracts contained termination
On the same day the trial court issued its ruling in the Tos action, it denied the Authority and Finance Committee's request for a validation judgment approving the issuance of more than $8 billion in bonds. The court found that the Finance Committee's determination that issuance of the bonds was necessary or desirable was a quasi-legislative act that must be supported by evidence in the record. The court explained that it could "find no evidence in the record of proceedings submitted by [the Authority and the Finance Committee] that supports a determination that it was necessary or desirable to authorize the issuance of more than eight billion dollars in bonds under Proposition 1A as of March 18, 2013. The record of proceedings in this matter consists of little more than the Authority's Resolution requesting that the Finance Committee authorize issuance of bonds, and the Finance Committee's Resolutions doing so. The Finance Committee's Resolutions contain bare findings of necessity and desirability which contain no explanations of how, or on what basis, it made those findings. Specifically, the findings contain no summary of the factors the Finance Committee considered and no description of the content of any documentary or other evidence it may have received and considered. Thus the findings themselves do not assist the Court in determining whether those findings are supported by any evidence."
The Authority, the Finance Committee, and others thereafter filed a petition for a writ of mandamus for relief in both cases.
Neither the Bond Law, the Bond Act, nor any of the validation cases we could find support the trial court's highly unusual scrutiny of the Finance
The Authority does not suggest that the validity of bond authorization is never subject to judicial review, that a bond finance committee can or should approve every request for bond authorization as a matter of course, or that courts must validate every authorization of bonds for which validation is sought. Rather, the Authority focuses on the exceptionally broad discretion conferred on any administrative or legislative body charged with making the mere determination that an action is desirable. Given such unencumbered discretion, there is little room for judicial intervention. Real parties in interest simply fail to appreciate the critical distinction between other types of challenges to validation and the very specific determination made by the Finance Committee that the issuance of the bonds was necessary or desirable. Thus, their reliance on Boelts, supra, 127 Cal.App.4th 116 and Poway Royal Mobilehome Owners Assn. v. City of Poway (2007) 149 Cal.App.4th 1460 [58 Cal.Rptr.3d 153] (Poway) misses the mark.
Indeed, Boelts highlights the distinction real parties in interest ignore. The case involved a reverse validation action challenging the validity of an amendment to a redevelopment plan. (Boelts, supra, 127 Cal.App.4th at p. 125.) The community redevelopment laws required the city to make a finding that the project area was blighted "based on clearly articulated and documented evidence." (Health & Saf. Code, § 33367, subd. (d); see Boelts, at p. 127.) Because the governing statute expressly circumscribed the legislative body's discretion by requiring evidence to support the finding, the court invoked the familiar substantial evidence standard of review. (Boelts, at p. 134.) By contrast, the statutory requirement that the legislative body find that an amendment to a redevelopment plan was "`necessary or desirable'" was not substantive and did not limit the city's discretion. (Id. at p. 128, fn. 13.) The "necessary or desirable" determination was not subject to judicial review in Boelts.
Poway, supra, 149 Cal.App.4th 1460 also is inapposite. According to pertinent federal law, the city was required to hold a public hearing before the bond qualified to be used for a residential rental project for low-income residents. (26 U.S.C. § 147(f)(2)(B)(i); Poway, at p. 1482.) The city noticed a
Moreover, such an intrusive standard would offend the fundamental separation of powers between the legislative and judicial branches of government. The Supreme Court has cautioned courts to exercise a highly deferential and limited review, "out of deference to the separation of powers between the Legislature and the judiciary, to the legislative delegation of administrative authority to the agency, and to the presumed expertise of the agency within its scope of authority." (California Hotel & Motel Assn. v. Industrial Welfare Com. (1979) 25 Cal.3d 200, 211-212 [157 Cal.Rptr. 840, 599 P.2d 31].) Where, as here, the administrative agency performs a discretionary quasi-legislative act, judicial review is at the far end of a continuum requiring the utmost deference. (Carrancho v. California Air Resources Board (2003) 111 Cal.App.4th 1255, 1265 [4 Cal.Rptr.3d 536].) An agency's exercise of discretionary legislative power will be disturbed "only if the action taken is so palpably unreasonable and arbitrary as to show an abuse of discretion as a matter of law. This is a highly deferential test. [Citation.]" (Ibid.)
Second, real parties in interest suggest that to allow the Finance Committee utmost discretion in determining whether issuance is necessary or desirable is to allow it to operate as a mere "rubber stamp." Real parties in interest further contend that in that case there is no purpose for the Finance Committee and we should not assume the voters would engage in the idle act of creating a meaningless decisionmaking body. Their argument requires us to presume that the State Treasurer, the Director of the Department of Finance, the Controller, the Secretary of Business, Transportation and Housing, and the chairperson of the Authority, all members of the Finance Committee with considerable public finance expertise, would shirk their responsibility to prudently control the timing of the authorization of the bonds. We do not agree that the creation of a Finance Committee with considerable discretion to employ its expertise would act as a mere "rubber stamp." Rather, by
Real parties in interest insist that even if we reject their argument that the "necessary or desirable" finding was not supported by substantial evidence, we should not enter judgment validating the bonds because the Authority improperly requested the Legislature to appropriate bond funds for a project that has morphed into something materially different from the project approved by the voters. Real parties in interest ask us to remand the validation to the trial court to make this determination. Their challenges are premature.
Real parties in interest acknowledge that there is no published appellate decision denying validation of a bond authorization before there has been an actual bond expenditure for a project differing significantly from the project approved by the voters.
For example, in East Bay Mun. Util. Dist. v. Sindelar (1971) 16 Cal.App.3d 910 [94 Cal.Rptr. 431] (EBMUD), the voters approved a measure allowing the utility district to incur a bonded indebtedness to finance a 10-year "`Water Development Project for the East Bay Area'" in 1958. (Id. at pp. 914-915.) By 1967 the construction of its physical components had been completed, with $84 million in authorized but unissued bonds remaining. The district celebrated the completion of the project. But in 1970 the board of directors authorized the issuance and sale of another $12 million in bonds based on its determination the bonds "`[were] `deemed necessary and desirable... to provide additional moneys to finance the Water Development Project for East Bay Area as authorized at ... [the 1958 bond] ... election.'" (Id. at pp. 915-916.) The district treasurer refused to sign the duly authorized bonds on the following grounds: "`1. That... [the district] ... is without authority to issue said Bonds of Series G or any part thereof for the reason that the Water Development Project for East Bay Area has been fully constructed and completed and that no authority exists for the issuance of said bonds purely for the expansion of the water system of the District based upon the expanded area and increased water demand of the District since the date of ... [the 1958 bond] ... election, to wit, since June 3, 1958. 2. That it was generally understood by the electors of the District voting upon the proposition for the issuance of said bonds that the construction program would end within a period of ten years and that no additional bonds would be issued or sold more than ten years after the date of said election and that the authority to issue and sell said bonds accordingly expired on June 3, 1968, to wit, ten years from the date of said election. 3. That more than twelve years have elapsed since the date of said election and by reason solely of the lapse of time the authority granted by the electors for the issuance and sale of the bonds has ceased to have any effect and the authority of the District to issue and sell said bonds has accordingly expired.'" (Id. at p. 917.)
The courts have been particularly attuned to the fluidity of the planning process for large public works projects. In fact, the Supreme Court has allowed substantial deviation between the preliminary plans submitted to the voters and the eventual final project, admonishing: "[T]he authority to issue bonds is not so bound up with the preliminary plans as to sources of supply upon which the estimate is based that the proceeds of a valid issue of bonds cannot be used to carry out a modified plan if the change is deemed advantageous." (Cullen v. Glendora Water Co. (1896) 113 Cal. 503, 510 [45 P. 822].) Similarly, the court broadly construed the purpose of the proposition approving the Bay Area Rapid Transit District and sanctioned the relocation of one of the terminal stations. The court wrote, "Obviously, the statutes, the notice of election and the ballot proposition itself contemplate a broad authority for construction of a three-county rapid transit system. In the wide scope of this substantial transit project, the deviation of 1 1/2 miles in location of a single station is but a minor change in the tentative plan which was relied upon only to forecast feasibility of the project as a whole." (Mills, supra, 261 Cal.App.2d at p. 669.)
The development of a high-speed rail system for the state of California is even more complex than a regional water or transportation system. The Authority is obligated to prepare preliminary and final funding plans as well as business plans every two years as it fine-tunes the construction of the project. Thus, it may be that the specifics of the project deviate from some of the preliminary planning documents or constitute minor changes from tentative plans. We cannot and should not decide whether any future use of bond funds will stray too far from the express language used in Proposition 1A to describe the purpose and parameters of the Bond Act. The pleadings and the trial court's rulings, in fact, were extremely limited in scope.
The complaint filed by the Authority and the Finance Committee was limited to the validity of the issuance of the bonds for any purpose authorized by the Bond Act, and as a consequence, it did not identify any particular use of the bond proceeds. Nor did the bond resolutions identify any particular use. Because there is no final funding plan and the design of the system remains in flux, as does the funding mechanism to support it, we simply cannot determine whether the project will comply with the specific requirements of the Bond Act and whether any future deviations will be considered
The Attorney General points out that whether or not any particular later expenditure of bond funds would comply with the Bond Act is not relevant to the validity of bond authorization and, as the cases cited by real parties in interest demonstrate, can be adjudicated in separate actions. (See, e.g., Tooker v. San Francisco Bay Area Rapid Transit Dist. (1972) 22 Cal.App.3d 643, 649, 652 [99 Cal.Rptr. 361].) The trial court agreed. "Issues regarding the use of proceeds are separate from the issue raised in this validation action, which is whether the bonds were properly authorized." In denying requests for judicial notice of documents from the Tos action because they were irrelevant, the court recognized that the only statutes and documents it would consider in the validation action were those relating to bond authorization. The court ruled that "[t]he issue before the Court in this validation proceeding is strictly limited to whether the Finance Committee's determination that issuance of bonds was necessary and desirable as of March 18, 2013 is supported by any evidence in the record.... [¶] ... [¶] Because this ruling disposes of the validation action, the Court finds it unnecessary to address or resolve any of the other arguments raised by the [real parties in interest] in opposition to the complaint." Thus, the trial court did not rule on the issue real parties in interest urge us to decide.
The validity of the authorization, therefore, is the only issue framed by the pleadings and decided by the trial court. The final funding plan and additional reports required by section 2704.08, subdivision (d) are yet to be prepared and approved by the Authority, let alone submitted to and approved by the Director of the Department of Finance. It is unclear, therefore, whether the final funding plan will recommend the expenditure of bond funds to "be applied only to the specific object" described in Proposition 1A. (Cal. Const., supra, art. XVI, § 1.) In other words, it is too soon to determine whether the project will be consistent with the parameters the voters approved.
The prayer, for the most part, is more carefully crafted. Each of the following paragraphs limits the validation to the actual authorization and all the "conditions, things, and acts required by law to exist, happen, or be performed" before the authorization:
"[3.]a. All conditions, things, and acts required by law to exist, happen, or be performed precedent to the adoption of the Resolutions, and the terms and conditions thereof, including the authorization for the issuance and sale of the Bonds, Notes, and any Refunding Bonds, have existed, happened, and been performed in the time, form, and manner required by law.
"b. [Petitioners] are legally existing and have the authority under the law to cause the issuance and sale of the Bonds and Notes and to cause the issuance and sale of Refunding Bonds to refund Bonds, Notes, or Refunding Bonds previously issued, as authorized by the Bond Act and the Resolutions; [¶]... [¶]
"d. The Bonds, Notes, and Refunding Bonds to be issued pursuant to the Bond Act, when executed and delivered, will constitute valid and binding general obligations of the State, and any contracts related to the issuance and sale of the Bonds, Notes, or Refunding Bonds will constitute valid and binding obligations of the State, under the Constitution and laws of the State of California...."
Paragraph 3.c., however, gives rise to the same concern as the introductory paragraph. The first part of paragraph 3.c. is consistent with the argument the
By contrast, paragraph 3.e. expressly limits the validation judgment to the authorization of the bonds and not to use of the proceeds. Paragraph 3.e. states: "Any challenges (including pending challenges) based on uses of proceeds of the Bonds, Notes, or Refunding Bonds will not affect the determination of validity of the Bonds, Notes, and any Refunding Bonds to be issued and sold, or the determination of validity of any contracts related to the issuance and sale of the Bonds, Notes, or Refunding Bonds." Despite the plain language of paragraph 3.e., the overly broad language used in the last phrases of paragraph 3.c. gives rise to unnecessary ambiguity and potential mischief. To ensure there is no ambiguity, we will direct the trial court to delete this language as set forth in our disposition.
Petitioners ask us to direct the trial court to vacate the peremptory writ of mandate commanding them to rescind the preliminary funding plan and to redo that plan. (§ 2704.08, subd. (c).) Although we agree with the Tos real parties in interest that the voters clearly intended to place the Authority in a financial straitjacket by establishing a mandatory multistep process to ensure the financial viability of the project, we agree with petitioners that issuance of the writ violates very basic principles circumscribing when and against whom a writ of mandate may issue. In short, the Tos real parties in interest's challenge to the preliminary funding plan was too late to have any practical effect, and it is too early to challenge a yet-to-be-approved final funding plan as required by section 2704.08, subdivision (d).
Yet the same basic rules of statutory construction apply to statutes enacted by the voters as to statutes passed by the Legislature. (Professional Engineers in California Government v. Kempton (2007) 40 Cal.4th 1016, 1037 [56 Cal.Rptr.3d 814, 155 P.3d 226].) We must look to the plain language of the statute to determine the intent of the electors (Terminal Plaza Corp. v. City and County of San Francisco (1986) 186 Cal.App.3d 814, 826 [230 Cal.Rptr. 875]); but the words of the statute are given their ordinary meaning in the context of the statute as a whole and in light of the entire statutory scheme (Professional Engineers, supra, 40 Cal.4th at p. 1037; Doe v. Albany Unified School Dist. (2010) 190 Cal.App.4th 668, 675-676 [118 Cal.Rptr.3d 507]).
The question posed is whether there was a clear and present ministerial duty imposed by the Bond Act on the Authority to redo the preliminary funding plan at the time the trial court issued the writ, given that the Legislature appropriated the funds despite the Authority's failure to submit a preliminary funding plan in compliance with the Bond Act.
The parties present opposing views about the intent of the voters and the scope of the duties they created under the Bond Act. The Attorney General argues the voters approved the act to construct a high-speed rail system as quickly as possible to reduce traffic congestion and greenhouse gasses and to create jobs. (Stats. 2008, ch. 267, § 8, p. 1254.) While the Attorney General concedes the voters imposed more financial restraints on the Authority than in more typical infrastructure projects, she insists the duty to prepare a preliminary funding plan mandated by section 2704.08, subdivision (c) was for the
The Tos real parties in interest, on the other hand, discount the environmental and economic benefits the voters sought to achieve and emphasize the extraordinary duties the voters imposed on the Authority to substantiate the financial and environmental viability of the project before the bonds could be authorized, sold, and spent. The Tos real parties in interest further contend the mandatory language of the statute was designed for the express benefit of the voters; that is, the voters insisted on an elaborate financial mechanism to ensure they would not be obligated to subsidize a boondoggle or pay for a stranded segment of the rail system. Because high-speed rail is the most expensive public infrastructure project in the state's history, the Tos real parties in interest passionately argue that the voters were only willing to bear such an enormous cost by minimizing the risk, imposing a clear and nondiscretionary "High-Speed Passenger Train Financing Program" on the Authority, and mandating a number of other restrictive fiscal protections.
As a matter of statutory construction, there is merit to many of the Tos real parties in interest's arguments. We give effect, as we must, to the plain language of article 2 as an indispensable part of the entire Bond Act. Article 2 is dedicated exclusively to the "High-Speed Passenger Train Financing Program." As described above, the Authority is required to prepare and certify not one, but two, different funding plans. The preliminary funding plan, at issue in these proceedings, must be prepared and submitted to the Legislature at least 90 days before the Authority requests the Legislature to appropriate bond funds. (§ 2704.08, subd. (c).) The preliminary funding plan also must be submitted to a peer review group, the Director of the Department of Finance, the policy committees with jurisdiction over transportation matters, and the fiscal committees in both houses of the Legislature. (Ibid.) The Authority did, in fact, submit its preliminary funding plan to each of the designated groups or committees, many of whom unabashedly registered their concerns and dissent.
The Tos real parties in interest point to glaring deficiencies in the preliminary funding plan. The trial court denied the Authority's motion for judgment on the pleadings on many of the Tos real parties in interest's substantive claims raised in their complaint, which remain pending in the trial court, including a number of ways in which the Tos real parties in interest assert the
The language of section 2704.08, subdivision (c)(2)(D) and (K) appears unambiguous and mandatory. The duty to identify the sources of funding and to complete the environmental clearances is consistent with the very purpose of article 2; that is, the voters designed a financing program to ensure that construction of a segment would not begin until potential financial or environmental obstacles were cleared.
The Bond Act compels the Authority to prepare a preliminary funding plan for submission to the Legislature and the Governor and a final funding plan for approval by the Director of the Department of Finance before committing any proceeds of bonds. The Tos real parties in interest focus on the mandatory language indicating that the preliminary funding plan shall identify the sources of all the funding for the usable segment and shall certify that all environmental clearances have been obtained. But under the Bond Act, bond funds cannot be committed and spent until the second and final funding plan is approved by the Authority and submitted to the Director of the Department of Finance and the chairperson of the Joint Legislative Budget Committee, and an independent financial consultant prepares a report. This latter report is particularly significant in that the independent consultant must certify that construction can be completed as proposed and is suitable for high-speed rail; the planned passenger train service will not require an
Furthermore, the Legislature attached conditions to its appropriation of over $8 billion to finance high-speed rail. As to the $1.1 billion appropriation for "Bookend" funding, the Legislature restricted the encumbrance of the funds to ensure the final funding plan was compliant with the Bond Act and all the necessary environmental clearances had been obtained. As enacted, Senate Bill No. 1029 (2011-2012 Reg. Sess.) provides:
"5. No funds appropriated in this item shall be encumbered prior to the High-Speed Rail Authority submitting a detailed funding plan for the project or projects in accordance with subdivision (d) of Section 2704.08 of the Streets and Highways Code to (a) the Department of Finance, (b) the Chairperson of the Joint Legislative Budget Committee, and (c) the peer review group established pursuant to Section 185035 of the Public Utilities Code.
"6. No funds appropriated in this item shall be encumbered for construction of a project prior to completion of all project-level environmental clearances necessary to proceed to construction and the final notices being contained in the funding plan for the project.
"7. Prior to the obligation of funds to any specific project, and subject to the approval of the Department of Finance, the High-Speed Rail Authority Board shall develop an accountability plan, consistent with Executive Order S-02-07, to establish criteria and procedures to govern the expenditure of the bond funds in this appropriation, and the outcomes that such expenditures are intended to achieve, including a detailed project description and project cost. The procedures shall ensure that the investments comply with requirements of applicable state and federal laws, and are consistent with and advance the state high-speed train system...." (Stats. 2012, ch. 152, § 3, provisions 5-7, approved by Governor July 18, 2012.)
This multilayer approval process is reminiscent of the statutory scenario in C-WIN, supra, 161 Cal.App.4th 1464. Before the developer could begin construction of a large industrial/business park in the City of Santa Clarita
Pursuant to the so-called "WSA law" (Wat. Code, §§ 10910-10915), the water supplier most likely to serve the project must, at the request of the lead agency under the California Environmental Quality Act (CEQA; Pub. Resources Code, § 21000 et seq.), prepare the WSA. (C-WIN, supra, 161 Cal.App.4th at pp. 1478-1480.) The Water Code specifically mandates what information the WSA must include, and like the Tos real parties in interest here, C-WIN asserted the assessment was fatally deficient because it did not satisfy the statutory requirements and was therefore subject to attack under either administrative or traditional mandamus. (C-WIN, at pp. 1480, 1483-1484.) The Court of Appeal held that the petition failed to satisfy prerequisites common to both forms of mandamus relief. (Id. at p. 1484.) In short, the WSA was not a final determination, finding, or decision as necessary to obtain relief by mandamus of either variety. (Id. at p. 1485.)
The court explained: "Thus, in our view the WSA is ... a technical, informational advisory opinion of the water provider. Though the WSA is required by statute to include an assessment of certain statutorily identified water supply issues and is required to be included in the EIR, the WSA's role in the EIR process is akin to that of other informational opinions provided by other entities concerning potential environmental impacts-such as traffic, population density or air quality. The fact that the duties of the water provider in preparing the WSA and responsibility of the lead agency in requesting the WSA are committed to statute does not change the fundamental nature of the WSA itself as an advisory and informational document." (C-WIN, supra, 161 Cal.App.4th at p. 1486.)
Similarly, the preliminary funding plan plays an equally interlocutory and advisory role midstream in the approval process. The Authority must submit the plan to a number of groups, committees, and agencies, including the Legislature, but bond proceeds cannot be committed and construction cannot begin until the final funding plan is sent to the Joint Legislative Budget Committee and approved by the Director of the Department of Finance. And as pointed out above, the Director of the Department of Finance must simultaneously review a report prepared by an independent financial consultant. Thus, the Tos real parties in interest would have us intermeddle in the fluid intermediary steps involved in studying the financial viability of high-speed rail in California.
The trial court found that the Tos real parties in interest did not challenge the legislative appropriation until filing a reply brief, and on that basis alone, the trial court rejected the argument. The court, however, also rejected the Tos real parties in interest's argument on substantive grounds. The court explained: "Nothing in Section 2704.08 (c)(2), or elsewhere in Proposition 1A, provides that the Legislature shall not or may not make an appropriation for the high-speed rail program if the initial funding plan required by Section 2704.08 (c)(2) fails to comply with all the requirements of the statute. Lacking such a consequence for the Authority's non-compliance, Proposition 1A appears to entrust the question of whether to make an appropriation based on the funding plan to the Legislature's collective judgment. The terms of Proposition 1A itself give the Court no authority to interfere with that exercise of judgment."
Beyond the plain language of the Bond Act, we are obliged to respect the separate constitutional role of the Legislature. (Cal. Const., art. III, § 3; Butt v. State of California (1992) 4 Cal.4th 668, 695 [15 Cal.Rptr.2d 480, 842 P.2d 1240].) "Respect for the Legislature's constitutional role demands that the courts refuse to judge the wisdom of legislation or the motives of the legislators." (Schabarum, supra, 60 Cal.App.4th at p. 1219.) In particular, the separation-of-powers principles limit judicial authority over appropriations. (Newton-Enloe v. Horton (2011) 193 Cal.App.4th 1480, 1491 [124 Cal.Rptr.3d 310].) Thus, in deference to a coordinate branch of government and in the absence of a clear directive from the people to constrain the discretion of the Legislature, we will not circumscribe legislative action or intrude on the Legislature's inherent right to appropriate the funding for high-speed rail. The trial court properly refused to issue a writ dictating if, or how, the Legislature should act in the face of a deficient preliminary funding plan. We too must defer to the legislative prerogative to control appropriations.
The Tos real parties in interest and amici curiae raise a number of additional arguments that are without merit. Echoing the trial court's creative reasoning, the Tos real parties in interest attempt to make the efficacy of the final funding plan contingent on the preliminary funding plan. In other words, the argument goes, the Authority cannot meet its mandatory ministerial duty to approve a final funding plan as required by section 2704.08, subdivision (d) if it does not generate a statutorily compliant section 2704.08, subdivision (c) funding plan. The trial court expressed its concern that the Authority could begin construction of high-speed rail in the absence of the necessary environmental clearances because subdivision (d), unlike subdivision (c), did not require the Authority to certify that the environmental clearances had been obtained. As a result, the trial court concluded the project could evade environmental review once the Legislature overlooked the deficiency and approved the sale of the bonds. Not so.
Second, a writ of mandate does not lie if the public agency has an obligation to perform under another law. (City of Fremont v. San Francisco Bay Area Rapid Transit Dist., supra, 34 Cal.App.4th at p. 1790.) The
Third, the Legislature forewarned the Authority to complete all the projectlevel environmental clearances. Indeed, as to the appropriation to finance improvements to the "Bookends," "[n]o funds appropriated in this item shall be encumbered for construction of a project prior to completion of all project-level environmental clearances necessary to proceed to construction and the final notices being contained in the funding plan for the project." (Stats. 2012, ch. 152, § 3, provision 6.) The Legislature thereby compelled the Authority to complete its responsibility to obtain the environmental clearances it had not obtained at the time it drafted its preliminary funding plan before it could encumber the appropriated bond funds. In effect, the Legislature simply gave the Authority an extension of time to complete its section 2704.08, subdivision (c)(2)(K) duty and assured it would be able to certify to the environmental clearances within the section 2704.08, subdivision (d) final funding plan.
Finally, section 2704.08, subdivision (d) requires a report describing any material changes from the section 2704.08, subdivision (c) preliminary funding plan. Given that CEQA requires the environmental clearances described in subdivision (d), the report undoubtedly will describe how and when the clearances were obtained in the period of time between the approval of the preliminary and final funding plans. In addition, the independent financial consultant must indicate that the construction "can be completed as proposed." (§ 2704.08, subd. (d).) The construction cannot be completed if the environmental clearances have not been obtained. The environmental clearance provision does not render the two funding plans interdependent, and in the absence of the writ issued by the trial court, the project will not evade environmental review.
The Kings County Water District contends it was prejudiced by petitioners' unreasonable two-month delay in filing the writ petition after entry of the ruling, and therefore, their petition is barred by laches and estoppel. The water district points out that the court did not sign the order until January 3, 2014, and it was not served on them until January 16, just eight days before petitioners filed their petition, originally before the Supreme Court. Their
Let a peremptory writ of mandate issue directing respondent court to (1) vacate its order of November 25, 2013, and the peremptory writ of mandate issued thereon requiring the Authority to rescind and reissue its preliminary funding plan under Streets and Highways Code section 2704.08, subdivision (c), and (2) enter judgment on the complaint for validation filed by the Authority and the Finance Committee, as follows:
1. All conditions, things, and acts required by law to exist, happen, or be performed precedent to the adoption of the resolutions, and the terms and conditions thereof, including the authorization for the issuance and sale of the bonds, notes, and any refunding bonds, have existed, happened, and been performed in the time, form, and manner required by law.
2. Petitioners are legally existing and have the authority under the law to cause the issuance and sale of the bonds and notes and to cause the issuance and sale of refunding bonds to refund bonds, notes, or refunding bonds previously issued, as authorized by the Bond Act and the resolutions.
3. All proceedings by and for petitioners in connection with the bonds, notes, and refunding bonds to be issued pursuant to the Bond Act, including the adoption of the resolutions and the authorization of the bonds, notes, and any refunding bonds, were and are valid and binding.
4. The bonds, notes, and refunding bonds to be issued pursuant to the Bond Act, when executed and delivered, will constitute valid and binding general obligations of the state, and any contracts related to the issuance and sale of the bonds, notes, or refunding bonds will constitute valid and binding obligations of the state, under the Constitution and laws of the state of California.
5. Any challenges (including pending challenges) based on uses of proceeds of the bonds, notes, or refunding bonds will not affect the determination of validity of the bonds, notes, and any refunding bonds to be issued and sold, or the determination of the validity of any contracts related to the issuance and sale of the bonds, notes, or refunding bonds.
Robie, J., and Butz, J., concurred.