The Trump administration is planning to take back nearly $1 billion in grants to build California's high-speed rail network and is "exploring all available legal options" to seek the return of an additional $2.5 billion in funds after the state's governor said he didn't see a path to complete the entire project from San Francisco to Los Angeles.
The letter from Ronald Batory, administrator of the Federal Railroad Administration, to California High-Speed Rail Authority CEO Brian Kelly on Tuesday said the agency intended to cancel a $929 million grant for the project on March 5, significantly escalating tensions between the Trump administration and California and threatening to throw the troubled project into further doubt.
"FRA has determined that CHSRA has materially failed to comply with the terms of the Agreement and has failed to make reasonable progress on the Project," Batory wrote.
The letter comes one week after California Gov. Gavin Newsom announced during his State of the State address that he would focus on completing only the Central Valley segment of the project, which is estimated to cost more than $77 billion and is years behind schedule.
"Right now, there simply isn’t a path to get from Sacramento to San Diego, let alone from San Francisco to LA. I wish there were," he said. "However, we do have the capacity to complete a high-speed rail link between Merced and Bakersfield."
Newsom's statements suggested "a significant change" in plans for the high-speed rail project and only reinforced the federal government's concerns about the rail authority's ability to "deliver on its obligations," the letter said.
"During his recent State-of-the-State address, Governor Newsom presented a new proposal that represents a significant retreat from the State's initial vision and commitment and frustrates the purpose for which Federal funding was awarded," Batory wrote.
The remarks prompted President Donald Trump to tweet, incorrectly, that California had canceled the bullet train and demand the state pay back the $3.5 billion in federal grants awarded for the project.
"Whole project is a 'green' disaster," Trump said.
While Newsom's remarks did spark some confusion about whether he was abandoning the entire project, the governor said the state will complete an environmental review for the rail line connecting San Francisco and Los Angeles and continue to push for more federal and private dollars to complete the system.
Newsom responded to the administration's letter Tuesday, calling it "political retribution" for the lawsuit California and 15 other states filed this week against Trump's national emergency declaration to build a US-Mexico border wall.
"It's no coincidence that the administration’s threat comes 24 hours after California led 16 states in challenging the president’s farcical 'national emergency,'" Newsom said in a statement to BuzzFeed News. "The president even tied the two issues together in a tweet this morning. This is clear political retribution by President Trump, and we won't sit idly by. This is California's money, and we are going to fight for it."
A spokesperson for the rail authority declined to comment, referring BuzzFeed News to the governor's statement.
In 2010, the rail authority received $2.5 billion in funding through the American Recovery and Reinvestment Act to begin planning and constructing the high-speed rail project. The following year, the state received an additional $929 million, bringing the total federal investment in the project to $3.5 billion, according to a November state audit report.
Though both grants were for the Central Valley segment of the rail, Batory's letter described the federal funding as "an initial investment in the larger high-speed rail" and stated that FRA is "exploring all available legal options" to also terminate the agreement for the $2.5 billion grant.
The audit report forewarned that the state risks having to pay back the $3.5 billion if it doesn't complete construction of the Central Valley portion of the system by December 2022. The FRA doesn't think the rail authority will meet that deadline based on its progress thus far, according to the letter.