Dive Brief:

• In his first State of the State speech on Tuesday, California Gov. Gavin Newsom said he would significantly scale back the California High-Speed Rail Authority’s beleaguered $77 billion bullet train project that would have connected Los Angeles and San Francisco. “Right now,” Newsom said, "there simply isn’t a path to get from Sacramento to San Diego, let alone from San Francisco to LA." 
• Newsom, who also said he would install Lenny Mendonca, his economic development director, as the authority’s new chair, plans to continue construction of the Merced-Bakersfield segment in order to help “reinvigorate" the state’s Central Valley area. He added that some regional projects, as well as Phase I environmental work, would continue.
• The governor also said that the state would continue to push for both federal and private investment in high-speed rail but that he would put all project information — change orders, cost overruns, travel expenses — online as part of a new policy of transparency and accountability for contractors and consultants.

Dive Insight:

Despite the dramatic shift in direction, Newsom’s announcement does not eliminate the future of high-speed rail in California. "Abandoning high-speed rail entirely,” he said, "means we will have wasted billions of dollars with nothing but broken promises and lawsuits to show for it.”

Newsom also made reference in his speech to the $3.5 billion that the federal government has already given the project, an amount that would have to be paid back if the Central Valley Line isn’t complete by 2022. That information came out as part of a state audit that determined that bad, risky decisions on the part of the authority contributed to the project’s schedule delays and cost overruns. The authority, for instance, started construction before it had actually acquired the necessary land. The auditor went so far as to say that the authority “cannot demonstrate that the large amounts it has spent on its contracts have been necessary or appropriate.”

In order to meet the federal deadline, the auditor said the authority will have to double the pace of construction. 

Newsom’s decision will likely add fuel to the arguments against another high-speed project, the bullet train Texas Central Partners is planning between Dallas and Houston. However, a Leon County, Texas, court dealt what could be a significant blow to the project this month when it ruled that Texas Central is not a railroad, reported Houston Public Media. This could keep the company from using eminent domain to acquire property if necessary, but Texas Central said it will appeal the ruling.