Tos v. State

JOHN TOS et al., Plaintiffs and Appellants, v. STATE OF CALIFORNIA et al., Defendants and Respondents.

C089466

California Court of Appeals, Third District, Sacramento

November 30, 2021

APPEAL from a judgment of the Superior Court of Sacramento County No. 34-2016-00204740-CU-WM-GDS, Richard Sueyoshi, Judge. Affirmed.

Law offices of Stuart M. Flashman, Stuart M. Flashman; and Michael J. Brady for Plaintiffs and Appellants.

Xavier Becerra and Rob Bonta, Attorneys General, Thomas S Patterson, Assistant Attorney General, Paul Stein and Sharon L. O'Grady, Deputy Attorneys General, for Defendants and Respondents.

RAYE P. J.

Appellants John Tos et al. (Tos parties) appeal from a judgment that section 2704.78 of the Safe, Reliable High-Speed Train Bond Act for the 21st Century (Bond Act) (Sts. & Hy. Code § 2704 et seq.) does not violate the state debt provision of the California Constitution set forth in article XVI, section 1.^[1]

Subdivision (d) of section 2704.08 of the Bond Act, approved by the voters in 2008 as Proposition 1A, requires an independent financial report indicating, among other things, that each corridor or segment of a corridor of the high-speed train system, if completed according to a "detailed funding plan" (§ 2704.08, subd. (d)(1)), would be "suitable and ready for high-speed train operation."^[2] (§ 2704.08, subd. (d)(2)(B).) Section 2704.78, subdivision (a), passed by the Legislature in 2016 but not submitted to the voters, provides that "[f]or purposes of the funding plan required pursuant to subdivision (d) of Section 2704.08, a corridor or usable segment thereof is 'suitable and ready for high-speed train operation' if the bond proceeds . . . are to be used for a capital cost for a project that would enable high-speed trains to operate immediately or after additional planned investments are made on the corridor or useable segment thereof and passenger train service providers will benefit from the project in the near-term."

Article XVI, section 1 of the California Constitution requires state debt over $300, 000 to be authorized by a law approved by two-thirds of the Legislature and a majority of the voters. This provision also requires that state debt be "for some single object or work to be distinctly specified therein" and the proceeds "applied only to the specific object" of the authorizing law. (Cal. Const art XVI, § 1.) The law is "irrepealable until the principal and interest thereon shall be paid and discharged . . . ." (Ibid.) The Tos parties contend the meaning of "suitable and ready for high-speed train operation" set forth in section 2704.78, subdivision (a), constituted an implied partial repeal of the Bond Act in violation of section 1 of article XVI of the California Constitution.

We disagree. This constitutional provision does not prohibit alterations of a bond law approved by the voters for a complex public works project, like the high-speed train system, which do not divert funds from, interfere with, or destroy the "single object or work . . . distinctly specified" (Cal. Const., art. XVI, § 1) in the law. Section 2704.78 did not do so. The "single object or work" of the Bond Act was (1) the initial planning and construction of a high-speed train system under (2) a "mandatory multistep process to ensure the financial viability of the project," which we described in California High-Speed Rail Authority v. Superior Court (2014) 228 Cal.App.4th 676 (Rail Authority), our prior opinion on the Bond Act, as a "financial straitjacket." (Rail Authority, at p. 706.) Section 2704.78 furthered the construction of the high-speed train system by investing in improvement of existing rail lines, which after additional investment would be shared with high-speed rail under the "blended systems" approach, while providing benefits to passengers in the near term. Nor did section 2704.78 constitute an escape from the "financial straitjacket." The multistep planning and review process in section 2704.08, subdivision (d), remained intact.

The judgment will be affirmed.

FACTUAL AND PROCEDURAL BACKGROUND

We need not repeat the description of the Bond Act, its history overall structure and initial implementation, which we set forth in Rail Authority, supra, 228 Cal.App.4th at pages 684-693. Lead petitioner in this case, John Tos, was also the lead petitioner in Rail Authority and the parties are well familiar with the background of the Bond Act and our opinion in Rail Authority.

This case concerns subdivision (d)(2) of section 2704.08, the final step in the series of plans and reports required by section 2704.08 to appropriate and expend bond proceeds for the capital costs of a high-speed train corridor or usable segment thereof.

The first step, subdivision (c) of section 2704.08, requires the California High-Speed Rail Authority (Authority), prior to a request to appropriate bond proceeds, to submit a "detailed funding plan" to the Legislature and Governor. (§ 2704.08, subd. (c)(1).) This report must have been previously submitted to the Director of Finance, a peer review group, and multiple legislative committees. (Ibid.) Section 2704.08, subdivision (c)(2), specifies the 11 subjects that the plan must "include, identify, or certify," beginning with "[t]he corridor, or usable segment thereof, in which the authority is proposing to invest bond proceeds," and ending with "[t]he authority has completed all necessary project level environmental clearances necessary to proceed to construction." (§ 2704.08, subd. (c)(2)(A), (K).) One of the 11 specified subjects is that "[t]he corridor or usable segment thereof would be suitable and ready for high-speed train operation." (§ 2704.08, subd. (c)(2)(H).)

The second step, subdivision (d)(1) of section 2704.08, requires the Authority, prior to expenditure of bond proceeds for a corridor or usable segment, to submit a "detailed funding plan" to the Director of Finance and Joint Legislative Budget Committee. (Rail Authority, supra, 228 Cal.App.4th at p. 688.) Subdivision (d)(1) specifies six subjects to be included in the plan beginning with "identif[ying] the corridor or usable segment thereof, and the estimated full cost of constructing the corridor or usable segment thereof" and ending with "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." (§ 2704.08, subd. (d)(1)(A), (F).)

The third and final step, subdivision (d)(2) of section 2704.08, requires the Authority also to submit to the Director of Finance and Joint Legislative Budget Committee "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 . . . ." The report or reports must "indicat[e]" five subjects, the first two of which concern us here: "(A) construction of the corridor or usable segment thereof can be completed as proposed in the plan submitted pursuant to paragraph (1), [and] (B) if so completed, the corridor or usable segment thereof would be suitable and ready for high-speed train operation." (§ 2704.08, subd. (d)(2)(A), (B).)

The meaning of "suitable and ready for high-speed train operation" set forth in section 2704.78 can be traced to the "Revised 2012 Business Plan" (revised business plan) adopted by the Authority in mid-April 2012. As noted in Rail Authority, the Authority is required to" 'prepare, publish, adopt, and submit to the Legislature, not later than January 1, 2012, and every two years after, a business plan.'" (Rail Authority, supra, 228 Cal.App.4th at p. 689, citing Pub. Util. Code, § 185033, former subd. (a), as amended by Stats. 2009, ch. 618, § 1.) The Authority certified the preliminary funding plan required by section 2704.08, subdivision (c), two days after issuing a "Draft 2012 Business Plan" in 2011. (Rail Authority, at p. 690.)

After a peer review group to the Legislature outlined weaknesses in the preliminary funding plan and draft business plan (Rail Authority, supra, 228 Cal.App.4th at p. 690), the Authority adopted the revised business plan in mid-April 2012. (Id. at p. 691.) Among other things, "the revised business plan introduced a 'blended systems' approach that integrates high-speed rail with existing commuter lines in various urban areas. The revised business plan states: 'Passengers will have more options, faster travel times, and greater reliability and safety. . . . [¶] Benefits will be delivered faster through the adoption of the blended approach and through investments in the bookends. Across the state, transportation systems will be improved and jobs will be created through the implementation of those improvements.'" (Id. at p. 691.)^[3]

In 2016, the Legislature passed Assembly Bill No. 1889 (2015-2016 Reg. Sess.), enacting section 2704.78, effective January 1, 2017. (Stats. 2016, ch. 744, § 2.) Section 1 of the statute explained that the impetus for section 2704.78 was the blended systems approach introduced in the revised business plan:

"(c) In 2012, the High-Speed Rail Authority released the Revised 2012 Business Plan, which called for near-term investments in northern and southern California, known as the 'Bookends,' which would enable high-speed trains to share infrastructure with existing passenger rail service providers as part of a blended system, and is consistent with Proposition 1A. [¶] . . . [¶]

"(g) It is the intent of the Legislature, in appropriating funding for initial investments, that these projects should proceed to construction in the near-term to provide...