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UPDATE: Jim Christie - Reuters
8:47 p.m. CDT, July 5, 2012
-SAN FRANCISCO (Reuters) - The California state Assembly on Thursday approved an $8 billion high-speed rail financing plan that likely will face a tougher vote in the Senate over the system's projected $68 billion cost and concerns about its management.

The project, expected to take decades to complete, has the backing of Democratic Governor Jerry Brown, who says a bullet train network will boost job creation and provide an alternative to car and plane travel in the country's most populous state.

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Unions also have lobbied hard for what is the most ambitious public works project in California, which has a 10.8 percent unemployment rate.

But Republicans oppose the plan, predicting it will be a massive financial burden for the state.

The plan passed the Democrat-controlled Assembly by a 51-27 vote on Thursday. Its fate in the Senate, which has a slimmer Democratic majority, is uncertain because six Democratic senators have expressed reservations about the plan.

The Senate is expected to vote on Friday.

If it is approved, California could begin selling bonds for the project and lock in federal funds for a line in the state's Central Valley.

Senator Leland Yee, a Democrat from San Francisco, said the plan's supporters have their work cut out winning him over, a sentiment other Democratic senators have shared with Reuters in recent days.

"Right now, my choice is not to support this particular arrangement," Yee said.

Voters approved the sale of nearly $10 billion in general obligation bonds in 2008 to build the system, but many have soured on the idea, which assumed the U.S. government would help pay for the system and the private sector would help fund it.

Support for the project has ebbed as California has struggled in recent years with large deficits that forced deep spending cuts to the state's most basic programs.

INTENSE SCRUTINY

The authority in charge of planning for the high-speed rail network also has seen its plans for routes, financing, cost estimates, ridership and travel times subjected to intense scrutiny and stinging criticism.

California's nonpartisan Legislative Analyst's Office, which studies state finances, released a report in April that said the California High-Speed Rail Authority had "not made a strong enough case for going forward with the project at this time."

Brown has sought to salvage the authority by appointing Dan Richard, a veteran board member of the San Francisco region's Bay Area Rapid Transit rail system, to its board. He took charge earlier this year and jumped into tackling concerns raised in the Legislature by the authority's previous leadership.

But the Obama administration's insistence that initial federal funds for California's high-speed rail network be spent in the state's Central Valley farming region remains a key problem.

The White House sees California as critical to keeping its plans for high-speed rail projects on track after Republican governors in Ohio, Wisconsin and Florida rejected federal funds for projects in their states.

"California is the signature high-speed rail project in the nation," said Petra Todorovich, a rail policy expert at Regional Plan Association in New York, a nonprofit urban planning group. "It has the potential to have transformative impacts on the state, on its geography, and how people get around."

Some Democrats in California's Senate say money should go to urban coastal areas, where improved rail service could ease traffic congestion and generate revenue to cover the costs of building and operating speedier rail lines.

Those concerns have found their way into the funding plan headed to the state Senate.

It proposes California sell $2.6 billion in bonds to unlock $3.2 billion in funds from Washington to build a Central Valley track. The plan would also spend more than $2 billion in a mix of federal, state and local funds on rail projects in urban areas to prepare to link them to a statewide system.

It remained uncertain whether enough Democrats in the Senate would rally behind that plan, which does not account for the tens of billions of dollars needed to fully extend the rail system across the state.

"That is the elephant in the room," said Democratic Senator Mark DeSaulnier, who is working on an alternate plan to present to his caucus.

(Reporting By Jim Christie; Additional reporting by Mary Slosson in Sacramento; Editing by Cynthia Johnston, Jan Paschal and Paul Simao)

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