Transportation Secretary Ray LaHood is warning the incoming Republican governors of two Midwestern states that unless they use certain grant funding for high-speed rail projects, they will lose the funds entirely.

LaHood sent the warning letters Monday to Wisconsin Governor-elect Scott Walker and Tuesday to Ohio Governor-elect John Kasich. Both have said they will oppose the Obama administration’s plans for high-speed rail projects in their states funded partly with competitive federal grants.

The U.S. Department of Transportation has awarded about $10.4 billion of high-speed passenger rail grants for federally designated corridors across the country.

The largest concentration of awards has been in California and Florida, but several states in the Midwest corridor have received funds from the American Recovery and Reinvestment Act’s totaling nearly $8 billion and the $2.5 billion that was appropriated by Congress for fast-rail development.

Ohio and Wisconsin have been offered a total of more than $1 billion to develop rail lines that would be part of a Midwest passenger rail corridor.

But the incoming governors have said they think the money would be better spent on roads and other traditional surface transportation projects than on President Obama’s national rail initiative. They also protested having to supply money from state coffers to satisfy the state matching requirements of at least 20% tied to some of the federal grants.

“I respect the power of governors to make decisions for their states,” the secretary said in the letter to Walker. “There seems to be some confusion, however, about how these high-speed rail dollars can be spent.”

LaHood went on to say that he wanted to “set the record straight” about the funds.

“None of the money provided to Wisconsin may be used for road and highway projects, or anything other than high-speed rail,” LaHood said. “Consequently, unless you change your position, we plan to engage in an orderly transition to wind down Wisconsin’s project so that we do not waste taxpayers’ money.”

The outgoing governor of Wisconsin, Jim Doyle, last week ordered work on the project to stop because of the governor-elect’s apparent desire to halt the project.

Kasich had written to Ohio’s outgoing governor, Ted Strickland, asking for the project to be halted, but his request has not been honored.

Kasich also wrote to the president, asking that Ohio’s $400 million for high-speed rail development be used instead for road projects in the state.

LaHood informed Kasich in a letter that “none of those funds may be used for anything other than our high-speed rail program,” and that by spending the money on that project, it would “create thousands of jobs and spur economic development — a shot in the arm that Ohio could well use.”

But if the state does not use the funds for that purpose, the U.S. Department of Transportation would wind down Ohio’s project, LaHood said, mirroring his warning to Wisconsin.

There would likely be plenty of demand for any re-allocated funds if the grants are reclaimed from Ohio and Wisconsin. The most recent round of high-speed rail grant applications — which would have required states to provide matching funds — was oversubscribed.

The Federal Railroad Administration received 132 applications from 32 states totaling $8.8 billion, but only $2.4 billion was available.

The FRA had received $55 billion of requests for ARRA rail funds, but had only $8 billion available to pay out.

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