BILL ANALYSIS                                                                                                                                                                                                    

                                                         VERSION: 6/26/08
          Analysis by: Art Bauer                         FISCAL:  YES
          Hearing date: July 1, 2008                     URGENCY


          High-speed rail 


          This bill makes several changes to the Safe, Reliable High-Speed  
          Train Bond Act for the 21st Century (bond act) scheduled to be  
          on the November 4, 2008 general election ballot.


          The Legislature inaugurated the high-speed rail program when it  
          enacted the California High-Speed Rail Act of 1996, SB 1420  
          (Kopp), Chapter 796. The statute established the California  
          High-Speed Rail Authority (HSRA) as an independent entity with  
          nine board members, five of whom are appointed by the Governor,  
          two by the Senate Rules Committee, and two by the Speaker of the  
          Assembly. The enabling legislation sunsetted the HSRA on  
          December 31, 2003. SB 796 (Costa), Chapter 696, Statutes of  
          2002, repealed that expiration date, making the HSRA permanent. 

          SB 1856 (Costa), Chapter 697, Statutes of 2002, placed The Safe  
          Reliable High-speed Train Bond Act for the 21st Century on the  
          November 2004 ballot and authorized the sale of $9.95 billion of  
          general obligation bonds, including $9 billion of which would be  
          allocated for planning and construction of a high-speed rail  
          segment between San Francisco and Los Angeles. The additional  
          $950 million was designated for rail projects to provide  
          connectivity with the high-speed rail system and other modes of  
          transportation. Because of budgetary constraints first in 2004  
          and again in 2006, the bond measure was removed from the ballot  


          AB 3034 (GALGIANI)                                        Page 2


          twice.  AB 713 (Torrico), Chapter 44, Statutes of 2006 now  
          scheduled for the November 2008 ballot.

          Existing law:

             1.   Identifies a high-speed rail line linking San Francisco  
               Transbay Terminal to Los Angeles Union Station to serve as  
               a "backbone" of a 700-mile system linking all the state's  
               major population centers and to be fully funded before  
               funding other corridors. 

             2.   Identifies the corridors in which high-speed rail is to  
               be constructed after the backbone system if fully funded  

                  a.        Oakland-San Jose
                  b.        Sacramento-Merced
                  c.        Los Angeles-Inland Empire
                  d.        Inland Empire-San Diego
                  e.        Los Angeles-Irvine

             3.   Authorizes the HSRA to undertake the following:

                  a.        Conduct planning, financial, environmental,  
                    and engineering studies to support decisions related  
                    to the selection and acquisition of rights-of-way and  
                    the selection of a franchisee.
                  b.        Select a proposed franchisee, a proposed  
                    route, and proposed terminal sites.
                  c.        Prepare a detailed financing plan, including  
                    any necessary taxes, fees, or bonds to pay for the  
                    construction of the system.
                  d.        Accept grants, fees, and allocations from the  
                    state, local governments, the federal government,  
                    foreign governments, and private sources.
                  e.        Issue revenue bonds guaranteed by state or  
                    federal funds or by project revenues.
                  f.        Prepare a business plan.
                  g.        Enter into contracts for the construction and  
                    operations of the high-speed rail system, including  
                    design-build or design-build-operate contracts.

             4.   Authorizes bond revenues to be used for acquisitions of  
               right-of-way, construction of tracks, bridges and related  
               infrastructure, acquisition of trains, and other related  


          AB 3034 (GALGIANI)                                        Page 3


             5.   Prohibits bond revenue from being used to defraying  
               operating or maintenance costs of trains and facilities.

             6.   Permits bond revenues to be used only for one-half of  
               the total cost of construction of track and stations for  
               each segment of the high-speed train system. 

             7.   Requires the State Auditor to perform periodic audits of  
               the HSRA's use of bond revenue for consistency with the  
               requirements of law.

             8.   Authorizes $9 billion of the bond revenues to be  
               available without reference to fiscal year for the planning  
               and construction of a high-speed train system consistent  
               with the Final Business Plan of June 2000.

             9.   Authorizes $950 million to be allocated by the  
               California Transportation Commission (CTC) for intercity,  
               commuter, and urban rail systems that provide connectivity  
               to the high-speed rail system.

             10.        Authorizes CTC to allocate $190 million of the  
               $950 million for state supported intercity rail services,  
               such as the service between San Diego and Los Angeles,  
               Sacramento and Oakland/San Jose, and Bakersfield to  

             11.        Authorizes CTC to allocate $760 million to  
               commuter and urban rail systems, including light rail,  
               heavy rail, and cable cars. The funds are to be used for  
               connectivity with the high-speed system or for  
               rehabilitation, modernization, or safety improvements to  
               tracks, signals, structures, and rolling stock.

             12.        Requires a dollar-for-dollar match by the  
               non-state providers of eligible services.
            This bill  :

              1.    Makes a finding that if the high speed rail bond is  
                approved, construction will begin on a high-speed rail  
                system linking the state's population centers, including  
                Los Angeles, Sacramento, the Bay Area, the Central Valley,  
                the Inland Empire, Orange County, and San Diego consistent  
                with the HSRA's certified environmental impact report of  


          AB 3034 (GALGIANI)                                        Page 4


                November 2005.

              2.    Makes a finding that the bond revenues are intended to  
                encourage contribution from the federal government and  
                private sector, and that the entire system is completed by  

              3.    Defines a high-speed train as a train that can travel  
                at least 200 miles per hour where conditions permit.

              4.    Deletes requirement that Los Angeles/San Francisco  
                link be fully funded before funding other corridors.

              5.    Defines the corridors in which high-speed rail  
                construction may occur as:

                  a.        Sacramento-Stockton-Fresno
                  b.        San Francisco Transbay Terminal-San  
                  c.        Oakland-San Jose
                  d.        Fresno-Bakersfield-Palmdale-Los Angeles Union  
                  e.         Los Angeles Union Station-Riverside-San Diego
                  f.        Los Angeles Union Station-Anaheim-Irvine
                  g.        Altamont Corridor connecting the Central  
                    Valley to the San Francisco Bay Area

              6.    Deletes the requirement that the high-speed rail  
                system be consistent with the Business Plan of 2000 and  
                requires the system be consistent with the HSRA's  
                certified environmental impact report of November 2005.

              7.    Defines a segment as a portion of a corridor that  
                includes at least two stations.

              8.    Deletes the requirement that revenues in excess of  
                maintenance, operating, and financing obligations are to  
                be transferred to the General Fund.

              9.    Requires revenues from operation above those needed  
                for operating and maintenance costs, financing  
                obligations, and debt service shall be used for  
                construction, expansion, improvement, replacement, and  
                rehabilitation of the system.

              10.        Defines capital cost for which bond revenues may  


          AB 3034 (GALGIANI)                                        Page 5


                be used to include acquisition of property, acquisition  
                and construction of tracks, structures, power systems, and  
                stations; acquisition of train equipment; mitigation of  
                direct and indirect environmental impacts; relocation  
                assistance; and other related capital facilities,  
                including financing and refinancing if authorized by a  
                subsequent statute.

              11.        Authorizes the Legislature to prescribe the  
                method of using bond revenues for acquiring capital assets  
                in a separate statute. 

              12.        Requires bond proceeds to be appropriated in the  
                annual Budget Act or a separate statute for planning the  
                high-speed rail system and associated capital costs.

              13.        Authorizes the Legislature to establish  
                conditions and criteria on funds appropriated for planning  
                and capital costs.

              14.        Authorizes the Legislature to appropriate not  
                more than ten percent of bond proceeds for planning,  
                environmental, and preliminary engineering activities. 

              15.        Limits the expenditure of bond proceeds to not  
                more than 50 percent of the total cost of the construction  
                of track and station cost of each corridor or "usable"  

              16.        Requires the HSRA to prepare and submit to the  
                Legislature, no later than October 1, 2008 a business plan  
                that discusses sources of funding, patronage, project  
                cost, foreseeable engineering and financial risks and  
                other related factors.

              17.        Establishes an eight member independent peer  
                review committee comprised of the following members:

                  a.        Two individuals appointed by the State  
                    Treasurer with experience in the construction or  
                    operation of high speed rail in Europe, Asia, or both.
                  b.        Two individuals, appointed by the Controller,  
                    one with experience in engineering and construction of  
                    high speed rail and one with experience in project  
                  c.        One representative, appointed by the Director  


          AB 3034 (GALGIANI)                                        Page 6


                    of Finance, from a financial service or financial  
                    consulting firm who has not been a contractor or  
                    subcontractor to the HSRA for the previous three  
                  d.        One representative, appointed by the Secretary  
                    of Business, Transportation and Housing, with  
                    experience in environmental planning.
                  e.        Two representatives, appointed by the  
                    Secretary of Business, Transportation and Housing,  
                    from agencies providing intercity or commuter  
                    passenger train service in the state.

              18.        Requires the independent peer review committee to  
                review and issue an analysis of the appropriateness and  
                accuracy of the HSRA's assumptions underlying its  
                planning, engineering, and financing plan and its  
                viability for a project in a corridor for which it is  
                seeking bond funds. 

              19.        Requires the HSRA, 90 days prior to presenting a  
                request to the Governor and Legislature for an  
                appropriation of bond proceeds, to submit to the Director  
                of Finance, the peer review committee, the Senate  
                Transportation and Housing Committee, Assembly  
                Transportation Committee and the legislative fiscal  
                committees a detailed funding plan for a corridor or a  
                usable segment.

              20.        Requires the HSRA to include in the funding plan:

                  a.        An Identification of the corridor in which the  
                    HSRA will expend the funds.
                  b.        A description of the expected terms and  
                    conditions associated with any lease agreement or  
                    franchise agreement proposed to be entered into by the  
                    HSRA for the construction or operation of passenger  
                    train services in the corridor or usable segment.
                  c.        An estimated full cost of constructing the  
                    proposed service, an estimate of construction cost  
                    escalation, and amount of contingency reserves.
                  d.        An identification of all funds to be invested  
                    in the project from public and private sources and the  
                    anticipated time of receipt of funds.
                  e.        An identification of forecasted ridership and  
                    operating revenue.
                  f.        An identification of all known or foreseeable  


          AB 3034 (GALGIANI)                                        Page 7


                    risks during the construction and operations of the  
                    service and the strategies for managing the risks.
                  g.        A certification that corridor or segment will  
                    be suitable and ready for high-speed rail service.
                  h.        A certification that one or more passenger  
                    service providers can begin using the tracks and  
                  i.        A certification that the planned service will  
                    not require a local, state, or federal operating  

              21.        Requires the peer review committee to report its  
                findings and conclusion to the Legislature no later than  
                60 days after receiving the plans.

              22.        Requires the HSRA prior to expending bond  
                proceeds appropriated by the Legislature for the  
                construction and acquisition of equipment and property to  
                submit concurrently to the Director of Finance and the  
                Chair of the Joint Legislative Budget Committee the  

                  a.        A detailed funding plan for the corridor that  
                    indentifies the full estimated cost of the project,  
                    the sources of public and private revenues and their  
                    assumed time of availability, and a project ridership  
                    and operating revenue report; an estimate of  
                    construction cost inflations and the amount of  
                    contingency reserve; a report on any material changes  
                    that have occurred since the initial report to the  
                    Legislature, Director of Finance, and the peer review  
                    committee; and a description of any contract entered  
                    into with any party for the construction and operation  
                    of the proposed service.

                  b.        A report prepared by an independent financial  
                    services indicating that when completed the segment  
                    would be ready for high-speed service; one or more  
                    service providers can use the facilities; the service  
                    provided by the HSRA will not require an operating  
                    subsidy; and assessment of risk and risk mitigation  
                    strategies being proposed.

                The Director of Finance must review the plan described in  
                (b) within 60 days and if the director finds that the plan  
                is "likely to be successfully implemented," the HSRA may  


          AB 3034 (GALGIANI)                                        Page 8


                proceed with the project. The Joint Legislative Audit  
                Committee may communicate its findings to the director  
                during the 60 day period.

              23.        Requires HSRA to give priority to those corridors  
                or segments that are expected to require the least amount  
                of bond revenues as a percentage of total cost of  
                construction. Other criteria include projected ridership  
                and revenue, the need to test and certify trains operating  
                at speeds of 220 miles per hour, and the possibility that  
                the corridor segments may be used by other passenger rail  

              24.        Authorizes the HSRA to use up to 10 percent of  
                the bond proceeds, ($900 million), for planning,  
                preliminary engineering, and environmental studies.

              25.        Authorizes the HSRA to use up 5 percent of the  
                bond proceeds ($450 million), for acquisition of property,  
                right of way and its improvement for the preservation of  
                high-speed rail uses third party improvements to ensure  
                compatibility with the high-speed system, mitigation of  
                incompatible improvements, mitigation of any direct or  
                indirect environmental impacts, and relocation assistance  
                for property owners and occupants.

              26.        Establishes that travel times between the points  
                shall not exceed: 

                  a.         San Francisco-Los Angeles Union Station: two  
                    hours, 40 minutes.
                  b.        Oakland-Los Angeles Union Station: two hours,  
                    40 minutes.
                  c.        San Francisco-San Jose: 30 minutes.
                  d.        San Jose-Los Angeles: two hours, 10 minutes.
                  e.        San Diego-Los Angeles: one hour, 20 minutes.
                  f.        Inland Empire-Los Angeles: 30 minutes.
                  g.        Sacramento-Los Angeles: two hours, 20 minutes.
                  h.        Sacramento-San Jose: one hour, 12 minutes.

              27.        Mandates that spacing between trains, (headways),  
                shall be five minutes or less.


          AB 3034 (GALGIANI)                                        Page 9


              28.        Mandates that the number of stations on all  
                corridors shall not exceed 24 and the stations shall be  
                located with good access to local mass transit services or  
                other modes of transportation.

              29.        Mandates that no station shall be constructed  
                between Merced and Gilroy.

              30.        Mandates that the alignment of high-speed trains  
                shall follow transportation and utility corridors to  
                extent they are financial feasible.

              31.        Mandates that the high-speed system shall be  
                planned and designed to minimize urban sprawl and impact  
                on the natural environment, including mitigating impacts  
                on the movement of wildlife. 

              32.        Designates the bond act as Proposition 1. 

              33.        Specifies both the ballot label and title and  
                summary of Proposition 1.


              1.   Purpose  . This bill revises several provisions of the  
               general bond obligation act Safe, Reliable High-Speed  
               Passenger Train Bond Act for the 21st Century, which is on  
               the November 4, 2008 general election ballot. This bill was  
               original scheduled for the November 2004 ballot. Since the  
               measure was enacted in 2002, the HSRA has refined its  
               analysis of the need for high-speed rail in California, has  
               completed a program environmental impact report on the  
               proposed system, and has completed other activities related  
               to system development. It is for these reasons that the  
               Authority believes it is appropriate to revise the bond  

              2.   San Francisco-Los Angeles corridor no longer the  
               keystone of high-speed rail system  . The bond act requires  
               that the San Francisco-Los Angeles system must be fully  
               funded before funds can be committed to other corridors.  
               This bill deletes the San Francisco-Los Angeles Corridor as  
               the keystone corridor. In testimony at this committee's  
               oversight hearings six months ago, there was no indication  
               that San Francisco-Los Angeles Corridor, which was to go  
               through San Jose, Gilroy, the Merced area, Fresno,  


          AB 3034 (GALGIANI)                                        Page 10


               Bakersfield, Palmdale/Lancaster on into Los Angeles was  
               going to lose its signature status.  The reason for the  
               change, according to the HSRA's documents, is that the high  
               value business trips between Los Angeles and San Francisco  
               would generate 91 percent of the system's revenue, but  
               carry only 16 million of the 94 million trips forecasted  
               for 2020. At the committee's oversight hearing, it was  
               understood that the San Francisco-Los Angeles corridor  
               would be built out incrementally, segment by segment, but  
               in the end there would be a San Francisco-Los Angeles  
               route. Having removed its commitment to the only corridor  
               that links the state's two population centers, the HSRA has  
               diminished the statewide benefit. This bill's lack of  
               clarity as to exactly how the collection of high-speed rail  
               corridors will emerge as a statewide system leaves the  
               impression that the expenditure of the bond revenues might  
               result in the construction of corridor segments without  
               achieving linkage between the state's largest regions. 

               Six of the seven corridors are defined by pairs of cities  
               comprising the corridors' end points. The seventh corridor,  
               added by this bill, The Altamont Corridor connecting the  
               Central Valley to the San Francisco Bay Area, is vague. The  
               committee may wish to amend the bill by renaming the  
               corridor, as the Merced to Stockton to Oakland/San  
               Francisco via the Altamont Corridor.

              3.   Oversight of the HSRA is needed  . One of the important  
               findings of the committee's oversight hearings is that  
               there is a need for greater oversight of the HSRA's  
               activities by both the administration and the Legislature.  
               This bill addresses oversight in three ways: creation of a  
               peer review committee; a pre-appropriation review; and a  
               pre-expenditure review. Each is discussed below.

                   a.        Creation of a peer review committee  . This bill  
                    creates an eight member peer review committee to  
                    review and analyze the planning, engineering, and  
                    financial assumptions underlying a proposed project to  
                    be funded with bond proceeds and report to the  
                    Legislature and the Department of Finance its  
                    findings. Two individuals are appointed by the  
                    Treasurer and two are appointed by the Controller both  
                    of whom must have in the construction and operation of  
                    high-speed rail. One appointment is made by the  
                                                                                               Director of Finance with experience in project  


          AB 3034 (GALGIANI)                                        Page 11


                    financing. The Secretary of Business, Transportation &  
                    Housing appoints an individual experienced in  
                    environmental planning. The Secretary also appoints  
                    two representatives from providing commuter rail and  
                    intercity rail services in the state.

                    On page 4 of the bill where the peer review committee  
                    is authorized, the committee may wish to authorize the  
                    Senate Rules Committee and the chair of the minority  
                    caucus in the Senate to each appoint on individual  
                    with technical, financial, and environmental expertise  
                    to peer review committee. Similarly, the committee may  
                    wish to authorize the Speaker of the Assembly and the  
                    chair of the minority caucus in the Assembly to each  
                    appoint on individual with technical, financial, and  
                    environmental expertise to the peer review committee. 

                    An additional amendment may be appropriate requiring  
                    the HSRA to provide the peer review all the  
                    information that it request.
                   b.        Review of a request from the HSRA for an  
                    appropriation of bond proceeds  . Ninety days before the  
                    HSRA submits a request for an appropriation of bond  
                    proceeds, the HSRA must submit a financing plan for  
                    the project it intends to fund to the peer review  
                    committee, the Director of Finance, the policy  
                    committees, and the fiscal committees of the Senate  
                    and the Assembly. This plan is a detailed plan which  
                    includes the identification of revenues, construction  
                    and operating risks, sources of non-state funds, the  
                    expected terms and conditions of the franchise  
                    agreement associated with the project, and other  
                    related information. Within 60 days of receiving the  
                    information, the peer review committee must report its  
                    findings to the Legislature.  With this information  
                    the Legislature will be in a position to hold public  
                    hearings on the merits of the HSRA's proposed  
                    investment before the budget committees begin their  
                    consideration of the Governor's budget. Depending on  
                    the outcome of the Department of Finance's review, the  
                    request may be placed in the Governor's budget. The  
                    Legislature and the administration will have the same  
                    period of time to review the proposed project to be  
                    funded by the project. 


          AB 3034 (GALGIANI)                                        Page 12


                   c.        Review of the HSRA's request to expend bond  
                    proceeds  . Prior to expending an appropriation to begin  
                    construction of a project the HSRA must report to the  
                    Director of Finance and the chair of the Joint  
                    Legislative Budget Committee (JLBC) a detailed funding  
                    plan and a statement of any material changes from the  
                    information provided in the submittal associated with  
                    the request for an appropriation, plus a description  
                    of the contract that the HSRA is proposing to enter  
                    with a contractor or consortium to construct,  
                    maintain, and operate high-speed rail service.  
                    Department of Finance is require to commission a  
                    report from an independent financial services  
                    warranting that the service would not require an  
                    operating subsidy and an assessment of the risks and  
                    risk management process established by the HSRA. The  
                    JLBC may submit its comments to the Department of  
                    Finance during the 60 day period. 

              4.   HSRA may use up to 15 percent of bond proceeds for  
               preliminary activities  . This bill authorizes the HSRA to  
               use 10 percent of the bond proceeds, which is $900 million,  
               for planning and preliminary engineering. It is the intent  
               of the HSRA to develop plans in one or more corridors to  
               about 30 percent completion. The HSRA would then solicit  
               proposals from firms seeking to design, build, operate, and  
               maintain a high-speed line for a specified period of time.  
               The HSRA is also seeking to use 5 percent of the bond  
               proceeds, which is $450 million, for the acquisition of  
               right-of-way and other property that may be under the  
               threat of development. Committee staff is unaware of any  
               written justification explaining how this funding need was  
               reached. In light of increasing construction costs, setting  
               aside $1.350 billion for essentially "soft costs" may be  
               viewed as excessive. 

               The committee may wish to amend merge paragraphs (g) and  
               (h) on page 12 into a single paragraph and limit the total  
               amount of bond proceeds for engineering and property  
               acquisition to 10 percent. 

               Page 10, line 7 is redundant language and should be removed  
               as it is repeated on page 12.
              5.   Limit on the state's share of bond proceeds committed to  
               a project  . This bill limits the state's share to 50 percent  


          AB 3034 (GALGIANI)                                        Page 13


               of track and station costs. In fact, the cost of these  
               elements of the system may be the least expensive of the  
               system. The cost of bridges, viaducts, tunnels, rolling  
               stock, and the electrification system may likely cost more  
               on a per unit basis. There is no cap on the state's share  
               of these costs. To be sure, among the criteria the HSRA is  
               to use when selecting between corridors is that the  
               corridor requiring the least amount of bond funds as a  
               percentage of total construction cost would get priority.  
               Because there is no documentation that describes the likely  
               financing scenarios and construction strategies, the  
               Legislature is at a disadvantage in assessing what it might  
               expect the state commitment to the capital cost may be. 

               The committee may wish to consider an amendment that would  
               mandate that "the state's share of the total cost of a  
               project may not exceed 50 percent of the project's cost."  
               Although the Legislature would know that there is a cap on  
               total project expenditures of bond proceeds, the HSRA could  
               negotiate an arrangement with contractors where some cost  
               elements might be 100 percent state revenue and the state  
               would bear no cost responsibility for other elements.  This  
               does not limit the HSRA's flexibility, but it clearly puts  
               all parties on notice that there are limits as to what the  
               state can commit to the project. 

              6.   Information regarding the financing of the project, its  
               risks, and the sequencing of project development lacking  .  
               The high-speed rail project is being proposed to be  
               developed and partially financed as public private  
               partnership. However, it is difficult to understand the  
               scope of the HSRA's intention in regard to funding, the  
               sequencing of corridor development, and the many risks  
               associated with the project. This is important because the  
               HSRA has removed the San Francisco-Los Angeles link as the  
               central feature of the system. The last comprehensive  
               document was the published in June 2000, the  High-Speed  
               Rail System Business Plan  . Until this bill was introduced,  
               the expenditure of bond act revenues was to be consistent  
               with the Business Plan. This bill deletes that requirement  
               and now requires that the expenditures be consistent with  
               the certified environmental impact report of November 2005.  
                An environmental document is  not  a financial analysis that  
               discusses the funding strategy for the project, assesses  
               the likelihood of federal matching funds and explains the  
               requirements of a public-private-partnership (PPP). At the  


          AB 3034 (GALGIANI)                                        Page 14


               committee's January oversight hearing, the chair asked for  
               the HSRA to prepare an updated business plan. `The HSRA has  
               now agreed to submit the plan by October 1, 2008. This bill  
               defines the elements of the business plan that the HSRA is  
               to provide. If this analysis is done correctly, it will be  
               the first updated narrative discussing the financing of the  
               HSRA's program since 2000. 

              7.   Public-Private-Partnership (PPP) will be critical  
               financial component . The PPP concept is both a project  
               delivery and project finance strategy. To date, the PPP  
               bills that have been before the committee have related to  
               highway construction. The usual revenue source to finance  
               project and provide a rate of return to investors have been  
               tolls. This project will be very different. State and  
               federal funds will make up two-third of the construction  
               revenue. Although Congress has yet to enact a federal  
               high-speed funding program, it does appear it may do so  
               this session. The final leg of the funding stool is private  
               funds. It is unclear exactly what will be required of the  
               state to attract private funding. For example, will the  
               negotiated rate of return to the private investors be  
               derived from the fare revenues or will the state have to  
               provide a secondary revenue source to guarantee the rate of  
               return? There may be other requirements financial  
               requirements that the state will have to negotiate to  
               attract private participation. The updated business plan  
               required by this bill should include a comprehensive  
               discussion of this and related issues.

              8.   Technical amendments  . The words segment and useable  
               segment are used interchangeably. It is recommended that  
               "useable segment" be used throughout the bill in place of  
               segment. A second amendment on Page 4, line 12, subdivision  
               (d) should read subdivision (c).

              9.   Opposition  . The Professional in California Government  
               (PECG) is opposed to this bill. PECG is seeking amendments  
               that "would assign essential public-interest  
               functions-preparation of environmental documents,  
               right-of-way acquisition, construction inspection and  
               materials testing, for example-to the California Department  
               of Transportation on the high-speed rail project."  To  
               address its concerns, PECG has suggested the following  
               amendment to the Authority's enabling statute: 


          AB 3034 (GALGIANI)                                        Page 15


                     (a) Notwithstanding Section185036, the authority  
                    shall utilize the department's services for  
                    project design and engineering, including  
                    construction inspection. The authority and the  
                    department shall enter into agreements, upon  
                    those terms as they may agree to in writing, for  
                    the department to provide design and engineering  
                    services on a project for the authority.  The  
                    agreements shall provide for payment in advance  
                    for all design and engineering services provided  
                    by the department.

                    (b) Any project utilizing the department's  
                    services shall be included in the department's  
                    capital outlay support program for workload  

                    (c) For the purposes of this section, the  
                    following terms have the following meaning:

                          Project design and engineering, including  
                          construction inspection" means preliminary  
                          engineering, pre-bid services, right-of-way  
                          acquisition, environmental documents,  
                          construction inspection including surveying  
                          and materials testing, and quality control  
                          inspection including highway and utility  
                          relocation and grade separations shall be  
                          performed by the department consistent with  
                          current practices for state highway  

               Committee staff notes that this language may be  
               unconstitutional as it mandates that the HSRA enter into an  
               agreement with Caltrans for services. It is unclear what  
               the response of the private sector market for a PPP  
               project, if the firms are unable to use their engineers for  
               inspection and materials testing.  It is also questionable  
               if Caltrans management would want to do inspection and  
               materials testing on a project where there are elements,  
               such as the rail design, for which its engineers do not  
               have the design experience. More permissive language  
               regarding the HSRA utilizing Caltrans services may avoid  
               the constitutional issues. 


          AB 3034 (GALGIANI)                                        Page 16


               Existing law requires all state contracts for public works  
               to be under the charge and direct  control of the  
               Department of Transportation (Caltrans), unless there is a  
               specific exemption. This bill provides authority to the  
               Authority (CHSRA) to let contracts for constructing a  
               high-speed rail project. 

          Assembly Votes:
               Floor:    60-3
               Appr: 12-0
               Trans:    10-0

          POSITIONS:  (Communicated to the Committee before noon on  
                     June 25, 2008)

               SUPPORT:  California High Speed Rail Authority (Sponsor)
                         Antelope Valley Board of Trade
                         Association for California High Speed Trains and  
                         its 90 firms, individuals
                           and associations
                         California State Association of Counties
                         City of Elk Grove
                         City of Hanford
                         City of Lemoore
                         City of Palmdale
                         City of Sacramento
                         City of San Jose
                         County of Kern
                         County of Los Angeles
                         County of Merced
                         County of Sacramento
                         County of Yolo
                         Merced County Association of Governments
                         Orange County Transportation Authority
                         Rail Passenger Association of California
                         Sacramento Area Council of Governments
                         Sacramento Metropolitan Air Quality Management  
                         San Diego Association of Governments
                         San Francisco Chamber of Commerce
                         San Francisco Democratic Party
                         San Francisco International Airport
                         San Joaquin Valley Regional Planning Agencies  


          AB 3034 (GALGIANI)                                        Page 17


                         Directors' Committee
                         San Mateo County Economic Development Association
                         Santa Clara Valley Transportation Authority
                         Silicon Valley Leadership Group
                         Tri-Valley Regional Rail Policy Working Group
                         University of California, Merced

               OPPOSED:  Alameda County Congestion Management Association
                         California Rail Foundation
                         Professional Engineers in California Government
                         Service Employees International Union (SEIU)
                         Transportation Solutions Defense and Education