BILL ANALYSIS                                                                                                                                                                                                    






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: AB 153
          SENATOR ALAN LOWENTHAL, CHAIRMAN               AUTHOR:  Ma  
                                                         VERSION: 1/23/09
          Analysis by: Art Bauer                         FISCAL:  yes
          Hearing date: June 23, 2009





          SUBJECT:

          High-Speed Rail Authority

          DESCRIPTION:

          This bill clarifies the California High-Speed Rail Authority's  
          (HSRA's) ability to exercise eminent domain power, authorizes  
          the HSRA to employ its own legal staff or to contract with other  
          state agencies for legal services, and makes changes to the  
          HSRA's authority governing project development.

          ANALYSIS:

          Existing law:
           
             1.   Creates the HSRA with a nine member governing board,  
               including five members appointed by the governor, two  
               members appointed by the Senate Rules Committee, and two  
               members appointed by the Speaker of the Assembly.

             2.   Authorizes the HSRA to develop a high-speed rail system  
               extending from San Diego to Sacramento with Phase I being  
               between Anaheim-Los Angeles Union  
               Station-Bakersfield-Fresno-San Jose-San Francisco Transbay  
               Terminal. 

             3.   Authorizes from the proceeds of Proposition 1A, the  
               Safe, Reliable High-Speed Passenger Train Bond Act for the  
               21st Century, approved by the voters last November, of up  
               to $9 billion for high-speed rail development. Of the $9  
               billion up to ten percent ($900 million) may be used for  
               planning, environmental review, and engineering associated  
               with the development of the high-speed rail system. Another  
               2.5 percent ($225 million) may be used for administrative  
               costs.




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             4.   Limits the expenditure of Proposition 1A bond revenues  
               for the construction of the high-speed rail system to not  
               more than 50 percent of the cost of building the high-speed  
               rail system.

             5.   Requires that 90 days prior to submitting to the  
               governor an initial request for an appropriation of bond  
               proceeds for capital expenditures, the HSRA shall convene a  
               peer review committee to review the detailed funding plan  
               for the proposed project. 

             6.   Prohibits state, local, or federal operating subsidies  
               for the high-speed rail service.

             7.   Requires the HSRA to have prepared a business plan by  
               September 1, 2008 that includes the types of services it  
               expects to develop, a description of the system's benefits,  
               a patronage forecast, the sources of funds to construct and  
               operate the project, the chronology for construction of the  
               corridors in which it will operate, the risk associated  
               with construction, technology, financing, and other aspects  
               of the project, and the HSRA's strategy for managing the  
               risks. 

             8.   Prohibits a state agency from employing legal counsel  
               other than the Attorney General, unless specifically  
               authorized by law to do so.

             9.   Authorizes the HSRA to acquire rights-of-way through  
               purchase or eminent domain.

             10.        Prohibits a public entity from commencing an  
               eminent domain proceeding until its governing body has  
               adopted a resolution of necessity. 

             11.        Designates the Public Works Board as the only  
               state agency that may exercise the power of eminent domain  
               to acquire property needed by any state agency, with  
               certain exceptions, including the California Transportation  
               Commission (CTC) for the Department of Transportation  
               (Caltrans)

             12.        Authorizes the HSRA to enter into contracts with  
               public or private entities for the design, construction,  
               operation, and maintenance of high-speed trains. The  




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               contracts may be for design-build method of project  
               delivery.

           This bill  :  
           
              1.   Designates the HSRA as the governing board for adopting  
               a resolution of necessity in order to exercise eminent  
               domain. 

             2.   Authorizes the HSRA to acquire property in the name of  
               the state.

             3.   Authorizes the HSRA to exercise the power of eminent  
               domain.

             4.   Authorizes the HSRA to employee its own legal staff,  
               contract with other state agencies for legal services, or  
               both.

             5.   Deletes unneeded references that related to conditions  
               existing prior to the passage of Proposition 1A, the Safe,  
               Reliable High-Speed Passenger Train Bond Act for the 21st  
               Century.

             6.   Expands the HSRA's authorization for entering into  
               contracts to include financing and maintenance of  
               high-speed trains and to use a  
               design-finance-build-operate-maintenance contract for  
               project delivery.  


          


          COMMENTS:

              1.   Purpose  . According to the author, this purpose of this  
               bill is to delete obsolete language, eliminate ambiguities  
               in the construction of existing law pertaining to the HSRA,  
               and provide the authority granted to large state agencies,  
               such as Caltrans, the Department of Water Resources, and  
               other similar agencies relative to the exercise of eminent  
               domain. 

              2.   Background  . AB 3034 (Galgiani), Chapter 267, Statutes of  
               2008, authorized the provisions of Proposition 1A, the  




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               Safe, Reliable High-Speed Passenger Train Bond Act for the  
               21st Century, which the voters approved last November. That  
               measure provides up to $9 billion in bond proceeds for  
               high-speed rail development. With the passage of  
               Proposition 1A, the HSRA is endeavoring to transform itself  
               from a planning and promotional organization into a project  
               development entity. It is for this reason the HSRA, which  
               is the sponsor of this bill, is seeking language to clarify  
               its authority to exercise the power of eminent domain and  
               relieve it from using the State Public Works Board to  
               initiate eminent domain proceedings. This statutory  
               exclusion is enjoyed by several other large state agencies.  


               The HSRA currently shares a deputy Attorney General with  
               the CTC. Presumably, as the          HSRA begins active  
               project development it will need the full time services of  
               an attorney. In addition, because of the unique technology  
               and the likely reliance on international suppliers, the  
               in-house attorney over time would develop specialized  
               knowledge and expertise related to the project.

               The committee or author may wish to amend the bill to  
               provide that outside counsel retained by the HSRA has not  
               been engaged by a current or potential supplier of services  
               or equipment for the previous five years. 
          
              3.   Is the expansion of the strategies for project  
               development premature  ?  The Senate Transportation and  
               Housing Committee held four oversight hearings on the  
               performance of the HSRA. The committee has been seeking an  
               acceptable business plan since January 2008. The business  
               plan is important because the HSRA is proposing that the  
               state and federal government each share in one-third of the  
               project's cost with the final one-third coming from the  
               private sector. The project will be completed as a  
               public-private partnership. The HSRA has never discussed  
               the type of arrangement it expects the public-private  
               venture to be. For example, is a private consortium  
               expected to design, build, finance, and operate the system?  
               Or is it expected only to operate and maintain the system?  
               Would the consortium buy the rolling stock or would the  
               state? HSRA's financial documents prepared do not discuss  
               the prohibition on the use of state, local, or federal  
               operating subsidies. 





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               In this bill, the HSRA is expanding its authority for  
               entering into contracts for financing and maintaining of  
               high-speed trains and to use  
               design-finance-build-operate-maintenance contract for  
               project delivery. AB 3034 mandated a business plan by  
               September 1, 2008, but the HSRA did not deliver the plan  
               until November 7, 2008, three days after the Proposition 1A  
               election. After reviewing the business plan, the  
               Legislative Analyst Office (LAO) wrote in its discussion of  
               the HSRA's 2009-10 budget request the following: 

                            Our review shows that, while the document  
                    includes, to some degree, each of the statutorily  
                    required elements, the information provided is  
                    very general and does not provide specifics that  
                    are included in typical business plans. In fact,  
                    the plan claims to be only "an outline of the  
                    most recent economic and financial studies that,  
                    taken together, constitute the most current  
                    update."

                            Lacking detailed information.  .  . the  
                    Legislature really has no better sense than prior  
                    to the plan's submission as to how the authority  
                    plans to accomplish its objective.

               The Budget Conference Committee appropriated only half  
               of the HSRA's budget with the remaining amount  
               contingent upon a satisfactory business plan being  
               submitted by the HSRA, partly in response to the LAO's  
               comments. 

               The committee or the author may wish to delete Section  
               6 of the bill, which expands the HSRA's authorization  
               for entering into contracts to include financing and  
               maintenance of high-speed trains and to use  
               design-finance-build-operate-maintenance contract for  
               project delivery.  

               Because the budget bill language adopted by the  
               Conference Committee addresses these topics, the  
               committee may consider the inclusion of this new  
               language in the HSRA's enabling legislation to be  
               premature. 

              4.   Clarification amendment  . The bill does not clearly  




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               distinguish between the HSRA agency and its governing  
               board actions related to acquiring property. The  
               committee or the author may wish to amend the bill and  
               specify that it is the board that takes those actions.  

            
          RELATED LEGISLATION
          
                 SB 409 (Ducheny) creates a Department of Railroads,  
               transfers the functions of the HSRA to a division of  
               high-speed rail, and designates the director of the  
               department as the chair of the HSRA's governing board.  
               This bill is in Senate Appropriations Committee.

                 SB 455 (Lowenthal) establishes legislative priorities  
               for investments and creates reporting requirements to  
               ensure accountability by the HSRA in the performance of its  
               functions and activities. This bill is in the Assembly  
               Transportation Committee

                 SB 783 (Ashburn) requires the HSRA to prepare an  
               expanded business plan, with the plan being submitted to  
               the Legislature by January 1, 2012 and every two years  
               thereafter. The draft business plan must be circulated for  
               public comment. The bill is in the Assembly Transportation  
               Committee.


                 AB 733 (Galgiani) authorizes the HSRA to consider, to  
               the extent permitted by federal law and all other  
               applicable provisions of state law, the creation of jobs in  
               California when awarding major contracts or purchasing  
               high-speed trains and related equipment and supplies. This  
               bill is in the Senate Transportation and Housing Committee.

                 AB 1375 (Galgiani) creates a Department of High-Speed  
               Trains. This bill is in the Assembly Transportation  
               Committee.

          Assembly Votes:
               Floor:                            53-16
               Appr:     11-5
               Judic:    7-2
               Trans:                            9-0

          POSITIONS:  (Communicated to the Committee before noon on  




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          Wednesday,  
                     June 17, 2009)

               SUPPORT:  California High-Speed Rail Authority (sponsor)
                         California State Association of Counties
                         State Building and Construction Trades Council
          
               OPPOSED:  None received.