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. AB 153 (MA) Page 2 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 AB 153 (MA) Page 3 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 AB 153 (MA) Page 4 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. AB 153 (MA) Page 5 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 AB 153 (MA) Page 6 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 AB 153 (MA) Page 7 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.