BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 783| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 783 Author: Ashburn (R),et al Amended: 7/2/09 Vote: 21 SENATE TRANS. & HOUSING COMMITTEE : 10-0, 4/28/09 AYES: Lowenthal, Huff, Ashburn, DeSaulnier, Harman, Hollingsworth, Kehoe, Pavley, Simitian, Wolk NO VOTE RECORDED: Oropeza SENATE APPROPRIATIONS COMMITTEE : 12-1, 5/26/09 AYES: Kehoe, Cox, Corbett, Denham, DeSaulnier, Hancock, Leno, Oropeza, Runner, Walters, Wolk, Yee NOES: Wyland SENATE FLOOR : 38-0, 6/1/09 AYES: Aanestad, Alquist, Ashburn, Benoit, Calderon, Cedillo, Cogdill, Corbett, Correa, Cox, Denham, DeSaulnier, Ducheny, Dutton, Florez, Hancock, Harman, Hollingsworth, Huff, Kehoe, Leno, Liu, Lowenthal, Maldonado, Oropeza, Padilla, Pavley, Romero, Runner, Simitian, Steinberg, Strickland, Walters, Wiggins, Wolk, Wright, Wyland, Yee NO VOTE RECORDED: Negrete McLeod, Vacancy ASSEMBLY FLOOR : 76-0, 8/17/09 (Consent) - See last page for vote SUBJECT : High-speed rail business plan SOURCE : Author CONTINUED SB 783 Page 2 DIGEST : This bill requires the High-Speed Rail Authority to prepare, publish, and adopt a business plan by January 1, 2012 and every two years thereafter. Assembly Amendments (1) authorize the High-Speed Rail Authority to use information that is has developed, in compliance with High-Speed Rail Bond Act requirements, for the preappropriation review process and the preexpenditure review process, for the biennial business plan updates; (2) specify that a draft of the business plan, when released, shall be submitted to the Senate Committee on Budget and Fiscal Review, and the Assembly Committee on Budget; and (3) add "right of way acquisition" and "environmental clearances" to the list of foreseeable risks for which the business plan should address. ANALYSIS : Existing law: 1.Creates the California High-Speed Rail Authority (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. Proposition 1A, the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, approved by the voters last November, provides up to $9 billion for the development of the high-speed rail system. 3.Limits the expenditure of bond revenues for the construction of the high-speed rail system to not more than 50 percent of the cost of building the system. 4.Requires that 90 days prior to submitting to the governor an initial request for an appropriation of bond proceeds SB 783 Page 3 for capital expenditures, the HSRA shall convene a peer review committee to review the detailed funding plan for the proposed project. 5.Prohibits state, local, or federal operating subsidies for the high-speed rail service. 6.Authorizes, to the fullest extent possible, HSRA to use information that it has developed, in compliance with High-Speed Rail Bond Act requirements for the preappropriation review process and the preexpenditure review process, for the biennial business plan updates. 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. This bill: 1.Requires the HSRA to adopt the business plan and submit the plan to the Legislature by January 1, 2012 and every two years thereafter. Sixty days prior to submitting the plan to the Legislature, the HSRA must publish a draft plan for public review and comment. 2.Requires the expanded business plan to include the most recent patronage forecast to identify high, medium, and low ridership scenarios and the corresponding levels of service for Phase I. 3.Requires the HSRA to prepare alternative financial pro formas for the different levels of service, identify the break even point, and assume no operating subsidies. 4.Requires the HSRA to identify supplemental sources of funding to augment bond revenues and its confidence in the availability of supplemental funds. SB 783 Page 4 5.Requires the HSRA to identify written agreements with public or private entities to fund components of the high-speed rail stations and terminals. 6.Requires the HSRA to identify alternative public-private development strategies for implementing Phase I. 7.Requires the HSRA hold at least one public hearing on the business plan and adopt the planet a regularly scheduled meeting. Requires HSRA take into consideration comments from the public hearing and written comments that it receives in that regard, and any hearings that the Legislature may hold prior to adoption of the plan. Comments AB 3034 (Galgiani), Chapter 267, Statutes of 2008, authorized the provisions of Proposition 1A, the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, which the voters approved last November. That bill provides up to $9 billion in bond proceeds for high-speed rail development. Among the provisions of AB 3034 was a requirement that the HSRA prepare a single business plan by September 1, 2008. The HSRA submitted the plan on November 7, 2008, three days after the election. The HSRA testified at an oversight hearing of the Senate Transportation and Housing Committee in October 2008 that the plan was going to late because of the delay in the adoption of the 2008-09 state budget. 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? The financial documents prepared by the HSRA do not discuss the prohibition on the use of state, local, or federal operating subsidies. SB 783 Page 5 Legislative Analyst comments on the HSRA's business plan . In its review of the HSRA budget request for the 2009-10 fiscal year, the LAO summarized inadequacies it found in the HSRA's November business plan, (see table below). This endeavors to address the issues raised by the LAO as well as other concerns. ----------------------------------------------------------- | | | Business Plan Fails to Provide Many Details | | | ----------------------------------------------------------- |-----------------------------+-----------------------------| |Statutory Requirements | Sample of Missing Details | |-----------------------------+-----------------------------| | | | |-----------------------------+-----------------------------| |Description of the |What are the expected | |anticipated system |service levels? | |-----------------------------+-----------------------------| | |What is the assumed train | | |capacity? | |-----------------------------+-----------------------------| | | | |-----------------------------+-----------------------------| |Forecast of patronage, |How are ridership estimates | |operation & capital costs |projected? | |-----------------------------+-----------------------------| | |What is the operating | | |break-even point? | |-----------------------------+-----------------------------| | |How will costs be | | |distributed by segment | | |route? | |-----------------------------+-----------------------------| | | | |-----------------------------+-----------------------------| |Estimate of necessary |How would funds be secured? | |federal, state, and local | | |funds | | |-----------------------------+-----------------------------| | |What level of confidence is | | |there for receiving each | | |type of funding? | SB 783 Page 6 |-----------------------------+-----------------------------| | | | |-----------------------------+-----------------------------| |Proposed construction |What is the proposed | |timeline for each segment |schedule, by segment, for | | |completing | | |design/environmental | | |clearance? | |-----------------------------+-----------------------------| | |For beginning/completing | | |construction | |-----------------------------+-----------------------------| | | | |-----------------------------+-----------------------------| |Discussion of risks and |How would each type of risk | |mitigation strategies |impact the project? | |-----------------------------+-----------------------------| | |What specific mitigation | | |strategies are planned to be | | |deployed? | | | | ----------------------------------------------------------- The LAO makes the following comment in its analysis of the HSRA budget and the inadequacy of the business plan: Lacking detailed information such as this, the Legislature really has no better sense than prior to the plan's submission as to how the authority plans to accomplish its objective. As the authority continues to develop the high-speed rail system, it is essential that the Legislature have a clear understanding of how the state is proceeding with the project and, most importantly, the risks it may be assuming and how those risks would be mitigated. So that the Legislature will have the necessary information, we recommend that the Legislature requires the authority to expand upon its business plan and submit information to include specific elements missing from the original document before appropriating any bond funding for 2009-10. Although it is likely that there will be an appropriation of bond revenue for continuing the environmental and preliminary engineering work that is already underway, the HSRA will not be seeking funding for a construction project SB 783 Page 7 for the 2009-10 fiscal year. Related legislation SB 455 (Lowenthal) provides the HSRA with certain property management powers, requires the governor's appointee to the governing to be confirmed by the Senate, establishes a policy for prioritizing investments, and provides a process for reporting on the progress of the high-speed rail project to the Legislature. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No According to the Assembly Appropriations Committee, minor additional bond-funded costs, likely less than $100,000 in 2011 and biennially thereafter, to complete the modified business plan. ASSEMBLY FLOOR : AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield, Brownley, Buchanan, Caballero, Charles Calderon, Carter, Chesbro, Conway, Coto, Davis, De La Torre, De Leon, DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, Nielsen, John A. Perez, V. Manuel Perez, Portantino, Ruskin, Salas, Silva, Skinner, Solorio, Audra Strickland, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, Bass NO VOTE RECORDED: Cook, Saldana, Smyth, Vacancy JJA:do 8/18/09 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END ****