BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                   SB 783|
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                              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





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           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  







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            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.








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          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. 








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           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?             |







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          |-----------------------------+-----------------------------|
          |                             |                             |
          |-----------------------------+-----------------------------|
          |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  







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          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

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