BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 16 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: perea VERSION: 12/6/10 Analysis by: Art Bauer FISCAL: yes Hearing date: June 28, 2011 SUBJECT: High-speed rail DESCRIPTION: This bill encourages the California High-Speed Rail Authority to acquire equipment manufactured in California ANALYSIS: In November 2008, California voters approved Proposition 1A, the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century of 2008 (Proposition 1A). The $9.95 billion bond measure provides $950 million for improving conventional rail services connecting to the high-speed rail line and $9 billion for high-speed rail development. Of the remaining $9 billion, $900 million is for the project's planning, environmental analysis, and preliminary engineering. Proposition 1A limits the expenditure of the $8 billion available for construction to not more than 50 percent of the cost of building the systems. Proposition 1A identifies the Phase I corridor for high-speed rail as an alignment from the San Francisco Transbay Terminal to the Los Angeles Union State and Anaheim via the San Joaquin Valley. The HSRA estimates the total cost of Phase I to be between $43 and $65 billion. Proposition 1A defines the capital cost for which bond revenues may 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. It also authorizes the HSRA to contract for services and equipment for developing and operating the high-speed train service. In January 2010, the High-Speed Rail Authority (HSRA) received AB 16 (PEREA) Page 2 an American Recovery and Reinvestment Act (ARRA) grant of $2.25 billion to aid in the development of the Phase I project. Of that amount, $400 million is for constructing the basement of the new Transbay Terminal in San Francisco to accommodate high-speed trains. According to the Federal Railroad Administration's (FRA) announcement of its ARRA award, the remaining $1.85 billion is for purchasing right-of-way, constructing track, signaling systems, and stations, and completing environmental reviews and engineering documents for the Los Angeles/Anaheim segment, the San Francisco/San Jose segment, the Fresno/Bakersfield segment, and the Merced/Fresno segment. In a second round of federal funding the HSRA received approximately $1.3 billion, and in a third round of funding, the HSRA received $300 million from funds declined by Florida. The HSRA and FRA jointly selected a segment from near Fresno to near Bakersfield as the first construction segment. Between federal funds and state bond funds, the HSRA has committed about $5.7 billion for the Central Valley project. As a condition of the ARRA grants, the HSRA must complete construction by September 30, 2017. ARRA prohibits the use of grant funds for a project involving the construction, alteration, maintenance, or repair of a public building or public facility, unless all of the iron, steel, and manufactured goods used in the project are produced in the United States. In addition, it requires that this prohibition be applied in a manner consistent with U.S. obligations under international agreements pertaining to procurement. Lastly, ARRA establishes conditions for waivers of these requirements. This bill authorizes the HSRA to make "every effort" to purchase high-speed rail equipment manufactured in California, provided it is consistent with federal law. COMMENTS: 1) Purpose . This bill seeks to maximize the number of California-based jobs that the construction of the high-speed train system will create by encouraging the acquisition of equipment manufactured in the state, provided that the procurement activity is consistent with federal law. This bill recognizes the supremacy of federal law in the matters of international trade. 2) High-speed rail project will create jobs . According to AB 16 (PEREA) Page 3 the US Department of Commerce econometric models, the number of construction-only jobs created by a heavy engineering project, such as high-speed rail, is assumed to be between 18,000 and 32,000 direct and indirect jobs for every $1 billion spent. The HSRA is assuming the number of jobs the project could create will exceed 800,000, which is within the accepted econometric parameters. This would have a very beneficial effect on the construction sector of California's economy. 3) Location, location, location . Siemens Mobility, the United States transportation division of the international manufacturing conglomerate Siemens, is headquartered in Sacramento. It opened for business twenty-six years ago to do final assembly of light rail transit vehicles, primarily for the California market. Today, the plant is situated on 55 acres in south Sacramento and manufactures vehicles. Every third light rail vehicle in the United States is a Siemens vehicles, and most were manufactured in Sacramento. Last November Amtrak awarded Siemens a $466 million contract to manufacture seventy electric locomotives for service between Washington and Boston. This order will add approximately 200 new employees to an existing workforce of about 750 persons. Currently, the Sacramento plant is recruiting about forty welders. 4) Related legislation . Recently, this committee passed AB 1097 (Skinner), which requires the Secretary of Business, Transportation and Housing to authorize a state or local agency receiving federal funds for transit purposes to provide a bidding preference to a bidder if the bidder exceeds Buy American requirements applicable to federally-funded transit projects. In 2009, this committee approved AB 733 (Galgiani), which would have required the HSRA to give an explicit preference to bids that included California-based manufacturers. The Governor vetoed that bill. Last year, this committee passed AB 1830 (Jones), which was identical to this bill, the Governor also vetoed AB 1830. Assembly Votes: Floor: 57-19 Appr: 12-5 AB 16 (PEREA) Page 4 Trans: 12-1 POSITIONS: (Communicated to the Committee before noon on Wednesday, June 22, 2011) SUPPORT: California Labor Federation (sponsor) OPPOSED: None received.