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 




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          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 




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               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




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               Trans:    12-1

          POSITIONS:  (Communicated to the Committee before noon on 
          Wednesday,
                     June 22, 2011)

               SUPPORT:  California Labor Federation (sponsor)

          
               OPPOSED:  None received.