BILL ANALYSIS Ó
AB 953
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Date of Hearing: April 25, 2011
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 953 (Jones) - As Introduced: February 18, 2011
SUBJECT : High-Speed Rail Authority: ridership study
SUMMARY : Prohibits the use of bond funds for high-speed rail
until certain conditions are met. Specifically, this bill :
1)Provides that no bond funds may be made available to the
High-Speed Rail Authority (Authority) for construction of the
high-speed rail system until adequate environmental studies
are completed based on a new ridership study that uses an
acceptable ridership evaluation methodology.
2)Requires the Authority to contract with the Institute of
Transportation Studies (ITS) at the University of California,
Berkeley, to complete a revised ridership study using the
institute's own ridership methodology.
3)Requires the new ridership study to be used as the basis for
subsequent environmental studies.
4)Requires the Authority to reconsider its adoption of the
optimal high-speed rail route based on both the new ridership
study and the ridership methodology.
EXISTING LAW :
1)Creates the Authority to direct the development and
implementation of intercity high-speed rail service throughout
California, initially running from San Francisco to Los
Angeles via the Central Valley, and later to Sacramento and
San Diego.
2)Requires the Authority to establish an independent peer review
group to review the Authority's planning, engineering,
financing, and other plans and to issue an analysis of the
appropriateness and accuracy of the Authority's assumptions
and an analysis of the viability of the Authority's funding
plans.
3)Requires the Authority to prepare, publish, adopt, and submit
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to the Legislature a business plan every two years, beginning
January 1, 2012. The business plan is to identify specific
elements, including:
a) A forecast of the anticipated patronage, operation and
maintenance costs, and capital costs for the system;
b) A forecast of the expected patronage and service levels
for Phase 1 of the system (i.e., San Francisco to Los
Angeles) and for each segment or combination of segments
for which a project level environmental analysis is being
prepared for Phase 1; the forecast is to assume a high,
medium, and low level of patronage and a realistic
operating planning scenario for each level of service.
Alternative fare structures have to be considered when
determining the level of patronage; and,
c) Based on these patronage forecasts, alternative
financial pro formas for the different levels of service,
and the operating break-even points for each alternative.
4)Requires the Authority, no later than 90 days prior to making
an initial request for appropriation of bond proceeds for
capital costs on each corridor, to approve and submit to the
Director of Finance, the high-speed rail peer review group,
and the Legislature a detailed funding plan (pre-appropriation
plan) for that corridor; the detailed funding plan is to
include, among other elements, the projected ridership and
operating revenue estimate based on estimated high-speed
passenger train operations on the corridor.
5)Requires the Authority, prior to committing any bond proceeds
for construction or right of way or equipment acquisition on
each corridor, to have approved and concurrently submitted to
the Director of Finance and the Legislature a detailed funding
plan (pre-expenditure plan) for that corridor that includes a
projected ridership and operating revenue report.
FISCAL EFFECT : Unknown
COMMENTS: The Authority's ridership forecast was developed by
Cambridge Systematics (CS), a highly regarded firm in the
industry. The forecast and the methodology used to develop it
have been peer reviewed and found by many, including the
Authority, to be well-proven and based on widely accepted and
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applied modeling techniques. Others criticize the forecast,
however, as being unreasonably optimistic and unreliable. In a
study ordered by the Senate Transportation and Housing Committee
last year, the Institute of Transportation Studies (ITS) at the
University of Berkeley evaluated the CS forecasts and concluded
that they were "unreliable for policy analysis." The ITS
analysis concluded that the "combination of problems in the
development phase and subsequent changes made to the model
parameters in the validation phases implies that the forecasts
of high-speed rail demand -- and hence of the profitability of
the proposed high-speed rail system -- have very large error
bounds." According to ITS, the errors may be "large enough to
include the possibility that the California high-speed rail may
achieve healthy profits and the possibility that it may incur
significant revenue shortfalls."
The Authority has subsequently worked with CS and ITS to resolve
differences between the expert opinions but key differences in
opinions remain. Writing in response to the ITS assessment
directed by the Senate Transportation and Housing Committee, the
Authority responded:
"ÝW]e believe that the robust exchange of opinions as
captured in the ITS Final Report and the July 8th Ý2010]
presentation Ýto the Senate Transportation and Housing
Committee] frames a classic disagreement between the
academician and the industry practitioner. In the
Authority's view, the professional opinions of the industry
practitioner carry more weight in this particular "real
world" context?We find that CS has provided a thorough
response to the ITS Final Report and has shown that it has
based its ridership and revenue model development on
well-proven, and widely accepted and applied techniques in
the industry?ÝT]he Authority plans to continue to utilize
the current ridership and revenue model developed by CS for
input to its environmental review, business planning, and
system development."
The Authority stipulates that it has an ongoing need for
ridership and revenue forecasts to assist it with planning and
development of the high-speed rail system, refinements to its
business plan, and to engage in private sector financing. It
cites a joint effort underway by CS and the University of
California, Davis, to produce ridership and revenue forecasting
ranges for the high-speed rail project. The effort will
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reportedly include refining current forecasting models,
developing independent forecasts of critical inputs, and
conducting a rigorous risk analysis to better understand the
influences of key determinants of high-speed ridership and
revenue. (Detractors of this effort insist that any refinements
will be fundamentally flawed because the data used as a basis
are flawed.)
Many see the ridership and revenue forecast as central to the
success of the project, particularly because the system is
proposed to operate without any public subsidies. The
Authority's business plan relies on operating revenue surpluses
from Phase 1 to construct extensions to, for example, San Diego
and Sacramento. Consequently, if the ridership and revenue
forecast is low, construction of these extensions would be put
in jeopardy for lack of funding.
The sponsors of this bill, the Cities of Palo Alto, Menlo Park,
Pico Rivera and the town of Atherton, have argued that a new
ridership study is crucial to obtaining a credible high-speed
rail project environmental report, and business and financial
plans. They further contend that the study will independently
corroborate the real system design need and validate the
financial viability of the system versus other available
transportation options.
The high-speed rail peer review group, in its November 2010
report to the Legislature, identified its own concerns, noting:
"The Authority has come under increasing criticism
regarding the project's demand and revenue estimates. The
issues identified by the Institute for Transportation
Studies at the University of California at Berkeley, the
Legislative Analyst's Office and the State Auditor's office
have raised sufficient concerns with the demand model so as
to call into question the project's fundamental basis for
going forward. The Ýpeer review] group recommends that the
Authority work with UC Berkeley, the Legislative Analyst's
Office and the State Auditor to complete an analysis of any
issues regarding the demand models so that a mutually
agreed estimate can be reached along with ranges of
uncertainty. Failure to arrive at such an agreement will
put the project's forward progress in jeopardy."
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Writing in support of this bill, Californians Advocating
Responsible Rail Design (CARRD) writes, "The ridership studies
help determine everything from the number of tracks needed, to
the frequency of trains and services, the type of trains that
should be purchased and even the number of parking spaces that
will be needed at stations. Without a ridership model that
clearly indicates a band of confidence levels, it is impossible
to adequately determine the potential environmental impacts or
indeed the basic construction requirements needed to adequately
serve the potential needs of the system."
Writing in opposition to this bill, Californians for High-Speed
Rail writes, "While it is reasonable to conduct a new ridership
study in conjunction with a new business plan, requiring the
Ýenvironmental studies] to be redone is an extreme requirement.
We feel that this would effectively end the project and thwart
the will of the voters. All federal deadlines would not be met
and all federal money would have to be returned."
Committee concerns:
1)Pulling all funding on the project until new environmental
studies are completed based on new ridership numbers could
jeopardize federal funding that has already been awarded to
California.
New ridership forecasts could take anywhere from six months
(according to this bill's supporters) to two years (according
to Authority staff). To date, California has been awarded
over $3.1 billion in federal grants to develop high-speed rail
and it has until September 2012 to complete environmental
studies and predevelopment work and enter into an agreement
with FRA to secure the funds. Although there may be some
opportunity to negotiate a time extension in this requirement,
the success of such an extension is uncertain.
2)Ridership forecasts are not intended to give exact results but
rather are educated guesses that indicate a likely range of
numbers reflecting probable highs and lows in estimated
patronage. The forecasts are built using complicated
modeling, sampling, and extrapolating. Although ITS's
modeling methodology is apparently highly regarded in the
field, there is no certainty that a ridership forecast
developed by it will not invite the same sort of negative
critiques as did the CS forecast.
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3)Abruptly halting all funding to the Authority is not
reasonable. Even if the Legislature decided, for instance,
that there was merit in re-visiting the ridership forecast and
in reconsidering the Authority's environmental studies, a more
surgical approach to suspending the Authority's work on
certain tasks would be more prudent.
REGISTERED SUPPORT / OPPOSITION :
Support
City of Menlo Park (co-sponsor)
City of Palo Alto (co-sponsor)
City of Pico Rivera (co-sponsor)
Town of Atherton (co-sponsor)
Californians Advocating Responsible Rail Design
Community Coalition on High Speed Rail
Kathy Hamilton
Opposition
Californians for High-Speed Rail
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093