BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 325|
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THIRD READING
Bill No: SB 325
Author: Rubio (D)
Amended: 5/11/11
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 4/12/11
AYES: DeSaulnier, Gaines, Harman, Huff, Kehoe, Lowenthal,
Pavley, Rubio, Simitian
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Railroads
SOURCE : Author
DIGEST : This bill creates the Central California
Railroad Authority to ensure the continuation of short line
rail service in the San Joaquin Valley for shippers and
receivers.
ANALYSIS : In June 2008, the Surface Transportation Board
(STB), the federal agency that oversees the United States'
railroad industry, authorized the abandonment of 30.6 miles
of service operated by the San Joaquin Valley Railroad
(SJVRR) between Strathmore and Jovista in Tulare County. In
the same decision, the STB denied a request to abandon the
rail line from Strathmore to near Exeter. The STB
documents show that the SJVRR sought authority to abandon
the line because "there is insufficient traffic available
to justify the cost of maintaining and operating the line,
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and that investing capital in the line would not be a
prudent use of carrier resources." During the abandonment
process, Tulare County sought to acquire the section being
abandoned and asked the STB to set terms and conditions for
the sale of the right-of-way. The STB set the purchase
price at $3.3 million. Tulare County declined to purchase
the line at that price.
Matters related to railroad operations, corporate
structure, ownership, service provision, and other aspects
of the railroad business are preempted by the federal
government. In fact, states and local governments cannot
exercise the right of eminent domain to obtain railroad
property and are unable to regulate shipping rates and
other aspects of railroad operations.
This bill:
1. Makes findings and declarations that the counties of
Fresno, Merced, Kern, Kings, and Tulare should continue
receiving short line rail service should one or more
short line operators discontinue service or abandon the
rail facilities. Finally, it finds that the Central
California Railroad Authority (CCRA) should also operate
passenger rail service.
2. Defines the CCRA as a "local agency" for the purpose of
receiving disaster assistance.
3. Defines the "area of jurisdiction" of the CRRA as the
counties of Fresno, Merced, Kern, Kings, and Tulare and
authorizes the counties of Madera, San Joaquin, and
Stanislaus to join the CCRA.
4. Provides that the CCRA be governed by a board consisting
of one board member appointed by each of the regional
transportation planning agencies of the counties of
Fresno, Merced, Kern, Kings, and Tulare. Should the
board be enlarged to include other counties, the
regional transportation planning agencies of the
counties shall each appoint a member. Board members
shall serve two-year terms.
5. Exempts CCRA board members from existing law prohibiting
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a local official from simultaneously holding
incompatible offices.
6. Authorizes the CCRA to exercise the following powers:
A. Acquire, own, operate, and lease real estate and
obtain property through the exercise of eminent
domain within its area of jurisdiction.
B. Acquire, own, lease, and operate railroad lines
and equipment, track, rights-of-way, and facilities.
C. Issue revenue bonds under the terms and conditions
of the Revenue Bond Act of 1941 without an election
within the counties comprising the area of
jurisdiction.
D. Accept grants or loans from federal agencies.
E. Operate railroads, including railroads outside its
area of jurisdiction, to connect its lines with the
lines of another railroad corporation, provided the
service begins within the authority's area of
jurisdiction.
F. Select a public or private entity as a franchisee
to acquire or operate a rail transportation system in
CCRA's area of jurisdiction.
G. Prepare a plan for the acquisition and operation
of any railroad line in the area of the member
agencies to further the purposes of the Act at no
expense to the state.
H. Conduct engineering and related studies related to
the acquisition of a railroad line.
I. Evaluate alternative plans from firms to acquire,
finance, and operate a railroad system consistent
with the purposes of the act.
7. Exempts the state from any liability for contracts,
debts, or other obligations of the CCRA, and specifies
the agencies joining the CCRA shall be liable for all
debts and obligations of the CCRA.
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8. Specifies the Transportation Development Act revenues
shall be not used by the CCRA and that the CCRA is not
entitled to funding from the Public Transit Account.
Background
With the deregulation of the American railroad industry in
1980, mergers, acquisitions, and bankruptcies have reformed
the railroad industry. Large railroads, like the Union
Pacific and the Burlington Northern Santa Fe, both of whom
operate in the San Joaquin Valley, are allowed to
discontinue unprofitable branch line service which link
customers to their trunk lines. The STB, the successor to
the Interstate Commerce Commission, which oversees the
surface transportation industry, may require that service
be continued to the branch line customers. Short line
railroads provide the branch line service and hand-off the
freight cars to the major railroads. A short line either
acquires the large railroad's branch line property outright
or, more frequently, enters into a long-term lease
agreement for the facilities. Short lines can afford to
provide service in the smaller markets because they have a
lower cost structure than the large railroads.
RailAmerica, operating as the SJVRR, is among the short
line operators providing service in the San Joaquin Valley.
RailAmerica, a publicly traded company with a market
capitalization of $934 million, operates forty railroads in
every region of the county. In California, the company
operates five railroads, including the SJVRR. The term
short line is a misnomer, since SJVRR operates over 477
miles from the Bakersfield area through Fresno and west to
Firebaugh and Oxalis.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 5/10/11)
California Partnership for the San Joaquin Valley
Central California Rail Shippers and Receivers Association
City of Blythe
City of Lemoore
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City of Lindsay
City of Parlier
City of Reedley
City of San Joaquin
City of Taft
City of Wasco
County of Kern
County of Tulare
Fresno Council of Governments
Golden Empire Transit District
Greater Merced Chamber of Commerce
Kern Council of Governments
Kings Canyon Unified School District
Madera County Transportation Commission
Merced County Association of Governments
Richard Best Transfer, Inc.
Superior Soil Supplements
Tricor Refining, LLC
Tulare County Association of Governments
Tulare Frozen Foods, LLC
San Joaquin Refining Co., Inc.
ARGUMENTS IN SUPPORT : According to the author, southern
San Joaquin Valley communities that rely on short line rail
service stand to lose access to shipping services unless an
alternative provider is established. Further, the
community representatives believe that without service they
are less attractive to potential commercial investors.
The Tulare County Association of Governments commissioned a
market analysis for rail service in the county. The
analysis' conclusion was that there are customers desiring
service and that the continuation of service would enhance
the attractiveness of the county for economic development.
A graduate school project by a group of students from the
business school at California State University Fresno
conducted an analysis of an abandoned segment and concluded
there was a potential market for continuing freight
service.
JJA:kc 5/10/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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