BILL ANALYSIS Ó SB 1225 Page 1 Date of Hearing: August 29, 2012 ASSEMBLY COMMITTEE ON TRANSPORTATION Bonnie Lowenthal, Chair SB 1225 (Padilla) - As Amended: August 24, 2012 SENATE VOTE : 38-0 SUMMARY : Authorizes, until June 30, 2015, the California Department of Transportation (Caltrans) to enter into an interagency transfer of services agreement (ITA) with the Los Angeles-San Diego-San Luis Obispo (LOSSAN) corridor agency for the administration of intercity passenger rail service. Specifically, this bill : 1)Makes various findings and declarations regarding the importance of intercity rail as an element of the state's transportation system, the state's historical investment in capital improvements and operation support for intercity rail service, and the importance of protecting that investment. 2)Makes various statements of legislative intent, including that: a) The Secretary of Business, Transportation and Housing Agency (Secretary) has responsibility for the overall planning, coordination, and budgeting of the intercity passenger rail service; b) The Secretary is authorized to allow Caltrans to enter into an ITA upon a determination that the transfer would result in administrative or operating cost reductions; c) The intercity passenger rail corridor is to remain a component of the statewide system of intercity passenger rail corridors upon transfer from the state; and d) The level of state funding is to be maintained at a level equal to at least the level of service funded by the state as of the effective date of the ITA, for a minimum three-year period. 1)States that the following provisions apply only to the LOSSAN corridor and only if the corridor is subject to an approved ITA: SB 1225 Page 2 a) Requires the Secretary to establish through the annual budget process the level of funding for the LOSSAN corridor operations, including associated feeder bus services; b) Requires the Secretary to allocate funds in accordance with the ITA for the mutually- agreed upon rail services as well as funds for marketing and administration; c) Authorizes the LOSSAN corridor agency or local or regional entities to augment state-provided resources or to fund shortfalls when agreed upon performance standards are not reached but prohibits a mandate for them to do so. d) Authorizes the LOSSAN corridor agency or local or regional agencies to identify and secure new supplemental sources of funding for the purpose of expanding or maintaining intercity rail passenger service levels, including state and federal intercity rail resources. e) Authorizes local resources to be available to fund operating deficiencies only if the local resources are dedicated by a vote of the local agency providing the funds, with the concurrence of the LOSSAN corridor agency. f) Authorizes Caltrans to provide support services as agreed upon by it and the LOSSAN corridor agency. g) Requires operating costs to be controlled by using the Amtrak cost allocation formula and the ability to contract out to Amtrak or other rail operators. h) Requires the Secretary to establish performance standards by June 30, 2014, and, to the extent necessary, to revise the standards by July 30, 2015, or the effective date of the ITA, whichever comes first. i) Prohibits the termination of feeder bus services unless the services are not cost-effective. 1)Authorizes Caltrans, pursuant to the Secretary-approved ITA, to transfer to the LOSSAN corridor agency the responsibility for administering the state-funded intercity passenger rail services, including associated feeder bus service, within the SB 1225 Page 3 corridor. Requires Caltrans to retain responsibility for developing budget requests for the corridor, consistent with the annual business plan as approved by the Secretary, through the state budget process. Requires the budget request to be developed in consultation with the LOSSAN corridor agency and in coordinating with other intercity passenger services in the state. 2)Establishes a deadline of June 30, 2015, for execution of the ITA that is to cover an initial three-year period that may be extended by mutual agreement. Requires the Secretary to report to the Governor and the Legislature by June 30, 2016, if an agreement is not met by the deadline, explaining why agreement was not reached along with specific recommendations on how to develop and acceptable ITA. 3)Mandates the Secretary to require the LOSSAN corridor agency to demonstrate its ability to meet the performance standards. 4)Requires the ITA to: a) Include the date and conditions of transfer, including the annual funding level for the initial three years following the transfer. b) Identify the funds to be transferred with the amounts adjusted annually for inflation and in accordance with the business plan. c) Specify the level of service to be provided, the Caltrans methods to ensure coordination of services with other rail passenger services including feeder bus services, and the methods for the annual review of the business plan and annual funding and appropriation proposals. d) Describe the terms of use by the LOSSAN corridor agency for the car and locomotive train sets and other equipment and property owned by Caltrans. e) Describe auditing responsibilities and process requirements as well as reimbursement and billing procedures. SB 1225 Page 4 1)Requires the LOSSAN corridor agency to describe how it will use the state funds allocated annually in its business plan that is to be submitted to the Secretary for review and recommendation by April 1 of every year. Deems the business plan accepted by the state when approved by the Secretary. Prescribes the requirements for the business plan. Requires the LOSSAN corridor initial business plan to be consistent with the immediately previous State Rail Plan as developed by Caltrans and the January 2014 business plan developed by the California High-Speed Rail Authority (Authority). 2)Requires the Secretary to allocate state funds annually to the LOSSAN corridor agency based upon the annual business plan and appropriation by the Legislature. Pursuant to the ITA, indicates that any additional funds that are needed to operate the passenger rail service during a fiscal year are required to be provided by entities within the LOSSAN corridor that receive service. Authorizes cost savings or farebox revenues to be used for service improvements related to intercity service. Requires the LOSSAN corridor agency to report the fiscal results of the previous year's operations as part of its annual business plan. 3)Requires that the level of service funded by the state to be no less than the number of intercity round trips operated at the effective date of the ITA, for a minimum three-year period. 4)Establishes the level of funding provided by the state for feeder bus service at substantially the same number of route miles as the current feeder system at the effective date of the ITA. Prohibits the ITA from not allowing the LOSSAN corridor agency from reducing the number of feeder bus route miles upon its determination that a route is not cost effective. 5)States that the bill's provisions do not preclude expansion of state-approved intercity passenger rail service. 6)Authorizes the use of local resources to offset any redirection, elimination, reduction, or reclassification by the state of state resources for operating intercity rail services only if the local resources are dedicated by a vote of the local agency providing the funds, with the concurrence of the LOSSAN corridor agency. SB 1225 Page 5 7)Authorizes Caltrans and the LOSSAN corridor agency to contract, through competitive bids, with Amtrak or with organizations authorized to provide intercity rail services. Deems the LOSSAN corridor agency as an entity of the state, allowing it to be a direct recipient federal public transportation grants. 8)Requires a contractor operating the LOSSAN corridor services, as a contractual condition, to agree to abide by federal railway labor laws. 9)Repeals provisions authorizing the Southern California Regional Rail Authority (SCRRA) to be a party to the ITA and replaces it with the LOSSAN corridor agency. 10)Stipulates that this bill is only operative if the members of the LOSSAN corridor agency enter into an amended joint powers agreement to expand the authority of the existing agreement. EXISTING LAW : 1) Authorizes Caltrans, in cooperation with local transportation officials, to develop guidelines to implement the intercity rail program and defines the intercity rail corridors within which rail projects are eligible for funding, and requires Caltrans to develop a comprehensive statewide rail passenger and freight system plan. 2) Authorizes Caltrans to contract with Amtrak for intercity rail passenger services and provides funding for these services from the Public Transportation Account. 3) Authorizes, until December 31, 1996, Caltrans, subject to approval of the Secretary, to enter into an ITA under which a Joint Powers Agency (JPA) assumed responsibility for administering a state-funded intercity rail corridor service. Authorized an expanded SCRRA, a JPA of five member agencies representing the counties of Los Angeles, Orange, Riverside, San Bernardino and Ventura, to be a party to an ITA for assuming operational authority for intercity rail passenger services in southern California. 4) Establishes the terms of the ITA to include various SB 1225 Page 6 elements, including the date and conditions of transfer; the funds to be transferred; the level of service to be provided and Caltrans' methods for coordination of services, annual review of the business plan, annual proposals on funding and appropriations; the terms for transferring car and locomotive train sets; and, auditing and other procedures. 5) Provides for the allocation of state funds by the Secretary to a JPA under the terms of the ITA and based on the annual business plan that includes the level of service to be operated. As provided in the ITA, authorizes the JPA to provide any additional funds that are needed to operate the passenger rail service during a fiscal year from jurisdictions that receive service. 6) Authorizes Caltrans and any entity that assumes administrative responsibility for passenger rail services through an ITA to contract with specified entities for the use of tracks and other facilities and for the provision of passenger rail services. 7) Requires a JPA to submit an annual business plan which is the basis of a budget request for service. 8) Pursuant to federal law: a) Authorizes states or state-created entities to contract with Amtrak for intercity passenger rail service. b) Beginning in October 1, 2013, requires states, according to a national cost allocation process adopted by the Service Transportation Board, to pay the full operating and capital cost for intercity passenger rail service in which the service is less than 750 miles in length. Interstate service is exempt from this provision. FISCAL EFFECT : According to the Assembly Appropriations Committee, one-time special fund cost to Caltrans in the range of $200,000 to implement a transfer agreement with the LOSSAN corridor agency, including supporting the transition of Caltrans' equipment and facilities. Caltrans also indicates a one-time payment of $300,000 to $400,000 would be made to the LOSSAN corridor agency associated with the transfer of operational and capital projects. Caltrans would thereafter SB 1225 Page 7 realize ongoing administrative savings of about $300,000. COMMENTS : This bill would authorize a locally-controlled JPA, the LOSSAN corridor agency, until June 30, 2015, to assume administrative responsibilities for the state-supported LOSSAN rail passenger corridor. The author cites the LOSSAN corridor as one of the most important segments of California's rail system and indicates that, despite its vital importance to California, "current law has stifled corridor improvements. A JPA modeled after the highly successful Capitol Corridor JPA would allow for greater administrative, procurement and operational efficiencies that come with integration." The 351-mile-long LOSSAN rail corridor (San Diego to Los Angeles to San Luis Obispo) is the second busiest passenger rail corridor in the nation, second only to the Boston-to-Washington D.C. Northeast Corridor. More than nine million passenger riders make trips on LOSSAN corridor commuter and intercity trains annually. The corridor runs through a six-county area, connecting major metropolitan areas of Southern California and the Central Coast. The LOSSAN rail corridor includes 41 stations and more than 100 daily passenger trains. Since the 1970s, the state has provided more than $1 billion in improvements to the corridor, Amtrak has contributed $220 million, and local passenger rail agencies have contributed $400 million. Within the LOSSAN corridor, there are three passenger rail carriers along this corridor, Amtrak's intercity Pacific Surfliner and the Metrolink and Coaster commuter lines as follows: 1)Amtrak operates both the long distance intercity Coast Starlight and the Pacific Surfliner passenger trains. The Pacific Surfliner route (essentially comprising the LOSSAN rail corridor), under the administration of Caltrans, is wholly within California and operates between San Diego and San Luis Obispo. It receives financial support from Caltrans that pays 70% of Pacific Surfliner costs above fare revenue. Amtrak contributes the remaining 30% of the operating deficit as the service is considered a part of Amtrak's basic intercity service. More than 2.8 million intercity rail passengers annually use the Pacific Surfliner service. Amtrak's other long-distance service, Coast Starlight, provides daily service connections between Seattle and Los SB 1225 Page 8 Angeles, passing through Portland, Sacramento, the San Francisco Bay Area and Santa Barbara. 2)Metrolink is the Los Angeles area commuter rail service, operated by the SCRRA. The Metrolink operations encompass six rail lines and 55 stations using 512 miles of track. The system operates within the counties of Los Angeles, Orange, Riverside, San Bernardino, San Diego, and Ventura. It connects with the Metro Rail system which serves Los Angeles County, with the San Diego Coaster and Sprinter commuter rail services which serves San Diego County, and with Amtrak's Pacific Surfliner, Coast Starlight, Southwest Chief and Sunset Limited intercity rail services. 3)Coaster commuter rail service, between the City of Oceanside and the City of San Diego, is operated by the North County Transit District (NCTD). The Coaster operations include seven locomotives covering the 41-mile route. It reports about 1.4 million boardings annually. The Sprinter commuter rail service also operates within the corridor with a station located at Oceanside continuing eastward to Escondido. To coordinate these various passenger rail services within the LOSSAN corridor, a JPA was formed in 1989. Metro, Orange County Transportation Authority, NCTD, San Diego Association of Governments, San Diego Metropolitan Transit System, San Luis Obispo Council of Governments, Santa Barbara County Association of Governments, Ventura County Transportation Commission, and Caltrans are voting members of the JPA. The Southern California Association of Governments, Amtrak, and the California High-Speed Rail Authority are non-voting, ex-officio members of the JPA. Further, there are four additional non-voting technical advisory committee members on the JPA representing the BNSF, the California Public Utilities Commission, SCRRA, and UP. This LOSSAN corridor agency advises Caltrans, as administrator of the corridor, on Amtrak services and facility improvements within the corridor. Legislation enacted in 1996 provided an opportunity for the LOSSAN corridor agency to create a JPA to assume responsibility for the LOSSAN intercity passenger service by December 31, 1996. As an agreement with Caltrans could not be reached because the local agencies were unable to reach a consensus on the structure of the corridor agency, the responsibility for operating the rail passenger service within SB 1225 Page 9 the corridor remains with Caltrans This bill is the second attempt for the separate agencies to reach consensus on forming a joint powers agreement and to become an agent of the state by entering into an ITA with Caltrans to manage the operation of Amtrak services. Upon formation, it is envisioned that the LOSSAN corridor agency will be able to better coordinate schedules and other operating matters with the commuter rail services provided by Metrolink and Coaster. State-supported intercity rail passenger services : In California, there are three state-supported intercity rail passenger services within three distinct corridor routes. In addition to the LOSSAN corridor described earlier, the state has funded Amtrak service from Bakersfield to Oakland via Stockton and Martinez since 1979 (San Joaquins), and the state contracted with Amtrak to operate Capitol Corridor service from Sacramento to Oakland/San Jose in 1991. The management of the latter service was transferred to the Capitol Corridor JPA (CCJPA) in 1998 by an ITA. Prior to 1976, Amtrak supported three round trips along the present Pacific Surfliner route from San Diego to Los Angeles. Under Caltrans management since 1976, the Pacific Surfliner route has been expanded to current service level of 11 daily round trips from San Diego to Los Angeles, five daily round trips continuing to Santa Barbara, and two daily round trips continuing to San Luis Obispo. The current LOSSAN farebox recovery ratio (ratio of revenues to expenses) in state fiscal year 2010-11 was 54%. In contrast, the farebox ratio for the San Joaquin service was 49%, and the Capitol Corridor, under transferred administration from the state since 1998, was 39%, the lowest of the three intercity passenger train services. State's remaining role in intercity rail passenger services : This bill requires, upon implementation of the ITA, Caltrans to continue coordinating rail corridor services with other intercity passenger services in the state. With the possible transfer of state administration of all three state-supported intercity rail passenger services - the San Joaquin (under reauthorization pursuant to AB 1779 (Galgiani), of 2012), Capitol Corridor, and the Pacific Surfliner - to locally-approved JPAs, what will be the state's residual role in overseeing the operations and interconnectivity of these SB 1225 Page 10 separate services? Arguments in support : 1)Proponents contend that placing passenger rail service in the LOSSAN corridor under local management will result in a more efficient and effective allocation of resources and decision making related to service expansion, frequencies, extensions, connectivity, and schedules. They further contend that a unified voice will be more effective at the state and federal level when advocating on passenger rail issues, including funding for capital improvements. 2)The author indicates that, to meet the demands of the region, about $6-8 billion in capital improvements are needed by 2025 to modernize the LOSSAN corridor and by not providing for the creation of a JPA, the future sustainability of the corridor is uncertain. 3)Writing in support of this bill, Amtrak indicates that it "will work collaboratively with the proposed JPA, provided the entity demonstrates an understanding of the criticality of preserving, and enhancing, intercity utility along the entire corridor. Not only do the Pacific Surfliners provide vital access to communities within the corridor, but the route is an important part of Amtrak's national network, and the JPA's actions must reflect this." 4)The terms of the ITA, as specified under existing law, serve to protect the interests of the JPA as well as the state. Further, as an element of the ITA, the requirement for the JPA business plan will provide a roadmap on how the entity will proceed and provide some level of confidence to state decision makers. Arguments in Opposition : 1)Transfer of the management of this corridor to a JPA, along with the similar potential transfer of the San Joaquin corridor pursuant to AB 1779 (Galgiani), could make statewide coordination of scheduling and other operations difficult. 2)This bill makes several changes to the original legislative statutes (SB 457 (Kelley), Chapter 263, Statutes of 1996), relative to transferring operations of a state-supported route SB 1225 Page 11 to a JPA. If the current authorizing statutes have proven adequate as evidenced with transfer of the Capitol Corridor to a JPA, why are changes as proposed by this bill necessary? Furthermore, some of the proposed changes in the bill may be disadvantageous to the state. For example, existing law requires the JPA to augment state funding to address operating funding shortfalls. However, this bill requires local approval prior to local funds being used for funding operating deficiencies. Upon transfer of the state-administered Pacific Surfliner route to the LOSSAN JPA, should operating costs outpace revenues, it is unclear how any shortfalls will be managed if local entities choose not to fund operating deficiencies. 3)Although proponents cite the "highly successful" performance record of the Capitol Corridor, actual farebox ratios of its performance are below that of the currently state-administered Pacific Surfliner and San Joaquin intercity rail passenger services. Therefore, the LOSSAN JPA will be tasked to maintain the state's effective past management efforts. 4)Unlike the legislation forming the CCJPA, this bill would not codify the structure or membership of the JPA that would assume management of the LOSSAN rail corridor. This raises doubts about the capacity of the JPA to manage the corridor because if its prospective members cannot even agree on the representational makeup and structure of the JPA it is unclear that they could effectively manage the more complex task of corridor operations. Proposed amendments : The author is proposing amendments to make the bill's provisions non-specific to a particular rail corridor by removing references to LOSSAN. Also, the amendments will align this bill's provisions with AB 1779 (Galgiani, 2012), currently pending hearing on the Senate floor. Lastly, the amendments will restore intent language pertaining to LOSSAN rail corridor operations maintaining a 58% farebox recovery ratio that was inadvertently deleted. Support : LOSSAN rail corridor agency (co-sponsor) Los Angeles County Metropolitan Transportation Authority (co-sponsor) Orange County Transportation Authority (co-sponsor) SB 1225 Page 12 California Transit Association CH2M HILL Los Angeles County Business Federation Los Angeles Division of the California League of Cities Mobility 21 Orange County Business Council Sacramento Regional Transit District San Joaquin Regional Rail Commission San Joaquin Valley Regional Policy Council Santa Barbara County Association of Governments Southern California Association of Governments Ventura County Transportation Commission (support in concept) Oppose : California Department of Finance North County Transit District (oppose unless amended) Analysis Prepared by : Ed Imai / TRANS. / (916) 319-2093