BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 557 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: hill VERSION: 2/22/13 Analysis by: Eric Thronson FISCAL: yes Hearing date: April 23, 2013 SUBJECT: San Francisco Bay Area high-speed rail expenditures DESCRIPTION: This bill reiterates a number of restrictions contained in existing law related to bond funds that the Legislature appropriated for the development of high-speed rail in the San Francisco Bay Area. ANALYSIS: Existing law created the California High-Speed Rail Authority (HSRA) in 1996 to direct development and implementation of inter-city high-speed rail service that is fully coordinated with other public transportation services. In 2008, voters approved Proposition 1A (Prop 1A) authorizing $9.95 billion in general obligation bonds for the project. The Legislature appropriates bond funds for expenditure and the bond act includes requirements for reporting and expenditure of bond funds. Prop 1A set aside $950 million in bond funds for capital improvements to intercity, urban, and commuter rail that provide direct connectivity to high-speed rail, while Prop 1A dedicates the remaining $9 billion specifically to high-speed rail projects. In 2012, the Legislature passed SB 1029 (Committee on Budget and Fiscal Review), Chapter 152, which appropriated the state bond and federal funds necessary to award the design-build construction contracts for the first segment of the high-speed rail project. SB 1029 also appropriated $1.1 billion in bond funds for investment in the "bookend" segments of the system located in the northern and southern California regions. SB 1029 included extensive reporting requirements and expenditure restrictions. With respect to the appropriation for projects in the "bookend" segments, SB 1029 contains a number of SB 557 (HILL) Page 2 restrictions, including: Making funds available only for improvements consistent with the memorandums of understanding (MOUs) approved prior to the appropriation between HSRA and the local partners. Prohibiting funds dedicated to the San Francisco-to-San Jose Peninsula corridor from being used to expand the project beyond the agreed-upon "blended system" with existing commuter rail service or to build a four-track system. Requiring HSRA to enter into a project management and funding agreement with the local sponsor of the project. Subjecting expenditures to audits to affirm HSRA spent them in accordance with established criteria and existing agreements. Making funds available for encumbrance or liquidation until June 30, 2018. This bill reiterates a number of restrictions contained in existing law related to bond funds that the Legislature appropriated for the development of high-speed rail in the San Francisco Bay Area. Specifically, restrictions in this bill include: Making funds available only for improvements consistent with the memorandums of understanding (MOUs) approved prior to the appropriation between HSRA and the local partners. Prohibiting funds dedicated to the San Francisco-to-San Jose Peninsula corridor from being used to expand the project beyond the agreed-upon "blended system" with existing commuter rail service or to build a four-track system. Requiring approval from all nine parties of the Bay Area MOU to expand beyond the blended system planned for the Peninsula corridor. COMMENTS: 1.Purpose . According to the author, this bill closes potential loopholes to make sure that funds cannot be transferred from the San Francisco Peninsula segment to other segments of the high-speed rail system. In addition, the bill clarifies that appropriated funds will be used solely to implement the negotiated two-track blended system on the Peninsula. Finally, the author contends this bill provides a critical safeguard against expansion of the shared system by requiring HSRA to obtain approval of any changes from all nine entities that were party to the original MOU involving the Peninsula segment. These protections are important because of the level of mistrust of HSRA that exists with Bay Area Peninsula SB 557 (HILL) Page 3 residents and communities. 2.What does this bill accomplish ? All of the protections in this bill already either explicitly exist or are implied in current law. Provisions connected to state budget appropriations remain attached to the funds as long as the funds are available for expenditure and cannot be changed or adjusted without new legislation. Therefore, the restrictions contained in SB 1029 will govern the high-speed rail funds provided to the "bookend" segments unless the Legislature passes and the governor signs a bill stating otherwise. It is unclear what this bill accomplishes, except reiterating current restrictions on appropriated funds. 3.Sunset date . As noted above, the funds appropriated in SB 1029 for the "bookend" projects are available until June 30, 2018. The committee may wish to amend this bill to add a sunset date so this language does not remain in statute beyond its applicability. POSITIONS: (Communicated to the committee before noon on Wednesday, April 17, 2013.) SUPPORT: City of San Carlos City of Palo Alto Mayor of Redwood City Peninsula Corridor Joint Powers Authority (Caltrain) San Mateo Transit District San Mateo Transportation Authority OPPOSED: None received.