BILL ANALYSIS Ó
AB 397
Page 1
Date of Hearing: April 20, 2015
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 397
(Mathis) - As Amended April 14, 2015
SUBJECT: Bonds: transportation: water projects
SUMMARY: Prohibits the sale of any additional bonds for
high-speed rail and redirects the remaining bonding authority to
fund the construction of water capital projects. Specifically,
this bill:
1)Prohibits the sale of any additional bonds for high-speed rail
purposes pursuant to the Safe, Reliable High-Speed Passenger
Train Bond Act for the 21st Century.
2)Exempts from the above prohibition an existing appropriation
for high-speed rail in the Budget Act of 2012 for early
improvement projects in the Phase 1 blended system.
3)Requires the unspent proceeds from any outstanding bonds
issued and sold for any other high-speed rail purpose to be
redirected, upon appropriation, for use in retiring the debt
incurred from the issuance and sale of those outstanding
bonds.
AB 397
Page 2
4)Authorizes the remaining unissued bonds from the high-speed
rail bond act to be issued and sold, with the proceeds to be
made available, upon appropriation, to fund construction of
water capital projects, including the construction of
desalination facilities, wastewater treatment and recycling
facilities, reservoirs, water conveyance infrastructure, and
aquifer recharge.
5)Leaves in place the authorization under the high-speed rail
bond act for the issuance and sale of $950 million in bonds
for rail purposes other than high-speed rail.
6)Requires voter approval at the next statewide election for
these provisions to become effective.
EXISTING LAW:
1)Establishes the California High-Speed Rail Authority
(Authority) and vests with it the responsibility to develop
and implement a high-speed rail system in California.
2)Authorizes the sale of $9 billion in general obligation bonds
to partially fund the development and construction of the
high-speed rail system.
3)Authorizes the expenditure of an additional $950 million in
general obligation bonds for capital projects on other
passenger rail lines to provide connectivity to the high-speed
rail system, as well as for capacity enhancements and safety
improvements to those lines.
FISCAL EFFECT: According to the Authority, $705 million in
Proposition 1A bonds have been issued to date. Of that total,
$400 million (of $9 billion) have been issued for the high-speed
rail project and $305 million (of $950 million) have been issued
AB 397
Page 3
for connectivity projects.
COMMENTS: In 2008, voters approved Proposition 1A, the Safe,
Reliable High-Speed Passenger Train Bond Act, a $9.95 billion
general obligation bond to fund the proposed California
high-speed rail project and related improvements. As envisioned
at the time of the ballot measure, the project was to consist of
an 800-mile dedicated high-speed passenger rail system capable
of speeds up to 220 miles per hour, initially serving San
Francisco through the Central Valley into Los Angeles and Orange
County (Phase 1) with service eventually extended to Sacramento,
the Inland Empire, and San Diego.
When voters approved the bonds in 2008, the Authority estimated
the cost for the entire project to be $45 billion, to be paid by
a mix of state bonds, federal grants, and private investments.
Since then, estimated costs for the project have risen markedly.
The Authority's most recent business plan estimates costs for
just Phase 1 to be $68 billion using a "blended approach"
-relying in part on existing tracks - rather than a fully
built-out system of dedicated rail lines. Furthermore, federal
contributions to date have been limited to $3.3 billion and
there have been no private investments.
In 2012, the Legislature passed and the Governor signed SB 1029
(Committee on Budget and Fiscal Review), Chapter 152, Statutes
of 2012, to appropriate $8 billion ($4.7 billion in Proposition
1A bond funds and $3.3 billion in federal funds) to the
Authority to initiate construction of the high-speed rail
project. This amount included $1.1 billion of Proposition 1A
bond funding for bookend projects on the San Francisco Peninsula
and in the Los Angeles Basin. Additionally, last year's Budget
allocated $250 million in cap-and-trade revenues to high-speed
rail for the 2014-15 fiscal year and dedicated 25% of all
cap-and-trade revenues to the project on an ongoing basis.
AB 397
Page 4
This bill proposes to ask voters to redirect roughly $8 billion
in bond capacity away from high-speed rail and towards the
construction of water capital projects, such as desalination
facilities, wastewater treatment and recycling facilities,
reservoirs, water conveyance infrastructure, and aquifer
recharge.
Committee concerns: While there is no doubt that the state is
facing tremendous challenges related to water, it is not clear
why the funding for additional water infrastructure needs to
come at the expense of the high-speed rail project. California
needs both a modern water system and modern transportation
system. While the funding hurdles facing high-speed rail are
daunting, the project is proceeding and its unsteady beginning
is not without precedent among mega-projects. The project may
not be progressing as smoothly as hoped, but it is progressing
and is better off today than it was three years ago when the
Legislature committed to the project. Stopping the project now
by redirecting the bonds will cause hundreds of millions of
dollars of work and study to be wasted. Instead, the
Legislature should redouble its resolve to the project and
thereby improve the likelihood of its success in luring federal
and private investors.
Related legislation: AB 6 (Wilk) prohibits the sale of any
additional bonds for high-speed rail and redirects the remaining
bonding authority to fund the construction of school facilities
for K-12 and higher education. AB 6 is set for hearing in this
committee on April 20, 2015.
AB 397
Page 5
AB 1087 (Grove) provides that the cap-and-trade funds that have
been continuously appropriated to high-speed rail are for
specified components of the initial operating segment and Phase
1 blended system, as described in the Authority's 2012 business
plan. AB 1087 is set for hearing in this committee on April 20,
2015.
AB 1138 (Patterson) prohibits the Authority, or the State Public
Works Board acting on behalf of the Authority, from commencing
an eminent domain proceeding to acquire property for the
high-speed rail system unless it identifies the sources of all
funds to be invested in the segment of the system the property
is needed for and certifies that it has completed all
project-level environmental clearances necessary to proceed to
construction. AB 1138 is set for hearing in this committee on
April 20, 2015.
Previous legislation: This bill is the latest in a string of
bills aimed at reducing the amount of authorized indebtedness
for high-speed rail. Other similar bills have included:
1)AB 2650 (Conway) of 2014, which failed passage in this
committee;
2)AB 1501 (Patterson) of 2014, which failed passage in this
committee;
3)SB 901 (Vidak) of 2014, which failed passage in the Senate
Transportation and Housing Committee;
AB 397
Page 6
4)AB 842 (Donnelly) of 2013, which failed passage in this
committee;
5)AB 1455 (Harkey) of 2012, which failed passage in this
committee;
6)SB 22 (LaMalfa) of 2012, which failed passage in the Senate
Transportation and Housing Committee;
7)AB 76 (Harkey) of 2011, which failed passage in this
committee; and
8)AB 2121 (Harkey) of 2010, which died in the Senate Rules
Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
AB 397
Page 7
Opposition
None on file
Analysis Prepared by:Anya Lawler / TRANS. / (916) 319-2093