BILL ANALYSIS Ó
AB 1866
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Date of Hearing: April 4, 2016
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 1866
(Wilk) - As Introduced February 10, 2016
SUBJECT: High-speed rail bond proceeds: redirection: water
projects
SUMMARY: Directs that a referendum be placed on the ballot
related to high-speed rail bonds. Specifically, this bill:
1)Directs the Secretary of State to put on the November 2016
general election ballot a measure which, if approved, would:
a) Prohibit further issuance and sale of any authorized
bonds for high-speed rail, except for early improvement
projects (a.k.a. bookend projects) in the Phase 1 blended
system for which appropriations have already been made.
b) Redirect the proceeds of any outstanding bonds issued
and sold, except for those related to the bookend projects,
to debt retirement.
c) Reauthorize the issuance and sale of any unissued bonds,
upon appropriation by the Legislature, to fund the
construction of water capital projects, including the
construction of desalination facilities, wastewater
treatment and recycling facilities, reservoirs, water
conveyance infrastructure, and aquifer recharge.
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2)Does not affect the authorization of $950 million in bonds for
connectivity projects.
3)Is an urgency measure.
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
California's 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.
4)Requires the Authority to complete and submit to the
Legislature funding plans and financial analyses prior to
requesting an appropriation of bond funds for eligible capital
costs and prior to committing bond proceeds for expenditure
for construction and real property and equipment acquisition.
5)Appropriates $1.1 billion of the $9 billion in high-speed rail
bonds for use on bookend projects.
FISCAL EFFECT: According to the Authority, $1.027 billion in
Proposition 1A bonds have been issued to date. Of that total,
$444.9 million (of $9 billion) have been issued for the
high-speed rail project and $581.8 million (of $950 million)
have been issued for connectivity projects.
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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 the major
metropolitan market of San Francisco through the Central Valley
into Los Angeles and Anaheim (Phase 1) with service eventually
extended to Sacramento, the Inland Empire, and San Diego (Phase
II).
When the bonds were approved in 2008, costs for the entire
project were estimated 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 Phase 1 to be $64 billion
using the blended approach of relying in part on existing tracks
in the Bay Area and parts of Los Angeles. Furthermore, federal
contributions to date are 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 to the Authority
($4.7 billion in Proposition 1A state bond funds and $3.3
billion in federal funds) to initiate construction of the
high-speed rail project. This amount included $1.1 billion of
Proposition 1A bond funding for the bookend projects in the San
Francisco Peninsula and the Los Angeles Basin.
In February, the High-Speed Rail Authority released the Draft
2016 Business Plan which switched the focus of the Initial
Operating Segment (IOS) from the LA Basin to Northern California
with a terminus in San Jose. The business plan also adjusted
the cost estimates for Phase I down to from $68 billion to $64
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billion.
Two relevant court cases were litigated in 2013 regarding
issuance of Proposition 1A bonds. Specifically, one case
challenged the funding plan that submitted to the Legislature
prior to the appropriation as required by Proposition 1A. The
lower court found that the plan did not meet the requirements
set forth in Proposition 1A. However, the appellate court found
that the purpose of the funding plan was to inform the
Legislature and if the Legislature acts on the plan, the plan is
presumed to have been sufficient. Additionally, the Authority
filed a validation suit to clear any potential legal hurdles to
issuance of the Proposition 1A bonds. The lower court ruled
against the Authority noting that the Authority had not met the
legal standards for issuing taxpayer bonds. The ruling was
overturned by the California Supreme Court and the lower court
was directed to issue an order validating the issuance of the
bonds.
With the continued threat of litigation on the issuance and
expenditure of the Proposition 1A bonds, the funds approved by
the voters remain in question. To begin construction work in
the Central Valley and move forward on the other project
sections, the Authority renegotiated its funding agreement with
the federal government to allow a "tapered match"-i.e., to allow
federal dollars to be spent first and state matching dollars to
be spent later. Additionally, the 2014-15 state budget SB 862
(Committee on Budget and Fiscal Review), Chapter 36, Statutes of
2014, continuously appropriated 25% of the revenues derived from
the state's cap and trade program to the project. This equates
to roughly $500 million annually.
The author introduced AB 1866 because "the ability to meet the
water needs of existing and future Californians is not only
dependent on our available supplies, but also on the
implementation of new programs to collect, store, treat and
delivery water to people." The author sites recent studies by
the U.S. Environmental Protection Agency (EPA) that showed
California ranks number one in water infrastructure needs in the
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nation and that California could use an estimated $44.5 billion
in the next two decades to fix our aging water systems. He
states that, "AB 1866 would repurpose $8 billion for such
programs which no one can deny are vital to the overall quality
of life for all Californians."
Committee concerns: The release of the business plan signaled a
more concrete funding plan for the development of the IOS.
However, the Authority continues to face funding and legal
challenges and their outcomes are unclear. The high-speed rail
project is under construction and proceeding and its unsteady
beginning is not without precedent among mega-projects. While
the project is not progressing as smoothly as hoped, it is
progressing and is better off today than it was 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.
The Legislature should continue its stringent oversight of the
project and work to improve its likelihood of success.
Double referral: This bill will be referred to the Assembly
Water, Parks and Wildlife Committee should it pass out of this
committee.
Related legislation: AB 2049 (Melendez), requires the Secretary
of State to put on the November 2016 general election ballot a
legislative referendum which, if approved by the voters, would
prohibit the sale of any additional high-speed rail bonds and
authorize the remaining bonds be issued to fund the construction
of the SHOPP, STIP, and TCIF. This bill is set for hearing in
this committee on April 11, 2016.
AB 1768 (Gallagher), requires the Secretary of State to put on
the November 2016 general election ballot a legislative
referendum which, if approved by the voters, would prohibit the
sale of any additional high-speed rail bonds and authorize the
remaining bonds be issued to fund the SHOPP. This bill is set
for hearing in this committee on April 11, 2016.
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Previous legislation: AB 6 (Wilk), would have required the
Secretary of State to put on the November 2016 general election
ballot a legislative referendum which, if approved by the
voters, would prohibit the sale of any additional high-speed
rail bonds and authorize the remaining bonds be issued to fund
the construction of school facilities for K-12 and higher
education. AB 6 failed passage in this committee on April 20,
2015.
AB 397 (Mathis), would have required the Secretary of State to
put on the November 2016 general election ballot a legislative
referendum which, if approved by the voters, would prohibit the
sale of any additional high-speed rail bonds and redirect the
authorize the remaining bonds be issued to fund the construction
of water capital projects. AB 397 failed in this committee on
April 27, 2015 and was granted reconsideration. It failed on
reconsideration on January 11, 2016.
All of the following bills would have reduced the amount of
authorized indebtedness for the Authority:
AB 2650 (Conway) of 2014, failed passage in the Assembly
Transportation Committee
AB 1501 (Patterson) of 2014, failed passage in the Assembly
Transportation Committee.
SB 901 (Vidak) of 2014, failed passage in Senate Transportation
and Housing Committee.
AB 842 (Donnelly) of 2013, failed passage in the Assembly
Transportation Committee.
AB 1455 (Harkey) of 2012, failed passage in the Assembly
Transportation Committee;
SB 22 (LaMalfa) of 2012, failed passage in the Senate
Transportation and Housing Committee;
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AB 76 (Harkey) of 2011, failed passage in the Assembly
Transportation Committee; and,
AB 2121 (Harkey) of 2010, died in the Senate Rules Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
Associated Builders and Contractors of California
Howard Jarvis Taxpayer Association
Southwest California Legislative Council
Valley Ag Water Coalition
Opposition
California Conference of Machinists
California Teamsters Public Affairs Council
Sierra Club California
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State Building and Construction Trades Council
Analysis Prepared by:Melissa White / TRANS. / (916) 319-2093