BILL ANALYSIS Ó
AB 1889
Page 1
(Without Reference to File)
CONCURRENCE IN SENATE AMENDMENTS
AB
1889 (Mullin)
As Amended August 19, 2016
Majority vote
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|ASSEMBLY: |79-0 |(May 5, 2016) |SENATE: |25-12 |(August 25, |
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|COMMITTEE VOTE: |10-5 |(August 31, |RECOMMENDATION: |concur |
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Trans.
Original Committee Reference: L. GOV.
AB 1889
Page 2
SUMMARY: Defines the terms "suitable and ready for high-speed
train operation."
The Senate amendments delete the Assembly version of the bill
and instead:
1)Outline the history of the California High-Speed Rail Program,
including funding and acts of the Legislature.
2)Declare the intent of the Legislature in appropriating funds
for the "Bookend" projects that the projects should proceed to
construction in the near term and the investments are
consistent with Proposition 1A of 2008.
3)Declare the intent of the Legislature that nothing in the bill
relives the California High-Speed Rail Authority (Authority)
of any requirements of Proposition 1A, including the
development of a funding plan for the use of bond funds.
4)Declare that the bill clarifies that early investments in the
Bookends and elsewhere along the system as defined in SB 1029
(Budget and Fiscal Review Committee), Chapter 152, Statutes of
2012, are consistent with the intent of the Legislature in
appropriating the funding and consistent with Proposition 1A.
5)Define, for the purposes of a funding plan required by
Proposition 1A, that a corridor or usage segment thereof be
"suitable and ready for high-speed train operation," for the
use of bond funds, as appropriated in SB 1029, to mean a
project that would enable high-speed trains to operate
immediately or after additional planned investments are made
on the corridor or usable segment thereof and passenger train
service providers will benefit from the project in the
near-term.
AB 1889
Page 3
6)Requires the Authority to include information in the Business
Plan and Project Update Report describing the use of bond
proceeds appropriated for the Bookends demonstrating that the
investments made are consistent with the Authority's current
Business Plan and advance the development of the Phase I
blended system as described in the Business Plan.
EXISTING LAW:
1)Establishes the Authority and vests with it the responsibility
to develop and implement a high-speed rail system in
California.
2)Enacts the Safe, Reliable High-Speed passenger Train Bond Act
for the 21st Century (Proposition 1A of 2008), which
authorizes the sale of $9.95 billion in general obligation
bonds to partially fund the development and construction of
California's high-speed rail system and other passenger rail
systems in the state that will provide for connectivity to the
high-speed system.
3)Continuously appropriates 25% of the cap and trade proceeds
annually from the Greenhouse Gas Reduction Fund to the
high-speed rail program.
4)Requires the Authority to prepare a business plan by March 1,
2014, and every two years thereafter that includes specific
requirements.
5)Requires the Authority to develop a project update report on
March 1, 2017, and every two years thereafter that includes
specific requirements.
6)Appropriates $8 billion in federal and state funds to begin
AB 1889
Page 4
construction of the Initial Operating Segment (IOS) of the
high-speed rail system, the bookend projects as defined, and
the rail connectivity projects administered by the California
Transportation Commission, and requires funds to be encumbered
by June 30, 2018.
7)Defines the "Bookend" projects as early improvements for the
Phase I Blended system as outlined in the Authority's 2012
Revised Business Plan and agreements with local transportation
agencies in Northern and Southern California.
8)Prohibits appropriated funds for the San Francisco to San Jose
corridor to be spent on a 4-track system.
9)Requires the Authority, prior to seeking an appropriation of
bond funds for a specific corridor or usable segment, to
submit a detailed funding plan, with specific requirements, to
the Director of Finance, the High-Speed Rail Peer Review
Group, and the Legislature.
10)Requires the Authority, prior to committing bond funds for
construction and real property and equipment acquisition for a
specific corridor or usable segment that has been
appropriated, to submit a detailed funding plan, with specific
requirements, to the Director of Finance and the Joint
Legislative Budget Committee.
11)Requires the Authority, in conjunction with the funding plan
prior to committing bond funds, obtain a report or reports by
one or more independent financial consulting firms that
includes an analysis on a number of elements, including
whether the corridor or usable segment will be suitable and
ready for high-speed train operation upon completion of
construction.
12)Requires the Director of Finance to approve the funding plan,
AB 1889
Page 5
with the abovementioned reports included, prior to the
Authority entering any commitments to expend bond funds for a
specific corridor or usable segment.
AS PASSED BY THE ASSEMBLY, this bill deleted obsolete provisions
of law creating the Peninsula Rail Transit District.
FISCAL EFFECT: According to the Senate Appropriations
Committee, this bill has potential accelerated expenditure of
$1.1 billion in previously-appropriated bond funds, relative to
current law (High-Speed Passenger Train Bond Fund). This bill
would explicitly allow for expenditure of bond funds in the
near-term for projects that benefit passenger train service
without providing all necessary funding for investments in a
usable segment that would be necessary for the immediate
operation of high-speed trains. Absent this bill, these funds
may not be available for project expenditures prior to the
expiration of the June 30, 2018, encumbrance limitation tied to
the previous appropriation of bond funds.
COMMENTS: The Authority was created in 1996 to direct
development and implementation of intercity high-speed rail
service in California that would be fully coordinated with other
public transportation services. In 2008, voters approved the
Safe, Reliable High Speed Passenger Train Bond Act for the 21st
Century (Proposition 1A), which authorized $9.95 billion in
general obligation bonds to develop and construct a high-speed
rail system connecting San Francisco Transbay Terminal to Los
Angeles Union Station and Anaheim, and for connecting intercity
and commuter rail systems that would enhance those systems'
capacity, safety, or connectivity to the high-speed rail system.
Proposition 1A prescribes specific design and funding
requirements for the high-speed rail system, and lays out
specific requirements the Authority must meet in order to access
and spend the bond funds, including submission of detailed
funding plans to the Legislature and Department of Finance, with
independent financial review.
AB 1889
Page 6
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. In November 2011, the Authority
released a Business Plan, as called for in Proposition 1A, with
an estimated cost of $98 billion. The Authority revised the
Business Plan in April 2012 to build the project "better,
cheaper, faster." The Revised Business Plan reduced the cost
estimate to $68 billion by utilizing the "blended system," or
integrating high-speed rail by sharing tracks with existing rail
systems in the San Jose/San Francisco segment and the Los
Angeles/Anaheim segments. Additionally, the Authority proposed
making near-term investment in the Bookends in the Bay Area and
Los Angeles to produce "immediate benefits and enhance the
ultimate utility of high-speed rail." The current 2016 Business
plan estimates the cost of the system at $64 billion.
In July 2012, the Legislature approved SB 1029 which
appropriated roughly $8 billion in federal and state funds to
begin the construction of the IOS, fund the bookends and
connectivity projects, and continue work on other high-speed
rail segments, as outlined in the 2012 Revised Business Plan.
Specifically, SB 1029 appropriated $1.1 billion of Proposition
1A funds for improvements in the Bookends. Specifically, $600
million was dedicated to the electrification of the Caltrain
system in the San Francisco Bay Area, and $500 million to fund
projects in the Los Angeles Basin as reflected in the 2012
Memorandum of Understanding (MOU) signed with the Southern
California Association of Governments (SCAG) and its regional
transportation members. SB 1029 requires that all funding
provided be encumbered by July 30, 2018.
Prior to spending any bond funds, Proposition 1A requires the
Authority to submit a detailed funding plan, referred to as
Funding Plan (d), to the Department of Finance and the
Legislature. Funding Plan (d) must include specific details
about the corridor or usable segment. An additional report to
accompany Funding Plan (d) must be completed by an independent
AB 1889
Page 7
financial services firm confirming the contents of the plan and
that the corridor or usage segment thereof would be suitable and
ready for high-speed train service, one or more passenger
providers could begin using the tracks or stations for passenger
train service, the planned passenger train service to be
provided by the Authority, or pursuant to its authority, will
not require an operating subsidy, and an assessment of risk.
The funding plan must be reviewed by the Director of Finance and
the Joint Legislative Budget Committee and the Director of
Finance has 60 days to approve the plan.
The Authority awarded a contract in November 2015 for
independent financial services to provide an independent review
of the funding plan. Whether or not the firm will find that the
system can operate without a subsidy is uncertain. Furthermore,
based on experiences with Funding Plan (c), it is likely the
merits of Funding Plan (d) will be litigated. If there is
litigation, the Authority's ability to use the bond proceeds for
the high-speed rail project and the Bookends will likely be
delayed until the lawsuit is resolved.
Caltrain's Peninsula Corridor Electrification Project (PCEP) is
ready to move forward with construction. In fact, in July, the
Caltrain Board of Directors approved $1.25 billion in contracts
to begin work, issuing a limited motion to proceed.
Additionally, in August, the Authority Board of Directors
approved a Caltrain corridor plan, including environmental
findings and funding agreements to proceed with the project. In
addition to the $600 million from Proposition 1A bond funds
appropriated for the PCEP, the Authority committed an additional
$113 million from other state funding sources. The Authority
estimates that Caltrain will need $117 million for the project
for the next fiscal year.
This bill would define, for the purposes of Funding Plan (d),
that a corridor or usable segment is "suitable and ready for
high-speed train operation," if the bond funds are used for
capital projects that would enable high-speed trains to operate
immediately or after additional planned investments are made on
AB 1889
Page 8
the corridor or usable segment and passenger train service
providers will benefit from the project in the near-term.
Additionally, this bill further declares the intent of the
Legislature that early investments in the Bookends and other
parts of the system, as outlined in the appropriation in SB
1029, is consistent with Proposition 1A.
According to the author, this bill provides the necessary
conforming statutory changes to provide more expeditious access
to Proposition 1A bond proceeds for the Caltrain electrification
project in the Bay Area, bookend projects in Southern
California, and California High-Speed Rail construction in the
Central Valley, consistent with funding provided for those
projects with the enactment of SB 1029. Additionally, the
author states that in making the appropriation, the Legislature
directed the Authority to make these early investments in the
Phase 1 Blended system, and that this bill is necessary to
expedite the availability to Proposition 1A bond funds for these
projects. In writing in support of the bill, the Santa Clara
County Board of Supervisors notes that while these early
investments would benefit the existing Caltrain and Metrolink
commuter rail services immediately, high-speed trains are not
expected to operate in the Peninsula Corridor or in the Los
Angeles Basin until sometime in the future. The Board further
states that the bill is consistent with the Legislature's intent
when it appropriated $1.1 billion for Bookend projects in SB
1029, including the electrification of the Peninsula Corridor.
Committee Comments: The intent of the author and sponsor of
this bill is to expedite the spending of Proposition 1A bond
funds for the Bookend projects as appropriated by the
Legislature in 2012. However, it is unclear whether this bill
would have the desired effect. Prior to expending bond funds,
the Authority must submit the required Funding Plan (d) and the
independent financial review and certification of that plan.
Although the Authority has retained an independent firm, it is
unclear when a funding plan will be submitted for review and
approval, and what portions of the overall project would be
covered. As previously mentioned, Funding Plan (c), submitted
to the Legislature prior to the appropriation, was litigated
AB 1889
Page 9
after SB 1029 was approved 2012. The Authority eventually
prevailed in 2014. It is expected that Funding Plan (d) will
also face litigation. In writing in opposition to the bill, the
Transportation Solutions Defense and Education Fund contends
that the Legislature may not unilaterally change the terms of a
bond measure, as understood and approved by the voters, by
changing the meaning of a material term in the measure presented
to the voters.
When the Authority submits a Funding Plan (d) for the Caltrain
project, or any other corridor or usable segment, such as
projects in the Southern Bookend or the initial construction in
the Central Valley, is will likely face litigation. This bill
could serve to provide a court with additional understanding of
the intent of the Legislature when appropriating Proposition 1A
funds, but it will likely not help avoid litigation all
together. As previously mentioned the appropriations authority
provided for in SB 1029 expires on July 30, 2018, and if the
bonds funds are not encumbered by that time, the Legislature
would need to revisit and re-appropriate funds in the future.
Analysis Prepared by:
Melissa White / TRANS. / (916) 319-2093 FN:
0005030