BILL ANALYSIS Ó
AB 2847
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Date of Hearing: April 18, 2016
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 2847
(Patterson) - As Amended April 11, 2016
SUBJECT: High-Speed Rail Authority: reports
SUMMARY: Adds additional required elements for inclusion in the
California High-Speed Rail Authority's (Authority) Business Plan
and Project Update Report. Specifically, this bill:
1)Requires the Authority to include projected financing costs,
for a proposed segment or combination of segments, in the
business plan.
2)Requires the Authority to identify any significant changes in
scope for segments identified in the previous business plan or
project update report, and provide an explanation of
adjustments in cost and schedule attributable to those
changes.
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.
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2)Enacts the Safe, Reliable High-Speed Passenger Train Bond Act
for the 21st Century (High-Speed Rail Bond Act). The
High-Speed Rail Bond Act, approved as Proposition 1A in
November 2008, provides $9.95 billion in general obligation
bond authority to fund the planning and construction of a
high-speed passenger train system and complementary
improvements to other specified rail systems in the state.
3)Continuously appropriates 25% of the state's cap and trade
program funds for the high-speed rail project.
4)Requires the Authority to prepare a business plan by March 1,
2014, and every two years thereafter, that includes:
a) The types of services it expects to develop and a
chronology for construction;
b) A forecast of the expected patronage, service level, and
operating and maintenance costs for Phase I of the system;
c) Alternative financing scenarios for different levels of
service;
d) Expected schedule of completing environmental review and
initialing and completing construction for segments of
Phase I;
e) An estimate, description, and confidence level of the
total anticipated federal, state, local and other funds;
f) Any written agreements with public and private entities
to fund components of the system;
g) Alternative public-private development strategies for
Phase I; and,
h) Risks associated with construction, technology,
financing and other aspects of the project, and the
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Authority's strategy for managing risks.
5)Requires the Authority to prepare a Project Update Report on
March 1, 2017, and every two years thereafter that includes:
a) A summary of the progress on the project;
b) The baseline budget for all project phase costs by
segment or contract;
c) The current and project budget for all project phase
costs;
d) All expenditures to date for all project costs;
e) A comparison of the current and projected work schedule
and the baseline schedule contained in the Revised 2012
Business Plan;
f) A summary of milestones achieved during the prior
two-year period and ones expected in the future;
g) Any issues identified in the prior two year period and
actions taken to address them; and,
h) A discussion of risks to the projects and steps taken to
mitigate them.
FISCAL EFFECT: Unknown
COMMENTS: On February 18, 2016, the Authority released its
Draft 2016 Business Plan, which signaled a major shift in its
proposed planning and construction of the high-speed rail
system. Rather than pursue a south-oriented Initial Operating
Segment (IOS) from the City of Merced in the Central Valley
through the Tehachapi Mountains to the San Fernando Valley in
Los Angeles County, the Authority is now proposing a
north-oriented IOS, from the Central Valley to San Jose. The
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Authority also updated its plans, cost estimates, and schedule
for the remainder of Phase I (San Francisco to Los
Angeles/Anaheim by 2029) and eventually Phase II (Sacramento and
San Diego).
On March 17, 2016, the Legislative Analyst Office's (LAO)
released a report, "Review of the High-Speed Rail Draft 2016
Business Plan." The LAO recommended additional items that could
be added to the business plan to better inform the Legislature
and help maintain oversight of the project. AB 2847 will
implement these recommendations. Specifically, AB 2847 will add
some new requirements for the Authority to include in both the
biennial business plan and project update report.
According to the author, AB 2847 will improve the quality of
information reported to the Legislature so that oversight can
actually be provided in a meaningful way and track the accuracy
and ability of the Authority to stay within a budget over time.
He further states that to expand the type of costs that are
reported to the Legislature so that an accurate and complete
picture of the costs to construct the high-speed rail project
can be better understood not only for policymakers, but for the
people who are paying for this project.
Specifically, the Authority would be required to identify any
significant changes in scope of segments described in previous
reports and provide an explanation of any adjustments of costs
and schedule attributable to the changes. The LAO notes that
"the information provided by HSRA [High-Speed Rail Authority] in
the business plan and other documents can be difficult to
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compare over time." The LAO cites a specific example, "since
beginning work on the ICS [initial construction section], the
scope, cost, and schedule of the project has changed, making it
difficult to determine how well HSRA is adhering to the budget
for that segment. The length of the ICS was reduced to 118
miles from 130 miles. The projected cost of the ICS assumed in
the draft 2016 business plan is $7.3 billion, compared to the
initially planned $5.9 billion cost. However, based on the
information provided by HSRA, it is difficult to determine the
extent to which the change in costs is related to the changes in
scope or other factors." Essentially, if the scope of project
segments change from one report to the next, it is impossible to
make an "apples-to-apples" comparison of costs and schedule and
to identify any concerns or trends.
Second, AB 2847 requires the Authority to include all projected
finance costs, for any financing proposed for a segment or
combination of segments. The main funding source for the
project is $9 billion in general obligation bonds approved by
the voters in Proposition 1A. At the time of the passage of the
proposition, the LAO noted that debt service on the bonds would
be roughly $19.4 billion or $647 million per year over 30 years.
Additionally, the Draft 2016 Business Plan proposes to fund
part of the IOS by financing future cap and trade proceeds
continuously appropriated for the project. Specifically, $5.2
billion would be generated by utilizing some type of financing
mechanism, possibly revenue bonds or federal loans, to be paid
back over 25 years. Providing detailed information about
financing costs will help the Legislature understand the
complete funding picture.
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The business plans and the project updates reports are the
Legislature's, and the public's, most complete source of
information about the high-speed rail project. The state,
through a voter approved initiative and appropriations, have
committed billions of dollars in public resources to this
endeavor. Requiring the Authority to include more details of
scope, schedule and financing costs in these reports will help
ensure that future decisions about the oversight, management,
and funding of the project are made by a fully informed
Legislature and public.
Previous legislation: AB 528 (Lowenthal), Chapter 237, Statutes
of 2013, added new elements to the California state rail plan
and the Authority's business plan.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
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None on file
Analysis Prepared by:Melissa White / TRANS. / (916) 319-2093