BILL ANALYSIS Ó
AB 2847
Page 1
GOVERNOR'S VETO
AB
2847 (Patterson)
As Enrolled August 29, 2016
2/3 vote
--------------------------------------------------------------------
|ASSEMBLY: |78-0 |(May 12, 2016) |SENATE: |37-0 |(August 15, |
| | | | | |2016) |
| | | | | | |
| | | | | | |
--------------------------------------------------------------------
--------------------------------------------------------------------
|ASSEMBLY: |79-0 |(August 22, | | | |
| | |2016) | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
--------------------------------------------------------------------
Original Committee Reference: TRANS.
SUMMARY: Adds additional required elements for inclusion in the
California High-Speed Rail Authority's (Authority) Business Plan
and Project Update Report.
AB 2847
Page 2
The Senate amendments are technical and non-substantive.
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)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, with specific
requirements; and requires the Authority to prepare a Project
Update Report on March 1, 2017, and every two years
thereafter, with specific requirements.
AS PASSED BY THE ASSEMBLY, this bill:
1)Required the Authority to include projected financing costs,
for a proposed segment or combination of segments, in the
business plan.
2)Required the Authority to identify any significant changes in
AB 2847
Page 3
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.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
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
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. This bill will
implement these recommendations by adding some new requirements
for the Authority to include in both the biennial business plan
and project update report.
According to the author, this bill 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.
AB 2847
Page 4
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
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, this bill 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.
AB 2847
Page 5
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.
GOVERNOR'S VETO MESSAGE:
I am returning Assembly Bill 2847 without my signature.
This bill mandates additional reporting requirements for
inclusion in the High-Speed Rail Authority's business plan and
in the project update report.
I believe this bill is unnecessary, particularly in view of the
passage of Assembly Bill 1813, which adds two legislative
members to the Authority. As with other projects of this
magnitude, state law requires strict standards of accountability
and transparency and I have every expectation that the Authority
will meet these high standards.
Analysis Prepared by:
AB 2847
Page 6
Melissa White / TRANS. / (916) 319-2093 FN:
0005131