BILL ANALYSIS
AB 2121
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Date of Hearing: April 19, 2010
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 2121 (Harkey) - As Introduced: February 18, 2010
SUBJECT : California High-Speed Rail Authority: bond financing
SUMMARY : Reduces the amount of State of California general
obligation (G.O.) debt authorized pursuant to the Safe, Reliable
High-Speed Passenger Train Bond Act for the 21st Century (Bond
Act) to the amount contracted by the California High-Speed Rail
Authority (HSRA), as of January 1, 2011.
EXISTING LAW :
1)Establishes and provides HSRA with the authority and
responsibility to develop and implement a high-speed train
system within California.
2)Pursuant to the Bond Act as approved by the statewide voters
at the November 2008 general election, provides $9.95 billion
in G.O. 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)Authorizes the Legislature to establish conditions and
criteria on funds appropriated for planning and capital costs;
requires HSRA, prior to expending bond funding for the
construction and acquisition of equipment and property, to
submit concurrently to Department of Finance and the Joint
Legislative Budget Committee a detailed funding plan for each
corridor or usable segment.
4)Authorizes, through enactment of the federal American Recovery
and Reinvestment Act of 2009 (the recently enacted federal
economic stimulus package referred to as "ARRA"), $2.25
billion for high-speed rail passenger service development in
California.
FISCAL EFFECT : Unknown
COMMENTS : The proposed California high-speed rail passenger
train network consists of an 800+ mile high-speed system capable
of a speed up to 220 miles per hour (mph), initially serving the
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major metropolitan market of San Francisco through the Central
Valley into Los Angeles and Orange County (Phase 1). The system
is required by statute to transport people from San Francisco to
Los Angeles in two hours and forty minutes. Eventually the
service would be extended to Sacramento, the Inland Empire, and
San Diego. Further, improved rail service over the Altamont
corridor would be implemented.
In August 2008, the Legislature passed and the Governor signed
AB 3034 (Galgiani) Chapter 267 that laid the framework for
improving the oversight of the HSRA's high-speed rail project.
That bill also clarified and modified bond provisions that
eventually were approved by the California voters in November
2008 with the passage of the Bond Act. With that endorsement,
$9.95 billion state general obligation bond funds were
authorized for eventual sale, providing the initial capital seed
funds for the completion of the entire statewide system. The
law requires the HSRA to pursue other federal, local, and
private funds to augment the state bond revenues.
Additionally, AB 3034 established significant oversight
processes and control mechanisms for the independent review and
approval of financing and engineering plans for the construction
of California's high-speed train system. Reporting and other
oversight mechanisms were also required by subsequent Budget Act
requirements.
Following the statewide voter approval of the Bond Act
authorizing $9.95 billion for the development of a high-speed
rail system in California, the HSRA is transitioning from a small
study and planning organization to a multi-billion dollar
engineering and construction entity. Together with the passage
of the Bond Act and California's approval and pending receipt of
$2.25 billion in federal ARRA high-speed rail funds, the HSRA
will soon be tasked to approve major purchases of train rolling
stock and equipment.
For garnering the receipt of the federal ARRA funds, California
proposed a 100% match of the requested federal funds with state
funds. Further, in accordance with a schedule approved by the
federal ARRA funding agency (Federal Railroad Administration
[FRA]), the state is slated to complete its environmental reviews
of the initial Phase 1 segments by September 30, 2011, and to
begin construction by September 30, 2012. Based upon this
federally-approved schedule, major capital expenditures for
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right-of-way acquisition or actual rail construction would not be
under HSRA contract by AB 2121 contracting cutoff date of January
1, 2011. Thus, this bill's provisions conflict with the schedule
as approved by the FRA. Accordingly, as it is highly unlikely
that the capital acquisition and construction funds would be
encumbered under HSRA contract by January 1, 2011, the bonding
capacity to fund those needs would be lost pursuant to this
bill's provisions. Consequently, not only would the bill's
provisions reduce most of the available bond capacity of the Bond
Act, California would also stand to forfeit its receipt of $2.25
billion in ARRA funds as well, due to the state's inability to
provide the necessary state-promised match.
The author's office contends that "While there may be some
benefits to high speed rail, it should not come at the expense
of our schools, local transportation, public safety, and health
and human services. It should be noted that $9-10 billion
represents only startup costs for this project. The HSRA
estimates the costs for this project in excess of $40-60
billion. The Legislature should demand complete projections and
tracking mechanisms prior to funding any project with public
funds? While high speed rail may benefit certain areas of the
state, the lack of specifics as to cost, subsidies, financing,
and ridership, added to the state of the state's finances,
should cause the Legislature to reconsider its overall value to
the people of the state of California. Public resources might
be better spent on a steady supply of water, roads, prisons, and
schools."
The Howard Jarvis Taxpayers Association, in support of this
bill, indicates that their association's "opposition to the
high-speed rail proposal has been consistent, especially after
the release of the Reason Foundation study concluding that high
speed rail in California would be a costly boondoggle. Our
concerns about the viability of the project have only been
confirmed as more is learned. For example, even supporters of
the project have criticized the so-called "business plan" as
being wholly inadequate. In addition, the California
Legislative Analyst's Office has raised serious questions about
this project."
Writing in opposition to this bill, the Association for High
Speed Trains contends that "California will:
1)Lose 160,000 jobs constructing this project.
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2)Lose $2.25 billion in federal matching funds to build high
speed rail in California.
3)Our $2.25 billion will likely be re-allocated to high speed
projects in Florida, the Midwest or Northeast. These states
will receive the jobs and the many economic benefits of
building this train that California will have thrown away."
Additionally, the California Labor Federation indicates that
"Proposition 1A, the bond measure to construct a statewide
high-speed rail system, was overwhelmingly approved by
California voters. AB 2121 would prohibit the spending of money
for high-speed rail bond funds that exceed what is spent in
2010. This would cap funding at an artificially low level
because bond dollars in 2011 would only be spent on
environmental reviews and engineering work, which is less
capital intensive than future construction needs."
Related bill: AB 289 (Galgiani) of 2009, among its other
provisions, would require the HSRA, to the extent possible, to
use the proceeds of Bond Act funds to match federal ARRA funds.
That bill passed out of this committee on unanimous vote and is
awaiting hearing in the Senate Transportation and Housing
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Howard Jarvis Taxpayers Association
Several individual letters
Opposition
American Council of Engineering Companies of California
Association for High Speed Trains
California High-Speed Rail Authority
California Labor Federation
California Nurses Association/ National Nurses Organizing
Committee
California Public Interest Group (CALPIRG)
City of Merced
Peninsula Corridor Joint Powers Board (Caltrain)
San Mateo County Economic Development Association
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San Mateo County Transit District
San Mateo County Transportation Authority
Santa Clara Valley Transportation Authority
Numerous individuals
Analysis Prepared by : Ed Imai / TRANS. / (916) 319-2093