BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 145
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Galgiani
VERSION: 6/21/11
Analysis by: Art Bauer FISCAL: yes
Hearing date: June 28, 2011
SUBJECT:
High-speed rail
DESCRIPTION:
This bill modifies the responsibilities of the High-Speed Rail
Authority (HSRA), creates a staff to the HSRA board, and creates
a Department of High-Speed Trains (DHST).
ANALYSIS:
In November 2008, California voters approved Proposition 1A, the
Safe, Reliable High-Speed Passenger Train Bond Act for the 21st
Century of 2008 (Proposition 1A). The $9.95 billion bond
measure provides $950 million for improving conventional rail
services connecting to the high-speed rail line and $9 billion
for high-speed rail development. Of the remaining $9 billion,
$900 million is for the project's planning, environmental
analysis, and preliminary engineering. Proposition 1A limits
the expenditure of the $8 billion available for construction to
not more than 50 percent of the cost of building the systems.
Proposition 1A identifies the Phase I corridor for high-speed
rail as an alignment from the San Francisco Transbay Terminal to
the Los Angeles Union State and Anaheim via the San Joaquin
Valley. The HSRA estimates the total cost of Phase I to be
between $43 and $65 billion.
Proposition 1A defines the capital cost for which bond revenues
may be used to include acquisition of property, acquisition and
construction of tracks, structures, power systems, and stations;
acquisition of train equipment; mitigation of direct and
indirect environmental impacts; relocation assistance; and other
related capital facilities, including financing and refinancing
if authorized by a subsequent statute. It also authorizes the
HSRA to contract for services and equipment for developing and
operating the high-speed train service.
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In January 2010, the High-Speed Rail Authority (HSRA) received
an American Recovery and Reinvestment Act (ARRA) grant of $2.25
billion to aid in the development of the Phase I project. Of
that amount, $400 million is for constructing the basement of
the new Transbay Terminal in San Francisco to accommodate
high-speed trains. According to the Federal Railroad
Administration's (FRA) announcement of its ARRA award, the
remaining $1.85 billion is for purchasing right-of-way,
constructing track, signaling systems, and stations, and
completing environmental reviews and engineering documents for
the Los Angeles/Anaheim segment, the San Francisco/San Jose
segment, the Fresno/Bakersfield segment, and the Merced/Fresno
segment. In a second round of federal funding the HSRA received
approximately $1.3 billion, and in a third round of funding, the
HSRA received $300 million from funds declined by Florida. The
HSRA and FRA jointly selected a segment from near Fresno to near
Bakersfield as the first construction segment. Between federal
funds and state bond funds, the HSRA has committed about $5.7
billion for the Central Valley project. As a condition of the
ARRA grants, the HSRA must complete construction by September
30, 2017.
ARRA prohibits the use of grant funds for a project involving
the construction, alteration, maintenance, or repair of a public
building or public facility, unless all of the iron, steel, and
manufactured goods used in the project are produced in the
United States. In addition, it requires that this prohibition
be applied in a manner consistent with U.S. obligations under
international agreements pertaining to procurement. Lastly,
ARRA establishes conditions for waivers of these requirements.
Existing law creates the HSRA and authorizes the agency plan,
develop, and implement high-speed train service in California.
In addition, Proposition 1A defines the characteristics of
high-speed rail, prescribes the Phase I project, and establishes
processes for funding and developing high-speed rail service in
the state.
The bill repeals the existing provisions establishing the HSRA
and its powers and duties, and instead the bill:
1) Reconstitutes the existing governing HSRA board with a
nine-member governing board, including five members
appointed by the governor, two members appointed by the
Senate Rules Committee, and two members appointed by the
Speaker of the Assembly. The members shall receive $100
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per meeting but not more than $500 in any month. In
addition, the members are reimbursed for travel costs.
2) Authorizes the HSRA to appoint an executive director.
3) Creates the Department of High-Speed Trains (DHST) in
the Business, Transportation and Housing (BT&H) Agency and
authorizes the governor to appoint the director of DHST,
who shall be subject to Senate confirmation.
4) Restates several of the provisions in existing law
relative to management and development of a high-speed rail
project, including the preparation of a business plan, the
continuation of the independent peer review group, and the
authorization to accept grants, acquire right-of-way
through purchase or eminent domain, enter into transactions
to acquire equipment, select a franchisee, and other
activities necessary to construct and operate a high-speed
train system.
5) Prohibits the HSRA from being involved with the
day-to-day operation of the DHST.
COMMENTS:
1) Purpose . According to the author, as the high-speed
train project proceeds, there is a need to re-organize the
governance structure of the HSRA and strengthen the
operational and administrative capabilities of the state's
high-speed train project management. The author believes
that this can best be achieved by creating a new DHST as
part of the state government, distinct from the existing
HSRA, and revise the role of the HSRA. The governance
structure set forth in this bill mirrors the existing
organizational relationship between the California
Transportation Commission (CTC) and the Department of
Transportation (Caltrans). Under this bill, DHST will
carry out the day-to-day activities of constructing and
implementing the high-speed rail project, while the HSRA
will continue as the policy-making body.
Incorporating the HSRA into the structure of state
government will engage the governor in the high-speed rail
development process. To this end, this bill creates a new
DHST within the Business, Transportation and Housing (BT&H)
Agency. This ensures the administration shares
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accountability with the Legislature for the HSRA's
performance of its duties.
A final goal, according to the author, is to reform the
HSRA board to facilitate informed engagement with the
public and the DHST's management regarding the policies for
the development of the high-speed rail project.
2) Background . The independent Peer Review Group, the
Legislative Analyst Office, the State Bureau of Audits, and
the Institute of Transportation Studies at the University
of California Berkeley have all raised serious issues with
management of the high-speed rail program. This bill
endeavors to address these issues by creating a DHST and
converting the HSRA board to an independent entity that
establishes polices for the new department. In large part,
this bill is an effort to respond to the LAO's critique of
the HSRA. In a May 2010 report, the LAO concluded:
". . . our analysis suggests that an autonomous
state operation does not seem to be a very good
fit with the critical set of tasks now required
to move forward with the high speed rail project.
First, the current governance structure for HSRA
grants its commission more independence and
autonomous decision-making that we believe is
appropriate for this phase of the project's
development."
The LAO goes on to argue that high-speed rail projects
should be "integrated into the state's current
transportation planning structure." The LAO recommends
that best way to address these concerns is to incorporate
the HSRA into Caltrans.
This bill does not move as far as the LAO recommends in
restructuring the HSRA, but it does establish the DHST in
BT&H, the same agency in which Caltrans is housed.
3) Is the CTC-Caltrans organizational model appropriate ?
The underlying premise of this bill is that the
CTC-Caltrans relationship is the appropriate model for
re-organizing the HSRA. The relationship between a
reorganized HSRA and DHST may not be parallel. The CTC is
akin to a referee. It manages the competing interest of
the state's forty regional transportation agencies,
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Caltrans, and local governments through the STIP process
and the allocation of bond funds. It advocates for
transportation funding and improvements. Finally, it
carries out certain ministerial functions, such as adopting
resolutions of necessity, the certification of
environmental documents, and voting for the allocation of
funds to initiate the construction of transportation
projects. The only managerial area that has been of
concern to the CTC is the timely delivery of projects. The
state's highway network is defined in statute, not by the
CTC. It adopts a fund estimate as part of the STIP
process, and it may develop and adopt financing plans for
some bond funded projects.
The LAO suggests that the Legislature may consider housing
the HSRA in Caltrans, where many of the skills for
developing large scale engineering projects, including
property acquisition, engineering management services and
the like, reside. There may be other organizational
options that the committee may wish to consider.
4) Is staff necessary for the new high-speed rail board ?
This bill authorizes the reconstituted HSRA to appoint an
executive director, who is a pleasure appointee, and
related support staff. This is again modeled on the CTC.
It's unclear what the role of this staff would be, because
the only function of the new HSRA is to oversee the
development of a single project.
5) Can the state afford a DHST ? The high-speed rail
project is a bond funded project. Of the $9 billion
available for high-speed rail development, about $8 billion
is for construction and $900 million is set aside for
planning, engineering, and administration. According to
the LAO, $522.8 million remains available for these three
functions. In three years since the enactment of
Proposition 1A, $377.2 million has been spent on management
and project development activities. With five years
required for the completion of the first construction
project in the San Joaquin Valley, as well as planning and
engineering continuing on the remaining segments of Phase
I, a $100 million per year "burn rate" would nearly consume
the all the funds set aside in the bond act for project
development and overhead. Then what? State agencies do
not operate entirely on bond funds, unless there is an
accompanying dedicated revenue stream to service the debt.
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Most state agencies either operate on general funds or
special funds. Caltrans and the CTC are funded from the
State Highway Account, a special fund in which gas tax
revenues are deposited. If the bond funds run out, there
is no apparent source of funding for the ongoing operations
of the proposed DHST.
6) Lack of a business model . The Peer Review Group leveled
a major criticism at the HSRA's lack of a defined a
business model for developing and operating a high-speed
rail service. This bill does not explicitly address that
question, but it appears the model underlying this bill
would be a government enterprise, similar to an urban
transit project. If that is the case, it is inconsistent
with Proposition 1A's prohibition on operating subsidies.
Creating a new department without clarifying this issue
may, in the future, create confusion and misunderstandings.
7) Is this the time to create DHST ? The HSRA is in the
process of embarking upon a $5 million construction project
that has a hard federal deadline for completion in 2017. A
basic policy question is whether the Legislature wants to
add the burden of creating a new department at the very
moment the HSRA is completing the environmental process on
the two San Joaquin Valley segments, finalizing agreements
with the federal government, formulating bid documents for
procuring design-build teams to construct the project,
initiating property acquisition and engaging other project
initiation activities.
8) Possible confusion between this bill and Proposition 1A .
There are some provisions of this bill that conflict with
Proposition 1A. The following are important examples:
a. Conflict in the definitions of "high-speed
train" . Proposition 1A defines the maximum speed of a
high-speed train as being capable of sustaining a
revenue service operating speed of "at least 200 miles
per hour" where conditions permit. This bill defines
a "high-speed train" to mean intercity passenger train
service that is capable of sustained speeds of 125
miles per hour. In this case Proposition 1A would
have to be amended to conform to this bill. That
would require a two-thirds vote of the Senate and the
Assembly. In addition, existing state law authorizes
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Caltrans to operate passenger rail service up to 125
miles per hour. To this end, the passenger cars that
Caltrans purchases for the state's Amtrak service are
design to operate at that maximum speed. The
committee may wish to amend this bill to conform to
Proposition 1A and existing law.
b. Conflict in the selection of routes . This
bill authorizes the new HSRA to adopt criteria for the
selection of routes for high-speed train service.
Proposition 1A identifies the corridor and prioritizes
Anaheim/Los Angeles to the San Francisco Transbay
Terminal via the Central Valley as the first corridor
for development. The only decision is the actual
alignment of the corridor, which is determined
primarily by the environmental review process. The
committee may wish to amend this bill to remove the
requirement for route selection criteria to conform to
Proposition 1A.
9) Related legislation . Earlier this year this committee
and the Senate passed SB 517 (Lowenthal). That bill
incorporates the HSRA into the structure of state
government by situating the agency in BT&H and places the
BT&H secretary on the HSRA board as a non-voting member.
In addition, SB 517 requires the governor's appointees to
have specific expertise related to large infrastructure
projects, including environmental science, transportation
engineering, legal, and financial expertise in order to
provide informed policy direction to the staff. It
subjects the appointees to Senate confirmation. Lastly, to
reduce the likelihood of conflicts of interest, this bill
prohibits board members from having been employed by a HSRA
contractor in the two years prior to being appointed and
prohibits board members from taking employment for two
after their term expires with HSRA contractor. This bill
is in the Assembly Transportation Committee.
Assembly Votes:
Floor: 51-18
Appr: 12-5
Trans: 12-0
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 22, 2011)
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SUPPORT: None received.
OPPOSED: None received.