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: July 5, 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.
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 $9 billion, $900
million is for the project's planning, environmental analysis,
and preliminary engineering. Proposition 1A limits the
expenditure of the $8.1 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
Los Angeles Union Station 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
provision of 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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Existing law creates the HSRA and authorizes the agency to 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.
In January 2010, the 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.
This bill repeals the existing provisions establishing the HSRA
and its powers and duties and instead:
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 per meeting but not
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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
revising 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 accountability with the
Legislature for the HSRA's performance of its duties.
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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 than 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, 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
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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, $8.1 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. 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.
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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 that 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 billion 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)Organizational options . Given the issues around creating a
DHST, the author and the committee may wish to chart a middle
course between the existing organizational arrangement, the
efficacy of which has been questioned by many oversight
entities, and the creation of a DHST, with a separate
independent governing board having its own staff. Although the
LAO recommended that the Legislature locate the HSRA in
Caltrans, the LAO also acknowledged that Caltrans has
organizational inadequacies of its own that might give the
Legislature pause to shift the entire HSRA into Caltrans. The
LAO does point out, however, that Caltrans has very
specialized work groups that could support the HSRA's efforts
to develop the project, essentially on a contract basis. Among
the tasks identified by the LAO that could be delegated to
Caltrans are the following:
Negotiating and managing large contracts . Caltrans
regularly contracts with large construction firms for the
construction of major projects. These contracts are both
design-bid-build and design-build contracts, which is the
HSRA's preferred construction method for the San Joaquin
Valley project.
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Acquisition and management of property . Caltrans has a
statewide staff of right-of-way personnel, including
right-of-way agents, appraisers, and attorneys, who
understand local property markets, the legal requirements
for initiating and consummating acquisitions, and related
skills. According to Caltrans, it may be necessary to
employ additional right-of-way staff. That may be, but the
important point is that Caltrans has an organizational
infrastructure in place, ready-to-go that the HSRA would
otherwise have to replicate from scratch.
Managing outreach and project communications . According
to the LAO, Caltrans maintains a public information office
with over 60 staff as well as its large planning staff
housed in Caltrans' district offices throughout the state
that is experienced with conducting project outreach. Both
the HSRA's communications program and its public outreach
programs have been the subject of controversy in various
segments of the Phase I Corridor.
Legal support . Caltrans, according to the LAO, has a
staff of 280 attorneys many of whom are experts in
addressing the legal issues associated with the
environmental process, acquisition of property,
construction contract law, construction claims, rail
equipment procurement for Caltrans rail division, and
related project development and implementation issues. The
HSRA has previously indicated that it desires to retain
outside legal services. Given the HSRA's timeframe, it
would be convenient to contract with Caltrans for legal
services. In addition, if it is found that specialized
services are necessary for certain aspects of the project,
Caltrans is already authorized to retain outside legal
assistance, which it could do in collaboration with the
HSRA.
Federal grant administration services . Caltrans has
extensive experience in dealing with the various grant
management procedures of the relevant U.S. Department of
Transportation agencies: the Federal Railroad
Administration (FRA) and the Federal Highway
Administration. Caltrans's Division of Rail has had several
years of experience in dealing with the FRA on railroad
safety, equipment procurement, grant management, and
related issues. To be sure, the HSRA will need technical
expertise in safety, rolling-stock, and electrical and
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systems control technologies. These are specialties
Caltrans does not possess but is in a position to procure
collaboratively with the HSRA.
The committee may wish to amend this bill to delete creation of
the DHST and instead
delegate the above activities to Caltrans.
1)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 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.
2) 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
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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
years after their term expires with HSRA contractors. This
bill passed the Assembly Transportation Committee on June 27,
2010. In light of this committee's action on SB 517, the
committee may wish to delete from this bill the provisions
related to the governing board of the HSRA.
Assembly Votes:
Floor: 51-18
Appr: 12-5
Trans: 12-0
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 29, 2011)
SUPPORT: None received.
OPPOSED: None received.