BILL ANALYSIS �
AB 1455
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Date of Hearing: April 23, 2012
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 1455 (Harkey) - As Amended: February 9, 2012
SUBJECT : California High-Speed Rail Authority: bond financing
SUMMARY : Reduces the amount of authorized indebtedness for the
California High-Speed Rail Authority (Authority) to the amount
contracted as of January 1, 2013; excludes from these provisions
indebtedness authorized for other rail purposes.
EXISTING LAW :
1)Establishes and provides the Authority with the responsibility
to develop and implement a high-speed rail system in
California.
2)Authorizes the sale of $9 billion in general obligation bonds
to partially fund the development and construction of the
high-speed rail system.
3)Additionally authorizes $950 million in general obligation
bonds for capital projects on other passenger rail lines to
provide connectivity to the high-speed rail system as well as
capacity enhancements and safety improvements to those lines.
4)Authorizes the Legislature to establish conditions and
criteria on the use of high-speed rail bond funds appropriated
for planning and capital costs.
5)Requires the Authority to complete and submit to the
Legislature funding plans and financial analyses, as
specified, prior to requesting an appropriation of bond funds
for eligible capital costs and prior to committing bond
proceeds for expenditure for construction and real property
and equipment acquisition.
6)Provides explicit authority for the Legislature to reduce the
amount of indebtedness authorized by a bond act to an amount
not less than the amount contracted at the time of the
reduction.
AB 1455
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FISCAL EFFECT : Unknown
COMMENTS : In 2008, voters approved Proposition 1A, the Safe,
Reliable, High-speed Passenger Train Bond Act--a $9.950 billion
general obligation bond to fund the proposed California
high-speed rail project and related improvements. As
envisioned, the project consists of an 800-mile dedicated
high-speed passenger rail system capable of speeds up to 220
miles per hour, initially serving the major metropolitan market
of San Francisco through the Central Valley into Los Angeles and
Orange County (Phase 1). Eventually the service is to be
extended to Sacramento, the Inland Empire, and San Diego.
The project is to be funded by a mix of federal grants, state
bonds, local government grants, and private investments. Of the
total Proposition 1A bond authorization, $9 billion is directly
for the high-speed rail project and the remaining $950 million
is for capital improvements to intercity, urban, and commuter
rail that provide direct connectivity to high-speed rail, are a
part of the high-speed rail system, or that provide capacity
enhancements or safety improvements to those other rail systems.
When the bonds were approved in 2008, costs for the entire
project were estimated to be $45 billion. Estimated costs for
the project have risen markedly since then. In the Authority's
November 2011 draft business plan, for example, costs for just
Phase 1 were estimated to be between $98 billion and $117
billion.
In the business plan released and adopted by the Authority
earlier this month, the Authority is now estimating costs for a
retooled Phase 1 to be significantly less than the November 2011
estimate, due primarily to a proposal to use a "blended
approach" rather than relying on a full build-out of dedicated
rail lines. The blended approach will use existing regional and
commuter rail lines in urban areas and, as a result, the project
can be delivered earlier, thereby reducing costs associated with
inflation over time. These changes, along with the Authority's
proposal to eliminate the segment of service between Los Angeles
and Anaheim, reduce estimated project costs to $68.4 billion.
From its creation through the end of this fiscal year, the
Authority will have spent about $630 million, $400 million of
which is from Proposition 1A bond funds. In its revised budget
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request for next fiscal year, the Authority is seeking
appropriations of approximately $6 billion for completion of an
initial segment of the project in the Central Valley: $3.240
billion from federal grants and $2.6 billion from state bonds.
The Authority anticipates needing $1.5 billion to $2 billion of
the $6 billion when it awards the first design-build contract in
early 2013.
Regarding the $950 million in bonds authorized for intercity
rail lines ($190 million) and commuter and urban rail systems
($760 million), the Authority's revised business plan promotes
"early investment" of these funds in the other rail systems.
Furthermore, the Authority is requesting a budget appropriation
for over $800 million of these funds and has also requested
budget bill language that would condition the availability of
these funds on the release of the other $6 billion in funds.
In introducing AB 1455, the author asserts that the high-speed
rail project "has the potential to double our state's debt and
become a huge future drain on our state's budget, while our
existing rail and roadway infrastructure is in dire need of
repair." The author anticipates that the bill will "stop the
out of control spending and allow California to focus on real
priorities such as schools, the needy and public safety."
Supporters of this bill argue that, given the state's current
financial situation, now is not the time to maximize its bonding
capacity, especially when it faces "massive structural deficit,
cuts to education, public safety, unfunded pension liabilities
and borrowing and deferring payments to local municipalities."
They further argue that, given a growing need for local
infrastructure improvements, the high-speed rail project itself
should be halted and, instead, the funding be made available in
Proposition 1A for local rail infrastructure projects.
Opponents, such as the California Labor Federation, argue that
"AB 1455 is a politically motivated attempt to destroy the
high-speed rail project along with California's chances for
economic recovery." They cite projections that the high-speed
rail project will initially create 100,000 construction jobs in
the Central Valley and 450,000 jobs in the long-term. They
believe the project is vital to spur California's economy
through job creation and by attracting foreign investment in
operations and maintenance.
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Related legislation : SB 22 (LaMalfa) is nearly identical to
this bill. It failed passage in Senate Transportation and
Housing Committee earlier this year.
Previous legislation: This is the third attempt by the author
to stop further bond funding for the high-speed rail project.
AB 2121 (Harkey) of 2010 and AB 76 (Harkey) of 2011 were nearly
identical to this bill. AB 2121 was subsequently amended to
deal with high-speed rail reporting requirements and AB 76
failed passage in the Assembly Transportation Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
City Council of San Juan Capistrano
Kings County Board of Supervisors
Orange County Board of Supervisors
San Diego Board of Supervisors
The Honorable Matt Hall, Mayor, City of Carlsbad
Opposition
American Council of Engineering Companies of California
California High Speed Rail Authority
California Labor Federation
State Building and Construction Trades Council
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093