BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 22
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: LA MALFA
VERSION: 3/24/11
Analysis by: Art Bauer FISCAL: YES
Hearing date: January 10, 2012
SUBJECT:
High-speed rail indebtedness
DESCRIPTION:
This bill reduces the amount of indebtedness authorized by
Proposition 1A - the Safe, Reliable High-Speed Passenger Train
Bond Act for the 21st Century - to the amount contracted as of
January 1, 2012.
ANALYSIS:
SB 1420 (Kopp), Chapter 796, Statutes of 1996, created the
High-Speed Rail Authority (HSRA) 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.
AB 3034 (Galgiani), Chapter 267, Statutes of 2008, authorized
the Safe, Reliable High-Speed Passenger Train Bond Act for the
21st Century (Proposition 1A), which authorized $9.95 billion in
bonds and which the voter passed in November 2008. Allows the
HSRA to develop a high-speed rail system extending from San
Diego to Sacramento with Phase I connecting Anaheim-Los Angeles
Union Station-Bakersfield-Fresno-San Jose-San Francisco Transbay
Terminal, and it requires the HSRA to prepare a draft business
plan by October 1, 2011 and a final plan by January 1, 2012,
with updated plans due every two years.
Prop 1A also created an independent peer review committee for
the purpose of reviewing the planning, engineering, and
financing of the project by issuing an analysis of the viability
of the HSRA's financing plan, including the funding for each
corridor. Ninety days prior to submitting to the governor a
request for an appropriation of bond proceeds for capital
expenditures, the HSRA must convene the peer review committee to
review the detailed funding plan for the proposed project. Prop
SB 22 (LA MALFA) Page 2
1A defines capital costs as the costs associated with the
acquisition of right-of-way and real property, construction of
tracks, structures, power systems, and stations, acquisition of
rolling stock, and the mitigation of direct and indirect
environmental impacts. Prop 1A prohibits state, local, or
federal operating subsidies for the high-speed rail service, and
it authorizes the HSRA to enter into contracts with private or
public entities for the design, construction, and operation of
high-speed trains.
Proposition 1A provided $950 million for improving 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 planning, environmental analysis, and preliminary
engineering for the project. The expenditure of the $8.1
billion available for construction is limited to not more than
50 percent of the cost of building the system.
Existing law related to public finance (Section 1 of Article XVI
of the California Constitution) authorizes the Legislature to
reduce the amount of indebtedness approved by the people in bond
acts to an amount not less than the amount contracted at the
time of the reduction. Alternatively, the Legislature may
repeal the law if no debt has yet been contracted.
This bill reduces the amount of indebtedness authorized by the
Safe, Reliable High-Speed Passenger Train Bond Act for the 21st
Century to the amount contracted as of January 1, 2012, thus
precluding the generation of additional bond funds for the
high-speed rail project after January 1, 2012.
COMMENTS:
1. Purpose . The author states that in 2008, a slim margin of
voters authorized the $9.95 billion bond to construct a
high-speed rail system in California. The author further
states that, while the voters approved the
bond, they did so with limited information about the overall
cost of the project, the cost of tickets, and train travel
time versus air travel time. The author states that the
overall cost of the project has risen from the original $33
billion projection to $98.5 billion now. The author also
states that the project would result in widespread use of
eminent domain in both rural and urban areas and the
construction of large infrastructure that would disrupt
communities.
SB 22 (LA MALFA) Page 3
2. Passage of Proposition 1A in 2008 . The voters of California
approved Proposition 1A with 52.7% of the vote. Support for
the measure was concentrated in the coastal counties of
California, with a few exceptions. The counties that
supported the measure were Alameda, Contra Costa, Fresno,
Imperial, Los Angeles, Marin, Mendocino, Merced, Monterey,
Napa, San Benito, San Francisco, San Joaquin, San Mateo, Santa
Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, and Yolo.
3. Concerns regarding the HSRA project . Since the passage of
Proposition 1A, interested parties have raised concerns about
some of the activities of the HSRA. The University of
California's Institute of Transportation Studies reported that
the HSRA used an unreliable model to forecast ridership. The
California State Auditor reported that the HSRA has made
payments that did not reflect the terms of its agreements,
thus risking its ability to hold contractors accountable for
their performance. The California High-Speed Rail Peer Review
Group reported that the HSRA needs to conduct more detailed
and transparent analyses of risk based on variations in
revenues, costs, and timing, because the lack of a clear
financial plan is a critical concern.
Recently, the HSRA issued a Funding Plan explaining its
request for a $2.684billion appropriation of bond revenues to
begin construction of the starter segment in the San Joaquin
Valley. The state funds will match $3.316 of federal funds
for a total project cost of $6 billion. Proposition 1A
requires the Peer Review Group to advise the Legislature on
the reasonableness of the request. In a January 3, 2012
report, the Peer Review Group concluded that it "cannot at
this time recommend that the Legislature approve the
appropriation of bond proceeds for this project."
4. Federal funding to date . To date, the HSRA has received
$2.321 billion in American Recovery and Reinvestment Act
(ARRA) funding and $929 million in funding from other federal
programs. The ARRA funds must be spent by 2017. The other
funds have a longer live span. Congress terminated further
funding for high-speed rail in the 2011-2012 federal budget.
5. Bond revenue appropriated to date . The Legislature has
appropriated $548 million of Proposition 1A funds. Of this
amount, $418 million has been for the high-speed rail
project's engineering and environmental work, and $130 million
SB 22 (LA MALFA) Page 4
has been from the $950 million set aside in Proposition 1A for
regional connector projects. The connector projects include
funding for safety technology being deployed by the commuter
rail agencies.
6. Bond funds for commuter and conventional intercity rail
improvements . If bond funds stop being appropriated, this
raises the question of what would happen to $950 million
designated in Proposition 1A for improving intra-city and
commuter rail. This money is overseen by the California
Transportation Commission and allocated to local operators and
Caltrans as matching funds for commuter and intercity rail
projects. The author may wish to amend the bill to exclude
commuter and intercity rail projects funded by Proposition 1A
from the provisions of this bill.
7. Effective date of the bill should be changed . Because this is
a two-year bill, the author may wish to change the effective
date in the bill to January 1, 2013. In making this
amendment, one must recognized that the HSRA intends to award
several design-build contracts during 2012. Should the
legislature appropriate the HSRA's request for construction
funding, the HSRA may award construction contracts before the
effective date of this bill. This action would nullify the
purpose of this bill.
8. Previous hearing . This bill was previously heard at the
committee's May 3, 2011 hearing and failed passage on a vote
of 2-6.
9. Related legislation . AB 76 (Harkey) of 2011 had identical
provisions to SB 22. It failed passage in the Assembly
Transportation Committee on April 4, 2011 by a 4 to 9 vote.
POSITIONS: (Communicated to the committee before noon on
Wednesday, January
4, 2012)
SUPPORT: Howard Jarvis Taxpayers Association
OPPOSED: American Council of Engineering Companies of
California
Association for California High Speed Trains
California Labor Federation
California Public Interest Research Group
SB 22 (LA MALFA) Page 5
Planning and Conservation League
Sierra Club California
State Building and Construction Trades Council of
California