BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 985
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: La Malfa
VERSION:
1/30/2012
Analysis by: Art Bauer FISCAL: yes
Hearing date: April 17, 2012 URGENCY: YES
SUBJECT:
High-speed rail bonds
DESCRIPTION:
This bill submits to the voters a proposition to suspend the
sale of bonds authorized by the Safe, Reliable High-Speed
Passenger Train Bond Act for the 21st Century (Proposition 1A),
which voters approved at the November 2008 general election.
ANALYSIS:
The California High-Speed Rail Authority (HSRA) was created in
1996 to develop and implement inter-city high-speed rail service
that is fully coordinated with other public transportation
services. Proposition 1A provides $9 billion for high-speed
rail and $950 million for intercity rail, commuter rail, and
urban rail services that connect to the high-speed rail service
(referred to as connectivity funds). The bond funds are
required to be matched by the HSRA or an eligible local agency
dollar-for-dollar.
Proposition 1A divides the high-speed rail project into two
phases. Phase one is from the San Francisco Transbay Terminal
to Anaheim via San Jose, Fresno, Bakersfield, and Los Angeles
Union Station. Phase two is an extension from Los Angeles to
San Diego via the Inland Empire and an extension from Merced to
Sacramento. The HSRA is currently focusing its efforts on
developing phase one. In addition, Proposition 1A specifies
that the trains are required to have a maximum operating speed
of 220 miles per hour and travel between the Transbay Terminal
and Los Angeles in 2 hours and 40 minutes.
Existing law:
1. Authorizes the Treasurer to sell of $9.95 billion in
general obligation bonds of which
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$9 billion is for high-speed rail planning, engineering,
and construction, and $950 million is for connecting
conventional rail, including intercity rail, commuter rail,
and urban rail transit systems to the high-speed rail line.
2. Requires the Legislature to appropriate bond proceeds.
3. Authorizes the Legislature to appropriate the amount of
bond funds at less than the amount authorized in a voter
approved bond measure.
4. Authorizes the Legislature to repeal a bond measure if
no bonds have been sold.
This bill :
1. Requires the Secretary of State to put on the November
2012 general election ballot a legislative referendum
which, if approved by the voters, would prohibit the sale
of any additional high-speed rail bond bonds.
2. Authorizes the Legislature to appropriate any
outstanding net proceeds from sale of the bonds before the
enactment of this bill for retiring outstanding high-speed
rail bond debt.
3. Is an urgency measure.
COMMENTS:
1. Purpose . The purpose of this bill is to allow California
voters to reconsider their vote for Proposition 1A. The
reason for this is because of the difficulties the HSRA has
encountered in developing the project. For example, the
financial plan and ridership forecasts have been called
into question, and the Authority's proposed alignments and
outreach efforts have aggravated rural communities in the
San Joaquin Valley and urban communities in both northern
and southern California. Because of these difficulties
there has been an apparent shift in public support for the
project.
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In 2008, the state voters approved Proposition 1A by a 52.7
to a 47.3 percent margin. Public sentiment toward the
project appears to have shifted since 2008. A December
2011 Field Poll found that 64 percent of the state's voters
favored another vote on the high-speed rail project. The
poll also found that 64 percent of both those who voted in
favor of Proposition 1A and those who voted against it
favored another vote on the measure. If another vote were
taken on Proposition 1A at the time of the survey, the poll
found that 59 percent of all voters would have voted
against the proposition. For this reason, the author
believes California voters need another opportunity to
express themselves on the project at the polls.
2. Initiative to repeal Proposition 1A . Senator La Malfa
and former Congressman George Radanovich are circulating an
initiative entitled "Stop the $100 billion Bullet Train to
Nowhere Act." To qualify for the November 2012 general
election, initiative sponsors must submit 504,760
signatures by August 13, 2012. This measure prohibits the
sale of any bonds authorized by Proposition 1A after the
passage of the initiative. The initiative does not
prohibit the state from paying debt service on high-speed
rail bonds already sold. SB 985 is identical to the
proposed initiative.
3. Expenditures and funding for the high-speed rail
program . From its creation in 1996 through 2011-12, the
HSRA will have spent about $630 million from the following
funding sources: Proposition 1A bond funds (about $400
million); federal funds (about $140 million); and various
state special funds and other bond funds (about $90
million). The proposition 1A revenue was augmented in 2009
when the HSRA received $3.3 billion in funding from the
federal American Recovery and Reinvestment Act (ARRA) and
other federal programs exclusively for capital outlay
purposes. The HSRA can only use federal funds if the
Legislature appropriates approximately $2.3 billion of
Proposition 1A bond for matching purposes.
4. What is the high-speed rail program and cost ? Perhaps
the issue that may have most contributed to the erosion of
public support for the project is the variability of
project cost. Two reasons for this are changes in costing
methodologies and in the concept of the project. For
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example, in the ballot pamphlet describing Proposition 1A,
the Legislative Analyst, relying upon a 2006 HSRA cost
estimate, states that combined cost of phase one and phase
two was approximately $45 billion. The 2008 business plan,
published just before the November election, put the cost
of phase one, San Francisco to Anaheim, at $33 billion in
2008 dollars. In 2009, the basis of calculating cost was
shifted to "year of construction dollars", a more realistic
estimating methodology. This resulted in the cost
increasing to $43 billion for phase one. Last November,
the draft 2012 business plan put the cost of phase one at
$98 billion. This cost included trains capable of
operating up to 220 miles per hour and meeting the time
requirement of 2 hours and 40 minutes.
The draft revised 2012 business plan proposes to establish
a "road map" to achieving high-speed rail service in
California. To this end it emphasizes making investments
in the urban areas, referred to as the "bookends," that are
compatible with future high-speed rail service. It further
proposes to use existing rail infrastructure in the urban
areas and build dedicated high-speed rail infrastructure in
the San Joaquin Valley and through the Tehachapi Mountains.
Together this is referred to as a blended approach to
high-speed rail development. The build-out cost from San
Francisco to Los Angeles is estimated to be $68.4 billion.
Because of this emphasis, this plan is very different than
the previous draft November business plan and the 2008 and
2009 business plans. The three previous business plans
estimated the cost for phase one, Anaheim/Los Angeles to
the San Francisco Transbay Terminal. In the April
revision, the cost is $30 billion less because emphasis is
on the blended plan with service operating between San
Francisco and Los Angeles Union Station. The blended
approach minimizes the emphasis on a full build-out phase
one compliant plan. The Proposition 1A compliant plan that
meets the 2 hours and 40 minute travel time between Los
Angeles and San Francisco is estimated to cost $91.4
billion, only $7 billion less that the November business
plan.
5. Peer review committee report . The statutorily mandated
peer review committee report discusses a number of ways the
draft business plan and the related funding plan can be
improved. The report concludes: "Pending review of the
Final 2012 Business Plan and absent a clearer picture of
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where future funding is going to come from, the Peer Review
Group cannot at this time recommend the Legislature approve
the appropriation of bond proceeds for this project." The
peer review committee has not yet issued a report on the
revised 2012 business plan.
6. Impact of SB 985 . The HSRA writes in its opposition to
this bill that:
SB 985 would mean all the time, effort, and
energy you put into helping shape this into an
improved plan would be forfeited along with
today's opportunity to build a high-speed rail
system in California at current costs for
securing right of way, building tracks, trains,
and systems. Foregoing the opportunity to
proceed with High-Speed Rail now means any
eventual high-speed rail connection through
California will only be more difficult and more
expensive due to the inevitable increase in costs
as a result of inflation, population growth, and
the potential requirement for rework of
preliminary engineering and environmental work
already completed by the HSRA.
SB 985 will, of course, irretrievably forfeit
the $3.5 billion in federal funds awarded under
the American Recovery and Reinvestment Act of
2009 ('ARRA') and likely forfeit the possibility
of any future federal funding for a high-speed
rail system in California. It will also
eliminate the use of $950 million in state bond
funds committed to integrate and 'interconnect'
urban and regional rail systems into the
High-Speed Rail project . . .
7. RELATED LEGISLATION. Last year this committee
considered bill SB 22 (LaMalfa), which if enacted would
have prohibited the sale of high-speed rail bonds after
January 1, 2012. The bill failed in committee on a vote
of 3-6.
POSITIONS: (Communicated to the committee before noon on
Wednesday,
April 11, 2012)
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SUPPORT: City of Palo Alto
Howard Jarvis Taxpayers Association
OPPOSED: Amalgamated Transit Union
California Conference of Operating Engineers
California High-Speed Rail Authority
California Labor Federation
California Teamsters Public Affairs Council
California Transit Association
Sierra Club California
State Building and Construction Trades of
California