BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1225 (Padilla) - Intercity rail agreements.
Amended: May 1, 2012 Policy Vote: T&H 9-0
Urgency: No Mandate: No
Hearing Date: May 24, 2012 Consultant: Mark McKenzie
SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
Bill Summary: SB 1225 would authorize the Department of
Transportation (Caltrans) to enter into an interagency transfer
agreement for the San Diego-Los Angeles-San Luis Obispo
intercity rail corridor (LOSSAN corridor).
Fiscal Impact:
One-time costs to Caltrans of approximately $200,000
(Public Transportation Account) to administer the transition
of operations and management to the JPA.
Cost pressures related to provisions in the bill that would
shift financial risk from the JPA to the state, while also
removing operational and management decisions from the state
and shifting them to the JPA. (see staff comments)
Background: Since 1976, Caltrans has contracted with Amtrak for
providing intercity passenger rail service in the LOSSAN
corridor. The initial service was between San Diego and Los
Angeles and later extended to Santa Barbara and San Luis Obispo.
The LOSSAN corridor is the second most heavily patronized
Amtrak corridor in the country, after the Northeast Corridor
between Washington-New York-Boston. About 6.7 million
passengers travel in LOSSAN corridor annually, which includes
users of the Metrolink and Coaster commuter lines.
The State and Amtrak share responsibilities for operating the
Pacific Surfliners trains in this corridor. Amtrak considers 30
percent of the service "basic system" service that is part of
the national long-distance service, and operating costs on this
portion are currently federally funded. Since 2004, the state
has supported 70 percent of the costs of all service in the
corridor. Pursuant to Section 209 of the federal Passenger Rail
Investment and Improvement Act, however, federal support will
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end on certain corridors that are less than 750 miles, including
the LOSSAN corridor. As a result, the state will support 100
percent of the Amtrak operational costs of the corridor
beginning in 2013-14, which will require state funding of almost
$50 million annually to continue service at current levels.
In addition to the LOSSAN Corridor, the state has funded Amtrak
service from Bakersfield to Oakland via Stockton and Martinez
since 1979, and the state contracted with Amtrak to operate
service from Sacramento to Oakland/San Jose in 1991. The
management of the latter service was devolved to the Capitol
Corridor Joint Powers Agency (CCJPA) in 1998 by an interagency
transfer agreement. This bill is intended emulate the
institutional relationship between Caltrans and the CCJPA in the
LOSSAN Corridor.
Proposed Law: SB 1225 would authorize Caltrans to transfer all
responsibility for administering state-funded intercity
passenger rail service in the LOSSAN corridor through an
interagency transfer agreement (ITA) to the LOSSAN Rail Corridor
Agency. Specifically, this bill would:
Require the BT&H Secretary to submit a report to the
Legislature on or before July 31, 2014, if an acceptable
transfer agreement has not been executed, that explains the
reasons for failure to reach agreement and includes
recommendations for developing an acceptable agreement in the
future.
Specify that the term of the transfer agreement with the
LOSSAN Corridor Agency will be for five years, but may be
extended by mutual agreement.
Require the level of service (number of round trips operated)
funded by the state to be no less than the level of service
funded as of January 1, 2013.
Requires the ITA to identify funds to be transferred to the
LOSSAN Agency, including operating subsidies, and funds
currently used by the department for administration and
marketing of the corridor, adjusted annually for inflation.
Prohibit the state from requiring a corridor agency to use
local funds to augment service or to fund shortfalls when
agreed upon performance standards are not met.
Prohibit the use of local funds for expenditure to offset any
redirection, elimination, reduction, or reclassification of
state resources for operating intercity passenger rail
services in the corridor.
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Require that cost for categories of service shall be
controlled by the cost allocation procedures established by
Amtrak in accordance with the federal Passenger Rail
Investment and Improvement Act of 2008.
Stipulates that the authority provided in this bill is only
operative if all of the members of the LOSSAN Corridor Agency
agree to amend their governing joint powers agreement to
expand the Agency's authority to allow for the administration
of intercity passenger rail service in the corridor.
State legislative intent that the intercity passenger rail
service in the LOSSAN corridor maintain a ratio of fare
revenue to operating cost of at least 58 percent.
Staff Comments: Caltrans indicates that this bill would require
a temporary increase of 2 PY of staff time for one year at an
estimated cost of $200,000 to cover the transition of
administration to the JPA, including the formulation of an ITA
and agreements regarding state-owned facilities. In addition,
three to four PY of staff dedicated to operations and capital
projects for the LOSSAN corridor would no longer be necessary at
Caltrans, but the equivalent funding level would be provided to
the LOSSAN Agency upon execution of the ITA.
SB 1225 would require the state to maintain a minimum level of
funding while transferring operating and management
decision-making authority to the LOSSAN Agency. This would
occur at a time when federal funding for the LOSSAN Corridor is
being eliminated and state subsidies are scheduled to increase
by about $25 million annually in 2013-14, if current levels of
service are maintained. Current levels of federal funding are
covering $9 million in operational losses and approximately $16
million in capital charges the state pays to Amtrak because they
own 85 percent of the fleet in the LOSSAN corridor. By
eliminating state authority to reduce operational or
administrative costs, this bill would mandate costs of $125
million ($25 annually from 2014-15 to 2019-20) beyond current
funding levels. Staff notes that there would be significant
pressure to continue the current level of operations in the
LOSSAN corridor, but the bill would eliminate the state's
discretion to cut back on service or seek other operational
agreements in the corridor. It is likely that the mandated
funding level in this bill would reduce the ability of Caltrans
to fund future capital projects or increased service levels
elsewhere in the state rail system, thereby creating a
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significant cost pressure.
This bill makes several changes to the statutes used to
establish an ITA with the Capitol Corridor JPA that are
disadvantageous to the state. For example, existing law
authorizes the JPA to augment state funding to address funding
shortfalls in achieving agreed-upon performance standards, while
this bill explicitly prohibits the state from requiring the use
of local funds for that purpose. The bill also adds a provision
to the ITA authorizing statute to prohibit the use of local
funds for expenditure to offset any redirection, elimination,
reduction, or reclassification of state resources for operating
intercity passenger rail services in the corridor. Existing law
requires that any funds beyond the amount allocated in an annual
appropriation that are needed for operation the passenger rail
service in a fiscal year would be provided by the JPA, while
this bill deletes the requirement and instead provides the
authority for the JPA to fill these funding gaps at its
discretion. The existing statute required an ITA to be executed
within a year of enactment of the statute, but SB 1225 would
leave the ITA execution date open, instead requiring the BT&H
Secretary to report within 18 months of enactment on the reasons
why an agreement has not been reached. A final key difference
is that federal funding for the LOSSAN corridor would be ending
prior to an ITA, but the bill requires the state to fund the
corridor entirely with state funds at a level that is $25
million higher than current annual state expenditures. All of
these factors would insulate the JPA from certain financial
risks, and shift the burden of those risks to the state while
subsequently taking the state out of operational and management
decision making in the corridor. All of these provisions would
impose additional cost pressures on the state.
Recommended Amendments: Staff recommends that the bill be
amended to conform more closely to the existing statute that was
used to execute the Capitol Corridor JPA to insulate the state
from increased risk, and instead leave these matters subject to
negotiation, rather than including them in statute.
Specifically, the Committee may wish to consider amending the
bill to do the following:
Authorize the JPA to augment state funding to expand
intercity passenger rail services, or to address funding
shortfalls in achieving agreed-upon performance standards.
(page 4, lines 24-28)
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Delete the mandate that funding be maintained at the
current Amtrak cost allocation formula that is subject to
Section 209 of the federal Passenger Rail Investment and
Improvement Act. (page 4, lines32-35)
Delete provisions that prohibit the use of local funds
for expenditure to offset any redirection, elimination,
reduction, or reclassification of state resources for
operating intercity passenger rail services in the
corridor. (page 5, lines 5-11)
Establish a date certain of June 30, 2014 by which an
ITA must be executed and delete the provisions for the
Secretary to report to the Legislature. (page 5, lines
27-33)
Require (rather than authorize) the JPA to provide any
additional funds needed in a fiscal year to operate the
passenger rail system beyond the amount allocated by the
Secretary. (page 7, line 37)
Proposed author amendments would:
Establish a date certain of June 30, 2014 by which an
ITA must be executed.
Delete provisions requiring a report to the Governor and
Legislature if an agreement has not been reached by June
30, 2014.
Delete language that specifically references federal
legislation in the provision that provides for minimum
funding for operating costs.
Proposed Committee amendments would specify that state funding
for the LOSSAN Corridor shall be, at a minimum, the amount
provided in 2012-13.