BILL ANALYSIS �
AB 1501
Page 1
Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 1501 (Patterson) - As Amended: March 13, 2014
SUBJECT : High-speed Rail Authority: federal funds
SUMMARY : Prohibits the High-speed Rail Authority (Authority)
from spending federal funds for which a state match is required
unless state funding for the match is immediately available.
Specifically, this bill :
1)Makes legislative findings and declarations related to
high-speed rail that:
a) Assert that, neither the Legislature nor the voters
approved the direct expenditure of General Fund dollars for
high-speed rail construction;
b) Describe the 2012 legislative appropriation of $4.7
billion in state bond funds and $3.3 billion in federal
funds to initiate high-speed rail construction;
c) Summarize intervening court rulings that affect the
ability of the Authority to use state bond dollars;
d) Summarize the Authority's rebuttal to the court's ruling
in which the Authority argues that, even if it cannot
proceed with the use of state bond dollars for
construction, it can proceed to construction by using
federal funds and fulfill federal matching requirements by
committing other state funds; and,
e) Declare that, based on this logic, the Authority could
unilaterally obligate the state to provide more than $3
billion in state resources to high-speed rail without prior
review or approval by the Legislature.
2)Prohibits the Authority from spending previously appropriated
federal funds unless state funds "are immediately available"
to the Authority for the purpose of providing required
matching state funds; provides that this requirement applies
regardless of whether the federal government has authorized
the expenditure of federal funds without the immediate
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availability of state matching funds.
EXISTING LAW :
1)Establishes the Authority and vests with it 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
California's high-speed rail system.
3)Authorizes the expenditure of an additional $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 for capacity enhancements and safety
improvements to those lines.
4)Requires the Authority to complete and submit to the
Legislature funding plans and financial analyses 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.
FISCAL EFFECT : Unknown
COMMENTS : In 2008, voters approved Proposition 1A, the Safe,
Reliable, High-Speed Passenger Train Bond Act, a $9.95 billion
general obligation bond to fund the proposed California
high-speed rail project and related improvements. Subsequent to
passage of the proposition, California received over $3 billion
in federal grants for planning, engineering, and construction of
up to 130 miles of dedicated and fully grade-separated
high-speed rail line in the Central Valley. The federal
appropriations came from a mix of American Recovery and
Reinvestment Act (ARRA) funds and direct Federal Railroad
Administration (FRA) grants. State matching funds are required
as a condition of federal funding. It is important to note that
this requirement is based on a funding agreement between the
Authority and the federal government and is not a statutory
requirement associated with either federal ARRA funds or with
the direct FRA appropriation.
In 2012, the Legislature passed and the Governor signed SB 1029
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(Committee on Budget and Fiscal Review, Chapter 152, Statutes of
2012) to appropriate $8 billion to the Authority ($4.7 billion
in Proposition 1A state bond funds and $3.3 billion in federal
funds) to initiate construction of high-speed rail. Last year,
the Authority issued its first design-build contract for
construction of a 29-mile segment between Madera and Fresno.
The value of the contract is just under $1 billion.
Additionally, the Authority is currently in the process of
procuring design-build services for the next 60-mile phase of
construction from Fresno to the Tulare-Kern County line near
Bakersfield. This second contract is estimated to cost between
$1.5 billion and $2 billion.
Recent court rulings have put funding for the project in limbo,
at least in the near term. The first court ruling essentially
concluded that the Authority's funding plan was invalid because
it did not meet the requirements of the law as set forth in
Proposition 1A, namely that the funding plan failed to identify
the sources of all funds to be invested in the initial operating
segment and failed to certify that project level environmental
clearances were complete for the entire initial operating
segment. The court subsequently ordered the Authority to
rescind its approval of the funding plan. The court also ruled
on a bond validation hearing and found that the Authority had
not met the legal standards for issuing taxpayer bonds. As a
result of the ruling, the state's ability to sell the
voter-approved Proposition 1A bonds is in question.
The ultimate result of these court decisions is still unknown,
although the Authority indicates it expects to satisfy the
court's objections and be able to proceed with the project with
minimal impact to the project's schedule. It has renegotiated
its funding agreement with the federal government to allow a
"tapered match"-i.e., to allow federal dollars to be spent first
and state matching dollars to be spent later. Additionally, the
Governor's proposed budget identifies $250 million in
cap-and-trade expenditures for the planning, construction, and
right of way acquisition for the first phase of the project.
The Governor has also proposed an ongoing state commitment of
cap-and-trade proceeds to high-speed rail. The Governor intends
that the use of cap-and-trade proceeds will allow the project to
move forward while legal issues surrounding Proposition 1A are
being resolved.
The author asserts that voters authorized only $9.95 billion in
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general obligation bonds for high-speed rail and that,
subsequently, neither the Legislature nor the voters have
approved the direct expenditure of General Fund dollars for the
project. The author is concerned that the Authority asserts
that, should Proposition 1A bonds not become available, other
sources of state funds can be used to fulfill the matching
requirement set forth in the federal agreement, including
General Fund funds-funds that the author argues may otherwise be
available for other purposes not related to high-speed rail.
Opponents of the measure argue that AB 1501 would irresponsibly
restrict access to critical federal funding while threatening
thousands of employment opportunities for one of the most
impoverished regions in the nation.
AB 1501 failed in Assembly Transportation Committee on March 24,
2014, with a vote of 4-11 and was granted reconsideration.
Related legislation :
AB 842 (Donnelly) of 2013 was the latest of bills that would
have reduced the amount of authorized indebtedness for the
Authority. That bill failed passage in the Assembly
Transportation Committee. Other similar bills included:
1)AB 1455 (Harkey) of 2012, which failed passage in the Assembly
Transportation Committee;
2)SB 22 (LaMalfa) of 2012, which failed passage in the Senate
Transportation and Housing Committee;
3)AB 76 (Harkey) of 2011, which failed passage in the Assembly
Transportation Committee; and,
4)AB 2121 (Harkey) of 2010, which died in the Senate Rules
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Associated Builders and Contractors of California
Opposition
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Association for California High-Speed Trains
Brotherhood of Locomotive Engineers and Trainmen, Teamster's
Rail Conference
California Conference of Machinists
California Labor Federation
California Teamsters Public Affairs Council
Sierra Club California
State Building and Construction Trades Council, AFL-CIO
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093