BILL ANALYSIS �
AB 2650
Page 1
Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 2650 (Conway) - As Introduced: February 21, 2014
SUBJECT : California High-Speed Rail Authority: bonds: ballot
measure
SUMMARY : Directs that a referendum be placed on the ballot
related to high-speed rail bonds. Specifically, this bill:
1)Directs the Secretary of State to put on the November 2014
general election ballot a measure which, if approved, would:
a) Prohibit further issuance and sale of any authorized
bonds for high-speed rail, except for early improvement
projects (a.k.a. bookend projects) in the Phase 1 blended
system for which appropriations have already been made.
b) Redirect the proceeds of any outstanding bonds issued
and sold-except for those related to the bookend
projects-to debt retirement.
c) Reauthorize the issuance and sale of any unissued bonds
for other transportation uses, upon legislative
appropriation, as follows:
i) Forty percent to fund construction improvement
projects in the State Transportation Improvement Program
(STIP);
ii) Forty percent to fund highway maintenance and
operations projects in the State Highway Operation and
Protection Program (SHOPP); and,
iii) Twenty percent to fund port and freight
infrastructure improvement projects identified in the
state's freight plan.
This bill is an urgency measure.
EXISTING LAW :
1)Establishes the California High-Speed Rail Authority
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(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.
5)Appropriates $1.1 billion of the $9 billion in high-speed rail
bonds for use on bookend projects.
FISCAL EFFECT : According to the Authority, $705 million in
Proposition 1A bonds have been issued to date. Of that total,
$400 million (of $9 billion) have been issued for the high-speed
rail project and $305 million (of $950 million) have been issued
for connectivity projects.
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. As envisioned
at the time of the ballot measure, the project was to consist 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) with service
eventually extended to Sacramento, the Inland Empire, and San
Diego.
When the bonds were approved in 2008, costs for the entire
project were estimated to be
$45 billion, to be paid by a mix of state bonds, federal grants,
and private investments. Since then, estimated costs for the
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project have risen markedly. The Authority's most recent
business plan estimates costs for just Phase 1 to be $68 billion
using a "blended approach"-relying in part on existing
tracks-rather than a fully built-out system of dedicated rail
lines. Furthermore, federal contributions to date are limited
to $3.3 billion and there have been no private investments.
In 2012, the Legislature passed and the Governor signed SB 1029
(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 the
high-speed rail project. This amount included $1.1 billion of
Proposition 1A bond funding for the bookend projects in the San
Francisco Peninsula and the Los Angeles Basin.
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
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Proposition 1A are being resolved.
The author introduced AB 2650 because "A functioning
transportation infrastructure is vital to the state's economic
well-being, and AB 2560 will ensure that this transportation
infrastructure is supported by sound and rational planning."
She proposes to ask voters to redirect roughly $8 billion in
bond capacity to the STIP, the SHOPP, and to freight
infrastructure improvements.
Certainly these underfunded transportation programs could use a
boost but, unfortunately,
$8 billion would be a drop in the bucket compared to the needs.
A 2011 needs assessment published by the California
Transportation Commission identified $536 billion in total costs
for all transportation system preservation, management, and
expansion projects (not counting high-speed rail) over a 10-year
period. Total estimated revenue for that same time period is
$242 billion-a $300 billion shortfall.
Committee concerns : Certainly legal and funding hurdles facing
the project are daunting and their ultimate outcomes are
unclear. However, in reality the high-speed rail project is
proceeding on track and its unsteady beginning is not without
precedent among mega-projects. While the project is not
progressing as smoothly as hoped, it is progressing and is
better off today than it was two years ago when the Legislature
committed to the project.
Stopping the project now by redirecting the bonds will cause
hundreds of millions of dollars of work and study to be wasted.
Instead, the Legislature should redouble its resolve to the
project and thereby improve the likelihood of its success in
luring federal and private investors.
Related legislation : AB 1501 (Patterson) prohibits the
Authority from spending federal funds for which a state match is
required unless state funding for the match is immediately
available. That bill failed in this committee on March 24,
2014, and was granted reconsideration on April 21, 2014. It is
scheduled to be heard on April 28, 2014.
SB 901 (Vidak) would have required the Secretary of State to put
on the November 2014 general election ballot a legislative
referendum which, if approved by the voters, would prohibit the
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sale of any additional high-speed rail bonds. That bill failed
in Senate Transportation and Housing Committee on April 22,
2014.
Previous legislation : All of the following bills would have
reduced the amount of authorized indebtedness for the Authority:
AB 842 (Donnelly) of 2013 failed passage in the Assembly
Transportation Committee.
AB 1455 (Harkey) of 2012 failed passage in the Assembly
Transportation Committee;
SB 22 (LaMalfa) of 2012 failed passage in the Senate
Transportation and Housing Committee;
AB 76 (Harkey) of 2011 failed passage in the Assembly
Transportation Committee; and,
AB 2121 (Harkey) of 2010 died in the Senate Rules Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093