BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 901
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Vidak
VERSION: 4/7/14
Analysis by: Eric Thronson FISCAL: yes
Hearing date: April 22, 2014 URGENCY: YES
SUBJECT:
High-speed rail bond funding
DESCRIPTION:
This urgency bill requires the Secretary of State (SOS) to put
on the November 2014 general election ballot a legislative
referendum which, if approved by the voters, would prohibit the
sale of any additional high-speed rail bonds.
ANALYSIS:
Existing law created the California High-Speed Rail Authority
(HSRA) in 1996 to direct development and implementation of
intercity high-speed rail service that is fully coordinated with
other public transportation services. In 2008, voters approved
Proposition 1A (Prop 1A) authorizing $9 billion in general
obligation bonds for the high-speed rail project. Prop 1A
included a number of requirements in order for the state to
access the bond funding for capital construction, including the
identification of matching funds, the completion of a funding
plan, and approval of required environmental clearance
documents.
In 2009, the federal government augmented the Prop 1A bond
funding with roughly $3.3 billion in funding from the American
Recovery and Reinvestment Act (ARRA) and other federal funding
programs. HSRA committed to match these federal funds with
approximately $2.3 billion in state funding. From its inception
through June 30, 2014, HSRA will spend about $820 million on the
project from the following funding sources: Prop 1A bond funds
(about $400 million); federal funds (about $330 million); and
various state special funds and other bond funds (about $90
million).
This urgency bill requires the SOS to put on the November 2014
general election ballot a legislative referendum which, if
SB 901 (VIDAK) Page 2
approved by the voters, would prohibit the sale of any
additional high-speed rail bonds. Further, the bill authorizes
the Legislature to appropriate any outstanding net proceeds from
sale of the bonds before the enactment of the referendum to
retire outstanding high-speed rail bond debt. Finally, this
bill restricts the state from expending bond funds for
high-speed rail purposes between the bill's effective date and
the November 5, 2014 election. Because it is an urgency bill,
this bill becomes effective immediately upon filing with SOS,
following legislative passage and a signature from the governor.
COMMENTS:
1.Purpose . According to the author, an overwhelming majority of
Californians want the right to vote again on whether the state
should spend bond funds on the proposed high-speed rail
project because of the many factors of the project that have
changed since the last vote in 2008. For example, project
proponents told voters in 2008 the project would cost
approximately $34 billion to build and that the cost would be
divided in thirds between the state, the federal government,
and a private partner. Today, a scaled-down version of the
project is expected to cost between $60 and $100 billion, and
the business plan does not include private capital until the
project is operational and it can demonstrate sustained
profitability. According to a September 2013 poll, 70 percent
of voters want the project put back on the ballot for a
revote. This bill accomplishes that aim.
2.How is the project going ? As Louis Thompson, Chair of the
High-Speed Rail Peer Review Group, stated in a recent Senate
Transportation and Housing Committee hearing, what was sold to
the voters in 2008 was an aspirational vision of high-speed
rail service in California. In the years since, the state has
had to work within financial and political realities to define
a project that the state can actually deliver.
As HSRA staff work to define the project, they have come up
against a number of real-world challenges. First and
foremost, it is clear the project is going to cost
significantly more than early estimates, and HSRA has not been
able to identify all the funding necessary to complete the
SB 901 (VIDAK) Page 3
initial operating segment, or the first 130-mile segment from
Fresno to the San Fernando Valley. In addition, further
design of the project suggests speeds and travel times
initially included in the 2008 ballot measure may be difficult
or impossible to achieve. Further, rising costs and political
hurdles have led HSRA to adapt the proposed project in ways
that blend service in major urban areas instead of building
completely separate and independent infrastructure for the
system. Some argue that, given these and other changes to the
proposed project compared to what voters approved in 2008, it
seems reasonable to resubmit the state bond funds to the
electorate for approval of the new plan.
3.Fulfilling the promise . Proponents of high-speed rail suggest
that the project still technically meets the promises made to
voters in 2008. In addition, some advocates argue that the
project is transformative and should be pursued regardless of
a potentially divergent electorate. These advocates suggest
that, while voters today may not approve the project as
currently envisioned, when the system is finally running and
all of the benefits are realized, Californians will be
thankful the state continued to pursue it in the face of its
many detractors. They point to the significant opposition to
construction of the Bay Area Rapid Transit (BART) system in
the 1960s, which today is an integral part of the Bay Area
transportation network. Some would say that the Bay Area
could not be all it is today without BART. Other supporters
of the high-speed rail project argue that, despite the fact
that today's plan may not fully live up to the vision
presented to voters in 2008, the large influx of construction
dollars and potential jobs created in the Central Valley are
too important to risk losing should the voters defeat the
project at the ballot. With the Central Valley region
suffering one of the worst unemployment rates in the country,
the funds from this project could bring much-needed relief to
that region's economy.
4.Federal matching requirements . Complicating the
implementation of this bill is the fact that the federal
government requires the state to match any federal funding
expended on the project. It is unclear whether the state, if
it suddenly ceased pursuing the high-speed rail project, would
be in a position to pay the federal government back for some
of the funds thus far expended. If that became the case,
without access to the Prop 1A bond funds it is not clear from
where the repayment would come.
SB 901 (VIDAK) Page 4
5.Previous attempts to thwart bond fund expenditures . AB 842
(Donnelly) of 2013 was the latest of bills that would have
reduced the amount of authorized indebtedness for the
high-speed rail project. That bill failed passage in the
Assembly Transportation Committee on January 13, 2014. Other
similar bills, all of which failed passage, included:
AB 1455 (Harkey) of 2012
SB 985 (LaMalfa) of 2012
SB 22 (LaMalfa) of 2011
AB 76 (Harkey) of 2011
AB 2121 (Harkey) of 2010
1.Double-referral . The Rules Committee has referred this bill
to both this committee and the Governance and Finance
Committee.
RELATED LEGISLATION:
AB 1501 (Patterson) prohibits HSRA from spending federal funds
for which a state match is required unless state funding for the
match is immediately available. Failed passage in the Assembly
Transportation Committee on March 24, 2014.
AB 2650 (Conway) prohibits the expenditure of Prop 1A bond funds
for the high-speed rail project and directs the remaining funds
to other transportation projects. Pending in the Assembly
Transportation Committee.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 16,
2014.)
SUPPORT: Citizens for California High-Speed Rail
Accountability
Howard Jarvis Taxpayers Association
Kings County Board of Supervisors
Tos Farms, Inc.
OPPOSED: California Labor Federation
Sierra Club California
State Building and Construction Trades Council,
AFL-CIO
SB 901 (VIDAK) Page 5