Existing law, the California High-Speed Rail Act, creates the High-Speed Rail Authority to develop and implement a high-speed rail system in the state, with specified powers and duties. Existing law requires the authority, on a biennial basis, to prepare a business plan containing specified elements and also requires the preparation of various other reports.

This bill would require the business plan to identify projected financing costs for each segment or combination of segments of the high-speed rail system, if financing is proposed by the authority. The bill, in the business plan and in another report, would require the authority to identify any significant changes in scope for segments of the high-speed rail system identified in the previous version of each report and to provide an explanation of adjustments in cost and schedule attributable to the changes.

Existing law, the California High-Speed Rail Act, creates the High-Speed Rail Authority to develop and implement a high-speed rail system in the state, with specified powers and duties. Existing law requires the authority, on a biennial basis, to prepare a business plan containing specified elements and also requires the preparation of various other reports.

This bill would require the business plan to identify projected financing costs for each segment or combination of segments of the high-speed rail system, if financing is proposed by the authority. The bill, in the business plan and in another report, would require the authority to identify any significant changes in scope for segments of the high-speed rail system identified in the previous version of each report and to provide an explanation of adjustments in cost and schedule attributable to the changes.

Existing law, the California High-Speed Rail Act, creates the High-Speed Rail Authority to develop and implement a high-speed rail system in the state, with specified powers and duties. Existing law requires the authority, on a biennial basis, to prepare a business plan containing specified elements and also requires the preparation of various other reports.

This bill, in each of these reports, would require the authority, by segment, to provide an explanation of adjusted costs and schedules in each situation in which the authority has approved a change in the scope or sequencing of the high-speed rail project since the issuance of the previous report, as specified. The bill would also require the authority to identify all estimated financing and administrative costs associated with construction of the high-speed rail system in the biennial business plan. bill would require the business plan to identify projected financing costs for each segment or combination of segments of the high-speed rail system, if financing is proposed by the authority. The bill, in the business plan and in another report, would require the authority to identify any significant changes in scope for segments of the high-speed rail system identified in the previous version of each report and to provide an explanation of adjustments in cost and schedule attributable to the changes.

Existing law provides that the Department of Transportation has full possession and control of all state highways and associated property, and sets forth the powers and duties with respect to operation, maintenance, and improvement of state highways. Existing law authorizes the California Transportation Commission to exercise various powers and duties on transportation matters, including the allocation of certain transportation capital improvement funds available to the state.

This bill would require the department to participate in a pilot program over a 5-year period under which 3 counties, one in northern California, one in southern California, and one in the central valley, are selected to operate, maintain, and make improvements to all state highways, including freeways, in the affected county. The bill would require the department, with respect to those counties, for the duration of the pilot program, to convey all of its authority and responsibility over state highways in the county to the county or a regional transportation agency that has jurisdiction in the county. The bill would require the commission to administer and oversee the pilot program, and to select the counties that will participate in the program. The bill would require certain moneys to be appropriated for these purposes as a block grant in the annual Budget Act to a participating county, as specified. The bill would authorize any cost savings realized by a participating county to be used by the county for other transportation priorities. The bill would require the participating counties to report to the Legislature upon the conclusion of the pilot program.

GOVERNOR'S VETO

GV Bill Id:AB 2847

Author:(Patterson)

As Enrolled Ver:August 29, 2016

2/3 vote

Original Committee Reference: TRANS.

SUMMARY: Adds additional required elements for inclusion in the California High-Speed Rail Authority's (Authority) Business Plan and Project Update Report.

The Senate amendments are technical and non-substantive.

EXISTING LAW:

1. Establishes the California High-Speed Rail Authority (Authority) and vests with it the responsibility to develop and implement a high-speed rail system in California.
2. Enacts the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century (High-Speed Rail Bond Act). The High-Speed Rail Bond Act, approved as Proposition 1A in November 2008, provides $9.95 billion in general obligation bond authority to fund the planning and construction of a high-speed passenger train system and complementary improvements to other specified rail systems in the state.
3. Continuously appropriates 25% of the state's cap and trade program funds for the high-speed rail project.
4. Requires the Authority to prepare a business plan by March 1, 2014, and every two years thereafter, with specific requirements; and requires the Authority to prepare a Project Update Report on March 1, 2017, and every two years thereafter, with specific requirements.

AS PASSED BY THE ASSEMBLY, this bill:

1. Required the Authority to include projected financing costs, for a proposed segment or combination of segments, in the business plan.
2. Required the Authority to identify any significant changes in scope for segments identified in the previous business plan or project update report, and provide an explanation of adjustments in cost and schedule attributable to those changes.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: On February 18, 2016, the Authority released its Draft 2016 Business Plan, which signaled a major shift in its proposed planning and construction of the high-speed rail system. Rather than pursue a south-oriented Initial Operating Segment (IOS) from the City of Merced in the Central Valley through the Tehachapi Mountains to the San Fernando Valley in Los Angeles County, the Authority is now proposing a north-oriented IOS, from the Central Valley to San Jose. The Authority also updated its plans, cost estimates, and schedule for the remainder of Phase I (San Francisco to Los Angeles/Anaheim by 2029) and eventually Phase II (Sacramento and San Diego).

On March 17, 2016, the Legislative Analyst Office's (LAO) released a report, "Review of the High-Speed Rail Draft 2016 Business Plan." The LAO recommended additional items that could be added to the business plan to better inform the Legislature and help maintain oversight of the project. This bill will implement these recommendations by adding some new requirements for the Authority to include in both the biennial business plan and project update report.

According to the author, this bill will improve the quality of information reported to the Legislature so that oversight can actually be provided in a meaningful way and track the accuracy and ability of the Authority to stay within a budget over time.

Specifically, the Authority would be required to identify any significant changes in scope of segments described in previous reports and provide an explanation of any adjustments of costs and schedule attributable to the changes. The LAO notes that "the information provided by HSRA [High-Speed Rail Authority] in the business plan and other documents can be difficult to compare over time." The LAO cites a specific example, "since beginning work on the ICS [initial construction section], the scope, cost, and schedule of the project has changed, making it difficult to determine how well HSRA is adhering to the budget for that segment. The length of the ICS was reduced to 118 miles from 130 miles. The projected cost of the ICS assumed in the draft 2016 business plan is $7.3 billion, compared to the initially planned $5.9 billion cost. However, based on the information provided by HSRA, it is difficult to determine the extent to which the change in costs is related to the changes in scope or other factors." Essentially, if the scope of project segments change from one report to the next, it is impossible to make an "apples-to-apples" comparison of costs and schedule and to identify any concerns or trends.

Second, this bill requires the Authority to include all projected finance costs, for any financing proposed for a segment or combination of segments. The main funding source for the project is $9 billion in general obligation bonds approved by the voters in Proposition 1A. At the time of the passage of the proposition, the LAO noted that debt service on the bonds would be roughly $19.4 billion or $647 million per year over 30 years. Additionally, the Draft 2016 Business Plan proposes to fund part of the IOS by financing future cap and trade proceeds continuously appropriated for the project. Specifically, $5.2 billion would be generated by utilizing some type of financing mechanism, possibly revenue bonds or federal loans, to be paid back over 25 years. Providing detailed information about financing costs will help the Legislature understand the complete funding picture.

The business plans and the project updates reports are the Legislature's, and the public's, most complete source of information about the high-speed rail project. The state, through a voter approved initiative and appropriations, have committed billions of dollars in public resources to this endeavor. Requiring the Authority to include more details of scope, schedule and financing costs in these reports will help ensure that future decisions about the oversight, management, and funding of the project are made by a fully informed Legislature and public.

GOVERNOR'S VETO MESSAGE:

I am returning Assembly Bill 2847 without my signature.

This bill mandates additional reporting requirements for inclusion in the High-Speed Rail Authority's business plan and in the project update report.

I believe this bill is unnecessary, particularly in view of the passage of Assembly Bill 1813, which adds two legislative members to the Authority. As with other projects of this magnitude, state law requires strict standards of accountability and transparency and I have every expectation that the Authority will meet these high standards.

Analysis Prepared by: Melissa White / TRANS. / (916) 319-2093 FN: 0005131

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2847

Author:(Patterson)

As Amended Ver:May 23, 2016

Majority vote

Original Committee Reference: TRANS.

SUMMARY: Adds additional required elements for inclusion in the California High-Speed Rail Authority's (Authority) Business Plan and Project Update Report.

The Senate amendments are technical and non-substantive.

EXISTING LAW:

1. Establishes the California High-Speed Rail Authority (Authority) and vests with it the responsibility to develop and implement a high-speed rail system in California.
2. Enacts the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century (High-Speed Rail Bond Act). The High-Speed Rail Bond Act, approved as Proposition 1A in November 2008, provides $9.95 billion in general obligation bond authority to fund the planning and construction of a high-speed passenger train system and complementary improvements to other specified rail systems in the state.
3. Continuously appropriates 25% of the state's cap and trade program funds for the high-speed rail project.
4. Requires the Authority to prepare a business plan by March 1, 2014, and every two years thereafter, with specific requirements; and requires the Authority to prepare a Project Update Report on March 1, 2017, and every two years thereafter, with specific requirements.

AS PASSED BY THE ASSEMBLY, this bill:

1. Required the Authority to include projected financing costs, for a proposed segment or combination of segments, in the business plan.
2. Required the Authority to identify any significant changes in scope for segments identified in the previous business plan or project update report, and provide an explanation of adjustments in cost and schedule attributable to those changes.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: On February 18, 2016, the Authority released its Draft 2016 Business Plan, which signaled a major shift in its proposed planning and construction of the high-speed rail system. Rather than pursue a south-oriented Initial Operating Segment (IOS) from the City of Merced in the Central Valley through the Tehachapi Mountains to the San Fernando Valley in Los Angeles County, the Authority is now proposing a north-oriented IOS, from the Central Valley to San Jose. The Authority also updated its plans, cost estimates, and schedule for the remainder of Phase I (San Francisco to Los Angeles/Anaheim by 2029) and eventually Phase II (Sacramento and San Diego).

On March 17, 2016, the Legislative Analyst Office's (LAO) released a report, "Review of the High-Speed Rail Draft 2016 Business Plan." The LAO recommended additional items that could be added to the business plan to better inform the Legislature and help maintain oversight of the project. This bill will implement these recommendations by adding some new requirements for the Authority to include in both the biennial business plan and project update report.

According to the author, this bill will improve the quality of information reported to the Legislature so that oversight can actually be provided in a meaningful way and track the accuracy and ability of the Authority to stay within a budget over time.

Specifically, the Authority would be required to identify any significant changes in scope of segments described in previous reports and provide an explanation of any adjustments of costs and schedule attributable to the changes. The LAO notes that "the information provided by HSRA [High-Speed Rail Authority] in the business plan and other documents can be difficult to compare over time." The LAO cites a specific example, "since beginning work on the ICS [initial construction section], the scope, cost, and schedule of the project has changed, making it difficult to determine how well HSRA is adhering to the budget for that segment. The length of the ICS was reduced to 118 miles from 130 miles. The projected cost of the ICS assumed in the draft 2016 business plan is $7.3 billion, compared to the initially planned $5.9 billion cost. However, based on the information provided by HSRA, it is difficult to determine the extent to which the change in costs is related to the changes in scope or other factors." Essentially, if the scope of project segments change from one report to the next, it is impossible to make an "apples-to-apples" comparison of costs and schedule and to identify any concerns or trends.

Second, this bill requires the Authority to include all projected finance costs, for any financing proposed for a segment or combination of segments. The main funding source for the project is $9 billion in general obligation bonds approved by the voters in Proposition 1A. At the time of the passage of the proposition, the LAO noted that debt service on the bonds would be roughly $19.4 billion or $647 million per year over 30 years. Additionally, the Draft 2016 Business Plan proposes to fund part of the IOS by financing future cap and trade proceeds continuously appropriated for the project. Specifically, $5.2 billion would be generated by utilizing some type of financing mechanism, possibly revenue bonds or federal loans, to be paid back over 25 years. Providing detailed information about financing costs will help the Legislature understand the complete funding picture.

The business plans and the project updates reports are the Legislature's, and the public's, most complete source of information about the high-speed rail project. The state, through a voter approved initiative and appropriations, have committed billions of dollars in public resources to this endeavor. Requiring the Authority to include more details of scope, schedule and financing costs in these reports will help ensure that future decisions about the oversight, management, and funding of the project are made by a fully informed Legislature and public.

Please see the policy committee analysis for full discussion of this bill.

Analysis Prepared by: Melissa White / TRANS. / (916) 319-2093 FN: 0003784

 THIRD READING  

Bill No: AB 2847

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 10-0, 6/28/16

AYES: Beall, Cannella, Allen, Bates, Gaines, Leyva, McGuire, Mendoza, Roth, Wieckowski

NO VOTE RECORDED: Galgiani

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 78-0, 5/12/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill adds additional reporting requirements for inclusion in the California High-Speed Rail Authority’s (HSRA) Business Plan and Project Update Report.

ANALYSIS:

Existing law:

1. Establishes the HSRA and vests with it the responsibility to develop and implement a high-speed rail system in California.
2. Enacts the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century (High-Speed Rail Bond Act). The High-Speed Rail Bond Act, approved as Proposition 1A in November 2008, provides $9.95 billion in general obligation bond authority to fund the planning and construction of a high-speed passenger train system and complementary improvements to other specified rail systems in the state.
3. Appropriates, continuously, 25% of the state’s cap-and-trade program funds for the high-speed rail project.
4. Requires HSRA to prepare a business plan by March 1, 2014, and every two years thereafter that includes specific reporting requirements.
5. Requires the HSRA to prepare a project update report on March 1, 2017, and every two years thereafter that includes specific reporting requirements.
   

This bill:

1. Requires the HSRA to include projected financing costs, for a proposed segment or combination of segments, in the business plan.
2. Requires the HSRA to identify any significant changes in scope for segments identified in the previous business plan or project update report, and provide an explanation of adjustments in cost and schedule attributable to those changes.

Comments

1. Purpose. The author notes that AB 2847 will improve the quality of information reported to the Legislature so that oversight can be provided in a meaningful way, including tracking the accuracy and ability of HSRA to stay within a budget over time. The author further notes that the bill expands the type of costs that are reported to the Legislature so that an accurate and complete picture of the costs to construct the high-speed rail project can be better understood, not only for policymakers, but for the people who are paying for this project.
2. HSRA business plan. Beginning in 2012 and every two years thereafter, HSRA is required to prepare and submit to the Legislature a business plan outlining key elements of the high-speed rail project. At minimum, the plan must include project development information, including a description of the type of service being developed, the timing and sequence of project phases and segments, and estimated capital costs. It must also include estimates and descriptions of the total anticipated federal, state, local, and other funds that HSRA intends to access to construct and operate the system, forecasts of financial scenarios based on projected ridership levels, and maintenance and operations costs. Additionally, it must identify all reasonably foreseeable risks to the project and outline HSRA’s strategies for managing those risks.

On February 18, 2016, HSRA released its Draft 2016 Business Plan, which signaled a major shift in its proposed planning and construction of the high-speed rail system. Rather than pursue a south-oriented Initial Operating Segment (IOS) from the City of Merced in the Central Valley to the San Fernando Valley in Los Angeles County, HSRA is now proposing a north-oriented IOS, from the Central Valley to San Jose. The Authority also updated its plans, cost estimates, and schedule for the remainder of Phase I (San Francisco to Los Angeles/Anaheim by 2029) and eventually Phase II (Sacramento and San Diego).

1. HSRA project update report. SB 1029 (Budget Act of 2012) appropriated almost $8 billion in federal and state funds to construct the first high-speed rail segments in the Central Valley and fund 15 “bookend” and connectivity projects throughout California. SB 1029 further included extensive reporting requirements to increase legislative oversight over the high-speed rail project. The project update report is required to include a number of elements, including, but not limited to:
2. A summary of the progress on the project.
   
3. The baseline budget for all project phase costs by segment or contract.
   
4. The current and project budget for all project phase costs.
5. All expenditures to date for all project costs.
   
6. LAO report. On March 17, 2016, the Legislative Analyst’s Office (LAO) released its analysis of the 2016 business plan. The LAO recommended additional items that could be added to the business plan to better inform the Legislature and help maintain oversight of the project. AB 2847 intends to implement these recommendations. Specifically, AB 2847 will add several new requirements for HSRA to include in both the biennial business plan and project update report — specifically, the projected financing costs for a proposed segment or combination of segments are to be included in future business plans, and HSRA will be required to identify any significant changes in scope for segments identified in the previous business plan or project update report and provide an explanation of said adjustments.
7. Accurate reporting? While sufficient oversight is a critical element as this project moves forward, so is the need for accurate reporting to carry out effective oversight. As the LAO recommendations include additional HSRA reporting requirements that will provide new information for the public and legislature to review, providing accurate projected financing costs may be difficult to report. Typically, financing costs are calculated when an agency actually moves forward with financing a project, and the financing rates and terms are determined close to the time when bonds are issued — which are affected by overall financial market conditions at the time of financing. Requiring future financing costs to be included in the biennial business plan could lead to HSRA reporting inaccurate projections due to its inability to predict future market conditions.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/3/16)

Californians Advocating Responsible Rail Design

Citizens for California High-Speed Rail Accountability

Mel’s Farms

Train Riders Association of California

OPPOSITION: (Verified 8/3/16)

California Department of Finance

ASSEMBLY FLOOR: 78-0, 5/12/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon

NO VOTE RECORDED: Burke, Jones-Sawyer

Prepared by:

8/3/16 19:11:06

**** END ****

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2015 - 2016 Regular

Bill No: Hearing Date: 6/28/2016

SUBJECT:

DIGEST: This bill adds additional reporting requirements for inclusion in the California High-Speed Rail Authority’s (HSRA) Business Plan and Project Update Report.

ANALYSIS:

Existing law:

1. Establishes the HSRA and vests with it the responsibility to develop and implement a high-speed rail system in California.
2. Enacts the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century (High-Speed Rail Bond Act). The High-Speed Rail Bond Act, approved as Proposition 1A in November 2008, provides $9.95 billion in general obligation bond authority to fund the planning and construction of a high-speed passenger train system and complementary improvements to other specified rail systems in the state.
3. Continuously appropriates 25% of the state’s cap-and-trade program funds for the high-speed rail project.
4. Requires HSRA to prepare a business plan by March 1, 2014, and every two years thereafter that includes specific reporting requirements.
5. Requires the HSRA to prepare a Project Update Report on March 1, 2017, and every two years thereafter that includes specific reporting requirements.
   

This bill:

1. Requires the HSRA to include projected financing costs, for a proposed segment or combination of segments, in the business plan.
2. Requires the HSRA to identify any significant changes in scope for segments identified in the previous business plan or project update report, and provide an explanation of adjustments in cost and schedule attributable to those changes.

COMMENTS:

1. Purpose. The author notes that AB 2847 will improve the quality of information reported to the Legislature so that oversight can be provided in a meaningful way, including tracking the accuracy and ability of HSRA to stay within a budget over time. The author further notes that the bill expands the type of costs that are reported to the Legislature so that an accurate and complete picture of the costs to construct the high-speed rail project can be better understood, not only for policymakers, but for the people who are paying for this project.
2. HSRA Business Plan. Beginning in 2012 and every two years thereafter, HSRA is required to prepare and submit to the Legislature a business plan outlining key elements of the high-speed rail project. At minimum, the plan must include project development information, including a description of the type of service being developed, the timing and sequence of project phases and segments, and estimated capital costs. It must also include estimates and descriptions of the total anticipated federal, state, local, and other funds that HSRA intends to access to construct and operate the system, forecasts of financial scenarios based on projected ridership levels, and maintenance and operations costs. Additionally, it must identify all reasonably foreseeable risks to the project and outline HSRA’s strategies for managing those risks.

On February 18, 2016, HSRA released its Draft 2016 Business Plan, which signaled a major shift in its proposed planning and construction of the high-speed rail system. Rather than pursue a south-oriented Initial Operating Segment (IOS) from the City of Merced in the Central Valley to the San Fernando Valley in Los Angeles County, HSRA is now proposing a north-oriented IOS, from the Central Valley to San Jose. The Authority also updated its plans, cost estimates, and schedule for the remainder of Phase I (San Francisco to Los Angeles/Anaheim by 2029) and eventually Phase II (Sacramento and San Diego).

1. HSRA Project Update Report. SB 1029 (Budget Act of 2012) appropriated almost $8 billion in federal and state funds to construct the first high-speed rail segments in the Central Valley and fund 15 “bookend” and connectivity projects throughout California. SB 1029 further included extensive reporting requirements to increase legislative oversight over the high-speed rail project. The Project Update Report is required to include a number of elements, including, but not limited to:
2. A summary of the progress on the project;
   
3. The baseline budget for all project phase costs by segment or contract;
   
4. The current and project budget for all project phase costs; and
5. All expenditures to date for all project costs.
   
6. LAO Report: On March 17, 2016, the Legislative Analyst Office’s (LAO) released its analysis of the 2016 business plan. The LAO recommended additional items that could be added to the business plan to better inform the Legislature and help maintain oversight of the project. AB 2847 intends to implement these recommendations. Specifically, AB 2847 will add several new requirements for HSRA to include in both the biennial business plan and project update report — specifically, the projected financing costs for a proposed segment or combination of segments are to be included in future business plans, and HSRA will be required to identify any significant changes in scope for segments identified in the previous business plan or project update report and provide an explanation of said adjustments.
7. Accurate reporting? While sufficient oversight is a critical element as this project moves forward, so is the need for accurate reporting to carry out effective oversight. As the LAO recommendations include additional HSRA reporting requirements that will provide new information for the public and legislature to review, providing accurate projected financing costs may be difficult to report. Typically, financing costs are calculated when an agency actually moves forward with financing a project, and the financing rates and terms are determined close to the time when bonds are issued — which are affected by overall financial market conditions at the time of financing. Requiring future financing costs to be included in the biennial business plan could lead to HSRA reporting inaccurate projections due to its inability to predict future market conditions.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

Assembly Votes:

Floor: 78-0

Appr: 20-0

Trans: 15-0

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 22, 2016.)

SUPPORT:

Californians Advocating Responsible Rail Design

Citizens for California High-Speed Rail Accountability

Mel’s Farms

Train Riders Association of California

OPPOSITION:

California Department of Finance

-- END --

Date of Hearing: May 4, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2847

Author:(Patterson) – As Amended Ver:April 11, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill adds the following two reporting elements to the High-Speed Rail Authority's (HSRA's) Business Plan and Project Update Report.

1. Projected financing costs, if financing is proposed for a segment or combination of segments.
2. Identification of any significant changes in scope for project segments identified in the previous version of each report, and an explanation of adjustments in cost and schedule attributable to these changes.

FISCAL EFFECT:

Any costs for the HSRA to incorporate the additional reporting elements should be minor and absorbable.

COMMENTS:

1. Background. The HSRA was required to prepare a business plan by March 1, 2014, and must provide a updated plan every two years thereafter, that includes:
   1. The types of services it expects to develop and a chronology for construction;
   2. A forecast of the expected patronage, service level, and operating and maintenance costs for Phase I of the system;
   3. Alternative financing scenarios for different levels of service;
   4. Expected schedule of completing environmental review and initialing and completing construction for segments of Phase I;
   5. An estimate, description, and confidence level of the total anticipated federal, state, local and other funds;
   6. Any written agreements with public and private entities to fund components of the system;
   7. Alternative public-private development strategies for Phase I; and,
   8. Risks associated with construction, technology, financing and other aspects of the project, and the Authority’s strategy for managing risks.

In February, the authority released its Draft 2016 Business Plan, which signaled a major shift in its proposed planning and construction of the high-speed rail system. Rather than pursue a south-oriented Initial Operating Segment (IOS) from the City of Merced in the Central Valley through the Tehachapi Mountains to the San Fernando Valley in Los Angeles County, the Authority is now proposing a north-oriented IOS, from the Central Valley to San Jose. The Authority also updated its plans, cost estimates, and schedule for the remainder of Phase I (San Francisco to Los Angeles/Anaheim by 2029) and eventually Phase II (Sacramento and San Diego).

1. Purpose. In its March review of the Business Plan, the Legislative Analyst's Office (LAO) identified additional items that could be added to the business plan to better inform the Legislature and help maintain oversight of the project. AB 2847 implements these recommendations.
   1. The LAO notes that “the information provided by HSRA [High-Speed Rail Authority] in the business plan and other documents can be difficult to compare over time.” Essentially, if the scope of project segments change from one report to the next, it is impossible to make an “apples-to-apples” comparison of costs and schedule, and to identify any concerns or trends. This bill requires the authority to identify any significant changes in scope of segments described in previous reports and provide an explanation of any adjustments of costs and schedule attributable to the changes.
   2. Second, AB 2847 requires the Authority to include all projected finance costs, for any financing proposed for a segment or combination of segments. Providing detailed information about financing costs will help the Legislature understand the complete funding picture.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: April 18, 2016

ASSEMBLY COMMITTEE ON TRANSPORTATION

Jim Frazier, Chair

ABPCA Bill Id:AB 2847 (

Author:Patterson) – As Amended Ver:April 11, 2016

SUBJECT: High-Speed Rail Authority: reports

SUMMARY: Adds additional required elements for inclusion in the California High-Speed Rail Authority’s (Authority) Business Plan and Project Update Report. Specifically, this bill:

1. Requires the Authority to include projected financing costs, for a proposed segment or combination of segments, in the business plan.
2. Requires the Authority to identify any significant changes in scope for segments identified in the previous business plan or project update report, and provide an explanation of adjustments in cost and schedule attributable to those changes.

EXISTING LAW:

1. Establishes the California High-Speed Rail Authority (Authority) and vests with it the responsibility to develop and implement a high-speed rail system in California.
2. Enacts the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century (High-Speed Rail Bond Act). The High-Speed Rail Bond Act, approved as Proposition 1A in November 2008, provides $9.95 billion in general obligation bond authority to fund the planning and construction of a high-speed passenger train system and complementary improvements to other specified rail systems in the state.
3. Continuously appropriates 25% of the state’s cap and trade program funds for the high-speed rail project.
4. Requires the Authority to prepare a business plan by March 1, 2014, and every two years thereafter, that includes:
   1. The types of services it expects to develop and a chronology for construction;
   2. A forecast of the expected patronage, service level, and operating and maintenance costs for Phase I of the system;
   3. Alternative financing scenarios for different levels of service;
   4. Expected schedule of completing environmental review and initialing and completing construction for segments of Phase I;
   5. An estimate, description, and confidence level of the total anticipated federal, state, local and other funds;
   6. Any written agreements with public and private entities to fund components of the system;
   7. Alternative public-private development strategies for Phase I; and,
   8. Risks associated with construction, technology, financing and other aspects of the project, and the Authority’s strategy for managing risks.
5. Requires the Authority to prepare a Project Update Report on March 1, 2017, and every two years thereafter that includes:
   
6. A summary of the progress on the project;
   
7. The baseline budget for all project phase costs by segment or contract;
   
8. The current and project budget for all project phase costs;
   
9. All expenditures to date for all project costs;
   
10. A comparison of the current and projected work schedule and the baseline schedule contained in the Revised 2012 Business Plan;
    
11. A summary of milestones achieved during the prior two-year period and ones expected in the future;
    
12. Any issues identified in the prior two year period and actions taken to address them; and,
    
13. A discussion of risks to the projects and steps taken to mitigate them.

FISCAL EFFECT: Unknown

COMMENTS: On February 18, 2016, the Authority released its Draft 2016 Business Plan, which signaled a major shift in its proposed planning and construction of the high-speed rail system. Rather than pursue a south-oriented Initial Operating Segment (IOS) from the City of Merced in the Central Valley through the Tehachapi Mountains to the San Fernando Valley in Los Angeles County, the Authority is now proposing a north-oriented IOS, from the Central Valley to San Jose. The Authority also updated its plans, cost estimates, and schedule for the remainder of Phase I (San Francisco to Los Angeles/Anaheim by 2029) and eventually Phase II (Sacramento and San Diego).

On March 17, 2016, the Legislative Analyst Office’s (LAO) released a report, “Review of the High-Speed Rail Draft 2016 Business Plan.” The LAO recommended additional items that could be added to the business plan to better inform the Legislature and help maintain oversight of the project. AB 2847 will implement these recommendations. Specifically, AB 2847 will add some new requirements for the Authority to include in both the biennial business plan and project update report.

According to the author, AB 2847 will improve the quality of information reported to the Legislature so that oversight can actually be provided in a meaningful way and track the accuracy and ability of the Authority to stay within a budget over time. He further states that to expand the type of costs that are reported to the Legislature so that an accurate and complete picture of the costs to construct the high-speed rail project can be better understood not only for policymakers, but for the people who are paying for this project.

Specifically, the Authority would be required to identify any significant changes in scope of segments described in previous reports and provide an explanation of any adjustments of costs and schedule attributable to the changes. The LAO notes that “the information provided by HSRA [High-Speed Rail Authority] in the business plan and other documents can be difficult to compare over time.” The LAO cites a specific example, “since beginning work on the ICS [initial construction section], the scope, cost, and schedule of the project has changed, making it difficult to determine how well HSRA is adhering to the budget for that segment. The length of the ICS was reduced to 118 miles from 130 miles. The projected cost of the ICS assumed in the draft 2016 business plan is $7.3 billion, compared to the initially planned $5.9 billion cost. However, based on the information provided by HSRA, it is difficult to determine the extent to which the change in costs is related to the changes in scope or other factors.” Essentially, if the scope of project segments change from one report to the next, it is impossible to make an “apples-to-apples” comparison of costs and schedule and to identify any concerns or trends.

Second, AB 2847 requires the Authority to include all projected finance costs, for any financing proposed for a segment or combination of segments. The main funding source for the project is $9 billion in general obligation bonds approved by the voters in Proposition 1A. At the time of the passage of the proposition, the LAO noted that debt service on the bonds would be roughly $19.4 billion or $647 million per year over 30 years. Additionally, the Draft 2016 Business Plan proposes to fund part of the IOS by financing future cap and trade proceeds continuously appropriated for the project. Specifically, $5.2 billion would be generated by utilizing some type of financing mechanism, possibly revenue bonds or federal loans, to be paid back over 25 years. Providing detailed information about financing costs will help the Legislature understand the complete funding picture.

The business plans and the project updates reports are the Legislature’s, and the public’s, most complete source of information about the high-speed rail project. The state, through a voter approved initiative and appropriations, have committed billions of dollars in public resources to this endeavor. Requiring the Authority to include more details of scope, schedule and financing costs in these reports will help ensure that future decisions about the oversight, management, and funding of the project are made by a fully informed Legislature and public.

Previous legislation: AB 528 (Lowenthal), Chapter 237, Statutes of 2013, added new elements to the California state rail plan and the Authority’s business plan.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Melissa White / TRANS. / (916) 319-2093