Senate Standing Committee on Transportation

Looking for a few more Members to come to room 1200 so we can get started, and any authors that like to jumpstart us into our first. zero, hello, Senator Dodd, you are here. Committee Member and author. So we'll begin as a Subcommitee for the time being. And so the Senate Transportation Committee will begin as a Subcommitee, and we'll come to order.

And just before we begin, we have to ensure that we continue to welcome the public in person and via the teleconference service for individuals who'd like to provide public comments. For today, the participant number is 877-226-8163 and the access code is 736-2834 and of course, we are holding our Committee hearings here in the O Street building. I ask all Members of the Committee to be present, if you can, so we can build a quorum in room 1200. And, Members, we actually have a hybrid hearing today.

First we'll adopt, after this, we'll adopt the Committee rules and hear bills, and then we'll get into our informational hearing on high speed rail. With that said, we'll go ahead and move forward with the first author, which is Senator Dodd. This is file item three, SB 295 for vehicles regulations on public property. Senator Dodd.

Thank you, Madam Chair and Members. SB 295 builds upon existing authority for California's public universities to enact policies that would regulate the use and storage of emergency, excuse me, emerging utility terrain vehicles, electric and electric personal assistive mobility devices on their properties. These include electric scooters, ebikes, and self balancing devices such as single wheel boards, just to name a few. Currently, University campuses are authorized to regulate specified transportation devices, but are not explicitly permitted to address newer forms of transportation devices on campus.

The Bill amends the current vehicle code in order to give universities greater flexibility in regulating these emerging technologies. Universities already manage dense transportation environments, and students are often early adopters to these new technologies that travel quietly at high speeds. Current law also limits UCs and CSUs from transitioning to more environmentally friendly transportation options. This Bill will allow UCs and CSUs to utilize smaller electric vehicles, like garden and maintenance carts to be driven across campus without having to be towed by larger polluting trucks.

SB 295 will improve public safety while providing much needed updates to existing law. Let's do the right thing and keep our students and faculty safe on campus. With me today is Jason Murphy, representing University of California, who are the sponsors of the Bill, as well as Chief Joe Farrow from the UC Davis Police Department.

Good afternoon, Madam Chair and Members. Jason Murphy, on behalf of the University of California here today in strong support, like to turn it over to our lead witness for his brief remarks.

Good afternoon, Madam Chair, Members of the State Senate. I am Joe Farrow. I'm the chief of police at the University of California, Davis. Prior to that, I was the Commissioner of the California High Patrol for 10 years, serving under Governor Schwarzenegger and Governor Brown. This is an important piece of legislation for us.

I think the Senator laid it out perfectly that we have a lot of emerging devices that have come to our campus. We're a very congested campus with a lot of pedestrian traffic, with bicycles, emerging technology. We're trying to find a better way to be able to regulate and allow these vehicles to operate safely within our communities and at the same time, take some of the commodities that we currently use and use them in a more efficient way.

For example, the use of golf carts that we use to transport equipment from point a to point b. We don't have the legal authority to be able to allow that. We want to be able to carve out some type of ability for us to be able to use these devices that are inherently non polluted. So I'll stop and answer any questions that you may have for me, but thank you for taking up this important Bill.

Thank you very much. Did you have another support witness? Okay. Thank you, Senator Dodd. All right, so if there are any others that would like to come forward in support of Senator Dodd's SB 295, please come forward in room 1200.

Madam Chair Members, Matt Broad on behalf of the teamsters in support. Thank you.

Any other witnesses in support? Okay. And I don't believe you have any registered opposition at this time, Senator Dodson? No registered opposition at this time. Okay. Is there anyone in room 1200 who'd like to come forward in opposition? Okay. None. And then actually we're going to do things a little bit different here. We're going to ask if there's any additional questions from Members, and I think Senator Blakespear has a question.

Yes. So thank you, Senator. And thank you to UCSD, or for the UC system. Not UCSD, sorry, that's the one in my district. This seems like a really important Bill. I'm really excited to support it. But I just wanted to ask publicly the question that was posed in the Committee report, because I think it is a good question.

And I know we spoke briefly about this, but I just wanted to get the official answer, which is basically it says, while this authority may be necessary on University and college campuses, it's unclear why other public agencies might need to have this authority, particularly when the authority specifies conditions for using otherwise road illegal vehicles. So just wanted to pose that to either of you to see if you could answer that.

That's right.

I'll take a shot at that. Thank you very much for your question, and thank you for your support of the merits of the Bill. The Bill was specifically authored to benefit the state college system and the University of California. That's the issue at large. I think when drafted, it includes public agencies, because in the existing law, where we have some authority, public agencies are included in that same description. Our intent really was for the University of California and the CSU system.

That's our primary interest in this Bill.

Okay, thank you.

And there was no amendments offered to solve that problem, so here we are.

Okay, thank you.

Okay, thank you. Senator Blakespear. Any other questions from Members behind the dice? Okay, no other questions. We've taken support and opposition here in room 1200, and now we'll go to the teleconference line. Is there anyone, moderator, who would like to. Who is queued up in the teleconference line in support or opposition of SB 295?

Please speak in support or opposition, please press 1 and 0 at this time. An at and t specialist will provide you with your live number by which you'll be identified. And if you'd like to remove yourself from the queue, you can repeat the one then zero command. We have no lines queuing up at this time.

Okay, thank you very much. We have no lines queuing up and we are still in a Subcommitee format, so we'll go ahead and leave this on call Senator Dodd, and then we'll make sure to bring it back up.

Thank you very much.

Thank you very much. Thank you to your witnesses as well. Okay. I don't believe we have another author here, Senator Min or Padilla. And we need one more to establish a quorum. So we need one more Member for transportation Committee to establish a quorum, and we need two authors. So if you hear or see Senator Min or Padilla, we'd love to invite them over to go ahead and present their bills. In the meantime, we'll take a short recess until we can do that. Thank you.

That is okay. Mr. Vice Chair for the win. So, Vice Chair Niello has arrived. I know. Yeah. We lost Allen. Just when one Senator arrives, another one leaves, unfortunately. So we'll go ahead and wait. Please hang tight and we'll make sure we have a quorum very shortly. Welcome, Senator Min. We still have not established a quorum, but we'll go ahead and bring you on up. We'll go ahead and hear your Bill as a Subcommitee. So welcome. Senator Min will be file item five, SB 381, electric bicycle study.

Thank you, Chair Gonzalez and Members. SB 381 would require the Minetta Transportation Institute at San Jose State University to conduct a study on electric bicycles and other micromobility vehicles. E bikes are an essential transportation device. They fill in transit gaps and allow us to pedal away from gas combustion cars into a cleaner environment. They have wonderful benefits. They are a key part of our strategy to get to zero emissions and transportation. But of course, they do present new challenges when it comes to roadway safety.

In recent years, cities, including ones that I represent, like Laguna Beach, Newport Beach, Huntington Beach, have seen a surge of accidents involving e bikes, bicycles and other micromobility devices. Some of these accidents have resulted in minor injuries, others, unfortunately, in death. The result has been a patchwork response ad hoc by different cities. It's created a lack of uniformity in ebike policy. I believe ebikes are really, really important. I actually ride an electric scooter on my way here to work and back when it's not raining.

But I also think we need to start addressing what the regulatory framework looks like for ebikes and other devices like that. SB 381, which I would emphasize will have no cost to the state because it'll be funded privately through the Minetta Institute, would provide the Legislature with the necessary data to start considering bike friendly policies that get ahead of these safety concerns and expand the safe movement of e bikes. I have with me today Marc Vukcevich from safe streets for all to testify in support.

Thank you.

Good afternoon, Committee. My name is Marc Vukcevich. I'm the co Director of state policy for streets for all. We're a multimodal transportation advocacy organization that prioritizes biking, walking, as well as transit, as well as safety for all users and all users of the transportation system. So we are huge proponents of ebikes. Study after study has shown that ebikes and its usage reduces vehicle miles traveled and greenhouse gas emissions.

Ebikes are an opportunity that we have to supplement car trips for, frankly, more sustainable and fun and healthy trips. Ebikes are the fastest selling electrical vehicle in the entire country. I'm going to say that again, the fastest selling electric vehicle in the entire country right now. They're not going away.

Ebikes represent freedom of mobility for folks like working class people and students who cannot afford a car, or for those who want to bike to the office without worrying about sweating through your suit because you can tackle those hills that at least my thighs can't handle. As a mobility advocate, I recognize that e bikes, though, are having some growing pains. We have a lot of concerns that despite all the benefits and opportunities, that they could be demonized for the issues that senatorman mentioned.

So when we first saw this Bill from Senator men, we were, frankly, originally opposed. But the senatorman called me and explained what his intent was and worked really closely with streets for all and Cal bike on amendments. And now I think the Bill before you is a Bill that is going to examine what we need to study with ebikes and really look at that closely. It's going to provide answers and open questions that advocates still have. It's going to collect more data.

It's going to look at international examples and policies from bike supportive countries. And overall, it will examine what we need to promote and expand the safe usage of ebikes across our state. As an advocate for cyclists, pedestrians and users of transit, I'm excited to see the results of this study. Thank you for your time. And I respectfully ask for an aye vote. Thank you.

Thank you. And I think that concludes your witness in support a testimony. I don't think you have anyone else. And then I'll ask if there's anyone else who would like to testify in support here in room 1200, please come forward. Okay, see none. So now we'll move to anyone in opposition. Doesn't look like you have any registered opposition. Is anyone in the room 1200 in opposition to SB 434? I'm sorry? SB 381. Okay, see none. So we'll move it to the teleconference line in case there's anyone who'd like to support or oppose SB four. I'm sorry, 381 I keep saying 434.

To speak in support or opposition, press one, then zero at this time. We'll go first to line 34.

Good afternoon, Madam Chair and Committee Members. Jonathan Clay, on behalf of the City of Encinitas, in support of SB 381. Thank you.

Line 35. Pardon me, line 35. We seem to have lost you. If you would press one, then zero again. Meanwhile, we'll go to line 29.

Good afternoon, Madam Chair Members. Eric O'Donnell, on behalf of the City of Laguna Beach, in support. Thank you.

We have line 35 re queued. Go ahead, please.

Chair Gonzalez and Members James Lombardo, on behalf of California Association of Bicycling Organizations, in support. Thank you.

Madam Chair. We have no one else in queue at this time.

Thank you. Moderator so we've concluded support and opposition. We'll take it back to questions. Members so we have Senator Blakespear, and we'll go to Senator Seyarto.

Thank you. This seems like a really great idea, and I just wanted to ask about the Manetta Transportation Institute, where it says that there are $2 million that are budgeted to the CSU system for transportation research. This basically puts this at the top of the line in terms of what the 2 million would be used for. Are they in support of using it this way, and are there other studies that won't be done? Because this one will be done.

So my understanding is that there's $2 million throughout the CSU system, not just for the Minute Institute, which is one part of what the CSU study. So it houses CSU. I believe this does put this at the top of the queue. We have not heard any objections from them. I think this gives them a mandate to do this, but I think it's an important issue and one that we've worked with them on trying to address. Okay.

Thank you.

Thank you, Senator Seyarto.

So when they do the study, are they going to be looking at some of the laws and stuff that we've passed lately, and if those are related to some of these increase in accidents? Because I don't see the ebike usage isn't a whole lot different than the bicycle usage, depending upon who's riding it. It simply substitutes effort to keep the bike moving at a reasonable pace.

Some of the laws that we have passed recently include allowing people to go through an intersection, and I've seen a few near misses from that. So this study will take that into account and maybe give us some insight on whether these laws that we've passed are indeed working and they're still safe.

Well, I know there are cities around the state that have passed some ordinances around. So just to clarify, the state Legislature, I think they're looking at a holistic framework. We have not specifically called, said to look at any particular recent laws. So that's not specifically something in the scope of the language, I believe. But at the same time, they have a broad purview to look at. What do they want? We're asking for essentially data and best practices to the extent they're able to find them.

And it's not just ebikes, it's micromobility devices. It would include scooters, anything that is electric, I believe, and so the skateboards, things like that, because we already have the regulations for helmets and everything else, all the safety gear that you could ever want. And I don't know, it's not a state government funded program, but it is a CSU funded program. It's indirectly funded by us. Yeah.

And look, I came into this, just the origins of the Bill, a number of my cities, because Orange County has a lot of beach towns and ebikes are becoming very popular there. And I've got a little local shopping mall I go to for my groceries. And you'll see like, little packs of, like, 12 year olds on ebikes and they'd probably be surfing otherwise. But it does present new challenges. Yes. I don't come into this knowing what the answers are.

So the immediate thought was, what should the answers be? When we looked around, no one knew. So we thought, okay, it makes sense to have a study now. Perhaps that study will come back with recommendations germane to what you're saying. Perhaps not, but that was not the intent of our Bill, if that makes sense. Appreciate it. Yeah. Ebikes have opened up mountain biking to people who would never have ever considered mountain biking. Yeah. Because of the effort. It's a non effort thing. It's really cool.

And you use less calories. Way less calories. So it's really good. Thanks.

Okay. Thank you, Senator Seyarto. And if we've got nine Members. So I'd like to establish a quorum Committee assistant, if you can go ahead and do that, please.

[Roll call].

Quorum is established by the Committee assistant. Thank you, Senator Min. I don't know if there were any other questions. Senator Seyarto has concluded. No other questions. Would you like to close?

Thank you, Madam Chair Members. Thanks for your comments. We will continue to work with stakeholders. We realize that like riding a bike, this is balancing multiple interests. And hopefully the chains don't come off. But I respectfully ask for your aye vote.

Very good. What a fantastic close. Thank you so much, Senator Min. Okay, so we'll go ahead and do the roll call here for Senator min's SB 381, please. I think we have a motion by Senator Dodd since he was the loudest over there. So thank you.

Absolutely.

For file item five, SB 381 by Senator Min. The motion is do pass to the Committee on Appropriations. [Roll call].

Okay, great. Thank you, Senator Min. We'll leave that Bill on call. And now aye see our next author, Senator Padilla, for his very first Bill in Committee, which is SB 775 of vehicles, electric school buses, signage. Welcome, Senator Padilla.

Thank you. Part of the joy of this job, Madam Chair, is that you never really know what Bill you're going to present first. But good afternoon, Madam Chair and colleagues. It's my honor to present SB 775, which allows K through 12 school districts to apply for signage at the rear of their electrical powered school buses, identifying them as zero emission vehicles.

This Bill authorizes the Department of the California Highway Patrol to issue guidelines for the same as the State of California moves towards a carbon free future, the electrification of the state's massive k through 12 school bus fleet is a significant step in achieving our climate goals. California, believe it or not, has an estimated fleet of 23800 school buses, of which only 2% are either hybrid or fully electric.

Students who ride diesel powered school buses are at higher risk for allergies, academic declines, asthma, heart issues and cancer. We put a lot of focus and effort on transitioning our fleet through achieving the very high goals that we've set with respect to climate. Part of this needs to be assuring that our kids are not exposed and that parents have the necessary information. They need to know the vehicles and the modalities by which their children are being transported.

Clear labeling of electric school buses allows communities to also see the direct impact of their hard earned tax dollars as we replace this aging fleet. Put very simply, Madam Chair, we need to, as we set a transition to our climate goals, take every simple opportunity to increase public education and awareness of the actual impacts and changes in the use of technology that facilitate that transition education. Increased awareness increases public support for these policies.

SB 775 is a simple way to authorize the Department of the Highway Patrol to set regulations to allow districts to do just that that are not currently permitted in existing statute. I would like to also add with me today is Deputy Superintendent Mike Simonson from the San Diego County Office of Education.

Thank you, Madam Chair and Members. Good afternoon. I'd like to share a little story about Lakeside Union School District in East County, San Diego. Recently, they received just under $5 million towards electrifying their entire fleet, 14 school buses and all of the charging stations that went with that. And we're not quite sure how much the community knows about that. And the important part of the community knowing is it's that snowball effect. The more people know, the more people care, and the more people support.

We have to remember that it's not just the community of Lakeside that sees these buses. It's when they take kids to athletic events or field trips throughout the county and to other school districts and other places of business. It is very important for our folks, our community, even our tourists here, to know that we, the State of California, as the national leader in carbon free, and that our local and state governments are working closely together to accomplish that. Thank you.

Thank you. Okay, so thank you very much, Senator Padilla, for your witness in support. Is there anyone else who would like to come forward in support of SB 775 in the hearing room here? See none. Anyone who. I don't think you have any registered opposition, which is great. So anyone who would like to come forward in opposition to SB 775, please come forward. See? None. So we'll go to the teleconference line. If there's anyone in opposition or support of SB 775, please to speak in.

Opposition or support, press one. Then zero at this time. Madam Chair, we have no one queued up.

Okay, thank you, moderator. We'll take it back to the dais for any questions by Members. Okay, Senator Limon moves the Bill. Senator Padilla, would you like to close?

I would just reiterate that it simply allows the CHP to prescribe this valuable information, be able to be displayed in a safe and reasonable manner on school buses for our districts. And I would respectfully ask for an aye vote.

Okay, thank you very much. Great job on your first Bill.

Thank you, ma'am.

And we'll go ahead and. Committee assistant, please call the roll profile item seven, SB seven. 75 by Senator Padilla. The motion is do pass to the Committee on Appropriations. [Roll call].

We'll go ahead and leave the Bill on call for you, Senator Padilla. Thank you. Okay, so now that we still have a quorum, we'll go ahead and move to. We'll actually go to file item three, SB 295, to add additional Members there really quickly. SB 295, Senator Dodd, for file item three, SB 295 by Senator Dodd.

The motion is do pass to the Committee on appropriations. [Roll call].

All right, we have 7-0 on that one. And then SB 381. Senator Min. Aye think we've already done that one so far. Okay, and then we'll take on consent. Now, we have the eight bills, and, of course, five of them are proposed for consent. Item one, which is SCR 258 by Senator Roth. Item two, SCR 16 by Senator Roth.

Item four, SB 374 by Ashby. Item six, SB 434. Senator Min. Item eight, SB 695. Gonzalez, can we go ahead and does any Member want to remove any item from consent at this time? Okay, see, none. And can we get a motion for the consent calendar, Senator Min. Or Senator Newman? Thank you. Please call the roll.

For the consent calendar. [Roll call].

Okay, we'll go ahead and actually just call the consent calendar, but we'll go ahead and if we can, we'll go ahead and do that again now that we have Senator Wahob here. This is the consent calendar. We've got five items on consent right now, so please, madam Assistant, please call the roll again

For the consent calendar. [Roll call].

And we also have to ensure that we are establishing the Committee rules and policies, which you will see in your tab number nine. So we'll go ahead and do that as well, and then we'll go ahead and add on a few more for the file. Okay, well, let's go ahead and go ahead and adopt the Committee rules first, which, again, are on tab nine. Please call. And we have a motion by Senator Newman. Thank you.

For the adoption of the Committee of Rules and policies. [Roll call].

Okay, we'll leave that on call for a few more Members to add on, and aye know, Senator Wahab has to leave very shortly as well. Lots going on today, so we'll go and start from the top for her.

File item three, SB 295, Senator Dodd. File item three, SB 295 by Senator Dodd. The motion is do passed to the Committee on Appropriations, Senators Niello.

Okay, we'll go ahead and continue to leave that on call. We have file item five, SB 381, Senator Min.

File item five, SB 381, by Senator Min. The motion is do pass the Committee on Appropriations. [Roll call].

Okay, and our last item on the file. File item seven, SB 775 by Senator Padilla.

Item seven, SB 775 by Senator Padilla.The motion is do pass to the Committee on Appropriations. [Roll call].

Okay, we'll continue to leave that Bill on call, and we'll start from the top again. I know this is. Thank you, everybody, for hanging in there with us. We'll start at the top for consent calendar, please. Madam Assistant, can you please call the roll.

For the consent calendar. [Roll call].

Okay. And we'll go ahead and go back to the Committee rules and policies tab nine Members will go ahead and take the roll on that Committee policies and rules, please.

For the adoption of Committee rules and policies. [Roll call].

Okay. Thank you. So I think we have gotten all the Members we can for now, so we'll just hang tight for just another moment to see if any other Members can add on. Thank you.

Okay. We'll add on one more Member for File Item Three, which is SB 295: Senator Dodd. Madam Assistant, can you please call the roll?

[Roll Call].

Okay, thank you. Okay. Now we have Senator Allen, so we're going to run through this one more time. That is quite all right. We're going to start at the top to adopt our Committee Rules and Policies, and that is on tab nine. Senator Allen, if you'd like to refer to that, we'll go ahead and do that first. Can you please call the roll?

For the adoption of Committee Rules and Policies, Senators [Roll Call].

Okay. Then we'll move next to consent calendar. We've got five items: Items One, Two, Four, Six, and Eight. We'll start from the top. Can you please call the roll?

For the consent calendar, Senators [Roll Call].

Okay. Thank you. We'll leave that open--we'll leave the consent calendar on call still. Next, we'll move to File Item Three: SB 295: Senator Dodd.

File Item Three: SB 295 by Senator Dodd. The motion is 'do pass the Committee on Appropriations.' [Roll Call].

Okay. We'll move on to File Item Five. We'll continue to leave File Item Three on call, and we'll move on to File Item Five: Senator Min: SB 381.

For File Item Five: SB 381 by Senator Min, the motion is 'do pass to the Committee on Appropriations.' [Roll Call].

Okay, thank you. And we'll move on to File Item Seven. We'll keep File Item Five on call. File Item Seven is SB 775 by Senator Padilla.

File Item Seven: SB 775 by Senator Padilla. The motion is 'do pass, but to the Committee on Appropriations.' [Roll Call].

Okay, thank you. So we'll continue to keep all of our file items on call, as well as our consent calendar, and Policies and Rules will need to be adopted by the full body as well. So we'll remain in recess for a few more minutes and we'll wait for one of our Senators to get back. Thank you. Okay. Now it's just Senator Nguyen.

That is okay. Senator Nguyen, thank you so much. Okay. So we're going to start at the top for Senator Nguyen. We're going to start with policy--adopting our Policy Rules. That is the first one. So, Madam Assistant, if you can call the roll on that?

For the adoption of Committee Rules and Policy, Senators [Roll Call].

Okay. Next, we'll take up--and that has---

Eleven.

Okay. We have 11 votes on that, so that is adopted. The second is the consent calendar. We are taking up Items One, Two, Four, Six, Eight on consent. Committee Assistant, can you please call the roll?

For the consent calendar, Senators [Roll Call].

Okay. Consent calendar is adopted. Next, File Item Three: SB 295: Senator Dodd.

The motion is 'do pass to the Committee on Appropriations.' [Roll Call].

Okay. Thirteen/zero, and that bill is out. So next is File Item Five: SB 381: Senator Min.

The motion is 'do pass to the Committee on Appropriations.' [Roll Call].

Okay. That bill has 14 votes; enough to get out. And we go to File Item Seven: SB 775: Senator Padilla.

The motion is 'do pass to the Committee on Appropriations.' [Roll Call].

Okay. That has 14 votes; that bill is out as well. Thank you so much for hanging tight with us. We thank everybody for participating. That concludes our Policy Hearing, and we will recess for a bit, and then we'll come back and we will start our Oversight Hearing because we've got more for you here in Senate Transportation. Our Oversight Hearing on High-Speed Rail Authority. Thank you so much.

All right. The Senate Transportation Committee on Oversight Hearing has begun, and I'd like to remind everyone of the teleconference participation for public comment. For individuals who would like to provide public comment via the teleconference service, the participant toll free number is 877-226-8163 and the access code is 7362834. For today's hearing, we will be hearing all of the panels of witnesses on the agenda prior to taking any public comment.

Once we have heard all of the witnesses, we will have a public comment period for those who would like to comment on the topics on today's agenda. Today's hearing, of course, is to review the California High-Speed Rail Authority's 2023 Project Update Report and discuss the next steps for the project. The Project Update Report updates cost, schedule, and ridership estimates since the 2020 and 2022 business plans.

Last year, the Legislature approved a ten billion dollar transportation budget package that included funding for transit, active transportation, port infrastructure, and climate adaptation. The package also appropriated the final 4.2 billion dollars in Proposition 1A bonds for the high-speed rail project. With the appropriation, the Legislature included provisions to refocus the project and increase oversight. Specifically, the Legislature required the Authority to prioritize the completion of a usable segment from Merced to Bakersfield in the Central Valley and restricted spending outside of that.

We also created an independent Office of Inspector General to not only conduct audits and investigations of the project, but to also conduct independent fiscal analyses and reviews of future business plans. The Joint Legislative Audit Committee is currently working on the recruitment process for the IG. And as we know, the California High-Speed Rail is the largest infrastructure project in the country. It continues to face serious challenges as megaprojects do, including a lack of funding, cost overruns, schedule changes, and project management issues.

The 2023 project update report is very sobering. The bottom line is that there is not enough funding to complete the 171 miles from Merced to Bakersfield, the Central Valley line. Specifically, the authority identifies a ten billion dollar funding shortfall. To help fill the gap, they are targeting eight billion dollars in new federal funding from the Bipartisan Infrastructure Law. Recently, I was in Washington, D.C. with many of my Senate colleagues, as well as our Senate President Pro Tem Tony Atkins, meeting with our federal partners and congressional delegation.

We discussed high-speed rail, certainly to a lot of different extents, and time and time again, we were told that California needs to do more to provide a more stable, long-term funding source for the project. With this feedback from D.C., will the Authority be able to achieve its eight billion dollar target? If not, where will the funding come from to complete a usable segment? They are serious challenges that we will all hopefully get answers from today.

Today we'll hear from the Authority and our respected oversight partners from the LAO and independent peer review. Members, as we sit here today, construction continues in the Valley. The Authority has created more than 10,000 construction jobs generated over six billion in labor income, and 16 billion dollars in economic activity. While we grapple with the questions of funding and oversight, we also are looking ahead to what it will actually be like to operate the first high-speed rail segment in the Valley.

Today we have the opportunity to hear from our local partners on the ground about how the project is impacting communities and their future plans to welcome high-speed rail service. We know that the next steps will be critical. Today we must take a hard look at where we are, ask the tough questions, and understand future options. I don't have Vice Chair Senator Niello here, but I'd like to open it up if any other Senators have any opening comments before we get started with our panel. Okay, thank you. So now let's hear from our very first presenter, Mr. Brian Kelly, CEO of the California High-Speed Rail Authority. Welcome, Mr. Kelly, and thank you again for being here.

Good afternoon. Thank you, Madam Chair and Members of the Senate Transportation Committee. My name is Brian Kelly, and I'm the Chief Executive Officer for the California High-Speed Rail Authority. I'm joined here by the gentleman to my right, colleague and friend, the Authority's Chief Financial Officer, Brian Annis. And on a later panel today, you'll also hear from another valued colleague, Meg Cederoth. She's the Authority's Director of Planning and Sustainability, and Meg will discuss with you our plans for station development as we advance this project further in the Central Valley. Thank you again for having all of us here today.

I'm here primarily to summarize the content of our 2023 business plan or--sorry-- Project Update Report--and that was submitted to the Legislature on March 1st of this year--and to broadly discuss the project and its challenges and opportunities. When the Authority submitted our last plan to the Legislature, the 22 Business Plan, our program was in a state of flux. The Legislature had not yet appropriated the Proposition 1A bond funds to the project. Management was settling old disputes with contractors.

We had just initiated work with the State Transportation Agency and Caltrans on a new ridership model. We were defining a relatively new concept for a sensible early operating segment, and after several years of relative absence as a partner, the federal government came roaring back as a key participant in this project. We therefore developed the 22 Business Plan as what we called a bridge document to get to this, the 2023 Project Update Report.

We indicated we would use this year's report to provide policymakers and the public with the vital project updates. In June of last year, when the 22-23 Budget Act was enacted, the Legislature added additional requirements to this report, including updates on costs, schedules, agreements, and milestones related to the 119-mile construction segment and the 171-mile Merced to Bakersfield early operating segment. The 2023 Project Update Report provides those updates.

It includes the most comprehensive and risk-based estimates for schedules and costs that we have ever performed for the early operating segment between Merced and Bakersfield. It also includes updates to our ridership estimates for each operating segment that we have proposed as part of the ultimate strategy to build the entirety of the Phase One project from San Francisco to Los Angeles and Anaheim.

Finally, this report describes important project advancements and our multiyear strategy to pursue and obtain federal grants to advance the project over the course of the next five years. These updates and enhanced analyses come at a tough time for megaprojects and public transit broadly in California and around the country. First, public transit ridership in California and across the nation is down. That reduction is largely attributable to more stagnant population growth in California and employment patterns that are different than they were before.

Transit agencies have also not fully recovered from the ridership fall that resulted from the Covid-19 Pandemic. Interregional travel, like air travel and inner-city rail travel has stabilized. Our enhanced ridership projections included in this report reflect these trends. While they show reduced ridership numbers, the projected ridership is still robust compared to traditional inner-city passenger rail service. For example, the San Francisco to Los Angeles and Anaheim route will still be the most traveled inner-city passenger rail corridor anywhere in the nation.

Second, the impacts of the Covid-19 Pandemic on global supply chains and the resulting market instability and inflation have impacted prices for construction commodities like concrete, steel, and labor. Large infrastructure projects all over the world and here in California have felt the impact of this market instability. For example, in January of this year, the State Transportation Agency awarded about two and a half billion dollars to several rail and transit projects that simply needed more funds to overcome cost impacts affecting their completion.

This is the tough reality in the post-Covid global economy. Inflation has been at a 40 year high and we are not immune. We have incorporated these impacts into the resetting of our unit prices to 2022 and in our escalation rates going forward. The impact on the cost impacts is predictable. These trends result in cost estimates higher than we identified in the 2022 Business Plan.

We estimate needing between six and a half and 9.7 billion more than we estimated before to complete the Merced to Bakersfield operating segment. In the report, we attribute these costs largely to three things. One: the impact of the project on the project of 40-year high inflation on commodities and the revised escalation rates included in our estimates.

Two: a more complete project definition for the Merced to Bakersfield operating segment that incorporates direction from the Legislature and local stakeholders on the full project definition. And three: enhanced program contingency for risk so that we can meet the guidelines for cost estimating on megaprojects through the FRA and the Federal Transit Administration. Project schedules for completing the initial construction segment and for getting the Merced to Bakersfield segment operational are also revised in the Project Update Report.

As we first reported last November, the first construction package in the Valley will be completed this year, while the other two will be completed in 2026. Our scheduled envelope for operations to commence on the Merced to Bakersfield run is between 2030 and 2033. The result of our analysis reflects a continuing, challenging environment to advance this transformative project.

While the work is advancing and our delivery performance is improving, the project still needs stabilized, long-term funding, as identified by both the Peer Review Group and the Legislative Analyst Office. We have been engaged with our federal partners about this challenge, and we believe we have a strong strategy to be successful at the federal level. We have worked closely with the Federal Railroad Administration on a strategy to obtain federal funding over the next five years that is tied to specific deliverables with each annual award.

We have been awarded federal grants in 2021 and 2022, and we are currently preparing our biggest grant application for submittal next month. The reality is this: no proposed high-speed rail project will advance in America without a funding partnership with the federal government. Not us, not Brightline, nobody. The good news is the opportunity to obtain federal funds has never been better.

The enactment of the Infrastructure Investment and Jobs Act provides up to 75 billion in funding for the advancement of rail projects, including high-speed rail over the next five years. Our project is uniquely positioned to put federal funds to use for two reasons. One: we have completed the environmental review process and we are in design and construction for the Merced to Bakersfield segment. And two: we have funds available now to match any federal award.

In other words, we can put federal funds to work immediately, and we will. So our plan is to combine dedicated state and federal funds to achieve the following objectives over the next few years. One: complete the construction of the 119-mile initial construction segment now underway in the Central Valley. That'll be done by 2026, and begin testing high-speed trains on that segment. Complete the environmental clearance for the entire 494 mile San Francisco to Anaheim Phase One system. That'll be completed by the end of 2025.

Deploy the lessons learned from the past and methodically and carefully extend the initial construction segment to a better operating run of 171 miles, connecting the three largest cities in the Central Valley: Merced, Fresno, and Bakersfield. Advance the design work on all segments of the Phase One system, San Francisco to LA and Anaheim, and perform early geotechnical work so challenges and opportunities are fully understood before those extensions are funded and construction is commenced.

Not to be lost in the challenges surrounding the project are the important milestones we have hit and will continue to hit as we advance our work. As the Chair mentioned, we just celebrated the creation of some 10,000 construction jobs in the Central Valley on this project. We have environmentally cleared 422 miles of the 494-mile segments between San Francisco and LA and Anaheim, including continuous clearance between San Francisco and Los Angeles County.

We have now secured nearly all of the right-of-way--96 percent--needed to complete the 119 miles of construction currently underway, and we have started advanced design on the high-speed rail stations and the Central Valley extensions to Merced and Bakersfield, ensuring that we will deliver those extensions the right way with much less risk of delay and costs going forward. In 2023, we will bring to our board a restructured request for qualifications to begin laying track in the Central Valley.

We will have advanced the design on the extensions to Merced and Bakersfield such that we will have a right-of-way acquisition plan ready to go, and we'll have identified the utilities that need to be relocated at just about the time the federal grant will be awarded for our application next month. And by the end of 23, we'll ask our board to consider certifying the environmental document for the Palmdale to Burbank segment, bringing us to 465 miles cleared of the 494-mile segment.

And finally, and most importantly, during 2023, we will have billions of dollars in grant applications pending award at the federal government to enable us to meet our goals and advance our work. And with that, Madam Chair and Members, I'm happy to answer your questions. Thank you.

Thank you very much. We appreciate the presentation. I do have a first question. I'll start it off, and I think we've mentioned this in the opening remarks that had mentioned, of course, going to D.C., having talked at length to both our elected officials and to agency representatives at our federal government. Many of them said that we needed to provide more dedicated funding. Of course, that's something that's very broadly stated by many of our federal agencies.

But can you elaborate on the federal--how we're strategizing around these federal funding? I know obviously next month will be when we actually apply, but what does that strategy actually look like to ensure that we get these dollars? And what is the plan? What's the scenario plan if we do not get the eight billion dollars?

Good questions. Appreciate them both. First, we have worked very closely with the Federal Railroad Administration since the middle of 2022 and beyond on putting together the strategy that we would deploy to apply for and then utilize federal grants for this project. I think rightfully, the FRA came to us and said, 'you guys are the big fish, and if we're going to award money to you, we need to understand what you'll do with those funds and when we can see deliverables from those funds.'

So we worked very closely, and this is reflected in the Project Update Report on page 48. We worked very closely with a phase strategy to apply for a set of applications of federal grants and use those to do two things.

One: finish all the work that we have in front of us on the 119 miles to double track that, purchase electrified high-speed trains in California, and then advance the work on the extensions, including the final design and the initial right-of-way acquisition for the extensions to Merced and Bakersfield. And then beyond that, year by year, we note additional grants that we would pursue and what we would do with those funds.

So we've now engaged in a process where we outlay or we describe with the FRA exactly what the grant is for, exactly what deliverable they can expect. We've done this in a five-year horizon, which is really the time horizon for the IIJA Bill, and again, that's reflected on page 48 in the Project Update Report.

And so that is why we have some confidence in our ability to get federal funds going forward, not just because California can match those funds and that we've advanced the project well into construction and design, but because we've worked hard to lay out a strategy and put together a strategy with our FRA partner.

Thank you very much on that, and I hope we certainly do have the best strategy in place, and we're looking forward to that. Senator Blakespear.

Thank you. Thank you for your presentation. And I read the briefing document, and I just wanted to ask if under the best of circumstances, which section would open and when, under the very best of circumstances?

Yeah. The first deliverable for us is completing the 119 miles that is currently under construction. The dilemma for us is that's not the best operating segment for high-speed rail. And so what we've proposed to the federal government is to extend that 119 to 171 miles, and that would enable us to get into Downtown Merced, Downtown Fresno, and Downtown Bakersfield as the initial operating segment for the entirety of the Phase One system. We're aiming to open that by 2030. Our schedule envelope with a risk says between 2030 and 2033.

And so, because Merced goes to Fresno, goes to Bakersfield, so when we talk about 119, is that going--does not stop in Fresno?

119 is short of Merced and short of Bakersfield, but it includes Fresno. It's a construction segment that's in the middle of that 171. The problem with it is back in 2008 and 2009, we got federal funds to build the 119, but it candidly is not a very good operational run. And so we need to get into the cities, and that's what we're proposing to do.

Okay. And so why are we doing this part first? I just don't understand that.

Again, that's a decision made back in 2008 and 2009, but I would say that California, when it applied for federal funds, actually applied with four different starting places in mind. And the FRA awarded the one that was in the Central Valley. And in part, I think it was because at that time, they wanted us to start construction in a place that was clearly a disadvantaged economic area. And that was part of it. And the idea was you could start there and then build west and south, northwest and south for the Bay Area and Southern California.

And so for that section, that 119 miles, do we own all the right-of-way?

96 percent of it is in hand now. 98 percent will be done. So right-of-way is really not an issue for us anymore. For many years, it was because we got into construction without having all the right-of-way. But in the last few years, we've really advanced the right-of-way. 96 percent is in hand now. Just to give you an order of magnitude of that, we need about 2,299 parcels for all of that 119, and we have delivered to the contractor about 2,215. So we're down to the very, very end.

So the right-of-way is not holding--that last remaining percentage is not holding this up?

Not materially, no. I mean, you got spots where you got to work through a couple of issues, but it's not really holding up construction at this point.

Okay. Okay. Thank you very much.

Thank you.

Thank you, Senator Blakespear. We'll move on to Senator Newman.

Mr. Kelly, Mr. Annis, it's good to see you both. It's sort of an interesting difference between the last hearing on this and this, but I'd argue that it's no less important today. So building on Senator Blakespear's comments, so I am among those who would assert that clearly we don't want to abandon a project which the state has made substantial investments of both taxpayer and other funds to date. And we've talked about the challenges of kind of the initial segment. Give us an overview.

Why should we continue advancing this project? How will it transform our transportation system in California and beyond transportation, what are the other anticipated impacts and benefits of the project? And by when would you say that Californians will start seeing those benefits in a meaningful way?

I appreciate the question. I mean, the short answer is we are living in the era of climate change, and you got to move your transportation investments to achieve more than just mobility improvements. Mobility improvements are important, but you also got to move off of fossil fuel-based systems to cleaner electrified systems, in our case, electrified systems that are based on renewable power. From a mobility standpoint, we will cut travel times significantly.

Even the initial operating run from Merced to Bakersfield will cut between 90 and 100 minutes off of the current Amtrak service that goes through that area. And then as you go beyond that, further and further into the Bay Area, for example, drive time from the Bay Area to Fresno can be up to four hours. The train is about an hour and 20 minutes. When you talk about LA to San Francisco, drive time could be seven or eight hours, sometimes even more.

The train will do it in about three, three and a half. What's designed to do it in under three, operating with stops will be a little bit more. But again, it really does shrink the state. And so I've been engaged in transportation policy for about 28 years, and for me, I've just never come across this single project that hits all of the things that you're trying to achieve with the investment of transportation dollars: mobility, environment, economic.

And so those are the things that I think this project delivers like no other does. And we spent a lot of time trying to get off or get past a difficult start on the project. I think that's coming to the end, and now we can start focusing on what we're doing going forward. Funding stability is key for us to be able to advance and do the things that we need to do and do them right. But those are the fundamental reasons that I'm for the project. Again, the mobility benefits, the environmental, and the economic.

So I appreciate that. I hope others do as well. You're going to hear, I'm sure, from some of my colleagues some level of frustration, also pessimism as to the future prospects for this. So, two questions. One: what can we expect by way of the real cost moving forward? And what is a realistic completion date that starts to connect all of these assumed benefits?

Right. So I think the first realistic completion date that I can give you is tied to the 171 miles where we have a well-defined scope we identified in the Project Update Report with what we call a CP 65 risk analysis, what it'll take to get that done. And we think we can deliver that in a schedule window between 2030 and 2033. Now, I'm going to be really candid with you: getting into the Los Angeles and San Francisco Bay Area, I can't give you a schedule on that because it's unfunded.

There is no identified funding for those extensions right now. So it's next to impossible to give you a schedule for the completion of that. But what I can do and what I can say is that we're going to complete the environmental work everywhere. We want to advance the design work everywhere, so all of you and the public knows exactly what it will take to get into the Bay Area and into the Southern California Basin.

And we'll have to work out a long-term funding strategy to do that. And so that's the best we can do right now, based on the limited funding we have for the program. We can only build with what we have.

Okay. So just to put a bracket on it, so Senator Dodd was born in 1956. I fully expect him to live to 100 years old. Will we make it by 56?

Okay.

Oh, yeah.

Come on.

Thank you, Madam Chair.

Thank you, Senator Newman. Don't talk about my birth date now. All right. We'll move on to Senator Seyarto and then Senator Cortese.

And thank you.

Hi, Senator.

And thank you, gentlemen, for stepping in and coming up today and giving us this information and giving us a good update. My good colleague, Senator Newman, was speaking about the person who might be a little more pessimistic, and I think he was referring to me, maybe. Okay. So I wanted to forewarn you, so forgive my pessimism. This project started in 2009, 2008ish. We were talking about it, doing a bond, all these things.

Great hope. A lot of people, both the pessimists and the optimists were all kind of on board with this. That's how the bond passed because we thought we were getting a train from LA to San Francisco for 33 billion dollars, and it's not that anymore. So we're talking about this one segment, Bakersfield to Madera. One of my concerns is ridership, and not just as a segment, but also as we try to--because this is just 119 miles? 171 miles now. Only 300 miles to go.

How are we going to sustain that segment, ridership-wise? Because when we're looking at mass transportation like that, everything in the past, all the models in the past have been, how do we get people from suburban hubs to the job centers, and the job centers being LA, San Francisco, San Diego, and places like that. Bakersfield is its own little job center, and the people that want to work in Bakersfield pretty much live in Bakersfield because the housing is there already.

And that's why they live out in the suburbs, like in my area. We have people go from the suburbs out to LA and Orange County because they can afford a house. A house is more affordable, I should say like that, in our region. And so in Bakersfield, the houses are already there. So they're not going to go live in Fresno and then work full time in Bakersfield. Same thing with the Fresno folks. Same thing with the Madera folks.

A lot of other people out there, a lot of the jobs are out there are construction jobs, and those folks carry their gear with them. And I know from being in my world, when you go from one region to another, you have to work, you got to carry your gear, and it's not going on a train, even if it is a fast one. And then as far as tourism is concerned, you tell me. Bakersfield and Fresno are not the hub for tourism.

You'd have to get them up to Yosemite, but then you'd have to get them there and then figure out how to get them up to Yosemite, and I know there can be connector buses, but once you start talking about buses, people start falling off on the idea and they think, 'I'll just drive.' So how are we going to sustain this one segment, given that scenario for--and this one's taken, what are you talking about, 2033 before we can even get it up and running?

So the other segments I could imagine. Well, I can't. I'll probably be dead because--and I'm not saying that flippantly--if it's going to take this long to get this segment done, it'll probably take maybe half as long because of the environmentals and everything are already done, but it's still a long time.

Yeah. So the timing for the extensions, as I said, will all come back to funding. If funding is available to get to the Bay Area and Southern California, we'll expedite the delivery of that. In the meantime, we think it's important to get trains up and running in California. And the estimates that we have is, even though our ridership numbers are down, the ridership from in that Merced to Bakersfield stretch versus the train ridership that you have today in that stretch.

And if you don't build this, by 2030 you have about 3.1 million riders a year. With this system, you are up to about 6.61. Most of them are riding on the high-speed service between Merced and Bakersfield. In Bakersfield, it will connect to buses going further south to Southern California, and in Merced, it will connect to the A system that goes to the Bay Area, Oakland, and San Jose, and to the Amtrak service that goes to Sacramento and Oakland at a single station in Merced.

Those connecting points don't exist in the Central Valley today, but there is value in the provision of the service in that segment. And the reason that we got on that is because we saw that we didn't have all the money for the entirety of the system, and the question is, what do you do to get a system that has value? And so our estimate was Merced to Bakersfield was the best valued system from a ridership improvement standpoint with roughly the funding that is available or obtainable.

And that's where we started that. And so, again, for us, the strategy is meet all of our commitments to our federal partner by getting the work done that we have to get done with the money they already gave us, get an operating run that makes some sense going, and get all of the other stuff up to construction ready so that you can fund it--so that it is ready to go if funding is available. And let's seek funding.

And so while I agree I can't give you dates beyond the Merced to Bakersfield stretch today, the idea is to get everything ready and come back with that question to move forward as we're operating in the Valley.

Okay, and just two other comments. People start talking about the jobs that are created when you have a project like that, and that's great. It's not a jobs program. It's a transportation program. We're trying to move people around the state and add a piece to our transportation network that will benefit the state because jobs programs can be anything from flood control, building new dams, new water infrastructure, new roads. We can put people together in all those things if they're funded.

And I think that's where a lot of frustration in California is. When people are looking at this, it's what are we not doing because we're spending money on this, and yet we could be getting a lot of other things done while this figures itself out because if you go to other countries, they can build this in five to six years. In California, we can't build it in 20. And it goes from our 38 billion dollars to 120 to 130 billion dollars in cost, and that's in today's dollars.

That's not later on down the road. So that's their fear, is that we're throwing good money after bad. And hopefully we have a plan after this one segment because I can't imagine--we can't stop in the middle of a segment and leave all this stuff. I've seen the infrastructure and that already needs maintaining, by the way. It's full of graffiti. And that's sad that people do that. But, you know, people don't want to throw good money after bad.

And they have all these other needs in California and they're thinking, 'why aren't we spending money on that?' And then we'll come back to this, if we can ever get handle in California on how to build and be able to afford something as magnificent as a high-speed rail. Because in California, with our regulations and our costs, that's tough and it's almost impossible. And that's what I think people are seeing. And that is where the pessimism comes from, as my colleague--

I just say one thing about the jobs' element. As I said earlier, the Federal Government picked the Central Valley in part because it was a highly disadvantaged community. Of the 10,000 construction jobs that we've created on this project, about 70% reside in the Central Valley. At one time, I think in 2017 and 2018, one in three jobs created in Fresno county were ours. And so there's a great economic impact from what we're doing.

When you talk to the workers about not having to commute to LA or the Bay Area to find construction work and the ability you can do it at home, I think that's an important element of what we've done. And again, it comes down to, do you believe in what we're ultimately trying to achieve? And we do.

But it shouldn't be a 20 year jobs program.

No argument here. No argument here.

Thank you, Senator Seyarto. Senator Cortese.

Thank you, Madam Chair. Having been around the regional transportation scene for 23 years, I've kind of forgotten about a lot of the original premise around federal funding or anything like that. So I surmise that the Federal Government was thinking that there'd be massive amounts of economic development that would come to those communities if you got this connectivity right, even on the 119 or whatever the new number is. Do we have that economic development forecast as a companion project? I vaguely remember-

We do.

First, one of these hearings that I attended, it was your first hearing as well here. We talked about that a little bit. But it seems to me that, first of all, what's happening in other countries, which I've visited as well, is that you have massive amounts of federal investment, or national investment, as the case may be. I guess what they call it, not federal investment, that moves things pretty quickly, and private partnership in some cases, like in Taiwan.

But I do think it's important, both from the economic development standpoint, to know what we're promising people or projecting for people, and in terms of the project impact, what we can tell people about when that's going to come. Realistically, you're environmentally cleared. I know people have moved out of West San Jose once the environmental clearance happened, but I know people who are staying there because they feel like they can still spend the rest of their lives in their homes.

But what they've managed to also prove up there is they've got basically five Silicon Valleys with the education component and the RD component and the manufacturing component all hooked up to the high speed rail. And people are moving back and forth, and I think they're now, if I understand it right, the leading manufacturer in the chip industry, exceeding what we used to be in Silicon Valley, in my hometown.

All that said, what's the reality of what we're going to be seeing Bakersfield turn into and Merced turn into, if in the best case scenario, from an economic development analysis, as opposed to the project delivery analysis.

In the short term, as just tied to the construction of the project, I think the estimate is that the extensions to Merced and Bakersfield, plus the work we have now, we've invested about $9.8 billion to date. That's gotten about 16 billion in economic output and created about 80,000 jobs as we extend this work beyond just construction jobs. But as we extend this work into Merced and Bakersfield, the estimate on the job years goes up to 325,000 jobs.

Again, you're cutting the travel time in the area by 90 minutes for every trip. But ultimately the best benefit will be the connections when we're to the Bay Area in Southern California. And that's because that's where you can do some of the things that Senator Seyarto pointed out. Like when you cut a travel time from 4 hours, for example, from the Bay Area to the valley to an hour and 20 minutes, that's a different commute. Now, affordable housing is a different animal for folks.

You could live one place and work another. I think when it comes to Bakersfield as well, there's a place that you've seen some diminishment of jobs tied to the oil industry as we move away from fossil fuel based economy. And I'm just not sure where the next public works project comes to Bakersfield at the magnitude that we have.

And so we see a lot of employment opportunity, and we also see a real change in the development in downtown with a major transit center in the middle of downtown Bakersfield that does not exist today, where you have buses and the high speed train system coming together with interregional bus systems going further south to LA and other places. So they've talked a lot about the transformation of their downtown community with the coming of high speed rail. The economic impacts speak for themselves based on what our analysis shows.

We update that every year publicly. And again, when you extend further south or west to the Bay Area, then I think you've also shrunk the state. And so people can work in one place and live in another with more affordable housing. So those are all sort of the elements that we see as benefits from this project ultimately.

But are there actual studies that project out post-construction, what Bakersfield's economic development is going to look like as a result of just this segment post-construction? That's really what I'm asking. Does it become, because of the shortened commute back on the rail, back and forth between the Merced side of it and the Bakersfield side of it? Does suddenly that become an economic development hub that it's not currently?

Do those universities become more equivalent to what we see in the Bay Area now with San Jose State and Cal. And all of those feeding suddenly becoming engineering feeders, cheap housing, do we start seeing people coming into that area saying, I can live in Merced and I can get to work in Bakersfield, or is that just not enough? Is it not enough of a benefit compared to what we see now to actually spur that kind of economic development? I'm not just talking about jobs or the transit mall or the beautification of downtown Bakersfield.

I'm talking about, will we see what we've seen in other countries where segments that long have taken those urban centers at the bookend and turned them into something much, much different than they were pre-construction?

And my answer to that is a couple. One, you will not see the magnitude of that until we are connecting the Valley to the economic powerhouse centers of the state.

However, is that based on a study or are we surmising that?

We're trying to get at, is the Legislature be directing more work? Not out of your budget necessarily, but on the economic development side of what's going to happen with those communities. We already know we need to be looking at Kern from a workforce transition standpoint to some extent. To some extent, because of all these climate goals that we've locked into. Should we be looking at this economic development picture tied to high speed rail with each segment so that we have real projections?

I know we did that with BART and Silicon Valley. I don't know how real those numbers were, but we at least looked at them and said, hey, if you do this, if you bring BART into the, you know, that kind of rail, this is what's going to happen in terms of moving people around and creating economic scale.

And there have been some studies, SPUR study comes to mind in the Bay Area that talked about the valley to valley connection and what it would do for both location of folks living and working in certain areas, the potential for increased business, relocating into the valley for cheaper purposes, but also being able to move employees more efficiently back and forth on the Merced to Bakersfield stretch, there's been a lot of conversation and some study done within the Central Valley region on the connectivity between the universities in Bakersfield, Fresno and Merced, and some expanded curriculum and job and workforce development through those universities for the system.

So those are some of the things I'm most familiar with, but I could get those to your office. Absolutely.

That may have been an ask a couple of years ago, to be honest with you. I wouldn't be able to go to a file cabinet and pull those out right now. We'll get an inbox. I'd appreciate it.

Yeah, we'll get relevant.

Starting to get, as you said, with funding, some additional funding commitments, things are starting to get a little more real than they were a couple of years ago. I have two more quick questions, Madam Chair, and I promise I won't keep asking follow up questions on these. Getting over to my area from Merced to Santa Clara County, over, basically over 152. Realistically, what's it going to take to get environmental clearance on that in terms of just time?

You're talking about not being able to project the timeline because we don't have money. If you had money, and I hate to ask you a hypothetical, I'm just trying to get a handle on what that environmental clearance process is going to look like when we get to it.

Just to be clear, the Merced to San Jose section is environmentally cleared. We just cleared that last year.

So you could, if you had money, break ground.

No, but what I could do and what I'm seeking money for right now is some of the federal funds we're asking is so that we can advance that design work. The key thing from the San Jose to Merced stretch is we've got to understand the geotechnical status there. And that's because there's big parts of that section that will include tunneling. That entire section includes about 13 and a half miles of tunnels to get from Merced to San Jose through the Pacheco Pass.

That's 100% environmentally cleared or you-

It is. It's 100% environmentally cleared. The strategy is what I referenced earlier. San Jose and Mercedes is a great example. But the other ones are where we're completing the rods, which is the record of decision for the environmental documents. On every segment in the phase one, our next step is to advance the design work, and that's what we want to get.

And I don't want to take up all the time here. And last question, again, refresh my recollection. From Diirdon to San Francisco, is that considered another phase going up the peninsula or do you have to at this point, move that, design it and build it all as one package?

There's a slightly complicated answer there that is also environmentally cleared today. And we are funding partners with the Caltrain electrification project. And so Caltrain right now is electrifying that corridor for their commuter service. But much of that infrastructure that they're putting in for that electrification will benefit our service when we get there.

What I'm getting at is what do I tell my constituents who are west of Diridon, do I tell them that once you see this coming over 152, consider yourself seamlessly part of that project or that, essentially that high speed rail will plan to design and build for certain up to Diridon and then depend on Caltrain coordination to get from there?

No, the way we're approaching this is there will be some additional infrastructure investments that are needed from the San Jose to San Francisco stretch because we want the corridor to go a little bit faster than Caltrain can. So those are things that we're going to do. There's a couple of more catenaries that will be needed for our trains, but generally within that same right of way, we're going to have services that are both the interregional trains that are ours and the commuter service that is theirs.

So they'll continue to run the commuter from, really Gilroy, San Jose, all the way to San Francisco. We will run a seamless train from San Francisco all the way to Merced, Fresno and Bakersfield once we're into the Bay Area.

But as far as you're concerned, that's one segment.

It's two segments. But, yeah, I mean, ideally, I'd like to not just go San Jose to Merced I'd like to get the corridor done all in one investment.

Look, let me just conclude by saying, I'll chime in, and there are a few people that are going to be in this building or county supervisors or mayors down there by the time it gets that far. I wish that wasn't the case. I'd like to see it all done tomorrow. I support the project. I think it would save a lot of money if it could all be done tomorrow, too.

That said, we have constituents to respond to who want to know if they're going to be in their homes or subject to eminent domain 10 years from now, 20 years from now, 30 years from now. I just want to explain. That's why I'm asking the question. As somebody whose district wraps right around that portion of the project, and I can get my answers offline, I don't want to- I understand, not everybody here has that circumstance.

And this kind of goes back to Senator Newman's remark, which was a little facetious. But I think it also begs the question in terms of what are the facts? What should we be telling people? Not over promising. Some people are going to be quite happy to know it's going to be their children or grandchildren that are dealing with the impact of this project once you get that far along. I think we should be telling them the truth.

Yeah. So just to respond to that specific concern about right away, one of the reasons that we want to get the advanced design work done is it enables us to identify all the right of way that will be needed for the project. I'm trying to get that done now. And so once that's done now, we will have the communication with all the constituents on what the right of way needs are for those segments. And so we've cleared the Enviro.

We are pursuing funding for that advanced design work. And with that we'll have what I call 100% right of way acquisition plan and so the community will know exactly where we're going and who will be impacted. All right.

Thank you, Madam Chair. I know what else I need to be briefed on later, but thank you for allowing me to ask those questions.

That sounds great. Thank you, Senator Cortese and I certainly agree with you on the economic development side in terms of now that if we are to realize funding from the feds for the additional 60 plus 60 or less than 60 miles or so to downtown Bakersfield and downtown Merced, it would be good to envision what the realities would be for those communities since this we feel like would be inevitable, but we just don't know.

So with that, thank you very much for those comments and I'm going to move on to Senator Dodd.

Thank you, Madam Chair. It's interesting is that Senator Cortese brings up some history with BART. There's lots of examples we can give here about construction overruns. I do appreciate the comments from all my colleagues here. I look at this a little bit differently. I look at it that our generation, unlike our parents, well, we're all multi-generational around here. But my know, my parents, my grandparents left this state something.

Just know Governor Brown, number one, left this state a much better Parks and Rec, a highway system. And you can really look at that and that didn't come easily. And you take a look at what in the very reason I was Chairman of the Metropolitan Transportation Commission when this was first brought out in Bay Area and it was something that the vision was unreal. We couldn't even understand even at that time.

What do you mean we can't get an environmental clearance to get another international airport somewhere in the State of California? Well, we all know today that is absolutely clear. We know that the traffic on our highways, the congestion there is just getting worse and worse. I am really disappointed in past management of this rail, and I think there's plenty of criticism to go around for that. But if you always continue to look back and you don't look straight ahead of what's to come, we're going to lose sight of the reason that we need to do this.

We have 40 million people, just less than 40 million people today. That number, obviously, with COVID and everything else, has not been growing. But this state will get bigger at some point in time, and this project will be needed. So for me to leave something behind for future generations is incredibly important. I have been to India. They've had similar challenges that we have in terms of getting the line from, I'm not getting the cities right, Delhi to Bombay. No. What's the name of this?

Mumbai now. Mumbai, sorry. Not politically correct. But nevertheless, you take a look in an area that doesn't have the environmental concerns that we've got, or even regulations. They don't have the cost of the land, purchasing the land that taking anywhere near we do, none of the labor standards. And their cost contracting with the Japanese is similar to what our cost is going to be on the same thing.

And I will remind those here, Senator Wiener has an article he shows me all the time from the San Francisco Chronicle in 1970, showing what a boondoggle BART was. The one billion dollar boondoggle. Well, we know that we've got issues there now because of COVID but the reality is Bay Area traffic without BART would just be absolutely unbelievable. We also thought that the BART to San Jose was going to be a slam dunk. Maybe a billion dollars at some point in time, maybe even less than that.

And today we're looking at something like $9.3 billion to get it down there. We can look at the Big Dig back in Massachusetts. That thing was supposed to be $2.8 billion. Construction was finished in 2007 at $14.6 billion. And then finally, the Bay Bridge, which I was Chairman during that whole thing. And, of course, it was all my fault, the bolts and everything else on the bridge, according to everyone during election times.

But nevertheless, that thing was supposed to be 800 million to a billion, maybe 1.5 billion. It ended up being 7 billion to 7.5. Now this is an indictment on how we do public works projects not only in California but across our country, probably across the world. We're certainly not hearing from the Japanese and the Chinese about any cost overruns. I can assure you that, again, when they don't have the labor standards or the environmental standards.

So I am an unabashed supporter of the current management, and they have been very transparent about the good, the bad and the ugly from day one when they got in. And I for one appreciate that approach. And for future generations, this is a good way of going. I'm sorry I don't have any questions, but I've already been briefed a number of times on this project. And I just know sometimes you just got to plug your noes and keep your head down and keep going straight ahead.

Thank you.

Thank you, Senator Dodd. And I think that concludes the questions for the first panel. But if there are any lasting remarks that you'd like to provide, you can certainly do so, Mr. Kelly or Mr. Anna.

Thank you for the time, Madam Chair and Members. Appreciate it. Thank you.

Thank you for your time as well.

Just add a thank you as we go into submitting the big grant application in April. Having the Prop 1A appropriation from the Legislature is very helpful and puts us on best foot forward. So thank you.

Thank you. Thank you very much. That concludes our first panel. We'll now move on to our second panel, Overview of Fiscal and Program Analyses. We have Helen Kerstein, Principal Fiscal and Policy Analyst for the LAO, the Legislative Analyst Office. And we have Mr. Louis Thompson, Chair of the High Speed Rail Peer Review Group. Welcome to you both.

Good afternoon, Chair and Senators. My name is Helen Kirstein with the Legislative Analyst Office. Thank you so much for inviting me to participate in today's hearing. We've prepared a handout which should accompany my remarks. If you don't already have one in your packet, the sergeants have one as well that they can pass to you. Additionally, if you're watching from home, our handout is available on the Committee's website as well as our office's website.

So you'll notice it's a pretty long handout in the interest of time, since I know it's getting a little bit late. And also, just given that mostly the beginning part is generally a background on the project as well as on the project update report. And I know the previous panel discussed that at some length. So I'm going to jump, if that's okay, to page 18 and start with really the meat of our analysis here, which provides some issues for legislative consideration.

And then I'll summarize some key questions for the Legislature to consider. So if you turn to page 18, if you want to follow along, the first main issue that we identify for the Legislature to consider is that the project has developed a really significant funding gap for the Mercedes to Bakersfield segment. So this is different from last year. Last year I was before you and we were talking about how the project had, basically, it was estimated to have roughly sufficient funding to complete Merced to Bakersfield.

Now we're in a different scenario. So the costs of that segment have increased by about 50%. As a result of that, the project is facing a roughly 10 to $12 billion funding gap for that segment. And that's, as you heard, largely a result of things like scope increase as well as inflation. Also, we think that there's significant chance that costs for this project will continue to grow. We've been here a number of times before you, and this has been consistent refrain with this project.

The project costs have increased significantly over time. We think that there's risk that that will continue. Partly. That's just, this is a large construction project, as it was referenced. There are many projects that have experienced similar things. Also, we would note that there are some portions of this project that are still in pretty early stages. So while the 119 that we heard about, that's well underway in many spots, but the extensions, those are still in the very early stages. So there's a lot of uncertainty there.

There's also work related to adding track and systems, rolling stock, the trains. And there's just a lot of uncertainty about what those costs would look like. So we think there's significant risk for additional costs, as well as potentially additional inflation costs that aren't fully reflected. We would also note that there's some risk that the greenhouse gas reduction fund, the cap and trade revenues that are assumed might not fully materialize.

The authorities, assuming that the relatively robust revenues that the state has experienced over the last couple of years will continue through 2030. That's certainly possible, but there's a lot of risk there. There's more risk as you get further and further and out because it's just harder to predict what revenues from that source will do further out into the future, particularly as the program gets near its statutory end date of 2030.

If you turn to page 19, we reference that the authority has identified this goal of getting $8 billion of additional federal funding to help make some progress towards meeting that funding gap. However, there is a lot of uncertainty regarding how successful the state will be. Certainly, we all hope that the state will be very successful. But over the last several years, the authority hasn't been as successful as we would hope in securing federal funds.

So the first couple of years of the project, in 2009 and 2010, the project received $3.5 billion in federal funds. But since then, it's received about 50 million. So not much in the way of federal funds. Most recently, the project or the authority submitted two grant applications for $1.2 billion and unfortunately did not receive that funding. So, as was referenced, there's a plan to submit significantly more applications, but it's just unclear how successful the state will be.

The next issue for legislative consideration that we identify is that there isn't a funding plan beyond Merced to Bakersfield. So this was referenced before, but there is this funding gap, even for Merced to Bakersfield. And beyond that, there's really no plan now for how to Fund that, and the gap continues to grow to Fund that. So right now we're looking at probably over 80 billion, likely more in terms of a funding gap for completing phase one, so significant amounts of additional funding will be needed.

At this point, the authority hasn't identified a specific funding plan to address that. And if you turn to page 22, other issues for legislative consideration that we identify, one is that the reduced ridership could affect the business case. So you heard a little bit about this. The new project update report assumes or estimates that there's nearly a 40% decline in the valley to valley ridership relative to the last ridership estimate, and a roughly 20% decline in phase one ridership.

So it's pretty significant reductions in ridership estimates. So that could affect operating revenues and those types of things for the project once it's up and running. And then finally, in terms of issues for legislative consideration, we note that project oversight continues to be really important for this project. So the Legislature took huge steps last year, and I think probably many of you, if not all of you, recall it was a very important budget trailer legislation that went along with the $4.2 billion appropriation last year.

And it did a number of things, including establishing an independent office of the Inspector General. And that's really intended to provide this strong oversight role. So we'll hopefully start to see the benefits of that in the coming year. If you turn to page 21, we identify some key near term questions facing the Legislature that really spring from those issues for legislative consideration. Again, the Legislature took a lot of really important actions last year.

We think, though, that given the updates in the project update report, given the changes, it's a good time for the Legislature to consider whether any additional actions are warranted. Some of the key questions that we suggest the Legislature consider are the following. First, is the Legislature still committed to completing Mercedes to Bakersfield? So last year that was stated in intent language in the budget trailer Bill, that the focus was to be Merced to Bakersfield, and then after that, phase one.

And really there was sort of this intent to do that. But given the emergence of this funding gap, it's, I think, worth the Legislature considering whether that still continues to be the intent. Second, what funding does the Legislature want to use to fill the funding gap? So, again, it's unclear how much federal funding will be in the picture, but there's a good chance that there'll be a multi $1.0 billion funding gap for Merced to Bakersfield.

And so while that funding gap doesn't need to be addressed this year, we think that there's value in starting to identify a funding source for that earlier rather than later, because there are going to be probably some pretty tough choices about which funding source to use. We identify a few things, a few factors the Legislature could consider, including financial approach. So the state could use cash or it could borrow, and there are a variety of means to do that.

The Fund source and some options, for example, include the General Fund GGRF, additional GGRF that could come, or, for example, using truck weight fees, which are currently used to offset General Fund costs related to debt service. And then on the next page, on page 22, we also note that the state could consider using either existing revenues, and that could mean, for example, cutting other programs, reducing other spending in other areas, or could raise new revenues, such as by increasing an existing or new tax.

The next question that we identify is whether the Legislature agrees with the elements that are included in the Mercedes Bakersfield segment. So one way to at least modestly reduce the costs of Mercedes Bakersfield would be to address the scope and to decide which elements are the most critical. We would note that in the project update report, for the first time, the authority adds some new project components, specifically a solar and battery system, for example, battery storage system.

So that's the kind of thing that the Legislature could consider. Is that worth kind of adding a couple of $100.0 million to the project or not? And then we also note that the Legislature could consider whether it agrees with the authority's planned actions beyond Merced to Bakersfield. So as the authority mentioned, they do plan to submit some very large grant applications in the next month. And one piece of that is to do this planning work outside of Merced to Bakersfield.

So I think a key question for the Legislature to consider is, is it comfortable with the authority taking those actions, or does it want the authority to focus more heavily on Merced to Bakersfield? So I think that's going to be a key question, and then I'm almost done. I apologize. I know it's a little bit lengthy, but if you turn to page 232 last questions. One is, does the Legislature have sufficient information to inform its decisions?

So, again, there are a number of these issues that I've identified in terms of ridership estimates, cost estimates, scope, whether that could potentially be modified, different funding options. To the extent the Legislature really feels like it needs more information for those types of things, it could, for example, Fund additional work. And I know there was also mention about jobs. To the extent that's important, that could be another area that's looked at.

And then finally, how can the Legislature promote the effectiveness of the Inspector General in providing project oversight? So, again, this was another really important part of that legislation, last year's establishing this independent Inspector General. But really a key component will be making sure it's as effective as possible, for example, by selecting someone who's really strong and independent, making sure that office is adequately resourced, those types of things. So that concludes my comments. Happy to take questions when it's appropriate.

Thank you, Ms. Kirstein. Next we'll go on to Mr. Thompson, who is, of course, with the high speed rail peer review group. Thank you.

What's happening here? Ok. I think it's all right. Okay. Madam Chairman, Members of the Committee. Thank you for the opportunity to appear before you today. As you know, Proposition one a created the peer review group, and our job is to report to you on documents or reports from the High Speed Rail Authority and also report to you on the progress of the project.

In the process of this, we have covered eight business plans now, we've issued 18 letters, and we've testified before your committees or congressional committees 15 times. It's always hard for me to appear after Helen Kirstein because she usually says what I want to say, and she says it better. She certainly says it faster than I do. So what I'm going to try to do is summarize what we intended to say. Most of the details are at the letter that we sent.

Overall, you know that costs are increasing and there doesn't, as far as we can see, appear to be any end in sight. The current contract values for the construction projects in place have increased by 97% from their award values. That's up from 86% last year. So the costs are going up, schedules continue to stretch out, and as Brian testified, there isn't even a schedule date now for completing phase one of the project because there's no credible funding in place.

Ridership has fallen by 25% from the 2009 business plan, which was what was presented to the public. Confidence in the forecast has probably grown for the 119 miles section, but I'm not sure it has increased on any of the other sections, partly because there's no bidding experience on the additions and there is no bidding experience on many things like electrification or tunneling. So it isn't clear what the confidence level is for the remaining part of the forecast.

Inflation has had a terrible impact, and it's likely to continue to have an impact. In particular, the estimates for Southern California, which cover about 41% of the total phase one cost, have not been updated for inflation. Local requests in the context of development in local areas have tended to add more money to the project, usually for good things, but they've tended to add more money to the project.

The memorandum of understanding that they have for operating the system is still unclear as to who will pay for what and who has the full responsibility for ensuring that the system operates properly. The new federal money is aspirational. I think there is a good chance that there will be new federal money. Whether it will be 8 billion or not is a different question. But the point I would like to make is that this is unreliable and fluctuating money.

It is not stable and it is not the sort of thing that contributes to management of a project if you don't know what you're going to get next year or year after that, it's very hard to manage. What I want to hit is the unfunded gap. As Helen Kirstein said, the unfunded gap on Mercedes Bakersfield is two and a half to $10 billion. That is money for which there is no funding gap, no funding available.

More important, the 2023 update shows a phase one gap of between 93 and $103,000,000,000. This is money for which there is no funding source, federal, no federal source or no state source. And this gap appears to be growing. This poses a dilemma that the state needs to be aware of, and that is that I don't think anyone would argue that we should build for $35 billion service from Merced to Bakersfield and stop. That is not justifiable.

That would only be justifiable in the context of a commitment to do all of phase one for which this would be the first part. If in fact, the state is not going to go beyond Merced Bakersfield, then there really should be some thought about what would be done as opposed to spending $35 billion. So the considerations that we propose to the Legislature are actually very similar to those of the LAO.

The phase one system that is currently envisioned is not the same as the system that was envisioned in the Proposition one a that was presented to the public. While the authority does envision completing the mileage that was proposed, it will cost about three times as much. It will take 15 to 20 years longer, and it will not meet the trip times as mandated by the law, and it will carry only about three quarters of the passengers that were promised very explicitly.

The economic and financial performance of the system cannot be as favorable as originally projected, and the tradeoffs between the investment and high speed rail and other state needs will be a lot harder to make.

Given what we know of the project today, and given the financial demands facing the state, the Legislature may want to Commission an independent review of the economic and financial justification for the project, including its ability to operate without subsidy as required by Proposition one A. Before recommitting to the full phase one system, this question came up by Senator Cortese asked a question about economic justification for the project.

The last one that I am aware of was in the 2012 business plan, where there actually was some economic analysis of the payoff of the project that was not, I don't think, as complete as you would want to see, but I would strongly urge the Legislature to consider thinking about how does this project look now knowing what we know now and knowing what we know about the other demands on the state, we have some other suggestions.

One is that the Inspector General Selection should be given the highest priority possible. It has been eight months now since the law was passed and we still don't have one, and I think the Inspector General will be a key person in some of the other suggestions that we make. We would like to request the authority to issue their updated information in the format for the dashboard format that they used for the error reports. That was very good. Current information to see how contracts are proceeding.

The review of the proposed contracts to be issued by the authority in the Mercedes Bakersfield section to make sure that they are consistent with the cost estimates that have been given is important. We suggest that you request development by the LAO or another appropriate agency of an analysis with options and trade offs available to the Legislature for how to Fund the gaps that I mentioned.

These gaps are going to have to be funded if the project is going to be completed and it is going to be critical that a funding approach be fully funded and that it be stable from year to year. As we have repeatedly said, and as I think Brian would heartily agree with me, it is not possible to manage a project like this without stable and adequate funding. It costs more and it causes all kinds of changes from year to year that make it unmanageable.

You may want to request that the authority assess changes that they could make in the Mercedes Bakersfield section pending a decision on commitment to the entire project. This assessment would be useful because, as we have suggested in earlier testimony, the state still has the option to limit the project to the 119 miles Madeira to Poplar Avenue section or revise the scope of the project in the Mercedes Bakersfield section, as Helen Kirstein suggested.

If the evaluation of complete phase one is unfavorable, you may want to, in the process, request the authority to identify options for reorganizing the project into more manageable parts. For example, taking the tunneling work out of the authority's purview and giving it to a different agency. Tunneling is a massive project. It has expertise, requirements that are completely different from much of the rest of the project, and it would relieve the burden for management of the rest.

Finally, you may want to Commission an independent study of the experience of the project and the lessons the state should learn that should be applied to future projects like this. We should not do the same thing over and over again and then ask what went wrong. We can learn from this and we should. I appreciate the opportunity to speak to you. I realize that the tone today shows more concern than we have in the past, and we do it with deliberately. We are concerned. I would be happy to answer any questions you may have.

Thank you very much, Mr. Thompson. Thank you again, Ms. Kirstein. I will kick it off to Members. We have Senator Becker.

Thank you. Thank you both for your work here in the reports. And I may ask a few things. I might have asked Mr. Kelly, but I was presenting another Bill, but I think you're well positioned to answer a lot of these or certainly to opine on them. I think we're all again, supportive of the goals here, but you do raise a lot of concerns, and that phase one will require over, I think, 90 billion that has no identifiable sources at the moment. I guess a couple of things. One, you mentioned the Inspector General having about eight months. What is the process for picking the Inspector General? What has to happen?

So my understanding broadly is that the Joint Legislative Audit Committee selects three candidates, and I believe that they issued sort of a request for basically interest. They basically put out a job application or job announcement of some sort. They got folks applying, and that they are sort of in the process of selecting those three potential candidates, and then they'll provide those to the Governor. And the Governor, as I understand it, will select from among those three candidates the person who will be ultimately chosen as the Inspector General.

Got it. One question I hadn't heard discussion of. Is there concern about flooding as some of the shifted. I know there was some information on social media around this. Is there a concern about flooding in terms of where the current path is located in the Mercedes, Bakersfield?

So I think I've seen the same pictures you have of inundated construction sites. So I do believe some of this does go through some areas that could be flooded. The authority probably provides some more specifics, but I think that there have been historically concerns, both sort of, there's potential concerns around flooding as well as just subsidence and other issues around making sure that the structure is ultimately protected and stable enough. I understand that they are taking some steps to try to address those types of issues, but they may have some more specifics.

Do we have a sense of ticket price from Mercedes to Bakersfield if we get that done?

So my understanding is that the assumption as part of the project update report is that the ticket prices will be roughly equivalent to what's being paid currently on the Amtrak system. So there's the San Joaquin system that runs south. So my understanding is that's what the current assumption is for the purposes, for example, of modeling ridership.

But I think it's a really important question because especially once this is operational, it's not supposed to require an operating subsidy per the requirements of Proposition 1A. So if it's not going to require an operating subsidy, you can't necessarily charge super low fares. Right. Because you have to be able to recoup enough funding to be able to operate the system.

So while the authority argues that that doesn't apply to the Mercedes Bakersfield segment because they're going to use a third party operator, likely the San Joaquin's joint powers Authority, which I think you'll hear from later, I think there's still some legal question about that as well. So it is kind of complicated and I don't think anything has been set in stone. But in terms of the modeling, that's my understanding of what the assumption is.

Okay. And do you know what that is equivalent now for the Amtrak or you don't?

We could look it up. I guess we could look it up.

Yeah. All right. Thank you. Just a couple other questions. I spoke to Mr. Kelly about this when I spoke to him yesterday. Kind of a carbon analysis of the kind of ROI of the project might be. Is there going to be a redo, essentially, because if we're kind of pushing out some of the benefits to, say, 2035 or 2045 of a potential completion, then we should have largely EVs on the road according to projections, and that might affect some of the benefits from a carbon standpoint. Obviously, there's a lot of concrete and other things to go into. Is there any?

Yeah, so I understand that they do do an estimate of the greenhouse gases that are saved or that are projected to be saved as part of their receipt of the cap and trade funds. But certainly I think that's a good question. Right. During the construction, the project, if anything, is going to generate carbon and they're going to have to offset those with, they do offset those with planting trees and other types of things, but there is some emissions from that.

So certainly I think there are some questions about kind of when those benefits of the carbon reductions will show up and how great those will be. And to the extent that that's something the Legislature wants to consider because I think probably the Committee is well aware, but about 25% of our cap and trade dollars are going to this program. So it's a very significant area where the state's contributing those dollars. So to the extent as it allocates those dollars, it wants to think about what's the biggest bang for your buck in terms of GHG reduction, certainly that's something that could be looked into further.

Let me add to that our recommendation of rethinking the economic justification of the project would certainly include a good analysis of this issue. I don't think anyone argue that this can be justified as a carbon reduction program. It is not. The impact on the state's carbon emissions from this program alone is not large. It's a benefit. But you would not justify this project on that basis. But it certainly would be and should be part of a good analysis of the project.

Thank you. Well, I just appreciate you raising these. You know, my area, we have a number of much needed housing projects with thousands of units that are being delayed because of land that high speed rail says they're going to need in the Bay Area sometime in the future. So these questions of whether we'll actually reach there are very pertinent. Especially we're spending a lot of money already to electrify Caltrain, which is going to speed that section up already considerably between San Jose and San Francisco.

And we have other big projects that are needed, like grade separations for electrified Caltrain or for high speed rail. And those are estimated to cost about $11 billion right now just for the grade separations or regional rail, like Dumbarton rail, which would be one of the few things that could be transformative in our region. And we already own the right of way around that bridge. And to build Dunbar and rail was estimated previously around 3 billion. So these are other big projects.

So, I mean, kind of figuring out what our ultimate plans here are important. I appreciate you raising this issue. I guess for Mr. Thompson, I'll just ask because I didn't see necessarily explicitly in there, but do you propose, are there certain off ramps to be considered here, and what would those potentially look like?

We have discussed this before. There are two off ramps. One is the 119 miles system, in which you finish what you owe the Federal Government and then connect it in some way with the current San Joaquins and use it as best you can. And then the other off ramp would be at the 177 miles system. But what you would do there, or what you might do there is not electrify it or not build all four tracks or two tracks. Rather, there are various ways of doing either of those as off ramps that would yield a benefit to the state, not the benefit from the full phase one system, but it would give you something for your money.

Great. Thank you very much.

I appreciate it. Senator Gonzalez had to step out, so I'm in charge. Just building on. Well, first of all, to your point, Mr. Thompson, if you did those things, could you still meet the statutory requirement of speed, average speed? No, you could not.

In fact, the only way to meet the statutory requirements is to build the entire system of.

So, you know, both the PRG and the LAO have suggested possible sources of additional state funding for the project, appreciating kind of the fiscal landscape we look into. What are your thoughts there?

Well, we have discussed before options. For example, if you gave them all of the cap and trade money and extended it to 2050, that would be certainly a way of funding a major part of the program. Gas taxes, oil taxes, real estate. The original proposal in 2000 was for a sales tax, a quarter cent sales tax. It is not a question of the money. Clearly the state could afford it.

The question is, do you want to compared to the other things that you could do with that money or not raise the money at all? But our point is that this question, which was answered one way in 2009, involved a lot lower cost and a different performance and a different sense of where the money would come from than it is now.

And the state and the Legislature may want to sit down and think about how would we do it now and what would be the best way for the state to proceed. Appreciate that.

Ms. Kirstein anything to add?

Not much more beyond what we had mentioned in the handout. So there are a lot of options. As Mr. Thompson mentioned, the state could raise an additional tax, a new tax.

Or in other words, nothing we have.

Yeah, or it could use. I mean, there's no easy solution here. There's not going to be. Part of it is that we're looking at a lot of money. I mean, we're looking at even just from Mercedes to Bakersfield, probably a multibillion dollar funding gap. And for phase one, we're looking at tens of billions of dollars, if not over 100 billion or more. So it's a very significant funding gap. So it's got to be pretty significant.

But yeah, there are a variety of, you could get a billion in change from the trek weight fees, but that's basically using the General Fund because we're currently using that to offset General Fund costs. There's greenhouse gas reduction Fund, but currently there are other programs that are getting those funds. And in fact, we're using that to backfill some of the cuts this year that were going to be made to other areas.

So that money isn't, there are lots of demands on that funding source as well, similar with the General Fund that's something that, of course, funds all sorts of different state programs, and the state could, again, could potentially try to finance some of it, but that adds financing costs, and that's challenging as well. So there's no easy solution. And I think that's one of the challenges, and that's one of the reasons we suggest the Legislature start thinking about that sooner rather than later.

And as you're deciding what scope you want to pursue, think about the funding sources that are going to support it, because I think it's easier to say, well, this is what we want, but putting the money behind it is very challenging because of the amount of money that we're talking about.

I do appreciate that. Any other Members questions? Nope. Senator Cortese.

I just wanted to pull up on Mr. Thompson's comments regarding the economic development piece, and I appreciate that, and I appreciated you responding somewhat in the context of my comments. What I'd like to do is figure out who did that. I wasn't around here then who did the last study? I'm not expecting to have that information right now, but if you do, that's great. But maybe offline, not to cut anyone else here out of it.

I mean, we could get that information to the whole Committee, but if indeed the Legislature was going to get involved in ordering something up, some new work in that regard, some updated work in that regard, maybe based on what we know now, some segmented work in that regard, maybe we would think about looking at these phases or segments as they are now in the new station location, for example, Bakersfield. Look at that now in the scenario that we're in.

But it would be helpful to know, I guess, who did it, whether or not you talked about going forward and learning from what we've done in the past, would we even want that consultant or that type of consultant? Presumably there'd have to be an RFP process anyway. But what would we be actually using as sort of minimum qualifications for somebody to come in and do that kind of work? Those are all thoughts that are bouncing around in my head.

I don't need the answers right now, but I'd certainly like to follow up with you on that, and then we can explore whether or not there's a little bucket of money somewhere to do that work. I think that's what it will really come down to. I don't think anybody would ever object to having that kind of a study or that kind of an update, especially after this much time. But if I don't know what I'm asking for, then we can't cost it out. I'd love to have your feedback on that.

If I might respond briefly. I believe that the 2012 work was done by one of the authorities, contractors. We use the word independent with a purpose, because I think given the importance of this decision, you're going to want to know that you've gotten independent advice. Now, I believe I heard earlier award of contract for study to San Jose State to do some work. The Minetta Transportation Institute, they do this kind of.

Yeah, no, I'm very familiar with them.

They're the kind of people who could do this, or California has the world's best economic universities. We can certainly do it. Yeah.

It seems to me a little bit more. I wouldn't call it macroeconomic, but it's more than just project delivery around the perimeter of the stations. At this point, in my mind, it is. What are the cascading effects of this investment? It's almost beyond even the kind of economic development studies you see around new port developments or putting a baseball stadium in Jacqueline and Square. There's great economists and such that do those studies.

I think this is even of a larger magnitude because we're talking about different microeconomic areas at one level, but we got one huge macroeconomic project. So again, I don't want to elongate the conversation unnecessarily, but would love to sit down with you then and hash it out. It's really good to know that that one was done. It sounds like more by kind of a project delivery consultant that would have been involved back in 2012. So helpful to start thinking about what might be different in terms of getting someone involved in 2023, 2024.

This does raise one issue that I want to raise for you, and that is that the government of China, in the time that we had started this project, they have built 20,000 miles of high speed rail.

Now, I'm not sure we want to follow their methods, but what you need to say is that the government of China conceived this project not just as a profit making project for the railway, which it isn't, by the way, except on some of the lines, but they conceived it as something the country wanted to do for a whole series of benefits they saw, including things like connectivity of the country, which is outside the normal bounds that we would think.

But then they put together a stable, dependable financing program so that the railway didn't have to come back and beg for money every year without knowing how much they were going to have. I do not believe California system can be built without a decision by the Legislature that overall the benefits are worth the cost, although you know, the costs are high and then having a way of responsibly paying for it, it just is not going to work.

We have 13 years of experience that tell us that through the chair.

I would just say just prior to 2012, I was in Taiwan looking at their system, amongst other things, that was considered a GDP project that wasn't considered commuter rail, or a nice way to get professors back and forth from universities. That was put in place to compete with the United States in a friendly way to keep up with us, to make sure that they had the connectivity between what they consider to be their five Silicon valleys, that would boost their ability to grow their own GDP.

I'm pretty sure that's what China's system is all about in the mainland China as aren't. The mentality is not, is this a good way to get people from point a to point b in commuter style or something like that? These are as important to them as educational institutions or other institutions that are seen as growing their innovation economy and their GDP. And that's how we saw it going back. I think Senator Dahle's not here right now, but I was with him when we were working on the alignment and all those things that we were in the Bay Area through the Metropolitan Transportation Commission.

I thought the discussion back then was also about continuing to grow the pie in a much larger way, not necessarily about the speed of rail per se, but those questions, that's why I asked the question, because I don't know that anybody's really taken a look at whether or not empirically you could demonstrate that in California. Does that push us closer to the third largest economy in the world, to the fourth, somehow? Have we answered that question?

Because that's a much bigger question than a few billion here and a few billion there. It becomes a lot of money, as they say. But when you're talking about a state that has assets that we probably haven't ever even put on a balance sheet, probably in the know, what does this do in terms of growing the state's GDP? That's what I'd like to know.

Appreciate that. Just following up regarding China, Mr. Thompson, sorry. It's probably worthwhile to point out they have a slightly different system of governance. They also suffered some pretty substantial construction quality and safety issues. But your broader point is well taken. But getting back to the question, the Federal Government is typically the entity that thinks in those terms. What would your first thoughts, either of you be in the event that the federal funding comes in? Well, short of the levels that we hope for. And how should we proceed from there? Because certainly we placed some big eggs in that basket.

My answer would be that we should be prepared. If we want to do the project, we should be prepared to pay for it. I mean, how, if we think it is that important to the state?

Yeah, it is unclear.

How can we at the same time say, well, unless the Federal Government bails us out, we aren't going to do this? There's a contradiction there. If we want to do it, we can afford it. Apple has a larger cash balance than the cost of this project. Serious suggestion, our state certainly. Well, yeah, possibly we should ask them to do it. Now, again, the question is we need to think carefully about what we're trying to do.

We're building a business right now, which is actually what we're doing, and we're expecting that business to operate without losing money. But at the same time, we're talking about massive public benefits to the state for which we should pay, but businesses won't pay. So what's the balance of benefits between what the business is going to generate and we, the state, want to get out of this that the business can't do for us, and then how are we going to pay for it?

And that's what we need to do some more thinking about. I believe we initiated this project on the belief that there would be one third private money would come in and finance part of the project. One third federal money and one third state money. Well, it turns out that the private money is not going to invest anything until the project is built because they're not going to take the demand risk. They just aren't the federal money.

We started out with federal money, then in the Trump Administration, they took it all back, and now they're trying to give some of it back. But who knows? The only stable source of money that we can depend on is our own money.

Yeah, I appreciate that. So to the what, I guess I asked a question differently. What's your level of confidence that we will receive something close to the federal monies that we're assuming?

I wouldn't say we have a lot of confidence. I think there's just a lot of uncertainty. Right. We could get the 8 billion, but we could get substantially less than that. And so I think it's really important for the Legislature not to assume that that's what we're going to get. For one thing, that's probably not going to be enough. Even if we got the full 8 billion, it's likely not going to be enough.

But I think there's a good chance that the state won't get the full 8 billion. I couldn't put a number on it, but I think it's definitely nonzero. And so it's important for the Legislature to have a clear sense, okay, what are the ways that the state will pay for any funding gap? Because this is kind of a once in a lifetime federal Bill that's providing this funding. If we don't get funding from this Bill, it's not clear what future federal dollars will be available.

And the project update report discusses this idea of having an ongoing funding stream from the Federal Government. And that would be wonderful. But at this point, that doesn't exist. And the Federal Government hasn't provided sort of the level of funding that was originally assumed for the project. So I think it is important certainly to try to get the federal funds, especially these large grants. The small grants, they're helpful, but sometimes they also come with more strings, too.

So this is something I think that really has been a lesson for the project. When we got the other federal funding, $3.5 billion, it was wonderful. And also it imposed a lot of requirements, and the project ended up doing a lot of things in a way that maybe it wouldn't have done otherwise that cost significant amounts of money.

And also I would point out, for example, with the planning money, or I should say the project development money that the authority is planning to go after outside of Merced to Bakersfield. To the extent that the state is really committed to doing phase one, it's probably very important for us to do that due diligence and really understand exactly which parcels and what would be entailed. Those are probably really important things to understand.

But if the state isn't committed to funding, that there could be some downsides to doing all of this work identifying exactly which parcels. It could be very disruptive for folks who live in those communities. Then we start acquiring those parcels because the authority does plan, starting in 2025, to start strategic acquisitions of parcels outside of the Mercedes Bakersfield segment to start other utility negotiations, other types of work.

So if we're not going to do that, or at least not going to do it in the sort of near term time horizon, then in some ways there could be some downsides to that. So it's complicated, and sometimes federal money is very helpful.

But I think we have to be strategic about making sure that, one, we're applying in ways and for money that the state is comfortable with, and two, that we don't just expect it's going to fill the funding gap and solve all of our problems, because I think there's a good chance it probably won't.

I appreciate that. One of my big concerns, in the event that the federal funds don't come through at the level we expect, that some of my colleagues, and it won't be surprising, will react as you would expect. And that puts us, I think, politically in a really precarious situation. So thank you to both of you. I did a little research, in case anybody was wondering.

So if you bought a ticket on Friday to go from Bakersfield to Fresno on Amtrak, it would cost you $23 in coach. And so clearly, I mean, we can refer, it's unlikely that high speed rail at some future date is going to be $23 to go with inflation. Maybe it keeps up. So thank you to both of you. We'll move on to the third panel. While we are, though, if you don't mind, Mr. Annis, Senator Beck raised the question of flooding and sort of its potential, but also with respect to both construction and cost, if you wouldn't mind, just very quickly.

Thank you, Senator Newman.

Just seeing if you were paying attention.

Yes. A couple of things on that is we were happy, as you might have seen in some of the press clips, that we were able to help some of the flood control efforts down there. I believe in terms of some of our construction material, on-site material we used to try to mitigate some of the flooding issues. And also, I think some of our areas was open up construction areas to some water to reduce pressure on other areas that might have farms or other facilities.

I have a general answer for you, not a specific one, but clearly all the environmental work that we do studies the flooding risk, and we build appropriately to mitigate that. A lot of our construction is elevated on berms above the surrounding area, and then we also do a lot of work on the hydrology in terms of water flow, if there needs to be in certain areas, bioducts instead of a berm to let the water flow under our track system. So that's something that's certainly fully considered.

I appreciate it. So you haven't had any major impacts on the construction so far, either by way of timelines or costs? I would say we certainly have been affected by the rain days. There's days where we can't construct a project because rain.

Not beyond kind of the normal construction impacts.

That's correct.

Thank you. Thank you for coming back. Let's move on to the third panel. Again. Thank you to our last panel.

Our last panel today is to focus on what the future operations in the Central Valley will be like and the planning we are doing to be ready. First, we will hear from Stacey Mortensen and the San Joaquin Regional Rail Commission, the operators of the San Joaquin's Amtrak service. I guess you could have answered that $23 question. And the ACE Train Service second will be Margaret Cederoth, Director of Planning and Sustainability for the authority.

And finally, we'll hear from Frank Quintero, Deputy City Manager from the City of Merced. Welcome to all three of you. Go ahead, get comfortable, and let's start with Ms. Mortensen.

Thank you. Good afternoon. I have a handout that's probably making its way to you, but I would just note I serve at the construction of two different policy boards, one that oversees the San Jose and one that oversees the ACE rail service. They are served by a consolidated staff so that you don't have any bickering who gets what. We're all one family, and so we're able to coordinate those services without a lot of disruption.

There's a map in that packet on page two that just gives you an idea, we're really involved in everything that sprouts north of Merced up into the Sacramento, the East Bay and the South Bay. We connect up there with services like Caltrain, BART, VTA, Capitol Corridor, things that were mentioned already today as important parts of feeder service. We also connect today through the San Joaquin rail service via connecting buses down to the greater Southern California area.

And that's a critical component that even when high speed rail begins its spine service in the valley, that feeder service is one of the most successful factors to the San Joaquin's. And so that will be in place as we go forward. In a nutshell, the Valley Rail program, it's a phase passenger rail expansion that goes from Merced up into the urban centers of Northern California. We're phasing it to progressively add more service on both the Union Pacific and Burlington Northern Santa Fe freight lines.

As you can imagine, they're kind of lukewarm on how much passenger service they want because goods movement is important to the State of California and to the nation. And so we have to ensure that they have enough capacity for those critical goods movements as well. The expansion also involves a couple mega projects. One is the Stockton diamond flyover. Really, it's a grade separation of the two major class one freight lines. So we're taking Union Pacific up and over the Burlington northern Santa Fe.

You can envision that's quite a haul. We're also undertaking the Mitzi project. This is the connector track project in Merced where trains will fly up and over from the Burlington northern Santa Fe route today to the combined station in Merced that's elevated. So we've got to go from trains running on the ground to meet trains that are up on an elevated section at the new Merced station.

This program is about $2 billion and it is complicated because most of it is built within the operating freight rail right of way or immediately adjacent. And we have to keep those corridors in working order while the construction happens. Your packet just shows you a quick snapshot of what the Stockton Diamond Flyover would look like. So I'm going to give you some challenges and some positives from my perspective. I share what Brian Kelly said earlier. Construction costs have skyrocketed.

This is largely due to delays in material availability and then just volatility of prices. Plants have shut down and have had to come back online post-Covid. Give you an example, a steel transmission poll for SMUD and PG&E and can't remember if it's Edison in Southern California, but those steel transmission lines now have an 18 month delay for delivery. So every time you have a delay like that, the cost really go up. The other issue is freight railroads and the utility carriers.

We've got PG&E, we've got SMUD, we've got Sprint. All the fiber carriers, Kinder Morgan's gas lines, they have finite resources to review $2 billion worth of projects. It might be our number one, but PG&E and other carriers, they have other issues. They've all been affected by wildfires, flooding. And so when we come in with 46 projects that we need ASAP, we end up getting in line. And so the simultaneous nature of trying to deliver this has created some challenges.

And basically that translates into us having to push some of the projects out. But if high speed rail is in a position to push as well, then we still end up phasing the projects and meeting each other synchronized at the time that we need to. On the positive side of the ledger, the inner city rail ridership has still maintained its levels through Covid and has rebounded better than commuter services post-Covid.

So I think for high speed rail and for inter regional services, that's really a good thing. And we shouldn't overestimate the decline in ridership. A commuter side, remember I wear the ACE hat. We've had a dip. We're waiting for the Googles and the Facebooks to bring their people back to work or to see what level they will bring them back. But innercity rail is really rocking and rolling still. And so I think we can count on that kind of travel.

People are still going to travel that way and we can build that in. The other item is we're building stations for the future, not just your regular typical stations, and we're future proofing them. We come in one time only for the whole future. We don't need to tear up the track again. We don't need to tear up the road again. We're building full accessibility for people of all different mobilities.

And I guess all these strange contraptions that people ride on now, that the little uni wheel with a skateboard on. I mean, we never would have contemplated that before, but we need to now. So that we're building the stations that let people access them in ways that the future hasn't yet revealed to us. And then they're stations that accommodate all future train scenarios for passenger and freight trains. No matter what the future is going to throw at us, we're building stations that take care of that.

And that generally has some complexity. In your packet, there's just a view of what stations look like now that have the elevators, the duplicate elevators and the stairs and different sloping platforms for people to be able to access whatever way they want. And then finally, I would just leave you in the back of the slide deck.

There's a series of sequences that show you where the ACE and San Joaquin trains are today and how piece by piece, we're phasing in additional service to get down to Merced. When you get to the very end of the slide, you go boom. It's a lot of service, but it's meant to have trains and buses that can meet the spigot that's turned on when the initial operating service and operating segment goes live. And so it's a lot of work to be done.

As Brian said, it's very complex, it's very layered, but really we just have to stay at it and get it done. And I'm happy to be here today to say we're still getting it done. It is a little difficult, but progress is still being made step by step. And I thank you for the time today and I look forward to my colleagues and what they're going to say about our northern segment. Thank you.

And thank you. Next up is Margaret Cederoth. Welcome, Ms. Cederoth.

Thank you. So thank you, Senator and Members of the Committee. As you know, my name is Margaret Cederoth. I'm the Director of Planning and Sustainability for the California High Speed Rail Authority. And as you just heard from Ms. Mortensen and earlier from CEO Kelly, the California High Speed Rail is well underway for planning for future operations of the nation's first electrified high speed rail segment.

And I appreciate the opportunity to spend a little time with you today to talk in a little more detail about the planning and design work that's underway. That work is really rigorously focused on the potential of the system through station investments, which are foundational to ridership and also help fulfill the promise and the expectation of the system to focus growth and to catalyze economic development. So the authorities worked for more than a decade as a planning partner to our station communities.

These station plans reflect local feedback and input that have been integral to the vision that we're building off of for station delivery. Our recently executed design contract is for the nation's first four high speed rail stations.

And starting with the packet that is the High Speed Rail packet you should have in front of you on page two in Merced, as you've heard from Ms. Mortensen, we've partnered with the city on completing an update to their general plan with a specific focus on the station as a mobility hub, and that work is ongoing. And importantly, as directed in SB 198, the authority is conducting the necessary environmental studies to confirm the capacity to move the Merced station location to unite the three rail lines together so that Merced is a seamless regional rail hub rather than burdened with three disparate stations.

So, as page two illustrates, the proposed plan means that the San Joaquin JPA service would terminate at Merced and then customers can safely and comfortably and easily walk across a platform just 20ft to board trains headed at speed further south and then the ACE trains would be at grade. If you look at your packet on page three, you will see in Fresno. There the planning for the station identified the criticality of it having two sides with equal investment on both sides.

The station serves as a bridge, a concept that is illustrated on page four. It connects Chinatown, the Chinatown community, which is an area of historic underinvestment with downtown Fresno. Fresno Station Area Master Plan, which was completed in 2018, actually identified by right development of an intensity and scale that acknowledges the opportunity of the high speed rail station investment to catalyze much denser mixed use development. In Kings-Tulare, which you'll see on page five.

Partnership with the Regional Association of Governments and Cities including Hanford, has focused on the station as a hub of regional rail and transit. The high speed rail station directly interconnects with the Cross Valley Rail Alignment, which extends the reach and the value of the high speed rail system into these rural areas, while also respecting the need to protect working lands.

And then in Bakersfield, on page 6 and 7 of your packet, the city's planning has centered on the station at F Street as a new node of economic development that's adjacent to their downtown. And that plan making downtown Bakersfield, studied land use and transportation scenarios, including locating much greater density on the station site, and then as well looking at regional bike networks and other corridors through the site.

So all of these station points are critical for seamless intermodal travel, and the stations have been planned and are being designed to be universally accessible and serve users across the spectrum. As Ms. Mortensen indicated, pedestrian scooters, bikes, other active transportation as well as transit the transportation network companies as they evolve into their next iteration and then integrate into the overall state rail plan.

Our work now is on finalizing the design of the station and the station sites to be ready for testing by the end of the decade and then enabling customer service between 2030 and 2033. So you see on page 89 of the packet, the station kit of parts has been developed to evoke the exceptional and signature nature of high speed rail transportation.

The design is intended to provide clarity to the users on how to access the train and reducing barriers, while also making the station intuitive as well as safe and shaded and comfortable. This kit of parts provides the authority with consistency across all of its stations, which is a tremendous benefit to cost effective and efficient maintenance and operations, as well as being a brand for the system.

However, we're committed to making sure that the design of the site reflects local priorities and context so that the stations fit into and they serve the surrounding and adjacent communities. Very briefly, on the topic of value capture, I think you know that real estate with access to good public transportation tends to higher property values. So investment in transportation infrastructure, such as the high speed rail system and the high speed rail stations, increases real estate values.

Value capture, of course, is the capture of a portion of that increased revenue by the public sector that results from that public sector investment in infrastructure. So the authorities worked in partnership with each of the station cities so that the layout best enables that value.

And in addition to partnering on planning, we've investigated a range of value capture tools, such as enhanced infrastructure finance districts, joint development, air rights development, and then other types of value capture, such as naming rights fees, impact fees, and then, of course, looking at revenue that comes from retail in the station sites or from the use of the high speed rail right of way implementation of that value capture can, of course, provide a supplement, a funding supplement to the authority's existing capital funding, as well as help fund our operations and maintenance.

But it has to be carried out strategically and it has to be specific to different locations, and it will, of course, require partnerships. So, as you noted, we fundamentally recognize the disruption that climate change is bringing to, and will continue to throw at our infrastructure and our communities.

And so to that end, the authorities worked on conceptual design and financial modeling of a battery energy storage system and a solar photovoltaic energy generation project that enables high speed rail to meet our 15 year old commitment to operate entirely on renewable energy, reduce our overall operating costs, and then maintain a supply of power to the rail system in the event of grid outages.

This also enables compliance with SB 1020 and SB 1203, which direct state agencies, of course, to achieve zero carbon energy resources for their operation. So, as we've explored in detail today, the stations enable economic resilience by providing a very fast transportation link between the economies of the valley and then outward to the LA Basin and the Bay Area.

But by incorporating solar generation on authority land and on our facilities that feeds a series of large scale batteries, the authorities address not only one of its own critical risk factors. But at the stations, this will also enable high capacity, reliable vehicle charging for the surrounding community. All of our stations serve disadvantaged communities with an estimate about 61,000 disadvantaged community residents just within the first half mile radius of the stations. And the stations and other areas of the alignment are opportunities, of course, to bring broadband access and service.

We've already incorporated fiber optic cable design into our alignment design and will make that available to third parties who can provide that broadband service. I think you appreciate how the system is really the backbone of electrified transportation in the state, and it delivers that value on multiple scales.

The system is essential for relieving congestion and for delivering the reductions in vehicle miles traveled as well as greenhouse gas emissions that are crucial component to realizing the carbon reduction goals and the carbon neutral goal that we have for the state as soon as possible. I appreciate your time today, and I'm also happy to answer any questions you have.

I appreciate that. Let's save all questions from all of the Committee Members. For the panelists, let's move on to Mr. Quintero. Please proceed.

Thank you and good afternoon. My name is Frank Quintero, and I serve as the Deputy City Manager for the City of Merced. And I've had the pleasure of working with high speed rail and all things rails for over 10 years. And I do want to emphasize we are partners with the High Speed Rail Authority. We've been working in tandem from day one that I was assigned to this project, and it's been just an outstanding experience.

One day when we were listening to a workshop and we were in Stockton, we learned something, and that was three stations were going to be combined into one. And we looked at each other, former city manager and I, and said, 'Oh my god, we're the center of the universe for all things rail in California'. But not only did we feel that we had others watching us thinking, what and how can we invest in Merced?

So as a result of that, we've seen over $125 million come into downtown Merced alone, generating a renaissance. Old historic buildings brought back to their grand, iconic glory, such as El Capitan Hotel, the former hotel Tioga, the Mainzer theater, are now vibrant and changing the face of downtown Merced, all linked to the promise of rail coming in and what it brought for the future. Yes, we are working in partnership with the High Speed Rail Authority on updating our general plan.

We want to make sure there is plenty of opportunity for high density housing, for transit oriented development, for great housing opportunity for all the people that will either be riding the train or looking for a new place to reside within the community. We're grateful that high speed rail has caused us to rethink our community. And part of our investment has been conducting a downtown pilot program. Which way should traffic flow in order to better serve the high speed rail station?

That pilot program is in effect right now and we are hoping to have a conclusion on it here very soon and implementing a final result. Within our town square, we're going to expand it because we want those that are coming in from the high speed rail down to our downtown area and our residents to have a wonderful experience. And part of it is expanding our town center, the Bob Hart Square. It's the heart where all our cultures combine and come together.

We are recipient of a Clean California grant and we want people to have not only a physical experience, but a visual experience. And new art will be brought into the downtown area. High speed rail is about moving people and we understand that. So part of that was we decided, how do we get people up to UC Merced, Dignity Health, new Valley Children's? We needed to build a new north Merced transit hub that is under construction and near completion right now.

We shared our vision and what high speed rail might bring with the Federal Aviation Administration. We are now underway to having a new terminal built in Merced, the first terminal built since 1942 when MacReady Field was designated within our area. UC Merced is going to provide abundant opportunity to generate engineers to help support high speed rail efforts. The layover facility that will be part of the ACE train is going to bring in jobs and countless opportunities, and we're hoping to become a self sustaining economy.

Fortunately, we're also recipients of a California Economic Resilience Fund grant, and part of that study is based upon what opportunities will high speed railway bring to Merced and other Central Valley communities. There's much more I'd like to say. For example, we have five street projects that are going on, all leading all paths leading to high speed rail, and we're prioritizing those things. But all in all, we've invested roughly $26.5 million into making enhancements to help make high speed rail a reality.

Keep in mind, the Bay Area Council identified Merced and many parts of the San Joaquin Valley as part of the Northern California mega-region. And high speed rail definitely fulfills the innovation, connectivity and growth portion of that. Thank you very much. I know you've had a long day, and I am grateful for the opportunity to address you.

I appreciate your testimony. You know, you folks covered this quite thoroughly. Real quick question for Ms. Mortensen. You talked through a little bit, sort of the future plans for expansion all the way down, including the combined Merced station. But any additional project funding you will need, and what sources or what do you expect to tap for that to complete those?

So we're a little over halfway there now. We've got a little over $1.6 billion. This is where the phasing comes into play. We still need another fairly good chunk, especially to deliver the Mitsi project, which will be about $400 million itself. So we're probably looking for another little over 1.6, but we've been treated very well at the state level. And thank you to State of California over the last three or four years. And the FRA and other federal partners have reached out.

And I think there is high speed rail independent line being developed for passenger service, but there's also interest at the federal level to make sure the goods movement keeps going. So where we have passenger and freight rail projects that are mutually beneficial, there's a lot of interest there and throughout disadvantaged communities that create links that don't exist today. Those are still very viable funding programs. So I say it like this, we only need another 1.6 million.

But I'm pretty happy about it still because we're over halfway there and we're building.

I appreciate your optimism. We need more optimism in this hearing.

That's right.

And I appreciate, Mr. Quintero, your enthusiasm. I took a tour of Fresno about 18 months ago and just sort of saw in person kind of the master plan of what high speed rail will do for that city. And it truly is exciting. But the devil is, in this case, in the completion of the project over time. So thank you to all three of you for your testimony. And that completes panel three. Now we will move to public testimony.

And so thank you again to all the presenters for all three panels. Before we move on to testimony here, let me ask the moderator. Hopefully, you're there to queue any callers. Please dial this toll free number if you'd like to comment publicly via the teleconference line, that number is 877-226-8163 when prompted, please use this access code, 7362834. Again, that's 7362834. Let's turn to public comment here. Mr. Dunn, good to see you.

Thank you, Senator. I appreciate the opportunity to speak. I wish more of your colleagues were here, but we're all certainly very busy today. I just want to address a couple of comments that I heard. First of all, obviously, I'm here on behalf of the Association for California High Speed Trains as well as the District Council of Iron Workers for the State of California, none of which view this as a jobs program.

We believe this is in response to policy that this Legislature and previous legislatures and this Governor have laid out for us to meet as far as a mandate, and it's part of that solution. So I want to make sure we say that. The other comment, real quickly, not to repeat everything that was said on the panelists, was that the State of California has stepped up.

And in fact, 80% of the funding for this project has come from the State of California, either from our Prop 1 bond and cap and trade revenue. So we are stepping up as a state. As we go back and look to request additional funding from the Federal Government, I think we should all keep that in mind. And as many of us have visited other successful high speed rail programs throughout western Europe and Asia, we have seen that those programs are successful because they have been nationalized.

This project, while starting in California, make no mistake, is a national model akin to our federal highway system. We're blessed to have it start here. It certainly is a great source of employment and frankly, careers for many of our members in the District Council of Iron Workers for the State of California, and we support that. But it's a policy that this state has led the nation, in fact the world on with reduction of our climate footprint.

So we should be well reminded to remember that when we have our discussions with our colleagues and friends on the east coast in Washington DC. So with that, thank you for the opportunity. I appreciate staff and the Members for the opportunity to make some comments. Thank you.

I appreciate your comments. Mr. Watts, nice to see you.

I see you too, sir. Nice to be here. Thank you for having me. I am Mark Watts for the record, representing Transportation California. And as a reminder, our board is comprised of trade, labor, leadership, material suppliers and contractors. So we have been tracking this project from the inception. Pleased to recognize the value to the Central Valley region and the State of California due to the 10,000 jobs that the authority has just celebrated.

We also appreciate the commitment that we heard today to finish the ongoing 119 miles segment and as well to hear about the intent to complete the environmental clearance for San Francisco to Los Angeles and Anaheim. We do stand ready to assist as necessary to identify solutions to the gap and we look forward to working with you and thank you for the opportunity to speak to you today. Thank you.

Thank you. And anybody else here in the Committee room would like to comment? Seeing none.

Ms. Moderator, if you could, if you could query the teleconference line as to how many callers we have.

Okay, we do have eight in the room here total. And if you have a public comment, please press one, then zero on your phone. If you are using a speaker phone, please pick up the handset before you're pressing the numbers. Once again for a public comment. It's one, then zero. And we got about five people in the queue. We will start with line number 37. Please go ahead.

Madam Chair, Member. Construction Trades Council of California. We appreciate the oversight hearing and today would like to thank the CEO, Mr. Kelly, for your leadership and staff this project to expand transit development provider and energy efficient transportation options, developing the living and create high paying jobs for our work.

To date, the High Speed Rail Project has generated over 80,000 job years of employment in the construction trades through building and maintaining the high speed rail system provide an estimated 16 billion in total economic activity around the state and encourage career opportunities through construction. Appraisal of our apprenticeships, identify as people of color, one in five foster care youth or come from the criminal justice system.

Notably, these opportunities are being created in the part of the state where it's hardest to earn a path in the middle class and it's elating regional economic growth. Benefits of high speed rail it is critical that we continue to advance production of rail system to create job meet our state GHG reduction goals. We are committed to working with the authority of partners to draw down federal funding and look forward to working with you as well. Thank you.

And if you could, if you could restate your name, you were breaking up when you first joined.

Absolutely. Beverly Yu with the State Building and Construction Trades Council.

Thank you, Beverly. Next caller, please.

All right, thank you. We will go to line number 39. Please go ahead.

Good afternoon, Chairman, Members. James Thuerwachter with the California State Council of Laborers. I'm here to express our strong support for the High Speed Rail Project. California has long been a leader in innovation, bold action, and in tackling critical infrastructure projects. Our state's highway system, the state water project and the Golden Gate Bridge stand out as prime examples of challenging projects that were seen through and today still benefit millions. The vision for high speed rail is no different.

High speed rail at its core holds fundamental economic and environmental promise to the hardworking men and women who call California home. The Central Valley, where 120 miles are under active construction, is an area rich with roots and history. The laborers proudly represent 300 to 350 hardworking laborers on any given day making this project a reality. Through them, I could attest to the importance of the economic benefit the high speed rail project is bringing to that region.

In addition to the 10,000 good paying construction jobs, our workers spend on an average nearly 100 days on job sites. Within the Central Valley, there are 3400 jobs that have gone to workers from Fresno county, about 1900 from Kern County, 1000 from Tulare County, 400 from Madera County, and almost 400 from Kings County. These are local jobs. To hear some people say that this project is just not important to California or that we should divert money away is just myopic and misguided.

Our state has a responsibility to think big and be bold. Providing clean transportation options that keep us all connected is essential to our economy, environment, and our quality of life. Thank you very much for your time.

Thank you. Next caller.

All right, next we will go to line number 38. Please go ahead.

Thank you. Good afternoon, Mr. Chair. And I want to take this opportunity to thank everyone for their participation and their comments today. My name is Sharon Gonzalez. I'm here on behalf of the City of Bakersfield, California's 9th largest city. The city wanted to recognize and thank Chair Richards for coming down to Bakersfield last year and meeting with the current council of governments and listening to their concerns and their desires as we bring high speed rail into the community.

With the funding being released from the Legislature and agreement for a station designer, the city recognizes that now is the time to embrace the project and looks forward to bringing a world class station to the City of Bakersfield. In 2018, the city began working with the authority to complete a station area plan and through that process highlighted Chester Avenue, which will connect the disadvantaged neighborhood to downtown Bakersfield and the anticipated high speed rail station site.

The city looks forward to continuing to discuss investments that will be made on the site. And again, I want to thank the authority for their continued partnership and encourage the Legislature for their support of the project. Thank you.

Thank you, Ms. Gonzalez. Next caller, please.

All right. Next, we have 32, line number 32.

Hi, my name is Andy Kunz. I'm founder and President of the US High Speed Rail Association. I want to just call to express our support for the project and everything you're doing. And we're working hard here from Washington, DC, doing everything we can in pulling out a major lobbying effort in favor of getting you as much grant money as possible for your project. I do want to just give you a quick overview of where we are in the world.

Today, there's 26 nations that have high speed rail carrying billions of people, and this has shown to be just remarkable for those countries. While Japan and France were first to the punch, as you heard earlier, China has recently emerged as the world's high speed rail leader, investing over $1.4 trillion in the construction of a 25,000 miles bullet train network. And they plan to build another 21,000 miles by 2035, connecting every city with a population over 500,000 into a comprehensive network.

And high speed rail is taking off all over. India is building a 300 miles system. Egypt is building a 1200 miles system. The UK is tripling their system right now. Australia is establishing a new line. Even the African Union has set a goal of constructing a pan African high speed train network that connects all of the continent's capital cities with high speed rail. The reason all these nations have or are building high speed rail is the transformative effect that the systems have on their nations.

High speed rail is the backbone of a sustainable future with electrified transport and is the basis of a renaissance of a network of walkable communities. It is the ultimate smart growth planning system for the future. I urge you to stay the course and finish the project. Yes, it's a difficult project to build, but that never stopped our ancestors from building all the great infrastructure we all enjoy today.

This is the most visionary project in America, and we encourage you to get this done for the future of not only California, but for the rest of America that looks to California to lead in so many pioneering things. Thank you so much.

Thank you, Mr. Kunz. Next caller.

All right. There is no one queued up for public comment at this time. You may continue, Mr. Chair.

And thank you, Madam Moderator. So I want to thank everyone who has testified today, both via the teleconference and in person. Thank you especially to the panelists. Thank you to staff. If you were not able to testify via the teleconference service today, please submit your comments or suggestions in writing to the Senate Transportation Committee or visit our website. Your comments and suggestions are important to us, and we want to include your testimony in the official hearing records. Thank you to everyone.

Thank you for your participation in this very important topic. And with that, this information hearing is adjourned.