Analysis of the 2008-09 Budget Bill: Transportation

High–Speed Rail Authority (2665)

The California High–Speed Rail Authority (HSRA) is responsible for planning and constructing an intercity high–speed rail system. The authority consists of nine board members appointed by the Legislature and Governor, as well as staff to support program operations and administration.

The budget provides $1.7 million and 9.5 positions for the administration of HSRA. The budget also includes $3.5 million in reimbursements from the Orange County Transportation Authority (OCTA) for project–specific environmental review for a portion of the Anaheim to Los Angeles segment of the proposed high–speed rail system.

Bond Measure Scheduled for November 2008 Ballot. Chapter 697, Statutes of 2002 (SB 1856, Costa) authorized the sale of $9.95 billion in general obligation bonds, $9 billion of which would be for planning and construction of a high–speed rail segment between San Francisco and Los Angeles. The other $950 million would be for projects that provide connections with the high–speed rail system and other modes of transportation. The bond measure was initially scheduled to be placed on the November 2004 ballot, however, the measure was postponed twice and is now scheduled for the November 2008 ballot. The Governor’s budget summary indicates that proposed modifications to the bond measure may be forthcoming, however, at the time this analysis was prepared, the Department of Finance was unable to provide any details on the proposed changes.

Project Work Will be Stopped Before Voters Weigh in

The budget does not provide funding for High–Speed Rail Authority (HSRA) to contract for project development work. This will effectively stop work on the project beginning July 2008. If voters pass a bond measure on the November 2008 ballot to fund the project, the state would incur unknown costs to restart the project and hire new contractors to continue project development. The Legislature should consider if it wants to provide some funding for HSRA to continue the project until voters make their decision in November 2008.

Budget Provides No Funding for Contract Services. The budget provides staff support for HSRA, but does not provide any funding for contract services. The HSRA contracts out for almost all the work on the project, utilizing state staff only for contract and program oversight. In the current year, about $17 million in project development work is being carried out through the following key contracts.

• Program Management—direct and manage regional engineering and environmental teams, and develop the basic design for a statewide high–speed train system.
• Financial Plan—develop a plan to fund the development, construction, and operation of the system with various state, federal, and private resources.
• Corridor–Specific Contracts—conduct project–level engineering and environmental work that must be completed before projects can advance to construction. Work is currently being done on the following corridors.
  • Anaheim to Los Angeles
  • Los Angeles to Palmdale
  • Bay Area to Merced

By providing no funding for contract services in 2008–09, work by contractors will have to stop at the end of the current year.

Reimbursements May Not Materialize Without Continuation of Some Contract Services. The Governor’s budget includes $3.5 million in reimbursements from OCTA to pay for specific environmental work on the Anaheim to Los Angeles corridor. The HSRA staff indicate that the reimbursement will cover only a portion of the costs of the environmental work on that corridor. With no state funding, it is not clear whether the scope of work can be reduced to cover only the portion of work OCTA is willing to pay for. It is also not clear whether OCTA would want to proceed with, and pay for, a limited scope of environmental work.

Work on the Project Will Stop Before Bond Measure Goes to Voters. Providing no funding for HSRA’s contract services will effectively stop all work on the development of a high–speed train system from July 2008 until early November 2008, when voters decide on the bond measure. If the bond measure passes, it would take HSRA some time to restart the project. The state would also incur unknown costs to hire new contractors to continue project development work.

If the Legislature does not want work on the project to cease, it should consider providing some funding for HSRA to continue project development work. The Legislature can consider a number of funding level options. For instance, the Legislature could fund the continuation of all the active contracts through November 2008. This would require approximately $19 million. Alternatively, the Legislature could fund a much reduced level of activity, such as funding through November 2008, work on the Anaheim to Los Angeles corridor only. The HSRA estimates that this would require about $ 5 million, including about $3.5 million in state funds and $1.5 million to be reimbursed by OCTA.