LAO 2004 Budget Analysis: Transportation

Analysis of the 2004-05 Budget Bill

Legislative Analyst's Office
February 2004

High-Speed Rail Authority (2665)

The California High-Speed Rail Authority (HSRA) is responsible for planning and constructing an intercity high-speed train service that is fully integrated with the state's existing mass transportation network. The California High-Speed Rail Act of 1996 (Chapter 796, Statutes of 1996 [SB 1420, Kopp]) established HSRA as an independent authority consisting of nine board members appointed by the Legislature and Governor. The HSRA has an executive director and three staff positions.

The HSRA was due to expire December 31, 2003. Chapter 696, Statutes of 2002 (SB 796, Costa), repealed the expiration date, making HSRA permanent. Additionally, Chapter 697, Statutes of 2002 (SB 1856, Costa), enacted the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century. The act, if approved by voters at the November 2004 election, would authorize the issuance of $9.95 billion in general obligation bonds for development of the initial stages of a high-speed rail network.

Budget Proposes to Cancel Bond Measure

The budget proposes to repeal Chapter 697, thereby removing the high-speed rail bond measure from the November 2004 ballot. Our review shows that postponing the bond measure to a later date would likely not cause delay in the development of a high-speed rail system. However, total costs of the system have been revised upward and will be significantly higher than previously reported to the Legislature.

In view of the state's fiscal situation, the administration believes that it would be premature for the state to proceed with additional general obligation debt for a high-speed rail system. Consequently, the administration is proposing to repeal the high-speed rail bond act, thereby canceling the measure from the November 2004 ballot. The administration, however, has not indicated whether it will propose to postpone the bond measure to a later election, and if so, when that would be.

Authority Will Continue Work on System Development. Despite the proposal to repeal Chapter 697, the budget proposes $1.1 million in support of HSRA in the budget year. The amount includes $300,000 for the legal defense of the final environmental impact report for the system. Discussion with HSRA staff indicates that this funding level would be sufficient to allow the authority to continue work in 2004-05, including the completion of an implementation plan for the system that will lay out in detail, among other things, the various construction and funding stages of the project.

In addition, given the current progress in the system's planning, HSRA staff indicates that a substantial amount of funding is not expected to be needed until 2005-06 or later. Thus, postponing the bond measure to a later election would likely not delay the system's development.

Cost of System Will Be Significantly Higher Than Previously Estimated. In January 2004, HSRA released a draft environmental impact report, which provides a cost and benefit analysis of high-speed rail as compared with other transportation options. The report now projects the cost of the system to be $37 billion—50 percent higher than originally estimated in 2000. The study nonetheless concludes that a high-speed rail system is the best overall alternative for the state given projected increases in travel demand within the system's planned service area.

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