BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1171|
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THIRD READING
Bill No: AB 1171
Author: Dutra (D)
Amended: 9/14/01 in Senate
Vote: 21
SENATE TRANSPORTATION COMMITTEE : 10-2, 9/13/01
AYES: Murray, Costa, Figueroa, Karnette, Perata, Romero,
Scott, Soto, Speier, Torlakson
NOES: McClintock, Brulte
SENATE APPROPRIATIONS COMMITTEE : 7-3, 9/14/01
AYES: Alpert, Bowen, Johannessen, Karnette, Murray,
Perata, Speier
NOES: Battin, Johnson, Poochigian
SENATE FLOOR : 23-13, 9/14/01
AYES: Alarcon, Alpert, Bowen, Burton, Chesbro, Escutia,
Figueroa, Karnette, Kuehl, Machado, Murray, O'Connell,
Ortiz, Peace, Perata, Romero, Scott, Sher, Soto, Speier,
Torlakson, Vasconcellos, Vincent
NOES: Ackerman, Battin, Brulte, Dunn, Haynes, Johannessen,
Johnson, Knight, Margett, McClintock, Monteith, Morrow,
Poochigian
ASSEMBLY FLOOR : 46-27, 9/15/01 - See last page for vote
SUBJECT : Toll bridges: seismic retrofit cost overruns
SOURCE : Author
DIGEST : This bill establishes requirements and
CONTINUED
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provisions to finance the seismic retrofit cost overruns on
the states toll bridges. It identifies the sources and
amounts of financing, state legislative findings relative
to the seismic work, assign responsibilities and authority
to various agencies, extend the current $1 toll surcharge
on Bay Area toll bridges for a specified time and establish
numerous financial requirements, conditions and references
related to the seismic bridge work.
ANALYSIS : The State Department of Transportation (DOT)
has determined that the bridge seismic retrofit work will
incur substantial cost overruns of approximately $2.019
billion, including an increase of $1.315 billion on the Bay
Bridge east span replacement alone, another $557 million
for 6 other toll bridges, and $147 million for the Bay
Bridge west span retrofit, as indicated:
Seismic Retrofit
Cost Overruns
Bridge (Millions of $)
Richmond-San Rafael $336
Benicia-Martinez 89
San Mateo-Hayward 63
Carquinez 42
Vincent Thomas 17
San Diego-Coronado 10
Non-Bay Bridge
subtotal ( $557)
Bay Bridge - east span replacement
$1,315
-- west span
$ 147
Total, all bridges $2,019
DOT advised the Legislature of the increased cost estimates
in a report released in April 2001. The report attributed
the cost overruns to several factors, including: (1)
inadequate original (DOT) estimates with unrefined
environmental, engineering and planning support costs and
the omission of escalation (inflation) and project
contingency costs; (2) a significant rise in construction
costs, including an 18% increase in the federal
construction cost index in 1999-2000 alone; (3) accelerated
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design work; (4) the Metropolitan Transportation
Commission's (MTCs) choice of bridge design; (5) a one-year
delay in receiving U.S. Navy permission to conduct sample
drillings on Yerba Buena Island, and (6) another year's
delay in completing environmental analyses in concert with
federal highway, environmental and engineering agencies.
In addition, issues arose among local jurisdictions and
officials regarding the location of the Bay Bridge
replacement span and its final design elements.
DOT's April 2001 report included a plan for resolving the
cost overruns on the 6 bridges other than the Bay Bridge,
proposing that $557 million from the state's share of
federal Highway Bridge Replacement and Rehabilitation
(HBRR) funds be used on those bridges. The report,
however, did not include a proposal to fund the $1.315
billion cost overrun on the Bay Bridge east span seismic
work. DOT, on August 15, 2001, belatedly submitted a
follow-up letter to the Legislature outlining a proposal to
fund all of the Bay Bridge and other bridges' cost
increases through an extension of the toll surcharge and
the use of the $557 million in federal bridge repair funds.
The use of the HBRR funds requires no legislative action
and can be accomplished through administrative authority
and actions.
This bill enacts a proposal to finance the cost overruns on
state-owned toll bridges, specifying the amount of funding
from various sources to cover the increased costs and
establishing related conditions, requirements and
authorization on the seismic retrofit projects' financing
and administration. The bill will do all of the following:
1.Authorize the extension of the seismic retrofit toll
surcharge beyond the current January 1, 2008 expiration
and repeal date. The surcharge would continue until the
time that a total of $2.282 million was collected from
the seismic retrofit surcharge to meet both of the
following:
A. A principal of $2.282 million, including interest.
B. All costs of financing, including capitalized
interest, reserves, costs of insurance, costs of
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credit enhancements and any other financial products
necessary and other costs related to financing.
Provides that if the project costs exceed $4,637,000,000
DOT may program not more than $448 million in project
savings or other available resources from the
Interregional Transportation Improvement Plan, the State
Highway Operation Protection Plan, or federal bridge
funds for that purpose.
The toll surcharge authorization would end when the
bonding indebtedness is retired and any debt secured by
the tolls are repaid.
2.Allocate a minimum of $642 million in state
transportation funds from the federal HBRR Program. If
the resources authorized to be provided above are
insufficient to pay all project costs, DOT may program
not more than $448 million in project savings or other
available resources from the Interregional Transportation
Improvement Plan, the State Highway Operation Protection
Plan, or federal bridge funds for that purpose.
None of the funds identified above may be expended for
any purpose other than the conditions and design features
specifically in this bill.
3.Prohibit any increase in the $1 toll surcharge for
seismic retrofit project funding. It also prohibits the
use of toll revenues to repay the use of state (non-toll)
funds used for the retrofit work, except that DOT will
have the authority to increase the retrofit surcharge for
debt purposes only if the bank finds and the State
Department of Finance confirms that both of the following
apply:
A. Extraordinary circumstances exist that jeopardize
the payment of debt service for which toll revenues
are authorized, and all other financial resources for
meeting toll commitment have been exhausted.
B. Bonds issued under Chapter 4.2 (commencing with
Section 30950) shall not be impaired solely by action
taken under this section, as evidenced by
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confirmation of the then existing ratings on those
bonds, by the rating agencies then rating the bonds.
4.Require the annual transfer of any excess toll revenues
to the Bay Area Toll Authority (that is, MTC) beyond the
amount needed for financing and debt service each year,
upon the substantial completion of the seismic
construction work, as specified. (Stated in a different
way: once the construction work was completed, if the
annual revenue from the $1 toll exceeded the amount
needed to pay off the tolls' share of construction and
financing costs, the excess would be transferred to the
MTC for Bay Area transportation purposes, including other
improvements to toll bridges, water transit (ferry)
services, or rail capital improvements authorized in
current law.)
Provides that, if DOT determines that the actual costs
exceed projections, DOT will be required to report to the
Legislature, within 90 days of the determination,
relative to the difference and the reason for the cost
increase.
The bill provides that, prior to the issuance of bonds
payable from the toll surcharge, the bank shall confirm
that bonds issued under Chapter 4.3 (commencing with
Section 30950) shall not be impaired solely by action
taken under this section, as evidenced by confirmation of
the then existing ratings on these bonds, by the rating
agencies than rating the bonds.
During the construction period, all revenues generated
from the toll surcharge shall be available to the
department only for the construction and financing
purposes of the toll bridge seismic retrofit program.
5.State findings and declarations relative to the seismic
retrofit work, including that:
A. DOT has full and sole responsibility for the work.
B. DOT should utilize a combination of financing
options, including federal loans, revenue bonds and
commercial paper, issued under the California
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Infrastructure Bank, the California Transportation
Commission, or other appropriate entity.
C. During the construction period, all revenues
generated from the toll surcharge shall be available
to DOT only for the construction and financing
purposes of the toll bridge seismic retrofit program.
6.Authorize DOT to borrow through the Infrastructure Bank
and authorize the issuance of bonds under specified terms
and conditions. The bill will reference and restate
existing short-term borrowing authority of DOT, for
purposes of the seismic work's financing.
7.Declare that the bill's provisions could not harm any
State Transportation Improvement Program project
programmed before January 1, 2002. It also states that
if federal "GARVEE" bonds are used to help finance the
seismic work, the expenditures will not count against a
county's share of state funds.
8.Update the statutory seismic retrofit cost estimates for
each affected toll bridge, and state the selected final
design and location of the replacement east span of the
Bay Bridge.
9.Repeal outdated or obsolete language, define certain
terms, and make various conforming changes.
Background
Following the October 17, 1989 Loma Prieta earthquake, the
DOT undertook an analysis and research effort to determine
the vulnerability of state-owned toll bridges and other
transportation structures to seismic (earthquake) activity.
DOT entered into contracts with private consulting firms,
the University of California and other research
institutions to assess bridge and structure vulnerabilities
and produce action plans for addressing the deficiencies.
Governor George Deukmejian created a Board of Inquiry to
investigate the collapse of various bridge and highway
structures and the Legislature convened special hearings to
examine the earthquake's effects and develop solutions to
avoid or mitigate similar seismic damage to the
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transportation system in the future.
The various boards, inquiries, studies and analyses
concluded that the state needed to retrofit thousands of
bridge structures, both on highways and over water,
including retrofit strategies for state-owned toll bridges.
A strong emphasis was placed on completing the retrofit
work at an accelerated pace to reduce the prospects of
future catastrophic loss, both in human and economic terms.
Work on highway bridges proceeded relatively quickly but
the retrofit of toll bridges has languished for numerous
reasons, including the age and complexity of bridge
structures, securing adequate financing, environmental
issues, traffic, utilities, design, location and other
concerns.
In 1997, the Legislature enacted SB 60 (Kopp) and SB 226
(Kopp), which established a plan and the financing
mechanisms for the seismic retrofit of state-owned toll
bridges. The plan consisted of the retrofit of seven toll
bridges (five in the Bay Area and two in southern
California) and the replacement of two bridges (the East
Span of the San Francisco-Oakland Bay Bridge and the
westbound Carquinez Bridge, the latter funded from Bay Area
Regional Measure 1 toll funds. The estimated cost of the
replacement and retrofit work at that time, developed by
the DOT, was $2.62 billion as follows:
1. Benicia Bridge: $101 million
2. Carquinez Bridge (northbound span): $83 million
3. Richmond-San Rafael Bridge: $329 million
4. San Mateo-Hayward Bridge: $127 million
5. San Pedro-Terminal Island (Vincent Thomas) Bridge: $45
million
6. San Diego-Coronado Bridge: $95 million
7. San Francisco-Oakland Bay Bridge (west span): $553
million
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8. San Francisco-Oakland Bay Bridge (east span): $1,285
million)
SB 60 and SB 226 prescribed the funding sources and the
amounts from each source to pay for the seismic work. The
state's share of funding included $790 million in seismic
bond funds (Seismic Retrofit Bond Fund of 1996 --
Proposition 192) and $875 million in state transportation
funds (State Highway Account: $795 million and Public
Transportation Account: $80 million). The regional/local
share was set at $955 million, of which $907 million was to
come from a $1 per vehicle toll surcharge imposed by SB 60
for passage on the Bay Area toll bridges through January 1,
2008, or until the $907 million was realized, whichever
occurred first. The legislation authorized the collection
of toll revenues beyond the $907 million to pay for the
costs of "amenities" approved by MTC. (The so-called
amenities included a change in the Bay Bridge design, the
relocation or replacement of the transbay bus terminal in
San Francisco, or the addition of bicycle/pedestrian access
on the Bay Bridge replacement span).
SB 60 made the MTC the responsible agency for selecting the
design of the Bay Bridge replacement span. The legislation
also required that if the seismic retrofit costs were less
than originally estimated, there would be a proportional
reduction in the funding provided by tolls and state
transportation account funds. If the actual costs of the
toll bridge work were determined by the department to
exceed its original estimates, however, the department was
required to report the reasons for the cost overruns to the
Legislature within 60 days and propose a financial plan to
pay for that increase, with the Legislature subsequently to
adopt a financial plan to pay for the increase.
Comments
The intent of this bill is to provide a means to fund the
increased costs of completing seismic retrofit work on the
state's toll bridges, while specifying the proportionate
shares and sources of funds to finance the estimated $2.019
billion in increased/unfunded costs. The bill proposes a
60/40 split of the principal costs between toll revenues
and the state's share of federal HBRR funds, respectively.
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Merely extending the toll surcharge would not provide
timely or sufficient financing for the bridge work and
increased costs. DOT, as noted earlier, proposed the use
of $557 million in HBRR funds in addition to a toll
extension, while the MTC proposed several financing
scenarios, including the use of up to $1.3 billion in HBRR
funds plus tolls.
In its April 2001 report on bridge cost overruns DOT
presented the financial shortfall as two separate issues:
a $557 million shortfall for seismic work on six bridges
other than the Bay Bridge, and the $1.32 billion Bay Bridge
shortfall. In addition, a $147 million overrun was
identified for the west span of the Bay Bridge. The
distinctions, however, are artificial; there is no
requirement to separate the financial problem into two or
three parts and, in fact, the original financing plan
treated the bridge seismic work as one large, comprehensive
undertaking, albeit involving several bridges.
DOT is prepared to start construction on the Bay Bridge
retrofit before the end of 2001 if the additional financing
is secured. The department has advertised the first of
four contracts for the new east span on an "at-risk" basis
(pending financing). According to DOT, delaying action on
a financing plan beyond this year's legislative session
will increase the costs of the seismic work by $3 million
to $3.5 million each week.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
ASSEMBLY FLOOR
AYES: Alquist, Aroner, Calderon, Canciamilla, Cardenas,
Cardoza, Cedillo, Chan, Chavez, Chu, Corbett, Correa,
Diaz, Dutra, Firebaugh, Florez, Frommer, Goldberg,
Havice, Horton, Jackson, Keeley, Kehoe, Kelley, Koretz,
Liu, Longville, Lowenthal, Migden, Nakano, Nation,
Negrete McLeod, Oropeza, Papan, Pavley, Salinas, Shelley,
Simitian, Steinberg, Strom-Martin, Vargas, Washington,
Wesson, Wiggins, Wright, Hertzberg
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NOES: Aanestad, Ashburn, Bates, Bogh, Briggs, Bill
Campbell, John Campbell, Cogdill, Cox, Daucher,
Dickerson, Harman, Leach, Leonard, Leslie, Maldonado,
Mountjoy, Robert Pacheco, Rod Pacheco, Pescetti, Richman,
Runner, Strickland, Wayne, Wyland, Wyman, Zettel
RJG:cm 9/26/01 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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