BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 463|
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UNFINISHED BUSINESS
Bill No: SB 463
Author: Ducheny (D)
Amended: 8/22/06
Vote: 21
SENATE TRANSPORTATION COMMITTEE : 12-1, 4/5/05
AYES: Torlakson, Ashburn, Cedillo, Ducheny Kehoe,
Lowenthal, Machado, Maldonado Murray, Runner, Simitian,
Soto
NOES: McClintock
NO VOTE RECORDED: Margett
SENATE FLOOR : 37-1, 4/21/05
AYES: Aanestad, Ackerman, Alarcon, Alquist, Ashburn,
Battin, Bowen, Campbell, Cedillo, Chesbro, Cox, Denham,
Ducheny, Dutton, Escutia, Figueroa, Florez,
Hollingsworth, Kehoe, Kuehl, Lowenthal, Machado,
Maldonado, Margett, Migden, Morrow, Ortiz, Perata,
Poochigian, Romero, Runner, Scott, Simitian, Soto,
Speier, Torlakson, Vincent
NOES: McClintock
NO VOTE RECORDED: Dunn, Murray
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 68-4, 8/30/06 - See last page for vote
SUBJECT : State Route 125 toll road: franchise agreement
extension
SOURCE : California Transportation Ventures
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DIGEST : This bill provides a 10-year extension (45 years
total) to the franchise agreement between the state and the
private entity constructing and operating the State Route
125 toll road in San Diego, if specified conditions are
met.
Assembly Amendments add the terms and conditions related to
the extension.
ANALYSIS : AB 680 (Baker), Chapter 107, Statutes of 1989,
authorized the Department of Transportation (Department) to
enter into agreements with private entities for the
construction by, and lease to, private entities of four
transportation demonstration projects (toll roads). The
bill authorized the department to lease rights of way,
grant easements, and take related actions to enable private
entities to construct transportation facilities
supplemental to existing state-owned transportation
facilities and lease those facilities to the private
entities for up to 35 years. Toll roads constructed under
these provisions are owned by the state while operated by
the private entities under a franchise agreement, and the
facilities revert to the state at the end of the lease
period.
The private entities are allowed by the law to earn a
"reasonable return" on their capital investment, the amount
of which return is stipulated in the franchise agreement.
During the term of the franchise agreement, the private
entity pays local property taxes as well as the operational
costs of the toll road, including the department's
maintenance costs and the California Highway Patrol's
enforcement costs.
This bill provides for a 45-year lease period, rather than
35-year, for the State Route (SR) 125 toll road franchise
lease agreement in San Diego County under the following
conditions:
1.Requires the franchise agreement to be amended to provide
for a lease period of up to 45 years, if that term is
agreed to by the private toll road operator and the
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Department of Transportation (Caltrans), with the
concurrence of the San Diego Association of Governments
(SANDAG), the County of San Diego, the City of San Diego,
and the City of Chula Vista.
2.Allows the tolls collected during any extension period to
reimburse the private operator for project costs it
incurred on behalf of Caltrans or SANDAG; to compensate
or reimburse the private operator for project costs or
other impacts for which it is entitled to compensation
under existing agreements; to reimburse Caltrans or
SANDAG for project development costs under the existing
franchise agreement; for the private operator's capital
outlay, operational, toll collection, or administrative
costs; for reimbursement of the state's police or
maintenance costs; and for a reasonable return on the
private operator's investment. The franchise agreement
under these circumstances must require excess revenue to
be applied to the repayment of the private operator's
indebtedness, or paid into the State Highway Account for
the benefit of the San Diego region, or both.
3.Allows Caltrans and SANDAG, in the event no franchise
amendment is executed by January 31, 2010, or if a
franchise agreement extends the lease period for less
than 10 additional years, to operate and maintain the
toll road for any additional period up to 10 years
following the expiration of the agreement. This would
have to be concurred with by the County of San Diego, the
City of San Diego, and the City of Chula Vista. Resulting
toll revenues would be used to reimburse Caltrans or
SANDAG for project costs under the existing franchise
agreement.
4.Requires the franchise agreement to remain in full force
unless amended pursuant to this bill and declares that
this bill does not modify any rights or obligations of
the parties to the agreement.
5.Allows SANDAG to operate the SR 125 project and collect
tolls upon expiration of the franchise agreement, or the
extended private toll franchise, if approved by a 2/3
vote of the SANDAG board, pursuant to an expenditure plan
to fund projects in the corridor which extends along
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State Route 125 to the California-Mexico border. These
projects would be limited to highway and street projects,
truck-only lanes, and transit services and facilities.
Changes to the expenditure plan would also require a 2/3
vote of the SANDAG board.
6.Allows SANDAG to operate the facility by itself or in
cooperation with Caltrans, with toll revenues being
available for operations, toll collection,
administration, and reimbursement of the state's
maintenance and police service costs.
Background
The SR 125 project consists of a 3.2-mile non-toll freeway
segment and a 9.3-mile toll facility in eastern San Diego
County. A private entity, California Transportation
Ventures (CTV), is constructing both segments, including
the non-toll segment on behalf of the state, with the
entire facility expected to be opened for travel in October
2006.
The extension of SR 125 has been included in the state's
freeway plans since 1959, and the route was added to San
Diego's 20-year Regional Transportation Plan in 1984.
Following the enactment of AB 680 in 1989, plans were
initiated for the facility currently under construction.
In 1991, a franchise agreement was completed and initial
project studies and design concepts were begun.
Development and project approval proved lengthy and final
environmental clearance was not granted until 2001. In
2003, the project received financing and broke ground.
Under the franchise agreement with the state, CTV's
"reasonable return" on investment is capped at 18.5 percent
over the 35-year period of the lease. CTV's capital and
related investment is currently estimated at $635 million,
or more than 50 percent higher than the projected $400
million project cost in 1990. CTV states that
approximately $40 million of the project's costs are for
mitigation expenses, including local parks, playing fields,
campgrounds, etc. In addition, the franchise will pay
approximately $5 million/year in property taxes throughout
the time period of the agreement, as well as the road
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maintenance and enforcement costs.
The SR 125 project will open as a four-lane freeway with
five interchanges (with two more planned), with sufficient
right-of-way to permit later expansion as needed. The
facility will operate as a fixed-rate toll road on the
9.3-mile leased portion of the route.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/28/06)
California Transportation Ventures (source)
Associated General Contractors of America, San Diego
Chapter
Chula Vista Chamber of Commerce
City of Chula Vista
Greg Cox, San Diego County Board of Supervisors
Otay Mesa Chamber of Commerce
San Diego Association of Governments
OPPOSITION : (Verified 8/28/06)
La Raza Roundtable
Department of Finance
ARGUMENTS IN SUPPORT : According to the Senate
Transportation and Housing Committee analysis, the source
of the bill states that since the project was approved,
permitting delays, community negotiations, environmental
and related mitigation, and financing and construction cost
increases together have increased the project's costs
substantially. Because of the 35-year limit on the
franchise agreement, CTV states that it will not be able to
earn the return on investment necessary to cover the
increased costs. Extending the term of the agreement by 10
years will provide enough time to earn a reasonable return
on the total investment without changing the terms
(percent) or capped return amount.
The proponents contend that charging higher tolls is not an
available option to increase the company's return because
the market will not bear substantially higher tolls. CTV
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also notes that during the proposed 10-year franchise
extension, it will pay another $50 million or more in
property taxes, as well as continue to pay the facility's
operational costs for the state.
ARGUMENTS IN OPPOSITION : The Department of Finance
opposes this bill, "because there are currently no grounds
for the state to agree to an increase in the period of time
the public must pay tolls after having negotiated a
contract with the franchisee, without receiving any benefit
in return. During this extension the public would
potentially pay hundreds of millions of dollars in
additional tolls. Inasmuch as the toll segment is not yet
completed, toll rates have not been set, and the vehicular
usage for the route is as yet unknown, we believe that it
is premature to extend the lease period on this particular
route simply to ensure the franchisee a larger return on
their investment."
ASSEMBLY FLOOR :
AYES: Aghazarian, Arambula, Baca, Bass, Benoit, Berg,
Bermudez, Blakeslee, Calderon, Canciamilla, Chavez, Chu,
Cohn, Coto, Daucher, De La Torre, DeVore, Dymally,
Emmerson, Evans, Frommer, Garcia, Haynes, Jerome Horton,
Shirley Horton, Houston, Huff, Jones, Karnette, Keene,
Klehs, Koretz, La Malfa, La Suer, Laird, Leno, Leslie,
Levine, Lieber, Lieu, Liu, Matthews, McCarthy, Montanez,
Mountjoy, Mullin, Nakanishi, Nation, Niello, Parra,
Pavley, Plescia, Richman, Ridley-Thomas, Sharon Runner,
Ruskin, Salinas, Spitzer, Strickland, Torrico, Tran,
Umberg, Villines, Walters, Wolk, Wyland, Yee, Nunez
NOES: Maze, Nava, Saldana, Vargas
NO VOTE RECORDED: Bogh, Chan, Cogdill, Goldberg, Hancock,
Negrete McLeod, Oropeza, Vacancy
JJA:nl 8/31/06 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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