BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Tom Torlakson, Chairman
156 (Simitian)
Hearing Date: 05/31/07 Amended: 05/24/07
Consultant: Dan Troy Policy Vote: ED 6-1
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BILL SUMMARY: SB 156 would enact the California Reading and
Literacy Improvement and Public Library Construction and
Renovation Act of 2008 for submission to voters at the statewide
general election (November, 2008). If approved by the voters,
the Act would approve the issuance of $4 billion in general
obligation bonds for the purposes of library construction and
renovation.
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Fiscal Impact (in thousands)
Major Provisions 2007-08 2008-09 2009-10 Fund
Bond authorization $4,000,000* Bond
*Principal and interest totaling $7.454 billion over 30 years.
Assuming a bond interest rate of 4.6%, average annual payments
would be $248.5 million, though early repayments may be higher.
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STAFF COMMENTS: SUSPENSE FILE.
In 1988, voters approved $75 million in general obligation bonds
for the acquisition, construction, remodeling, or rehabilitation
of public libraries. In 2000, voters approved $350 million in
general obligation bonds for the construction and renovation of
public libraries. These funds have all been allocated, and over
75% of applicants were denied funding, including $132 million
worth of projects that were rated "Outstanding" by the
California Public Library and Construction Board.
A statewide needs assessment recently completed by the
California State Library has identified 662 potential library
projects at a total cost of $8 billion for the 2007-2016 time
period.
This Act, if approved by the voters, would authorize $4 billion
in general obligation bonds for the acquisition of land,
construction, remodeling, renovation, acquisition, or
rehabilitation of public library facilities. The Act would
further establish the California Public Library Construction and
Renovation Board with the authority to adopt rules, regulations,
and policies for implementation of the program.
Eligible applicants would include library districts, cities, and
counties. Minimum requests would be $500,000 and maximum awards
would be $30 million. Recipients are responsible for funding a
minimum of 35% of project costs. Also, 5% of the bond proceeds
would be set aside for joint-use projects with public education
partners.
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SB 156 (Simitian)
Consideration may be given to joint-use projects proposed for
low-income areas or areas where the public schools have low
scores on the Academic Performance Index (API).
For purposes of this analysis, staff assumes a 30-year repayment
period and a bond interest rate of 4.6%. Under these
conditions, the total principal and interest would $7.454
billion with an average annual repayment of $248.5 million. The
ultimate repayment figures will depend on the rate on the
date(s) sold and the length of the repayment period.
This bill would give first priority for funding to projects
deemed "Outstanding" in cycle three of the 2000 Bond Act but
went unfunded due to insufficient funds. Total grants for these
projects may not exceed $150 million, though the projects would
be eligible for this bond's proposed maximum award of $30
million (the previous bond capped awards at $20 million). The
chief advantage to providing priority for earlier rated projects
would be to relieve the prioritized projects from the expense of
resubmitting an application. A potential disadvantage is that
the criteria for awarding grants may not be similar from one
bond to the next, and circumstances may have changed such that
newer projects would be seen as greater priorities for funding
than were those rated for an earlier bond. The Committee may
wish to consider this issue.
Staff notes that California voters have authorized $121.8
billion in general obligation bonds since 1970 and two-thirds of
that amount has been authorized since 2002. According to
estimates prepared by the Legislative Analyst's Office, the
state's General Fund debt-service costs are expected to rise
from $4.7 billion in 2007-08 to $7.5 billion in 2014-15. If
ultimately approved by the voters, this measure would increase
those costs. Each dollar spent paying debt service is a dollar
that could have been spent on other programs. When authorizing
bonds, the state should consider their affordability in terms of
how the debt service payments can be accommodated within the
state's long-term and short-term programmatic and budgeting
priorities.
This bill is similar to Chapter 698 (SB 1161, Alpert, 2004)
which proposed $600 million in general obligation bonds for
library construction and renovation. That bond measure
(Proposition 81) was rejected by the voters in the primary
election held in June of 2006.