BILL ANALYSIS
AB 672
Page 1
Date of Hearing: April 27, 2009
ASSEMBLY COMMITTEE ON TRANSPORTATION
Mike Eng, Chair
AB 672 (Bass) - As Amended: April 21, 2009
SUBJECT : Bond-funded transportation projects: letters of no
prejudice
SUMMARY : Specifically, this bill :
1)States the intent of the Legislature to enhance the ability of
regional and local government entities to deliver critical
transportation capital improvement projects in an expeditious
manner.
2)Authorizes a regional or local agency to apply to an
administrative agency for a letter of no prejudice (LNOP) for
a project that has been approved for funding with bonds made
available from the Highway Safety, Traffic Reduction, Air
Quality, and Port Security Bond Act of 2006, approved by the
voters in 2006 as Proposition 1B.
3)Provides that, if approved, the LNOP will allow the regional
or local agency to use its own funds for any bond-funded
component of the project.
4)Sets forth criteria governing projects eligible to receive
LNOPs to those for which:
a) The administrative agency has made an allocation;
b) The project component for which the LNOP is being
requested has been completed;
c) The expenditures are legitimate expenditures pursuant to
state and federal laws; and,
d) The regional or local agency complies with all legal
requirements of the project, including environmental review
requirements of the California Environmental Quality Act
(CEQA).
5)Provides that, once an LNOP has been agreed to and an
agreement to transfer funds entered into, an administrative
AB 672
Page 2
agency can delay reimbursement to a regional or local agency
only if cash management issues prevent immediate repayment and
the delay is on the advice of the State Treasurer.
6)Authorizes an administrative agency, in consultation with
regional and local agencies, to develop guidelines to
implement this section.
EXISTING LAW :
7)The Highway Safety, Traffic Reduction, Air Quality, and Port
Security Bond Act of 2006 (bond act) provides $19.925 billion
in transportation infrastructure bonds in over a dozen
individual programs.
8)Governs the issuance and administration of the bonds
authorized in the bond act.
9)Defines "administrative agency" for each bond account as
follows:
a) The California Transportation Commission (CTC) is the
administrative agency for the:
i) Corridor Mobility Improvement Account;
ii)Trade Corridors Improvement Fund;
iii)Transportation Facilities Account;
iv)State Route 99 Account;
v) State-Local Partnership Program Account;
vi)Local Bridge Seismic Retrofit Account;
vii)Highway-Railroad Crossing Safety Account; and,
viii)Highway Safety, Rehabilitation, and Preservation
Account.
b) The Office of Homeland Security and the Office of
Emergency Services are the administrative agencies for the
Port and Maritime Security Account and the Transit System
Safety, Security, and Disaster Response Account.
AB 672
Page 3
c) The California Department of Transportation (Caltrans)
is the administrative agency for the Public Transportation
Modernization, Improvement, and Service Enhancement
Account.
10)Provides that agencies receiving bond funds must provide to
the administrative agency a project funding plan demonstrating
that funds are expected to be reasonably available and
sufficient to complete the project, prior to receiving a
project allocation.
11)Authorizes a regional agency, in the event bond funds are not
available for a bond-funded project, to use federal economic
stimulus funds on the project and to select a replacement
project for the use of the displaced bond funds.
12)Allows the CTC, Caltrans, a regional agency an a local agency
to the California local agency to pay for delivery of a State
Transportation Improvement Program (STIP) project with its own
funds in advance of the year in which the project is
programmed. Reimbursements can be in the form of a cash
repayment or programming of a replacement project.
FISCAL EFFECT : Unknown but presumably some savings for avoiding
project delays due to the lack of available bond funds.
COMMENTS : On December 17, 2008, the Pooled Money Investment
Board (PMIB) (comprised of the State Treasurer, State
Controller, and State Director of Finance) shut down $3.8
billion in financing for infrastructure projects. As a result,
more than $16.2 billion in highways, schools, levees, housing,
and other infrastructure projects were delayed for lack of bond
funding.
PMIB manages the State's Pooled Money Investment Account (PMIA).
The PMIA provides loans to bond-funded infrastructure projects
and to the state general fund to help meet cash flow needs. The
state's budget problems put it in a precarious cash-flow
position and placed unprecedented demand on the PMIA to loan the
general fund money to support critical public services.
Consequently, money was not available to loan to bond-funded
capital improvement projects.
The PMIB action impacted virtually every bond-funded project in
the state. Fortunately, just as transportation projects were
AB 672
Page 4
about to be suspended for lack of funding, federal economic
stimulus funds became available and the Legislature passed, and
the Governor signed, legislation allowing state and regional
transportation agencies to use their share of the federal
economic stimulus funds in lieu of bond funds, with payback
provisions.
This bill is intended to provide similar flexibility with other
sources of funds should bond funds again be delayed. Project
sponsors will be able to apply to the administrative agency for
an LNOP. If approved, the LNOP will serve to ensure the project
sponsor will be reimbursed for expending its own funds for any
bond-funded component of the project. Parameters are in place
to ensure that projects meet all applicable laws and regulations
and that all bond obligations are fully complied with.
Suggested amendment : This bill applies to projects that have
been approved for funding. The CTC only approves projects if
funding appears available. During the uncertainty earlier this
year due to the PMIB situation, the CTC withheld project
approval because it could not guarantee funds for the project
would be readily available. In this case, the provisions of
this bill would not have been helpful. Consequently, the
committee recommends amendments to the bill that would make
Proposition 1B projects programmed as of July 1, 2008, eligible
for LNOPs should the need arise. This will allow bond-funded
projects to proceed if bond funds are delayed.
REGISTERED SUPPORT / OPPOSITION :
Support
Los Angeles County Metropolitan Transportation Authority
(Sponsor)
Opposition
None on file
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093