BILL ANALYSIS
AB 672
Page 1
Date of Hearing: May 28, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 672 (Bass) - As Amended: May 19, 2009
Policy Committee:
TransportationVote:13-0 (Consent)
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill provides a mechanism for local transportation agencies
to receive approval from the state, via a letter of no prejudice
(LNOP), to be eligible for reimbursement of local funds expended
up front on projects eligible for state bond funding.
Specifically, this bill:
1)Authorizes a local or regional transportation agency, for a
project that may be funded from Proposition 1B transportation
bonds, to apply to the state agency administering the bond
program for an LNOP for the project or a component of the
project. This authorization does not apply to Prop 1B funding
for grade separation projects.
2)Authorizes the administrative agency to approve LNOPs for
projects or project components that the agency has programmed,
allocated, or otherwise approved for bond funding, and
regardless of whether funds have been appropriated for the
purpose of the project. The LNOP is to indicate that
reimbursement of local funds is dependent on the availability
of bond funds, and the amount to be reimbursed may be less
than the amount stated in the LNOP.
3)Specifies conditions under which expenditures on a project for
which a LNOP has been issued shall be eligible for
reimbursement from the applicable bond fund account.
FISCAL EFFECT
1)Minor additional costs to the California Transportation
Commission and other Prop 1B administering agencies to approve
AB 672
Page 2
and issue LNOPs and to track compliance with bond act
requirements for LNOP, such as matching requirements, for
projects receiving LNOPs.
2)Potential significant savings in aggregate state and local
transportation funds to the extent the issuance of LNOPs
allows projects to remain on schedule and thus reduces total
project costs.
COMMENTS
1)Background . Proposition 1B, approved by the voters in
November 2006, provides $19.925 billion in general obligation
bonds for numerous transportation-related categories and
programs. All of these categories and programs have been
established in statute and for many, projects have been
programmed in the full amount provided under the bond act.
For example, the California Transportation Commission (CTC)
has established guidelines and adopted a program of projects
for the Corridor Mobility Improvement Account (CMIA) to meet
the $4.5 billion of bond funds allocated for this purpose.
Under CTC's guidelines, projects must be delivered by a
certain date.
In February, when Department of Finance (DOF) issued a stop
work notice on thousands of bond-funded infrastructure
projects, local transportation agencies resorted to using
other cash-management strategies to keep projects moving. In
some cases, local agencies used their own funds to prevent
projects from stopping, without any certainty they would
retain their bond fund commitment from the state.
2)Purpose . AB 672 establishes a process to provide more
certainty for local transportation agencies that choose to
help keep state bond-funded projects moving by advancing local
funds and providing for state reimbursement. This process-a
letter of no prejudice-is currently used for the Traffic
Congestion Relief Program, Chapter 908 (AB 1335) of 2001. A
similar process was established in 1992 for projects in the
State Transportation Improvement Program.
According to the author's staff, if bond funding is delayed,
making the LNOP process available as a cash-management
strategy for Proposition 1B projects is key for timely
delivery of the voter-approved transportation program.
AB 672
Page 3
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081