BILL ANALYSIS
AB 672
Page 1
ASSEMBLY THIRD READING
AB 672 (Bass)
As Amended June 2, 2009
Majority vote
TRANSPORTATION 13-0 APPROPRIATIONS 17-0
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|Ayes:|Eng, Jeffries, |Ayes:|De Leon, Nielsen, |
| |Blumenfield, Conway, | |Ammiano, |
| |Furutani, Galgiani, | |Charles Calderon, Davis, |
| |Garrick, | |Duvall, Fuentes, Hall, |
| |Bonnie Lowenthal, Miller, | |Harkey, Miller, |
| |Niello, John A. Perez, | |John A. Perez, Price, |
| |Solorio, Torlakson | |Skinner, Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Krekorian |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Authorizes letters of no prejudice (LNOP) for certain
bond-funded transportation projects for which bond funding is
not yet available, thereby enabling projects to advance in the
meantime using other funds. 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 an LNOP for a project, or component
of the project, that may be funded with bonds made available
from the Highway Safety, Traffic Reduction, Air Quality, and
Port Security Bond Act of 2006 (bond act), approved by the
voters in 2006 as Proposition 1B; excludes from this authority
projects to be funded from a certain portion of the
Highway-Railroad Crossing Safety Account.
3)Authorizes the administrative agency to approve the LNOP for
one or more projects or project components that has been
programmed or otherwise approved for funding; the LNOP is to
indicate the amount of approved bond funding (except for
projects funded under the State-Local Partnership Program of
the bond act in which case the LNOP is to indicate the
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targeted amount of funding expected to be received by the
regional or local agency).
4)Sets forth criteria governing reimbursement eligibility for
project expenditures under an LNOP, to include those
expenditures for which:
a) The project or project component has commenced and local
expenditures have been incurred;
b) The expenditures are legitimate expenditures pursuant to
state and federal laws and are permitted pursuant to the
bond act;
c) The regional or local agency complies with all legal
requirements of the project, including environmental review
requirements of the California Environmental Quality Act
(CEQA);
d) The expenditures were incurred after the project or
project component was programmed or otherwise approved for
funding by the administrative agency; and,
e) Adequate bond proceeds are available in the appropriate
bond fund or account in an amount sufficient to make
reimbursement payments.
5)Authorizes the administrative agency and the regional or local
agency to enter into an agreement governing specific LNOP
reimbursements.
6)Authorizes the administrative agency, in consultation with
regional and local agencies, to develop guidelines to
implement the LNOP process.
7)Provides specifically that nothing in this bill modifies the
original bond act.
8)Defines "letter of no prejudice" to mean an agreement between
a regional or local agency and an administrative agency that
makes eligible for future reimbursement from bond proceeds
expenditures of funds under control of the regional or local
agency.
9)Provides that the timing and final amount of reimbursement is
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dependent on the terms of the LNOP and the availability of
bond funds; the amount of reimbursement may be less than the
amount stated in the LNOP.
10)Requires the California Transportation Commission (CTC)
annually to project targeted amounts of money expected to be
made available to regional or local agencies under the
State-Local Partnership Program of the bond act.
EXISTING LAW :
11)The bond act provides $19.925 billion in transportation
infrastructure bonds in over a dozen individual programs.
12)Governs the issuance and administration of the bonds
authorized in the bond act.
13)Defines "administrative agency" for each bond account.
14)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.
15)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.
16)Allows a regional or 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 : According to the Assembly Appropriations
Committee:
17)Minor additional costs to the CTC and other administering
agencies to approve and issue LNOPs and to track compliance
with bond act requirements for LNOP, such as matching
requirements, for projects receiving LNOPs.
18)Potential significant savings in aggregate state and local
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transportation funds to the extent the issuance of LNOPs
allows projects to remain on schedule and thus reduces total
project costs.
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
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.
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093
FN: 0001389