BILL ANALYSIS
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THIRD READING
Bill No: AB 672
Author: Bass (D)
Amended: 6/2/09 in Assembly
Vote: 21
SENATE TRANSPORTATION & HOUSING COMM: 10-0, 7/7/09
AYES: Lowenthal, Huff, Ashburn, DeSaulnier, Harman,
Hollingsworth, Kehoe, Pavley, Simitian, Wolk
NO VOTE RECORDED: Oropeza
SENATE APPROPRIATIONS COMMITTEE : 12-0, 08/17/09
AYES: Kehoe, Cox, Corbett, Denham, Hancock, Leno, Oropeza,
Runner, Walters, Wolk, Wyland, Yee
NO VOTE RECORDED: Price
ASSEMBLY FLOOR : 78-0, 6/3/09 - See last page for vote
SUBJECT : Proposition 1B: letter of no prejudice
SOURCE : Metropolitan Transportation Commission
DIGEST : This bill allows, under specified conditions,
an agency responsible for administering a Proposition 1B
program to issue a letter of no prejudice" to a local
agency providing an assurance that the administrative
agency will reimburse the local agency for expenditures it
makes on a Proposition 1B project that has been programmed
but for which funds have not yet been allocated.
ANALYSIS : Proposition 1B
CONTINUED
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In November 2006, voters approved the Highway Safety,
Traffic Reduction, Air Quality and Port Security Bond Act
of 2006, also known as Proposition 1B, that established 14
funding programs that serve a variety of transportation
purposes.
Traffic Congestion Relief Act of 2000
AB 2928 (Torlakson), Chapter 91, Statutes of 2000, created
the Traffic Congestion Relief Program (TCRP), which
established a mechanism to provide funding for projects
specified in statute. The TCRP includes a process by which
a lead applicant for a project may apply to the California
Transportation Commission (CTC) for a letter of no
prejudice to allow a local entity to expend its own funds
to be reimbursed by the state, provided the following
conditions are met:
1.The project is included in an adopted regional
transportation plan.
2.The department makes an allocation of TCRP funds.
3.The expenditures made by the regional or local entity are
eligible for reimbursement in accordance with state and
federal laws and procedures.
4.The regional or local entity complies with all legal
requirements for the project, including the requirements
of the California Environmental Quality Act.
This bill allows, under specified conditions, an agency
responsible for administering a Proposition 1B program to
issue a letter of no prejudice to a local agency providing
an assurance that the administering agency will reimburse
the local agency for expenditures it makes on a Proposition
1B project that has been programmed but for which funds
have not yet been allocated. Specifically, the bill:
1.Defines a "letter of no prejudice" as an agreement
between a regional or local agency and the administrative
agency that makes expenditures of funds under the control
of the local or regional agency eligible for future
reimbursement from bond proceeds.
2.Allows a local or regional agency to apply for, and an
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administering agency to approve, a letter of no prejudice
for a project that may be funded by Proposition 1B, with
the exception of the Highway-Railway Safety Account,
under the following conditions:
A. The project or project component for which the
letter of no prejudice is requested has commenced,
and local or regional expenditures have been
incurred.
B. The expenditures made by the regional or local
agency are eligible for reimbursement in accordance
with state and federal laws and procedures. If
expenditures made are determined to be ineligible,
then the state has no obligation to reimburse those
expenditures.
C. The regional or local agency complies with all
legal requirements for the project, including the
requirements of the California Environmental Quality
Act.
D. The expenditures are incurred after the project
or project component was programmed or otherwise
approved for funding by the administrative agency.
E. There is in the applicable bond proceeds fund
or account under Proposition 1B an appropriated
amount sufficient to make the reimbursement payment.
3.Provides that the timing and final amount of
reimbursement is dependent on the terms of the agreement
and the availability of bond funds and that the final
amount of reimbursement may be less than the amount
stated in the letter of no prejudice.
This bill also requires the CTC to calculate, and revise
annually, projected targets for the distribution of bond
funds under the State Local Partnership Program (SLPP), as
authorized by Proposition 1B.
Comments
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The SLPP is a Proposition 1B program that provides matching
funds for projects by local entities that have established
a local source of transportation funding (e.g., local sales
tax on gasoline dedicated to transportation purposes). The
majority of these funds (95 percent) are distributed on a
formula basis based on locally-derived revenues and
population. Because revenues may change from year to year,
CTC calculates a local entity's share annually and programs
projects in accordance with the entity's share for that
year.
According to CTC's guidelines, the annual SLPP program of
projects will also include multi-year programs of projects
for SLPP funding. CTC includes these multiyear programs
for informational purposes, acknowledging the future plans
and intent of the eligible applicants. The inclusion of a
multi-year project, however, does not constitute a
programming commitment by CTC for future year funding.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11
2011-12 Fund
LNOP admin. potential
costs, probably less than Bond*
$100 annually
Prop 1B project costs potential
avoidance of cost Bond*
escalation that would result from
delays, absent LNOPs
*Various Prop 1B bond funds
SUPPORT : (Verified 8/19/09)
Metropolitan Transportation Commission (source)
Santa Clara Valley Transportation Authority
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ARGUMENTS IN SUPPORT : According to the author's office,
the recent instability of the bond market and the Pooled
Money Investment Board's freeze on distributing funds has
affected some of the projects funded in part by Proposition
1B. Bond sale proceeds are currently used to fund existing
commitments; bonds are not being issued to fund any new
allocations for transportation (or other) projects, slowing
some projects that are otherwise ready to move forward.
Some local agencies, in particular the Metropolitan
Transportation Commission, would like to spend its own
funds to keep projects going but are concerned that, once
Proposition 1B funds do become available, the state will
not uphold its commitment to allocate those funds to the
Proposition 1B project. The letter of no prejudice
provides assurance that the local agency will be reimbursed
for funds it spends on a Proposition 1B project and in this
way represents a cash management strategy for
transportation and air quality projects funded under the
bond initiative.
The author states that AB 20xxx (Bass), Chapter 21,
Statutes of 2009, authorized local agencies to use federal
economic stimulus funds (i.e., American Recovery and
Reinvestment Act - ARRA) to prevent a project from
stopping, without jeopardizing their eligibility to retain
their commitment of bond funds from the state.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher,
Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,
Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight,
Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza,
Miller, Monning, Nava, Nestande, Niello, Nielsen, John A.
Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas,
Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Bass
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NO VOTE RECORDED: Block, Yamada
JA:nl 8/19/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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