BILL ANALYSIS AB 798 Page 1 Date of Hearing: April 13, 2009 ASSEMBLY COMMITTEE ON TRANSPORTATION Mike Eng, Chair AB 798 (Nava) - As Introduced: February 26, 2009 SUBJECT : California Transportation Financing Authority Act SUMMARY : Creates the California Transportation Financing Authority (CTFA) to provide for increased construction of new capacity or improvements for transportation systems through the issuance of revenue bonds. Specifically, this bill : 1)Defines key terms, most notably "project" to include all or a portion of planning, design, development, finance, construction, reconstruction, rehabilitation, improvement, acquisition, lease, operation, or maintenance of a highway, public street, rail, or related facility. 2)Defines "project sponsor" to mean either the California Department of Transportation (Caltrans); a regional transportation planning agency; a county transportation commission, as defined; any other local or regional transportation entity that is designated by statute as a regional transportation agency; a joint exercise of powers authority, as defined; or, an agency designated to submit a county transportation plan. 3)Defines CTFA membership to include: a) The State Treasurer, who will serve as CTFA chair; b) The Director of the Department of Finance; c) The State Controller; d) Caltrans Director; e) Executive Director of the California Transportation Commission (CTC); f) A local agency representative appointed by the Senate Committee on Rules; and, g) A local agency representative appointed by the Speaker AB 798 Page 2 of the Assembly. 4)Authorizes the CTFA chair to appoint an executive director and stipulates that CTFA offices will be located in the Office of the Treasurer. 5)Provides that CTFA may delegate to one or more of its members or executive director the power to enter into contracts on behalf of the authority and vests CTFA with all powers reasonably necessary to carry out the responsibilities granted or imposed in this bill. 6)Explicitly states that the objective of CTFA is to increase the construction of new capacity or improvements for the state transportation system in a manner that is consistent with the state's greenhouse gas reduction goals, air quality improvement goals, and natural resources conservation goals, through the issuance of revenue bonds. 7)Provides that the Attorney General will be the legal counsel for CTFA and that the Treasurer will be the treasurer. 8)Grants CTFA broad authorities to secure project financing and provides that all its expenses will be payable solely from funds provided for in this bill. 9)Provides that project sponsors may pledge the following revenue sources as security for revenue bonds issued by CTFA: local transportation funds, fuel taxes, Article XIX B fuel sales taxes, local transportation sales taxes, developer fees, tolls, and other state revenues approved for these purposes by the Legislature or by initiative. 10)Ensures that the California Department of Transportation (Caltrans) and the California Transportation Commission (CTC) approve the use of any state funds a local transportation agency pledges to a project. 11)Authorizes project sponsors to apply to CTFA for bond financing for approved transportation projects and requires CTFA to ensure the following specific requirements have been met, to the extent these requirements have not already been met through approval of the project by CTC: a) The project complies with all relevant statutes AB 798 Page 3 applicable to planning, programming, and construction of transportation improvement projects and is contained in the constrained portion of a regional transportation plan; b) The project sponsor has secured Caltrans support for the project; c) The project conforms to design standards and environmental requirements and has all necessary permits to enable its construction; d) The project is financially feasible; e) Project performance measures have been developed; f) The project has community support, demonstrated in part by public notice and a public review period; and, g) The project sponsor of a highway project has demonstrated how transit service or alternative modes of transportation will be enhanced by the project. 12)Explicitly provides that CTFA will not have the power to plan or approve projects, other than project financing, as provided for in this bill. 13)Requires the CTC to report annually on the status of projects funded using the authority granted by this bill. 14)Grants CTFA authority to authorize a project sponsor to collect tolls if a project meets the following criteria: a) The imposition of tolls will be voted on or approved by either the appropriate governing body or a majority of the voters within the jurisdiction of the project; b) Each highway project for which tolls are imposed will have non-tolled alternative lanes available for public use in the same corridor; c) For highway projects, the road segment is on the state highway system; d) Project financing is expected to be sufficient to pay debt service, operations, and maintenance over the life of AB 798 Page 4 the bonds and any excess revenues will be used exclusively within the corridor to fund high-occupancy vehicle (HOV) facilities, other transportation activities, or transit service pursuant to an expenditure plan developed by project sponsors; and, e) Tolls are set to provide no more than the cost of paying debt service on the bonds, operating and maintaining the project, and providing improvements in the corridor, except to the extent that higher tolls are necessary to implement congestion management mechanisms. 15)Excludes from the authority granted in this bill the conversion of any existing non-tolled or non-user-fee lanes into tolled or use-fee lanes, except for the conversion of high-occupancy vehicle lanes to high-occupancy toll lanes. 16)Authorizes a project sponsor to incorporate congestion management mechanisms to regulate usage of a tolled facility and to increase mobility, accessibility, and environmental benefits. 17)Directs CTFA and CTC to develop a cooperative, timely approval process. 18)Enacts technical provisions to govern the sale of bonds. 19)Provides that provisions of this bill do not conflict with the authority granted in earlier legislation, AB 2032 (Dutra), Chapter 418, Statutes of 2004, to specific agencies to develop high occupancy toll (HOT) lanes and do not limit the ability of any agency that has existing authority to issue bonds. 20)Creates the California Transportation Financing Authority Fund (Fund) and directs all moneys in the Fund to be continuously appropriated. 21)Repeals provisions of existing law that require legislative approval of a project application for one of four authorized high-occupancy-toll lane projects. EXISTING LAW: 1)Authorizes local governmental agencies to enter into agreements with private entities for the study, planning, AB 798 Page 5 design, developing, financing, construction, maintenance, rebuilding, improvement, repair, or operation, or any combination thereof, by, and lease to or ownership by, that entity of a revenue-generating infrastructure project, as specified. Requires agreements entered into under these provisions to include adequate financial resources for the project and allowed for terms of up to 35 years, after which the project would revert to the local governmental agency. Broadly prohibits the use of this authority for state highways. 2)Establishes the 13-member CTC to advise and assist the Secretary of the Business, Transportation and Housing Agency and the Legislature in formulating and evaluating state policies and plans for transportation programs in the state. 3)Authorizes regional transportation agencies or Caltrans to enter into an unlimited number of comprehensive development lease agreement with public or private entities for transportation projects, under the following key conditions: a) Projects must be primarily designed achieve improved mobility, improved operations or safety, and quantifiable air quality benefits; b) At least 60 days prior to executing a final lease agreement, the project sponsor (i.e., Caltrans or a regional transportation agency) must submit the agreement to the Legislature and to the Public Infrastructure Advisory Committee for review; c) Prior to submitting a proposal, the project sponsor would have to conduct a least one public hearing; d) Existing non-toll or non-user-fee lanes cannot be converted to toll lanes except that high occupancy vehicle (HOV) lanes can be converted to high occupancy toll (HOT) lanes for vehicles not otherwise meeting the occupancy level requirements for those lanes; and, e) No lease agreements can be entered into after January 1, 2017. 4)Authorizes a regional transportation agency, in cooperation with Caltrans, to apply to the CTC to develop and operate HOT AB 798 Page 6 lanes, including the administration and operation of a congestion-pricing program, using the following process: a) CTC is to review each application for HOT lane development; b) For each project, CTC is required to conduct a least one public hearing in northern California and one in southern California; c) Following the hearings, CTC is to submit the application, including any public comments made at the hearings, to the Legislature for rejection or approval; d) Approval by the Legislature must be by statute; e) The number of projects under this authority is limited to four, two in northern California and two in southern California; f) CTC, in cooperation with the Legislative Analyst, must annually report to the Legislature on the progress of the development and operation of HOT lanes; and, g) No application may be approved under this authority after January 1, 2012. FISCAL EFFECT : According to the Senate Appropriations Committee's analysis of last year's identical AB 3021 (Nava): 1)Administrative costs and expenses incurred by CTFA would be charged to participating project sponsors. However, it is not known how much demand there will be for the financing tools offered by CTFA and when sufficient revenues will be realized to fully cover the administrative costs of the Authority. Initial costs are to be borrowed from available resources within the State Treasurer's Office and paid back with interest once there is sufficient demand for CTFA financing. 2)Initial workload is also dependent upon demand, but the bill requires the chair of the Authority to appoint an executive director and authorizes employment of bond counsel and other consultants, as necessary. Staff estimates that annual costs to develop and establish the Authority, including overhead and operating expenses would likely be in the range of $150,000 to AB 798 Page 7 $300,000 for the Executive Director position, and the addition of one administrative staff. 3)If special fund resources are not sufficient to cover initial costs of the Authority, there may be some General Fund impact. All borrowed funds would be paid back with interest, and ongoing expenses would be covered by project sponsors. Also, the Assembly Appropriations Committee, in its analysis of last year's AB 3021, reported: 1)Significant increase in the volume of revenue bonds and other bonded indebtedness secured by transportation revenue sources, if CTFA is effective in accelerating transportation project financing and construction by enhancing the use of revenue-secured indebtedness. 2)Potentially significant toll revenue resulting if CTFA authorizes transportation project sponsors or Caltrans to impose and collect tolls as a source of bond repayment and to implement congestion management mechanisms. COMMENTS : This bill would provide for what has become known as "public-public partnerships" wherein government agencies partner to finance public infrastructure. The process provided for in this bill is permissive. State, regional, and local transportation agencies may, if they choose, sponsor projects using CTFA's authority to approve financing and tolls. However, these agencies will not be required to use CTFA's services. Furthermore, this bill provides flexibility in the issuance of bonds. Transportation agencies may request CTFA to issue bonds or they may request approval to issue bonds themselves. This bill is identical to AB 3021 (Nava) of 2008, which passed the Legislature with broad support and no opposition but was vetoed by the Governor who cited that, because of budget delays, he could not sign the bill (or dozens of other bills) at that time. Ironically, supporters of AB 798 argue that budget woes are exactly why this bill is needed. According to this bill's sponsor, State Treasurer Bill Lockyer, this bill will help increase transportation capacity in our state by providing transportation entities with the resources needed to meet growing transportation needs. The Treasurer AB 798 Page 8 believes that this bill will "enable local and regional entities to contribute more to the funding of transportation projects, create a method for them to finance projects in the municipal bond market, and ensure that projects and funding are consistent with state transportation policy objectives and "best practices" public finance criteria." Additionally, the California Labor Federation supports AB 798 stating, "Critical state and local infrastructure needs have gone unmet for too long and in these hard economic times, we should look beyond traditional revenue streams." Related legislation : SB 3x 4 (Cogdill), Chapter 2, Statutes of 2009, among other things, authorizes Caltrans and regional transportation agencies, until January 1, 2017, to enter into an unlimited number of comprehensive development lease agreements with public or private entities, or consortia thereof, for transportation projects. SB 3x 4 provides the Legislature an opportunity to submit written comments about a proposed agreement to Caltrans or a regional transportation agency, but vests the ultimate discretion for executing the final lease agreement with Caltrans or the regional transportation agency. REGISTERED SUPPORT / OPPOSITION : Support State Treasurer Bill Lockyer (sponsor) Associated General Contractors of California California Labor Federation California Association of Council of Governments State Building and Construction Trades Council of California Opposition None on file Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093