BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 798 (Nava) Hearing Date: 08/27/2009 Amended: 06/24/2009 Consultant: Mark McKenzie Policy Vote: T&H 9-1 _________________________________________________________________ ____ BILL SUMMARY: AB 798 would establish the California Transportation Financing Authority (CTFA) to assist transportation agencies in obtaining financing, primarily through issuing bonds backed by specified sources of revenue, to construct transportation projects. In doing so, this bill allows the authority to permit agencies to impose tolls for use of facilities constructed. Among other things, this bill would: Establish the CTFA within the Office of the Treasurer and specifies the membership of the seven-member Authority. Specify CTFA's objective is to increase the construction of new transportation capacity or improvements in a manner that is consistent with the state's greenhouse gas reduction goals, air quality improvement goals, and natural resource conservation goals, through the issuance of bonds that are backed by specified transportation-related revenues. Require the Chair of the CTFA to appoint an executive director, and authorize CTFA to fix compensation of bond counsel, consultants, and advisors, and charge administrative costs and expenses incurred by CTFA to project sponsors. Authorize CTFA to borrow money for purposes of meeting necessary expenses of initial organization until the date that CTFA derives a reliable funding source. Borrowed funds would be paid back with interest from participating project sponsors. Require CTFA, beginning June 30, 2011 and annually thereafter, to report on its activities to the California Transportation Commission (CTC). This information would be incorporated into CTC's annual report to the Legislature. Authorize project sponsors to apply to CTFA for bond financing or refinancing of transportation projects, as specified, collect tolls to pay debt service and operate the project, and implement variable pricing to manage congestion on the tolled facilities. Prohibit the conversion of existing lanes, except existing HOV lanes, into toll lanes. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2009-10 2010-11 2011-12 Fund CTFA startup costs initial costs in the range of $150-$300 per Special* year, repaid by project sponsors in future years CTFA ongoing costs ongoing costs offset by bond issuance fees Special** paid by participating agencies ____________ * Various special funds within the STO, possibly General Fund to the extent special funds are unavailable for startup cost loans ** California Transportation Finance Authority Fund, a continuously appropriated fund created by this bill. _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. Page 2 AB 798 (Nava) In light of the diminishing value of transportation funding resources, this bill is intended to create a method for local and regional entities to finance projects in the municipal bond markets, and ensure that projects and funding are consistent with state transportation policy objectives and financing criteria that reflect "best practices." SB 798 would also provide an alternative approach for agencies to develop toll roads with oversight provided by the CTFA to ensure that anticipated toll revenues would be adequate to pay for capital, operation, maintenance, and rehabilitation costs of the proposed project. AB 798 specifies that ongoing 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 (STO) and paid back with interest once there is sufficient demand for CTFA financing. 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 $300,000 for the Executive Director position, and the addition of one Administrative staff, and one CEA position. 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. Staff notes that this bill would establish the California Transportation Financing Authority Fund, a continuously appropriated fund, to be administered by CTFA. All moneys accruing to the Authority would be deposited into this fund, and revenues would be used to secure bond financing and "as necessary and convenient to the accomplishment of any other purpose of the authority." Absent the oversight associated with a legislative appropriation, staff recommends an amendment to sunset the authority to finance additional transportation projects on January 1, 2016 to provide the Legislature with the opportunity to extend or repeal the authority provided by this bill. Staff notes that this bill is nearly identical to AB 3021 (Nava), which the Governor vetoed last year due to the delay in the passage of the 2009-10 Budget Act. The following is an excerpt from the generic veto message that was applied to numerous bills: The historic delay in passing the 2008-2009 State Budget has forced me to prioritize the bills sent to my desk at the end of the year's legislative session. Given the delay, I am only signing bills that are the highest priority for California. This bill does not meet that standard and I cannot sign it at this time.