BILL ANALYSIS
AB 1364
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Date of Hearing: May 12, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 1364 (Evans) - As Amended: April 29, 2009
SUBJECT : Public contracts: state bonds: grant agreements.
SUMMARY : Permits a state agency that has entered into a grant
agreement for the expenditure of state bond funds to renegotiate
the terms of that agreement under certain specified
circumstances. Specifically, this bill :
1)Permits, with the consent of the grant recipient, a state
agency that has entered into a grant agreement for the
expenditure of state bond funds, and the state agency or grant
recipient is unable to comply with the terms of that agreement
due to a suspension of programs by the Pooled Money Investment
Board (PMIB) as described in California Department of Finance
(DOF) Budget Letter 08-33 to:
a) Renegotiate the deadlines and timetables for
deliverables within the grant agreement that may not be met
because of the suspension in order to preserve the validity
of the agreement; or,
b) Invalidate the grant agreement.
2)Adds an urgency clause.
EXISTING LAW permits the modification of contracts by state
agencies in specified instances.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of the bill . According to the author's office, "The
stop work order and freeze on disbursement of state
infrastructure bond funds issued by the Pooled Money Investment
Board on December 17th has impacted thousands of projects
throughout California, placing the state and its project
partners in uncertain and uncharted territory. The disposition
of contracts between the state and the recipients remain
obligated to the dates, liabilities and deliverables that the
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existing contracts and grants contain.
"Since the state's deteriorating budget outlook was an obstacle
to the sale of additional bonds to end the freeze, policymakers
focused on balancing the budget with the hope that the bond
market would respond in turn. Although the Treasurer's recent
success in issuing bonds last month is encouraging, enduring
questions remain about the road ahead. Prior to the March 2009
bond sale, the state was unable to sell bonds since June of
2008. In addition, a mismatch remains between the amount of
bond resources committed through state contracts and the amount
of bond funds available.
"Two key questions have shaped discussion about state contracts
within the context of the bond freeze. First, what is the
status of these contracts since bond funds are not going out?
Second, will the state provide fiscal assurances to project
partners who proceed with non-state bridge financing, as
permitted in Budget Letter 09-05, to continue working on state
projects?
"On April 3, the Department of Finance issued Budget Letter
09-09 which says, 'If projects continue with non-state funding
sources, the state intends to eventually pay the costs to which
it has committed through a valid agreement.' While this passage
brings important clarity regarding the state's intentions
relating to fiscal assurances, uncertainty now shifts to the
validity of contracts where datelines for deliverables are
passing. For these reasons, as the state moves ahead with its
contract partners, the grey area centers on what constitutes a
valid contract. This raises the inevitable question: Since the
timetables for deliverables are passing and not being met, are
such contracts valid? AB 1364 proposes an affirmative solution
to validate these state contracts. The approach proposed to in
AB 1364 is for state agencies to amend timetables for these
contracts."
Background . According to the DOF, "The Pooled Money Investment
Board (PMIB) on December 17, 2008 froze all disbursements from
the Pooled Money Investment Account (Account) because of the
poor cash position in the Account. This Account has been
historically used to provide interim funding for all bond funded
projects (general obligation and lease revenue) until the State
Treasurer's Office (STO) is able to schedule bond sales. This
"freeze" affected approximately 5,700 projects across the state.
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In the weeks that followed this action, the Department of
Finance authorized 276 projects to continue and the remaining
5,400 projects were directed to be shut-down unless other
non-state funding sources were available to enable them to
continue.
"The passage of the Budget in February 2009 allowed the STO to
re-enter the bond market and start issuing bonds. However, the
Account, while slightly improved still remained in a weak cash
position and was unable to provide all the necessary funding for
the exempt and shut-down projects to re-start as well as provide
the necessary source of cash borrowing for the state's regular
day-to-day operations. Therefore, the PMIB has continued the
freeze on disbursements, with limited exceptions ?."
Related legislation . AB 672 (Bass) of 2009 authorizes a
regional or local agency that is a lead agency for a project
that is programmed for bond funding on or after July 1, 2008, to
apply to the administrative agency for a letter of no prejudice
that would allow the regional or local agency to expend its own
funds for any bond-funded component of the project, subject to
later reimbursement from bond proceeds, as specified.
Support . The California Council of Land Trusts, California
State Parks Foundation, and Planning and Conservation league,
write in support, "We are writing as co-sponsors to urge your
support of Assembly Bill 1364 - the only measure introduced to
the Assembly that specifically addresses concerns regarding the
detrimental impacts of the bond freeze to all state agencies and
all of their partners adversely affected by this cash-flow
crisis.
"In the four months since the Department [of Finance] issued
Budget Letter 08-33, this bill has played an instrumental role
in advancing the conversation at the State Capitol as to what
this Legislature can do to provide both short-term and long-term
solutions to this ongoing crisis. Consequently, AB 1364 has
become more than a bill on the bond freeze. It has become a
catalyst for advancing other important objectives outside the
scope of the legislation, and will undoubtedly continue to do so
as the measure moves forward."
REGISTERED SUPPORT / OPPOSITION :
Support
AB 1364
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California Council of Land Trusts (co-sponsor)
California State Parks Foundation (co-sponsor)
Planning and Conservation League (co-sponsor)
A Living Library
American Land Conservancy
Anza Borrego Foundation
Arroyo Seco Foundation
Association of California Construction Managers
Bay Area Open Space Council
Big Sur Land Trust
California Association of Nonprofits
California ReLeaf
California Urban Forest Council
Canopy
Central Valley Land Trust Council
City of Napa
City of Oakland
City of Sacramento
Community Alliance for Family Farmers
East Bay Regional Park District
Elkhorn Slough Foundation
Environmental Justice Coalition for Water
Friends of the Urban Forest
Goleta Valley Beautiful
Housing California
Lake County Land Trust
Land Conservancy of San Luis Obispo County
Land Trust Council
Land Trust for Santa Barbara County
Land Trust of Napa County
Land Trust of Santa Cruz County
Lassen Land & Trails Trust
Marin Agricultural Land Trust
Mattole Restoration Council
Mattole Salmon Group
Mountain Meadows Conservancy
Muir Heritage Land Trust
Outdoor Heritage Alliance
Palos Verdes Peninsula Land Conservancy
Peninsula Open Space Trust
Placer Land Trust
Redwood Coast Land Conservancy
Sacramento Tree Foundation
Sacramento Valley Conservancy
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San Diego River Park Foundation
San Francisco Bay Joint Venture
San Joaquin River Parkway and Conservation Trust
Save Mount Diablo
Sequoia Riverlands Trust
Sierra-Cascade Land Trust Council
Solano Land Trust
Sonoma Land Trust
The Trust for Public Land
Tree Davis
Tri-Valley Conservancy
Opposition
None on file.
Analysis Prepared by : Rebecca May / B. & P. / (916) 319-3301