BILL ANALYSIS                                                                                                                                                                                                    


          |SENATE RULES COMMITTEE            |                  AB 1620|
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                                 THIRD READING

          Bill No:  AB 1620
          Author:   Assembly Budget Committee
          Amended:  10/6/10 in Senate
          Vote:     27 - Urgency


           SUBJECT  :    Budget Act of 2010:  State Public Works Board

           SOURCE  :     Author

           DIGEST  :     Senate Floor Amendments  of 10/6/10 delete the  
          prior version of the bill which expressed the intent of the  
          Legislature to enact statutory changes relating to the  
          Budget Act of 2010, and add the current content relating to  
          the State Public Works Board.

          This bill now authorizes the Public Works Board to utilize  
          asset transfers as an interim financing mechanism for  
          lease-revenue bond financed projects and make other  
          technical, clarifying, and conforming changes to Public  
          Works Board oversight of capital outlay projects.

           ANALYSIS  :    Since the Pooled Money Investment Board  
          stopped authorizing upfront interim financing loans for  
          lease-revenue bond financed capital outlay projects, the  
          Public Works Board has changed its processes for issuing  
          lease-revenue bonds from selling the bonds near the end of  
          project construction to near the end of design.  This  
          results in the need to capitalize the costs of the project  


                                                               AB 1620

          until the completion of construction which is when  
          occupancy occurs and rent revenue becomes available.   
          Historically, the ability to capitalize one asset and use  
          the proceeds to build another has been restricted to higher  
          education and was used only in very limited situations.   
          The asset transfer authority provided in these amendments  
          would allow the Public Works Board to capitalize one state  
          building that is not otherwise encumbered by debt and use  
          the proceeds to fund the design and/or construction of one  
          or more different state buildings.

          There are currently 50 projects stalled in the design phase  
          that are not far enough along to issue bonds to complete  
          the project.  The ability to utilize asset transfers would  
          enable the Public Works Board to restart some of these  
          projects and decrease the cost of financing these assets by  
          eliminating the need for capitalized interest costs. 

          This bill adds a five-year sunset clause applicable only to  
          the asset transfer authority.

          This bill makes technical, clarifying and conforming  
          changes to Public Works Board oversight of capital outlay  

           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  No

          DLW:nl  10/6/10   Senate Floor Analyses 


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