BILL ANALYSIS                                                                                                                                                                                                    

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          AB 1620 (Budget Committee)
          As Amended  October 6, 2010
          2/3 vote.  Urgency
          |ASSEMBLY:  |     |(April 22,      |SENATE: |33-3 |(October 7,    |
          |           |     |2010)           |        |     |2010)          |
                    (vote not relevant)

          Original Committee Reference:    BUDGET  

           SUMMARY  : Contains necessary statutory and technical changes to  
          implement changes to the Budget Act of 2010.  

           The Senate amendments  delete the Assembly version of this bill,  
          and instead:

          1)Re-affirm the authority of the State Public Works Board  
            regarding oversight of capital outlay projects.  

             a)   Many of these changes are technical in nature.

          2)Provide the State with a new interim financing mechanism for  
            bond funded projects.  

             a)   The Pooled Money Investment Board historically utilized  
               its large fund balance to finance lease revenue capitol  
               outlay projects, allowing the Board to sell the actual  
               bonds for the project towards the end of project  
               completion.  This greatly decreased the costs of the bond,  
               as the revenue from tenant rents was available shortly  
               after bond sale, minimizing the need for capitalization.

             b)   Due to depleted funds and a sluggish bond market in  
               2009, the Pooled Money Investment Board stopped authorizing  
               interim financing loans for lease revenue financed capital  
               outlay projects, requiring projects to wait until bonds  
               could be sold.  This requires capitalization of the bond  
               costs for the entire term of construction until rents are  

             c)   To provide an alternative, this legislation authorizes  
               "asset transfers".


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               i)     This would provide the Board with the ability to  
                 capitalize one asset (generally a state owned building)  
                 and use the proceeds to build another. 

                  (1)       The Board would be allowed to sell bonds on a  
                    state-owned building that is not encumbered by debt. 
                  (2)       The Department/Agency who owns the building  
                    would be required to pay rent for the building.
                  (3)       The Board would then pledge those rental  
                    revenues to make the debt service payments on the  
                    bonds, and would use the proceeds from the bond sale  
                    to design and or construct one or more buildings.  

               ii)    This process is already authorized for California's  
                 higher education segments, but has only been used in  
                 limited situations.

               iii)   There are currently 50 projects stalled in the  
                 design phase. 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  

             d)   The portions of the bill relating to Asset Transfers  
               include a 5 year sunset, at which time they will return to  
               existing law prior to this legislation unless otherwise  
               amended by a future bill.

          3)Urgency Clause.  Declare this bill take effect immediately as  
            an urgency statute.

           AS PASSED BY THE ASSEMBLY  , this bill was a vehicle for 2010  
          Budget legislation.

           Analysis Prepared by  :   Daisy Gonzales / BUDGET / (916)319-2099

                                                               FN: 0007221 


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