BILL ANALYSIS AB 1757 Page 1 Date of Hearing: April 28, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 1757 (Monning) - As Amended: April 6, 2010 Policy Committee: Veterans AffairVote: 7-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill requires the California Department of Veterans Affairs (DVA) to design and develop the Central Coast Veterans Cemetery at Fort Ord (Monterey County), upon appropriation of funds by the Legislature. Specifically, this bill: 1)Expands the eligible uses of an endowment fund-previously established for purposes of generating income to cover the annual operations and maintenance costs of the proposed cemetery-to also cover the costs of project design and development of all documents necessary for construction. 2)Requires the State Controller, upon appropriation by the Legislature, to transfer sufficient moneys from the cemetery Endowment Fund to the cemetery Operations Fund for each phase of the cemetery design and development. Transfers are to be made only when sufficient funds exist to accomplish each phase. 3)Authorizes DVA, upon approval certification of a grant award for the cemetery development from the federal Department of Veterans Affairs, to proceed with construction and equipping of the cemetery. 4)Requires federal grant funds received for cemetery development to reimburse the Endowment Fund for transfers made from the Operations Fund. FISCAL EFFECT The DVA's current cost estimate to complete preliminary plans AB 1757 Page 2 and working drawings, using endowment funds, is about $800,000. Because revenue sources for endowment funding may include the General Fund, by expanding the eligible uses of the endowment fund, this bill creates General Fund pressure. Any costs to the endowment fund for design activities would subsequently be reimbursed by the federal grant, which would be awarded prior to the start of construction. COMMENTS 1)Background . In 1991, Fort Ord was announced for closure by the U.S. Base Realignment Commission. Prior to its closure, the Fort Ord Reuse Authority set aside 204 acres for development of a Central Coast Veterans Cemetery. Attempts to develop a national veterans cemetery at the site have been unsuccessful because the site lies within 75 miles of the San Joaquin Valley National Cemetery in Gustine. As an alternative, local agencies are seeking establishment of a state veterans cemetery, whereby the federal government funds 100% of development costs and the state is responsible for ongoing operations and maintenance costs-estimated at about $500,000 annually. (The federal funds are typically not received until project construction bids have been submitted. The federal grant is sufficient to provide reimbursement for all pre-construction costs.) In order to relieve the state General Fund of the operations and maintenance burden, AB 3055 (Laird)/Chapter 291 of 2006, established an Endowment Fund for the receipt of donations of cash or other gifts to be used for this purpose. Moneys received in the fund were to first be invested with the goal of achieving ongoing earnings to cover annual oversight and maintenance costs. Upon determination that the Endowment Fund has adequate principal to annually yield sufficient investment earnings to cover operating costs of a new veterans' cemetery for 10 years, the DVA is required to submit an application to the federal government for development of the cemetery. According to the State Controller's Office, no moneys have yet been deposited into the Endowment Fund. 2)Purpose . The author is seeking to jump-start the cemetery project by allowing the endowment fund to front the costs of project design. According to staff at the DVA, though the endowment fund currently has no balance, local interests have identified sufficient resources that could be deposited into AB 1757 Page 3 the endowment fund to pay for the design costs, which, as mentioned above, would be reimbursed following receipt of federal grant monies. 3)Recommendation . Section 5 of the bill should be amended to clarify (a) the allowable uses of the endowment fund and (b) that upon completion of project design, advertisement for construction bids shall not proceed until it is determined that the endowment fund has sufficient principal to adequately cover expected operations and maintenance costs. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081