BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1164 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: gordon VERSION: 6/28/11 Analysis by: Art Bauer FISCAL: yes Hearing date: July 5, 2011 SUBJECT: Federal transportation funds DESCRIPTION: This bill authorizes the Department of Transportation (Caltrans) to make loans of federal funds deposited in the State Highway Account (SHA) to advance projects funded by Proposition 1B. ANALYSIS: California has two major capital outlay programs for transportation investments: The State Transportation Improvement Program (STIP) and the State Highway Operations and Protection Program (SHOPP). The STIP is the states' five-year transportation capital outlay program, which is updated and adopted by the California Transportation Commissioner (CTC) every two years. Regional agencies program 75 percent of the STIP revenue and Caltrans programs 25 percent. The projects in the STIP are typically capacity increasing projects. The SHOPP is the state's ten-year highway rehabilitation program, which the CTC adopts every two years. Some Proposition 1B, the 2006 $19.925 billion state transportation bond, included programs that are within the STIP. Existing law authorizes Caltrans, with the approval of the Director of Finance, to loan funds from the American Recovery and Reinvestment Act of 2009 (ARRA) to fund Proposition 1B bond projects that are ready for construction, but for which bond funds are unavailable. This bill authorizes Caltrans, with the approval of the Director of Finance, to loan federal funds in the State Highway Account (SHA) to accelerate Proposition 1B projects. Caltrans would repay the loans when Proposition 1B bonds are sold. AB 1164 (GORDON) Page 2 COMMENTS: 1.Purpose . The purpose of this bill is to ensure that there is a steady stream of transportation projects going to construction even when bond funds are unavailable. This bill achieves this in two ways. First, because of the difficulty the state is having in selling bonds, the stream of Proposition 1B bond revenue is unpredictable. Nevertheless, there are projects sitting on the shelf ready to go to construction. This bill addresses this issue by allowing Caltrans to borrow federal funds to commence the projects. A second reason put forward by the bill's sponsor, Caltrans, is that this bill would enable the state, at the end of the federal fiscal year, to commit any unobligated federal funds that the state would be at risk of losing to unfunded, but read-to-go, bond projects. In addition, if other states forfeit federal funds, California would be in a position to claim them, under the provisions of federal law. 2.Proposed amendments . There are two shortcomings with the bill. The first is that the CTC does not approve the loans. This makes it difficult to coordinate the timing of the expenditure of loan funds with STIP expenditures, as CTC is responsible for STIP expenditures. Second, there is no stated period of time for the repayment of the loans, nor for the authority to borrow federal funds. In addition, Caltrans is proposing an amendment that ensures the loans will not impact the SHOPP and STIP projects already funded. The following amendments address these issues: a. On page 2, line 8, after Director of Finance add "and the California Transportation Commission." The amendment requires CTC approval of any loan. b. On page 3, line 3 after the period add " The Department may make a loan of federal funds under this section only if it has determined that the loan of such funds will not impact its ability to fund programmed projects delivered under the State Highway Operations and Protection Program or the State Transportation Improvement Program." This amendment ensures that SHOPP and STIP projects are not put at risk by the loan program. AB 1164 (GORDON) Page 3 c. On page 3, line 16, add after the parenthesis "within three years of the date of the original loan." This amendment limits the length of the loan. d. Between lines 36 and 37 add the following, "The loan authority provided by this section shall be available only until September 30, 2015. This section shall become inoperative when all loans are repaid pursuant to subdivision(a)." This is the sunset amendment. 3. Double-referral . The Rules Committee referred this bill to both the Transporation and Housing Committee and to the Rules Committee. Therefore, if this bill passes this committee, it will be referred to the Committee on Rules. Assembly Votes are not relevant. POSITIONS: (Communicated to the Committee before noon on Wednesday, June 29, 2011) SUPPORT: Department of Transportation (sponsor) OPPOSED: None received.