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.