BILL ANALYSIS Ó AB 1164 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1164 (Gordon) As Amended September 1, 2011 Majority vote ----------------------------------------------------------------- |ASSEMBLY: | |(June 2, 2011) |SENATE: |35-0 |(September 7, | | | | | | |2011) | ----------------------------------------------------------------- (vote not relevant) Original Committee Reference: TRANS. SUMMARY : Authorizes the California Department of Transportation (Caltrans) to loan federal funds to accelerate Proposition 1B projects, under certain conditions and for a limited time. The Senate amendments entirely replace previous provisions of this bill and instead: 1)Authorize Caltrans, under certain conditions, to loan federal funds in the State Highway Account (SHA) to accelerate Proposition 1B projects, until September 30, 2015. 2)Provide that loans of federal funds may be made only upon approval of the Director of Finance and the California Transportation Commission and only if doing so will not impact Caltrans' ability to fund programmed projects. 3)Limit the aggregate amount of the loans that may be made to no more than the amount of unsold Proposition 1B bonds and requires the loans to be repaid to the SHA within three years. 4)Provide that loans may be made only under circumstances where federal funds might otherwise be lost to the state and prohibits Caltrans from making a loan of local subvention funds except at the request of a specific regional transportation planning agency to which the funds had been allocated previously. 5)Appropriate repaid funds to Caltrans for use in the local assistance program, in a manner in which the federal funds would have otherwise been used, or for use on projects in the State Highway Operations and Protection Program. 6)Require Caltrans to report to the Joint Legislative Budget AB 1164 Page 2 Committee within 45 days after the end of each fiscal year in which the loan authority has been used. 7)Provide that these provisions will become inoperative when all loans are repaid and repeals these provisions on January 1, 2019. 8)Make technical, conforming changes to related provisions of law. EXISTING LAW : 1)Authorizes, pursuant to the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006, (approved by the voters as Proposition 1B), $19.925 billion in transportation infrastructure bonds in over a dozen individual programs. 2)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. AS PASSED BY THE ASSEMBLY , this bill required Senate confirmation of the five members of the High-Speed Rail Authority (Authority) who are appointed by the Governor. FISCAL EFFECT : According to the Senate Appropriations Committee, minor administrative costs to Caltrans, the Department of Finance, and the California Transportation Commission. The bill could prevent the loss of federal funds. COMMENTS : According to Caltrans, in the midst of a severe economic downturn in early 2009, Congress enacted ARRA to, among other things, provide states with a substantial infusion of federal funding for transportation projects. ARRA required that these funds be used on projects that could break ground immediately (in most cases within 120 days). Caltrans and local and regional agencies were successful in utilizing all of the federal funds awarded to California and, in the process, were able to accelerate construction of many projects. The side effect, however, was that this major short-term infusion of funding cleared out most of the projects that Caltrans (and many agencies) had ready to go to construction upon funding becoming available (often known as "shelf" projects). Consequently, the current list of shelf projects is relatively short. AB 1164 Page 3 This shortage of shelf projects could pose a significant challenge to Caltrans in utilizing all of the regular (non-ARRA) federal funding that California receives. Under federal law, all funds received in a federal fiscal year (FFY) have to be obligated to projects prior to the end of the FFY. Any funds not assigned to projects within that time frame are forfeited and can be claimed by other states. However, funds cannot be obligated for construction until the project is ready for bid. Caltrans is working to accelerate delivery of projects to ensure that it can use all available funding. However, if any major projects scheduled for delivery in the near future fail to meet their targets, there is a significant risk that the department may fall short of being able to use all available federal funds in FFY 2011 or FFY 2012. In that case, the state would forfeit these funds to other states. At the same time that Caltrans is facing challenges in obligating all of its federal funds, the state is having difficulty in moving forward with Proposition 1B projects. By December of 2011, the state is expected to have at least $1.3 billion in Proposition 1B projects ready to go to construction. However, due to economic conditions and the state's fiscal situation, California may be unable to generate adequate bond funding to fully fund these projects and allow them to proceed. This bill would enable a significant number of these projects to proceed with loans of federal dollars authorized by this bill. The provisions of this bill have not been heard in the Assembly. Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093 FN: 0002691