BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1229
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Feuer
VERSION: 6/21/11
Analysis by: Art Bauer FISCAL: yes
Hearing date: July 5, 2011
SUBJECT:
Federal grant anticipation revenue vehicles
DESCRIPTION:
This bill authorizes a transportation planning agency to use
federal regional surface transportation program (RSTP) funds and
congestion mitigation and air quality (CMAQ) funds, to pay the
debt service on federal grant anticipation revenue vehicles
(GARVEEs).
ANALYSIS:
GARVEE bonds are tax-exempt debt issued by the Treasurer to fund
eligible State Transportation Improvement Program (STIP) and
State Highway Operations and Protection Program (SHOPP)
projects. The STIP is California's five-year transportation
capital outlay program which is updated every two years. The
projects in the STIP are typically capacity increasing projects.
The SHOPP is the state's ten-year highway rehabilitation
program, which is updated every two years. Both the STIP and
the SHOPP are adopted by the California Transportation
Commission. The debt service on GARVEE bonds is paid from
California's apportionment of federal transportation funds.
GARVEE bonds are a tool for accelerating transportation
projects, which results in the motorists enjoying the benefits
of the projects sooner, and the state realizing cost saving by
completing projects at present-day costs rather than at a future
cost that may likely be higher.
Existing law:
1. Defines "eligible project" for the use of revenue from
GARVEE bonds to mean the federally funded portion of any
highway or other transportation project that the CTC has
been designated for accelerated construction and that
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increases the capacity, reduces the travel time, or
provides long-life rehabilitation of the key bridges and
roadways of a corridor or gateway for interregional travel
and movement of goods.
2. Authorizes the CTC to approve the use of GARVEE bonds
for federal projects upon approval of the Federal Highway
Administration (FHWA) and the regional transportation
planning agency in which the project is located, and upon
obtaining environmental clearance and completing project
design.
3. Prohibits the State Treasurer from authorizing the
issuance of GARVEE notes, if the annual repayment
obligation of all outstanding notes in any fiscal year
exceeds fifteen percent of the total amount of federal
transportation funds deposited in the State Highway
Account.
4. Requires debt service on GARVEE notes used for a STIP
project to be counted against the Interregional Improvement
Program share, in the case of a project in the
interregional improvement program, and the county share for
the county in which the project is located, in the case of
a project in a STIP.
5. Requires the CTC to compare the use of GARVEE versus
other funding mechanisms, such as pay-as-you-go, to achieve
maximum efficiency from the state's federal allocation of
transportation funds, before authorizing the issuance of
GARVEEs notes by the Treasurer.
6. Declares that GARVEE bonds are not a debt or liability
of the state and bond repayment is only from the revenues
pledged, federal funds in the State Highway Account.
7. Distributes federal RSTP and CMAQ funds to regional
agencies according to federal allocation formulas.
This bill :
1. Expands the definition of an eligible project for using
GARVEE bonds to include projects programmed by a Regional
Transportation Planning Agency (RTPA) using the share of
federal RSTP or CMAQ funds.
AB 1229 (FEUER) Page 3
2. Limits to no more than fifty-percent of bonding
capacity, as determined by the Treasurer, to be available
for RSTP and CMAQ GARVEE bonds.
3. Authorizes the CTC to require RTPAs to commit to
repaying the state for debt service if that RTPA's share of
RSTP and CMAQ is insufficient to repay the note or if a
portion of the project costs are ineligible for federal
funding.
4. Authorizes the CTC to put into the STIP funds necessary
for the repayment of these GARVEE bonds which would count
against the county share for the county in which the
project is located.
COMMENTS:
1. Purpose . According to the author, this bill provides
RTPAs with another tool to jump start necessary projects
and get people back to work when construction costs are
down, unemployment is high, and transportation projects are
waiting in line for funding. This bill would make it
easier for transportation planning agencies to access funds
to build transportation projects using GARVEE bonds by
giving them access to specific federal funds allocated to
each region that can be encumbered to pay the required debt
service.
2. Background . Beginning in the mid-1990s federal law
authorized the use of federal gas tax apportionments to the
states for deferring the costs of GARVEE bonds. In 2000,
the Legislature authorized the issuance of GARVEE bonds.
To date, there have been two issuances of GARVEE bonds, a
$615 million issue in 2004 for STIP projects and a $98
million issue in 2008 for SHOPP projects. The Treasurer
issues the bonds at the recommendation of the CTC.
Annually, the Treasurer reports to the CTC on the amount of
bonding capacity that exists to guide the CTC. In the 2011
analysis, the Treasurer estimates that the bonding capacity
ranges from $1.8 billion to $3.3 billion, depending on
market conditions and the amortization period.
Although the state has substantial GARVEE bond capacity,
the CTC has chosen not to rely upon the GARVEE bonds
because of the availability of Proposition 1B and federal
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stimulus funds provided by the American Recovery and
Reinvestment Act of 2009 (ARRA) to pay for projects. Both
programs have met the funding needs of the CTC without
having to pay interest and issuance costs associated with
bonds. Whenever possible the CTC prefers to fund
transportation investments with pay-as-you-go funding. The
CTC recognizes the need to use debt financing when
additional funding is needed for critical projects.
3. RSTP and CMAQ program . The federal Intermodal Surface
Transportation Efficiency Act (ISTEA) of 1992 established
both the RSTP and CMAQ programs. The RSTP funds that are
allocated on the basis of population to federal planning
regions referred to as metropolitan planning organizations
(MPO). CMAQ funds are allocated on the basis of population
and the severity of air quality in a state's urbanized
areas. Both programs are referred to as "flexible funds"
because the revenue may be used for both transit and
highway projects as well as programs aimed at reducing
travel. In response to ISTEA, the Legislature enacted SB
1453 (Kopp), Chapter 1117, Statutes of 1992, which
authorized both RSTP and CMAQ funds be "passed through" to
the regions without any intervention by Caltrans.
Nevertheless, federal law creating both programs makes
Caltrans accountable for the use of all federal highways
apportioned to a state, including RSTP and CMAQ.
Caltrans estimates that in the 2010-2011 fiscal year,
California will receive $395.2 million of RSTP funds and
$423.5 million of CMAQ funds. In the 2011-2012 fiscal
year, Caltrans estimates that RSTP and CMAQ funds will be
$395.2 million and $431.1 million, respectively. The
difficulty that the state and regional agencies that rely
on RSTP and CMAQ funds are facing, is that the most recent
federal transportation funding act, the Safe, Accountable,
Flexible, Efficient Transportation Equity Act: A Legacy
for Users (SAFETEA-LU), expired on September 30, 2010. The
act was extended until September 30, 2011. Both the Senate
and the House have been reported to be working on
legislation that is a multi-year reauthorization. The
structure of the bill and the likely date of enactment
remain unknown.
4. CTC's and Caltrans' reaction to this bill . Although the
CTC and Caltrans do not have official positions on this
bill, the technical nature of this bill required
AB 1229 (FEUER) Page 5
consultation by the committee staff and the author with
both organizations. The CTC and Caltrans staff indicated,
however, that the requirements that no more than fifty
percent of the GARVEE bonding capacity may be used by RSTP
and CMAQ and that an RTPA is responsible for backing the
GARVEE debt service from local sources are sufficient to
protect the overall integrity of the SHOPP and STIP.
Assembly Votes:
Floor: 77-0
Appr: 12-0
Trans: 14-0
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 29, 2011)
SUPPORT: Alameda Corridor-East Construction Authority
California State Council of Laborers
Riverside County Transportation Commission
State Building and Construction Trades Council of
California
Ventura County Transportation Commission
OPPOSED: None received.