BILL ANALYSIS                                                                                                                                                                                                    Ó






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: AB 1770
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  lowenthal
                                                         VERSION: 2/17/12
          Analysis by:  Eric Thronson                    FISCAL:  yes
          Hearing date:  June 19, 2012



          SUBJECT:

          California Transportation Financing Authority

          DESCRIPTION:

          This bill makes two minor, clarifying changes to the types of 
          projects that the California Transportation Financing Authority 
          (CTFA) may assist.

          ANALYSIS:

          Existing law establishes the CTFA within the California State 
          Treasurer's Office to assist transportation agencies in 
          obtaining financing for transportation projects.  The objective 
          of CTFA is to increase new capacity in the state transportation 
          system in a manner consistent with the state's greenhouse gas 
          reduction, air quality improvement, and natural resource 
          conservation goals.  CTFA will accomplish this through issuing 
          bonds directly or through the approval of the issuance of bonds 
          that are backed by specified transportation-related revenues.

          Further, existing law specifically defines parameters in which 
          projects can be eligible for CTFA assistance.  For example, a 
          project sponsor is defined as either the California Department 
          of Transportation (Caltrans), a regional transportation planning 
          agency, a county transportation commission, any other local or 
          regional transportation entity designated in statute as a 
          regional transportation agency, or a joint powers authority.  In 
          addition, only highway, public street, rail, bus, or related 
          facilities that are supplemental to or improvements upon 
          existing facilities Caltrans or another project sponsor 
          currently own and operate qualify for CTFA's assistance.  

          Finally, existing law lays out specific requirements that a 
          project must meet to qualify for CTFA assistance.  Should a 
          project meet all identified requirements, then CTFA may, among 
          other things, authorize a project sponsor to impose and collect 




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          tolls as one source of project funding.

           This bill  makes two minor, clarifying changes to CTFA's enabling 
          statutes which determine eligibility for CTFA assistance:  
           
          1.Specifies that a rail project may consist of, or include, 
            rolling stock (i.e. buses, rail cars, or locomotives).

          2.Specifies that a project must be a facility currently owned  or  
            operated by Caltrans or other project sponsor (as opposed to a 
            facility owned  and  operated by Caltrans or other sponsor).



          COMMENTS:

           1.Purpose  .  This bill clarifies definitions contained in CTFA 
            enabling statutes.  The author contends these clarifying 
            changes to law are technical in nature but necessary to 
            address some ambiguities identified by the Treasurer's staff.  
            First, existing law is not clear whether rolling stock is an 
            eligible expenditure, and this bill clarifies that it is.  
            Second, because transportation projects are complex and often 
            involve multiple entities, the author believes it is important 
            to broaden the universe of eligible projects by requiring that 
            a project sponsor is either the owner or operator of the 
            facility (and not necessarily both).  By resolving these 
            ambiguities, CTFA will have maximum flexibility within its 
            original statutory parameters in order to help finance viable 
            transportation projects.

           2.What impact might these changes have  ?  The clarifying changes 
            this bill makes appear technical and non-controversial, but 
            after only two years of existence it is still unclear what 
            role CTFA will play in the state's transportation 
            infrastructure development.  Toll roads are feasible 
            principally in urban areas where the transportation agencies 
            are relatively sophisticated in their own right but also have 
            the resources to contract for any additional financial and 
            legal expertise they may need.  Smaller transportation 
            agencies in less populated areas of the state would perhaps 
            benefit most from this bill, but these agencies are less 
            likely to undertake a toll project.  Because CTFA has yet to 
            be called upon for assistance, it is difficult to know what 
            impact the changes proposed in this bill may have on 
            transportation financing and development.




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           3.Using bond funds responsibly  .  One way CTFA can assist a 
            project sponsor to increase capacity in the transportation 
            system is to issue bonds to fund upfront project costs.  A 
            basic principal of bond finance is to align repayment of the 
            debt with an asset over its lifetime, giving those who benefit 
            from the asset the opportunity to share its cost.  Therefore, 
            when issuing bonds, it is important to weigh the value the 
            bond proceeds provide over time against the borrowing costs 
            associated with the bond issuance.  For example, it may not be 
            prudent to issue bonds with 30-year terms in order to purchase 
            items with an expected useful life of only 12 to 15 years, 
            such as typical transit buses.  In this case, it makes more 
            sense to sell bonds with shorter terms in order to align the 
            costs with the expected life of the purchased asset.  By 
            including rolling stock in the definition of eligible projects 
            for CTFA assistance, this bill creates the possibility for 
            shorter-life assets to be purchased with longer-termed bonds.  
            It seems reasonable to expect the State Treasurer's office to 
            understand the drawbacks of such an action.

           4.Double-referral  .  The Rules Committee has referred this bill 
            to both this committee and the Governance and Finance 
            Committee.  Therefore, if this bill passes this committee, it 
            will be referred to the Committee on Governance and Finance.
          
          Assembly Votes:
               Floor:    69 - 4
               Appr: 13 - 4
               Trans:    14 - 0



          POSITIONS:  (Communicated to the Committee before noon on 
          Wednesday,                                             June 13, 
          2012)

               SUPPORT:  California State Treasurer (sponsor)
                         Santa Clara Valley Transportation Authority
                         California Transit Association

               OPPOSED:  None received.








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