BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1770| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1770 Author: Bonnie Lowenthal (D) Amended: As introduced Vote: 21 SENATE TRANSPORTATION & HOUSING COMM. : 6-3, 6/19/12 AYES: DeSaulnier, Kehoe, Lowenthal, Pavley, Rubio, Simitian NOES: Gaines, Harman, Wyland SENATE GOVERNANCE & FINANCE COMMITTEE : 5-3, 7/3/12 AYES: Wolk, DeSaulnier, Hernandez, Kehoe, Liu NOES: Dutton, Fuller, La Malfa NO VOTE RECORDED: Yee SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 69-4, 5/3/12 - See last page for vote SUBJECT : California Transportation Financing Authority SOURCE : State Treasurer DIGEST : This bill clarifies that the California Transportation Financing Authority (CTFA) may approve rail projects that are, or include, rolling stock; also provides that a project may be eligible for financing under CTFA if it is owned or operated (rather than owned and operated) by the Department of Transportation (Caltrans) or other project sponsor. CONTINUED AB 1770 Page 2 ANALYSIS : Existing law establishes the CTFA within the 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 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 tolls as one source of project funding. This bill makes two 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 CONTINUED AB 1770 Page 3 Purpose of the bill . 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. Impact of changes . 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. 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 CONTINUED AB 1770 Page 4 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. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/7/12) State Treasurer (source) California Transit Association Santa Clara Valley Transportation Authority ASSEMBLY FLOOR : 69-4, 5/3/12 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, Eng, Feuer, Fong, Fuentes, Beth Gaines, Galgiani, Gatto, Gordon, Gorell, Grove, Hagman, Halderman, Hayashi, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NOES: Donnelly, Garrick, Harkey, Nielsen NO VOTE RECORDED: Bonilla, Fletcher, Furutani, Hall, Roger Hernández, Mansoor, Smyth JJA:m 8/8/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 1770 Page 5 CONTINUED