BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  AB 1770|
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                                 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. 
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           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  

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           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 

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          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

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