BILL NUMBER: SB 475 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 20, 2011
AMENDED IN ASSEMBLY JUNE 6, 2011
AMENDED IN SENATE MAY 3, 2011
AMENDED IN SENATE APRIL 12, 2011
AMENDED IN SENATE MARCH 21, 2011
INTRODUCED BY Senators Wright and Emmerson
FEBRUARY 17, 2011
An act to amend Sections 5956, 5956.1, 5956.2, 5956.3, 5956.4,
5956.5, 5956.6, 5956.7, 5956.8, 5956.9, and 5956.10 of, and to add
Section 5956.12 to, the Government Code, relating to infrastructure
financing.
LEGISLATIVE COUNSEL'S DIGEST
SB 475, as amended, Wright. Infrastructure financing.
Existing law authorizes a governmental agency, as defined, to
solicit proposals and enter into agreements with private entities for
the design, construction, or reconstruction by, and lease to,
private entities, for specified types of fee-producing infrastructure
projects. Existing law permits these agreements to provide for
infrastructure facilities owned by a governmental entity, but
constructed by a private entity, to be leased to or owned by that
private entity for a period of up to 35 years, after which time the
project would revert to the governmental agency.
This bill would authorize a local governmental agency to enter
into an agreement with a private entity for financing for specified
types of revenue-generating infrastructure projects. The bill would
require an agreement entered into under these provisions to include
adequate financial resources to perform the agreement, and would
additionally permit the agreements to lease or license to, or provide
other permitted uses by, the private entity.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 5956 of the Government Code is amended to read:
5956. Local governmental agencies have experienced a significant
decrease in available tax revenues to fund necessary infrastructure
improvements. If local governmental agencies are going to maintain
the quality of life that infrastructure provides, they must find new
funding sources. One source of new money is private sector financing
utilized to study, plan, design, develop, finance, construct,
maintain, improve, rebuild, repair, operate, or any combination
thereof, infrastructure facilities. Infrastructure projects may be
financed by a combination of public funding and private sector
financing under this chapter. Private sector financing for an
infrastructure project under this chapter may include, but is not
limited to, cash, cash equivalents, loans, debt assumption, letters
of credit, capital investment, in-kind contributions of materials or
equipment, construction or equipment financing, carrying of costs
during construction, or any combination thereof. Unless private
sector financing becomes available to study, plan, design, develop,
finance, construct, maintain, improve, rebuild, repair, or any
combination thereof, fee-producing infrastructure facilities, some
local governmental agencies will be unable to replace deteriorating
infrastructure. Further, some local governmental agencies will be
unable to expand and build new infrastructure facilities to serve an
increasing population.
SEC. 2. Section 5956.1 of the Government Code is amended to read:
5956.1. It is the intent of the Legislature that local
governmental agencies have the authority and flexibility to utilize
private sector financing or financing alone
or in concert with public financing , and any
combination of these financing sources, to study, plan,
design, construct, develop, finance, maintain, rebuild, improve,
repair, or operate, or any combination thereof, fee-producing
infrastructure facilities. Without the ability to utilize these
sources of financing to study, plan, design, construct, develop,
finance, maintain, rebuild, improve, repair, or operate, or any
combination thereof, fee-producing infrastructure facilities, the
Legislature finds that some local governmental agencies will not be
able to adequately, competently, or satisfactorily retrofit,
reconstruct, repair, or replace existing infrastructure and will not
be able to adequately, competently, or satisfactorily design and
construct new infrastructure.
SEC. 3. Section 5956.2 of the Government Code is amended to read:
5956.2. It is the intent of the Legislature that this chapter be
construed as creating a new and independent authority for local
governmental agencies to utilize private sector financing or
financing alone or in concert with public
financing , and any combination of these financing sources,
to study, plan, design, construct, develop, finance,
maintain, rebuild, improve, repair, or operate, or any combination
thereof, fee-producing infrastructure facilities. To that end, this
authority is intended to supplement and be independent of any
existing authority and does not limit, replace, or detract from
existing authority. This chapter may be used by local governmental
entities when they deem it appropriate in the exercise of their
discretion. It is the intent of the Legislature that this act create
no new governmental entities.
SEC. 4. Section 5956.3 of the Government Code is amended to read:
5956.3. For purposes of this chapter, the following definitions
shall apply:
(a) "Fee-producing infrastructure project" or "fee-producing
infrastructure facility" means the operation of the infrastructure
project or facility will be paid for, in whole or in part, by the
persons or entities benefited by or utilizing the project or
facility.
(b) "Governmental agency" includes a city, county, city and
county, including a charter city or county, school district,
community college district, public district, county board of
education, joint powers authority, transportation commission or
authority, or any other public or municipal corporation.
(c) "Private entity" includes a person, business entity,
combination of persons and business entities, or a combination of
business entities.
SEC. 5. Section 5956.4 of the Government Code is amended to read:
5956.4. A governmental agency may solicit proposals and enter
into agreements as authorized under this chapter for the following
types of fee-producing infrastructure projects:
(a) Irrigation.
(b) Drainage and sanitary sewer systems.
(c) Energy or power production.
(d) Water supply, treatment, and distribution.
(e) Flood control.
(f) Inland waterways.
(g) Harbors.
(h) Municipal improvements.
(i) Commuter and light rail.
(j) Highways or bridges.
(k) Tunnels.
(l) Airports and runways.
(m) Purification of water.
(n) Sewage treatment, disposal, and water recycling.
(o) Refuse disposal.
(p) Structures or buildings, except structures or buildings that
are to be utilized primarily for sporting or entertainment events.
SEC. 6. Section 5956.5 of the Government Code is amended to read:
5956.5. (a) Notwithstanding Chapter 10
(commencing with Section 4525) of Division 5, or Part 2 (commencing
with Section 10100) or Part 3 (commencing with Section 20100) of
Division 2 of the Public Contract Code, the governmental agency
soliciting proposals and entering into agreements with private
entities for the studying, planning, design, developing, financing,
construction, maintenance, rebuilding, improvement, repair, or
operation, or any combination thereof, by private entities for
fee-producing infrastructure projects shall ensure that the
contractor is selected pursuant to a competitive negotiation process.
Projects may be proposed by the private entity and selected by the
governmental agency at the discretion of the governmental agency.
Projects may be proposed and selected individually or as part of a
related or larger project. The competitive negotiation process shall
utilize criteria that the governmental agency identifies in the
solicitation documents. The selection criteria shall, to the extent
applicable to the proposed project, include the following factors:
financial approach or price proposal, features, life cycle-costs,
technical approach, an acceptable safety and labor code
compliance record, experience and qualifications of the private
entity to perform the services under the agreement, and any other
criteria specifically identified by the governmental agency. The
selection criteria shall also ensure that the facility be operated at
fair and reasonable prices to the user of the infrastructure
facility services. The competitive negotiation process shall not
require competitive bidding. The competitive negotiation process
shall specifically prohibit practices that may result in unlawful
activity including, but not limited to, rebates, kickbacks, or other
unlawful consideration, and shall specifically prohibit governmental
agency employees from participating in the selection process when
those employees have a relationship with a person or business entity
seeking a contract under this section that would subject those
employees to the prohibition of Section 87100. Other than these
criteria and applicable provisions related to providing security for
any required construction and completion of the facility, the
governmental agency soliciting proposals is not subject to any other
provisions of the Public Contract Code, this code, or any other
statutory provision that relates to public procurements.
(b) Prior to entering into an agreement with a private entity
pursuant to Section 5956.4 that includes at least some public
financing and relates to a project for which public financing is
available to finance the entire project, the governmental agency
shall assess whether that agreement provides greater benefits or
value for money to the governmental agency as compared with a project
that is financed entirely with public financing and is subject to
competitive bidding.
SEC. 7. Section 5956.6 of the Government Code is amended to read:
5956.6. (a) For purposes of facilitating projects, the agreements
specified in Section 5956.4 may include provisions for the lease,
license, or other permissive use of rights-of-way in, and airspace
over, property owned by a governmental agency, for the granting of
necessary easements, and for the issuance of permits or other
authorizations to enable the private entity to construct, maintain,
rebuild, improve, or repair infrastructure facilities supplemental to
existing government-owned facilities. Infrastructure constructed by
a private entity pursuant to this chapter shall, at all times, be
owned by a governmental agency. All construction, alteration,
demolition, installation, and repair work performed pursuant to this
chapter shall comply with Chapter 1 (commencing with Section 1720) of
Part 7 of Division 2 of the Labor Code. The agreement may provide
for the lease or license of those facilities to, or their other
permissive use by, the private entity for up to 35 years. In
consideration therefor, the agreement shall provide for complete
reversion of the privately constructed facility to the governmental
agency at the expiration of the lease, license, or other permissive
use at no charge to the governmental agency. Subsequent to the
expiration of the period of the lease, license, or other permissive
use, the governmental agency may continue to charge fees for use of
the infrastructure facility. If, after the expiration of the period
of the lease, license, or other permissive use, the governmental
agency continues to lease airspace rights to the private entity, it
shall do so at fair market value.
(b) The agreement between the governmental agency and the private
entity shall include, but need not be limited to, provisions to
ensure the following:
(1) Compliance with the California Environmental Quality Act
(Division 13 (commencing with Section 21000) of the Public Resources
Code). Neither the act of selecting a proposed project or a private
entity, nor the execution of an agreement with a private entity,
shall require prior compliance with that act. However, appropriate
compliance with that act shall thereafter occur before project
development commences.
(2) Security for the performance of the agreement and contractual
provisions that are necessary to protect the funding and financial
terms of the agreement.
(3) Adequate financial resources of the private entity to perform
the agreement.
(4) Authority for the governmental agency to impose user fees, in
whole or in part, for use of the facility in an amount sufficient to
protect the revenue streams necessary for projects or facilities
undertaken pursuant to this chapter. User fee revenues, used in whole
or in part, may be paid to the governmental agency or the private
entity and shall be dedicated exclusively to payment of all of the
following costs relating to the facility, including, but not limited
to, the private entity's and the governmental agency's direct and
indirect capital outlay costs for the project, direct and indirect
costs associated with financing of the facility, including interest,
principal, repayment, issuance, and refinancing costs, direct and
indirect costs associated with operations, direct and indirect user
fee collection costs, direct and indirect costs of administration of
the facility, direct and indirect costs of maintenance, and other
project-related costs, including a reasonable return on investment to
the private entity as set forth specifically in the agreement, or
included as part of the costs and fees, as negotiated or determined
during the procurement process.
(5) As a precondition to the imposition or increase of a user fee,
the governmental agency shall conduct at least two public hearings
at which public testimony will be received regarding a proposed user
fee revenue or increase in user fee revenues. The public hearings
shall precede the action by the governmental agency to actually
impose a user fee or to increase an existing user fee. The
governmental agency shall consider the public testimony prior to
imposing a new or increased user fee. The governmental agency shall
provide the following notices and utilize the following procedures:
(A) Notice of the date, time, and place of the meeting, including
a general explanation of the matter to be considered, shall be mailed
at least 14 days prior to the meeting to any interested party who
files a written request with the governmental agency for mailed
notice of the meeting on new or increased fees or service charges.
Any written request for mailed notices shall be valid for one year
from the date on which it is filed unless a renewal request is filed
prior to the expiration of the one-year period for which the written
request was filed. The legislative body may establish a reasonable
annual charge for sending notices based on the estimated cost of
providing the service.
(B) At least 10 days prior to the meeting, the governmental agency
shall make available to the public data that supports the amount of
the fee or the increase in the fee.
(C) (i) At least 10 days prior to the meeting, the governmental
agency shall publish a notice in a newspaper of general circulation
in that agency's jurisdiction stating the date, time, and place of
the meeting, including a general explanation of the matter to be
considered.
(ii) Any costs incurred by the governmental agency in conducting
the meeting or meetings required by this section may be recovered
from fees charged for the services that are the subject of the fee.
(iii) For infrastructure projects specifically authorized by this
chapter, at least 10 days prior to the meeting, the governmental
agency shall publish for four consecutive times, a notice in the
newspaper of general circulation in the affected area stating in no
smaller that 10-point type a notice specifying the subject of the
hearing, the date, time, and place of the meeting, and in at least
8-point type a general explanation of the matter to be considered.
(D) No governmental agency shall levy a new fee or service charge
or increase an existing fee or service charge to an amount that
exceeds the estimated cost for which the user fee revenues are
dedicated pursuant to paragraph (4). Any action by a governmental
agency to levy a new fee or service charge or to approve an increase
in an existing fee or service charge pursuant to this chapter shall
be taken only by ordinance or resolution. The legislative body of a
governmental agency shall not delegate the authority to adopt a new
fee or service charge, or to increase a fee or service charge.
(6) Require that if the legislative body of the governmental
agency determines that fees or service charges create revenues in
excess of the actual cost for which the user fee revenues are
dedicated pursuant to paragraph (4), those revenues shall either be
applied to any indebtedness incurred by the private entity or the
governmental agency with respect to the project, be paid into a
reserve account in order to offset future operation costs, be paid
into the appropriate government account, be used to reduce the user
fee or service charge creating the excess, or a combination of these
sources.
(7) If the private entity operates the facility, require the
private entity to maintain the facility in good operating condition
at all times, including the time the facility reverts to the
governmental agency.
(8) Preparation by the private entity of an annual audited report
accounting for the income received and expenses to operate the
facility. The private entity shall make that report available to any
member of the public for a cost not to exceed the cost of
reproduction of the report.
(9) Provision for a buyout of the private entity's capital
investment by the governmental entity in the event of termination or
default before the end of the lease term.
(10) Provision for appropriate indemnity promises between the
governmental agency and the private entity.
(11) Provision requiring the private entity to maintain insurance
with those coverages and in those amounts that the governmental
agency deems appropriate.
(12) In the event of a dispute between the governmental agency and
the private entity, both parties shall be entitled to all available
legal or equitable remedies.
SEC. 8. Section 5956.7 of the Government Code is amended to read:
5956.7. (a) The governmental agency may exercise any power
possessed by it with respect to the development and construction of
infrastructure projects pursuant to this chapter. Agreements for the
maintenance and operation of services entered into pursuant to this
chapter shall provide for full reimbursement for services rendered by
the governmental agency in accordance with the terms and conditions
specified in the agreement. The governmental agency may provide
services for which it is reimbursed with respect to preliminary
planning, environmental certification, and preliminary design of the
infrastructure projects. The governmental agency may consult with
legal, financial, and other consultants in the negotiation and
development of the agreement. To the extent existing public utility
infrastructure is necessarily required to be modified, relocated, or
removed in order for an infrastructure project authorized by this
chapter to be constructed, the cost of modification, relocation, or
removal of the existing infrastructure shall be borne by the private
entity and included as a recoverable capital cost of the project.
This cost shall not be construed to include costs of increasing the
capacity, or upgrading, or improving the existing public utility
infrastructure.
(b) The private entity's responsibility to modify, relocate, or
remove existing public utility infrastructure shall not alter any
agreements that may be in place between the governmental agency and
any public utility regarding projects funded by the governmental
agency.
(c) In the event of a dispute regarding the reimbursement
required, a private entity may request an audit of the public utility'
s costs by a mutually acceptable certified public accountant. The
result of the audit shall determine the actual costs. If the audit
indicates that the public utility's actual costs were less than 95
percent of the cost claimed, the cost of the audit shall be borne by
the public utility. If the audit indicates that the public utility's
actual costs were 95 percent or more of the cost claimed, the cost of
the audit shall be borne by the private entity.
SEC. 9. Section 5956.8 of the Government Code is amended to read:
5956.8. The plans and specifications for each project constructed
pursuant to this chapter shall comply with all applicable
governmental design standards for that particular infrastructure
project. The private entity performing the agreement shall utilize
private sector design and construction firms to design and construct
the infrastructure facilities. However, a facility subject to this
chapter and leased, licensed, or permitted to a private entity shall,
during the term of the lease, license, or permit, be deemed to be
public property for purposes of identification, maintenance,
enforcement of laws, and for purposes of Division 3.6 (commencing
with Section 810). All construction, alteration, demolition,
installation, and repair work pursuant to this chapter shall comply
with Chapter 1 (commencing with Section 1720) of Part 7 of Division 2
of the Labor Code.
SEC. 10. Section 5956.9 of the Government Code is amended to read:
5956.9. In order to use the authority conferred by this chapter
to the maximum extent, a governmental agency may use private
infrastructure financing pursuant to this chapter as the exclusive
funding or revenue source or as a supplemental funding or revenue
source with federal or local funds. The governmental agency involved
may be a local governmental agency or a combination of local
governmental agencies. The governmental agency may work cooperatively
with the California Infrastructure and Economic Development Board
with regard to the design, construction, operation, and financing of
privately financed facilities, but the projects will not be subject
to the review or approval of that board.
SEC. 11. Section 5956.10 of the Government Code is amended to
read:
5956.10. Notwithstanding any provision of this chapter, neither
the state or any state agency may directly or indirectly use the
authority in this chapter, nor may any governmental agency as defined
in Section 5956.3, use the authority in this chapter, to design,
construct, finance, or operate a state project. For purposes of this
section, a state project includes any of the following:
(a) Toll roads on state highways.
(b) State water projects.
(c) State park and recreation projects.
(d) State financed projects.
These limitations shall not prohibit the state, any state agency,
or any governmental agency as defined in subdivision (b) of Section
5956.3, from utilizing authorizations contained in other provisions
of law. This section shall not be construed to prohibit a
governmental agency from using this chapter to accomplish projects
that are not expressly prohibited in this section.
SEC. 12. Section 5956.12 is added to the Government Code, to read:
5956.12. The governmental agency may determine the validity of
any permits, authorizations or approvals, contracts and agreements,
user fees, and other actions taken pursuant to this chapter, by
initiating a validating proceeding, as provided in Chapter 9
(commencing with Section 860) of Title 10 of Part 2 of the Code of
Civil Procedure. The validating action may also be initiated by
interested persons as provided in Chapter 9 (commencing with Section
860) of Title 10 of Part 2 of the Code of Civil Procedure.