BILL NUMBER: SB 867	INTRODUCED
	BILL TEXT


INTRODUCED BY   Senator Padilla

                        FEBRUARY 18, 2011

   An act to add Division 4 (commencing with Section 64140) to Title
6.7 of the Government Code, and to add Sections 17053.25 and 23629 to
the Revenue and Taxation Code, relating to bonds.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 867, as introduced, Padilla. Build California Bonds.
   Existing law creates the California Transportation Financing
Authority with specified powers and duties relative to the issuance
of bonds to fund transportation projects to be backed, in whole or in
part, by various revenue streams of transportation funds and toll
revenues in order to increase the construction of new capacity or
improvements for the state transportation system.
   This bill would, in addition, provide for the authority to issue
Build California Bonds, the proceeds of which would be used for
specified transportation capital improvements. Bondholders would be
entitled to nonrefundable tax credits against their personal income
tax or corporate tax liability. The bonds would not be a debt or
liability of the state or a political subdivision of the state,
except for the authority. The bill would provide for the authority to
enter into financing agreements with participating local
transportation authorities for the purpose of financing or
refinancing transportation projects. Each series of bonds issued by
the authority would be secured by a financing agreement between the
authority and the local transportation authority. The bill would
limit the principal amount of bonds to be issued by the authority
under these provisions to $5 billion over a 5-year period commencing
January 1, 2012. The bill would enact other related provisions.
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Division 4 (commencing with Section 64140) is added to
Title 6.7 of the Government Code, to read:

      DIVISION 4.  Build California Bonds


   64140.  The Legislature finds and declares all of the following:
   (a) The Build California Bond Program (the program) will enhance
California's transportation infrastructure and improve mobility,
reduce congestion, enhance air quality, create jobs, and boost
California's economic competitiveness.
   (b) It is in the public interest to authorize and implement the
program as soon as possible, in order to ensure the funding of high
priority public transportation projects pursuant to the program
described in Section 64142.
   (c) California's economy is highly dependent upon the efficient
movement of goods and people throughout its major metropolitan areas.
By creating the program, the state recognizes that investing in
transportation infrastructure can stimulate economic growth, support
additional jobs, and generate fiscal benefits for the state.
   64141.  For purposes of this division, the following terms have
the following meanings, unless the context clearly requires another
meaning:
   (a) "Authority" means the California Transportation Financing
Authority established in Division 3 (commencing with Section 64100).
   (b) "Build California Bonds" means bonds, as defined in
subdivision (e) of Section 63010, that entitle the beneficial owners
thereof to California state tax credits as provided in this division.

   (c) "Transportation project" means and includes all or a portion
of the planning, design, development, finance, construction,
reconstruction, rehabilitation, improvement, or acquisition of a
highway, street, rail line, bus line, or related facilities
supplemental to or improvements upon existing facilities currently
owned and operated by a transportation agency, provided the project
shall be a capital project and have a useful life at least as long as
the term of the bonds financing it.
   (d) "Record date" means the close of business on the last day of
each calendar year. The first record date with respect to any Build
California Bond will be the close of business on the last day of the
calendar year in which the Build California Bond is issued, and the
last record date with respect to any Build California Bond will be
the close of business on the last day of the calendar year in which
the Build California Bond is redeemed or retired.
   64142.  (a) The authority may enter into financing agreements with
participating local transportation authorities for the purpose of
financing or refinancing transportation projects. Each series of
bonds issued by the authority shall be secured by a financing
agreement between the authority and a local transportation authority.

   (b) The authority may issue Build California Bonds for the purpose
of financing or refinancing all or any portion of the cost, as
defined in subdivision (f) of Section 63010, of a transportation
project. Bond proceeds may also be used to fund necessary reserves,
credit enhancement costs, and costs of issuance, provided that at
least 95 percent of the proceeds of Build California Bonds must be
expended for financing or refinancing capital expenditures for
transportation projects. Refinancing shall be limited to providing
permanent financing for interim construction financing only, and not
refinancing outstanding long-term bonds previously issued to finance
transportation projects.
   (c) The total principal amount of Build California Bonds
authorized to be issued pursuant to this division in each of the five
fiscal years beginning with the 2011-12 fiscal year is one billion
dollars ($1,000,000,000), for a total of five billion dollars
($5,000,000,000), and any portion of the authorization not used in
any fiscal year may be used in a future fiscal year, provided that
the authority must determine prior to the issuance of any Build
California Bonds that the aggregate amount of California state tax
credits granted to all taxpayers pursuant to this division for all
Build California Bonds previously issued pursuant to this division
and the Build California Bonds then being issued does not exceed two
hundred fifty million dollars ($250,000,000) for any fiscal year.
   (d) Build California Bonds may not have a final maturity in excess
of 30 years from the date of issuance. Following the construction
period, the principal of each series of Build California Bonds is
required to be structured on an approximately level debt service
basis, taking into account the annual tax credits and any
supplemental interest payable by the authority.
   (e) The authority must obtain an investment grade credit rating
from a nationally recognized rating service for each series of Build
California Bonds issued pursuant to this division prior to the sale
of those bonds.
   64143.  The amount of the state tax credit associated with any
issuance of Build California Bonds shall not exceed the greater of
(1) 5 percent of the face amount of bonds outstanding, or (2) the
yield required to market the bonds to investors at a price of par.
   64144.  (a) The beneficial owners of Build California Bonds on
record dates shall be entitled to annual California state tax credits
in amounts determined by the authority on or prior to the date of
issuance of the Build California Bonds, claimable semiannually on any
interest payment date on the bonds. The amount of the tax credit in
any calendar year with respect to any Build California Bond shall be
an amount that is equal to the principal amount of the bond times the
percentage rate set forth in Section 64143. In the event that the
bond is not outstanding for the entire year preceding the record
date, the amount of the credit allocated to the beneficial owner of
the bond will be prorated based upon the number of days the bond was
outstanding.
   (b) Any holder of a Build California Bond may claim a tax credit,
which at all times shall be a nonrefundable tax credit, at the time
the holder files its personal income or corporate tax return with the
state. The state is at no time obligated to make any cash payment
under this division with respect to a tax credit.
   64145.  (a) For each calendar year beginning on or after January
1, 2012, the beneficial owner of a Build California Bond shall be
allowed as a credit against the amount of the beneficial owner's "net
tax," as defined in Section 17039 of the Revenue and Taxation Code,
and the beneficial owner's "tax," as defined in Section 23036 of the
Revenue and Taxation Code, for that calendar year, an amount equal to
the annual tax credit for that calendar year established by the
authority pursuant to subdivision (d) with respect to the Build
California Bond.
   (b) In the case where the credit allowed by this section exceeds
the "net tax," as defined in Section 17039 of the Revenue and
Taxation Code, or the "tax," as defined in Section 23036 of the
Revenue and Taxation Code, the excess may be carried over by the
beneficial owner to reduce the beneficial owner's "net tax" or the
"tax," respectively, for the next 10 taxable years, or until the
credit has been exhausted, whichever occurs first.
   (c) There may be a separation, including at issuance, of the
ownership of a Build California Bond and any entitlement to the
credit under this section with respect to that bond. In case of that
separation, the credit under this section shall be allowed to the
person that on the credit allowance date holds the instrument
evidencing the entitlement and not to the holder of the bond.
   (d) The authority or the indenture trustee for the Build
California Bonds shall do all of the following:
   (1) Certify the amount of each annual tax credit as specified in
subdivision (a).
   (2) Issue documentation evidencing the tax credit to the
registered owners of the Build California Bonds on each record date
and request from those registered owners the names of the beneficial
owners of the Build California Bonds on the record date, the taxpayer
identification number of each beneficial owner, and the amount of
tax credit to which each beneficial owner is entitled, and provide an
annual listing to the Franchise Tax Board, preferably in electronic
form, and in a manner agreed upon by the Franchise Tax Board, of the
responses of the registered owners.
   (3) Request each registered owner of each Build California Bond to
provide the beneficial owner or owners of that Build California Bond
with a copy of the information reported to the Franchise Tax Board
for that beneficial owner or owners.
   (e) To be eligible for the credit under this section the taxpayer
shall do all of the following:
   (1) Retain for the taxpayer's records a copy of the information
provided to the taxpayer pursuant to paragraph (3) of subdivision
(d).
   (2) Provide a copy of the information provided to the taxpayer
pursuant to paragraph (3) of subdivision (d) to the Franchise Tax
Board upon request. If the taxpayer fails to comply with the
requirements of this subdivision, no credit shall be allowed to that
taxpayer under this section for any taxable year unless the taxpayer
subsequently complies.
   (3) Provide the registered owner of the Build California Bond with
the taxpayer's taxpayer identification number.
   64146.  Build California Bonds issued under this division are not
a debt or liability of the state or of any political subdivision
thereof, except as to the authority pursuant to a financing
agreement, as described in Section 64142.
   64147.  Notwithstanding any other law, the scheduled dates for the
payment of principal of Build California Bonds issued pursuant to
this division shall not be subject to acceleration for any reason.
  SEC. 2.  Section 17053.25 is added to the Revenue and Taxation
Code, to read:
   17053.25.  There shall be allowed as a credit against the amount
of "net tax" (as defined in Section 17039) the credit provided for in
Sections 64144 and 64145 of the Government Code. The credit shall be
nonrefundable but any unused portion in any year may be carried over
to future years as provided in subdivision (b) of Section 64145 of
the Government Code.
  SEC. 3.  Section 23629 is added to the Revenue and Taxation Code,
to read:
   23629.  There shall be allowed as a credit against the "tax" (as
defined in Section 23036) the credit provided for in Sections 64144
and 64145 of the Government Code. The credit shall be nonrefundable
but any unused portion in any year may be carried over to future
years as provided in subdivision (b) of Section 64145 of the
Government Code.