BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SB 907 HEARING: 4/27/11 AUTHOR: Evans FISCAL: Yes VERSION: 4/25/11 TAX LEVY: No CONSULTANT: Detwiler MASTER PLAN FOR INFRASTRUCTURE FINANCING AND DEVELOPMENT COMMISSION Creates a temporary state commission to study infrastructure needs. Background and Existing Law Nearly a decade ago, the Legislature adopted three state planning priorities: Promote infill development and equity. Protect environmental and agricultural resources. Encourage efficient development patterns. These statutory priorities guide the state government's actions relating to land use planning and infrastructure spending (AB 857, Wiggins, 2002). Every four years, the Governor must prepare a State Environmental Goals and Policy Report which looks at state growth and development over the next 20 to 30 years and includes approved environmental goals and policies. The Governor's Office of Planning and Research (OPR) prepares the report, the Governor sends it to the Legislature for review, the Legislature can study the report, and the Governor must consider the Legislature's advice before approving it (AB 2070, Assembly Select Committee on Environmental Quality, 1970). Starting in 2004, revisions to the Environmental Goals and Policy Report must be consistent with the state planning priorities adopted in 2002. The last Environmental Goals and Policy Report that a Governor approved was An Urban Strategy for California (1978). State law intends the Governor's Environmental Goals and Policy Report to be a "clear framework" for statewide functional plans and capital spending. A 1992 OPR study, Statewide Plan Coordination in California, identified over SB 907 -- 4/25/11 -- Page 2 two dozen state functional plans that affect growth management, including plans for coastal resources (California Coastal Commission), energy supplies (California Energy Commission), housing (Department of Housing and Community Development), transportation (Department of Transportation), and water resources (Department of Water Resources), among others. As part of the annual state budget proposal, the Governor must submit a five-year infrastructure plan to the Legislature. This annual, five-year plan must identify: Infrastructure projects requested by state agencies. Transportation projects identified in the State Transportation Improvement Program. K-12 school infrastructure needs. Higher education facility needs. The plan must estimate the costs of those infrastructure projects. The plan must also identify the criteria and priorities for funding infrastructure, funding sources, the effect on the state government's debt position, and recommend specific projects for funding and capital outlay appropriations (AB 1473, Hertzberg, 1999). The criteria for selecting state agencies' infrastructure projects must be consistent with the state planning priorities adopted in 2002. The State Department of Finance issued the California Five-Year Infrastructure Plan in 2002, 2003, 2006, 2007, and 2008. The Department intends to issue a new five-year plan in January 2012. Governor Schwarzenegger issued the California Strategic Growth Plan in 2007 and 2008, laying out the state's infrastructure requirements for the next two decades. The 2008 edition proposed $48.1 billion in general obligation bonds and $2.3 billion in lease-revenue bonds to cover projects through 2016. The U.S. Census counted 37.3 million Californians in April 2010. According to a projection prepared by the State Department of Finance in 2007, the state may reach almost 60 million residents by 2050. Not only will California's population grow, it will also see demographic changes involving aging, immigration, race, and ethnicity. Settlement patterns may also change as established communities become denser. By any measure, Californians will need more housing and the public works that serve SB 907 -- 4/25/11 -- Page 3 them. Proposed Law Senate Bill 907 creates the 11-member Master Plan for Infrastructure Financing and Development Commission. By December 1, 2013, the Commission must submit a final report to the Governor and the Legislature which contains a long-term plan and strategy for the state's infrastructure needs and a prioritized plan to meet those needs. The Commission must also submit periodic progress reports. The Commission dissolves 30 days after it issues its final report. Further, the bill's provisions automatically terminate when the Commission dissolves, unless legislators extend the date. SB 907 -- 4/25/11 -- Page 4 The Commission's plan must: Project population, social, and economic trends through 2050. Identify the type and distribution of infrastructure needed through 2050. Incorporate the findings of existing state infrastructure plans and reports. Assess the state's capital needs for infrastructure projects through 2050, including private capital and public financing. Assess the availability of private and public funds for joint projects through 2050. Recommend a financing plan for capital needs through 2050, by five-year intervals, along with feasible financing methods. The Commission must recommend a method to track the state's infrastructure progress and periodically reassess the master plan. The Commission's final report must contain a plan that identifies the types, distribution, and priority for developing infrastructure projects through 2050, and a measureable process to implement this plan. The plan must also include a process to periodically adjust these projects to meet changing circumstances. When developing its recommendations, the Commission must use existing state and local reports on infrastructure needs. SB 907 specifically lists: The Governor's annual, five-year infrastructure plan. The State Environmental Goals and Policy Report. The California Transportation Plan. The sustainable communities strategies. Greenhouse gas emissions reduction planning. The California Water Plan. The Commission consists of: The State Treasurer or a designee with a public finance background. Six members appointed by the Governor: o A representative from organized labor. o A representative from a statewide business organization. o A public member. SB 907 -- 4/25/11 -- Page 5 o A state agency or department director. o A member with large-scale public works financing expertise. o An economist accomplished in interpreting the state's economy. Two members appointed by the Assembly Speaker: o A member with transportation expertise. o A member with natural resources and conservation expertise. Two members appointed by the Senate Rules Committee: o A member with education infrastructure financing expertise. o A member with housing, urban planning, or financing expertise. The Governor appoints the Commission's chair who serves full-time at an unspecified salary. The Commission's vice chair is the State Treasurer (or designee). The other Commissioner members may receive a per diem of $50, not to exceed $300 a month, plus travel and other expenses. The Commission's chair appoints the executive director who receives an unspecified salary. The executive officer must examine ways to borrow staff from state and local governments and private nonprofit organizations, subject to the Commission's approval and direction. The Commission can ask experts for help. The Commission may delegate contracting authority to its staff, subject to relevant state law. SB 907 requires the Commission's products to incorporate opportunity for public comment and participation. The Commission's chair must appoint at least five task force committees to assess, inventory, and report on long-term needs and financing alternatives: Planning and financing. Transportation. Housing. Natural resources and conservation. Education. A Commission member may chair each task force committee which must also include topical experts and representatives of industry and trade groups. The chair of each task force committee must develop a work plan with deadlines, and convene meetings. Each task force committee's chair must SB 907 -- 4/25/11 -- Page 6 present its findings to the Commission. SB 907 becomes operative only if the Legislature appropriates funds through the Budget Act to support the Commission. The bill declares that the Legislature will appropriate funds for the Commission's operating costs. The bill indicates that funds will be appropriated from the existing California Debt and Investment Advisory Commission fund. The bill contains five legislative findings and declarations regarding California's population growth and the need to plan for infrastructure. State Revenue Impact No estimate. Comments 1. Purpose of the bill . The early 20th Century architect and urban planner Daniel Burnham admonished his colleagues, Make no little plans. They have no magic to stir men's blood and probably will not themselves be realized. Grand societies need grand plans to stimulate public support, gather financial resources, and motivate political commitment. The Commission created by SB 907 will focus on the demographic changes that Californians must embrace by 2050, translating long-range infrastructure needs into feasible implementation programs over five-year intervals. By blending executive branch participants with four legislative appointees -- along with public participation and vigorous efforts by broadly based task forces -- the bill brings the affected parties together in ways that the previous infrastructure planning exercises have not. A century after Californians endorsed Governor Hiram Johnson's Progressive principles, it's time again to challenge the experts to help state government get ready for the future. 2. Just do it ! State planning priorities guide state officials' land use and infrastructure planning. The State Environmental Goals and Policy Report is the Governor's quadrennial duty to look ahead 20 to 30 years. Scores of SB 907 -- 4/25/11 -- Page 7 state agencies and departments have their own long-term statewide functional plans. The Strategic Growth Plan lays out the state's public works funding scheme until 2016. The Governor's California Five-Year Infrastructure Plans annually links public works funding to State Budget spending. If California doesn't lack from statewide planning for public works, what's the need for another state commission and another statewide infrastructure plan? What the state government needs is long-term leadership that's committed to turning these existing plans into political and fiscal realities. Constitutional officers like the Governor and State Treasurer have the resources and powers to accomplish that goal without a bill. One quick executive order can galvanize state departments into action. 3. Long horizon, short deadline . SB 907 charges the new Commission to look forward, in five-year intervals, to the state's needs in 2050, reporting by December 1, 2013. The Commission must reach for that 37-year time horizon in just 23 months. Between the bill's effective date of January 1, 2012 and the Commission's dissolution by December 31, 2013, that's a lot of work for a part-time Commission and its multiple task force committees. If the commissioners want their task force committees to generate new demographic, fiscal, and infrastructure research, and then engage the wider public, they may not have enough time. However, if the Commission's executive director and borrowed staff rely on current studies, reports, and recommendations, they can probably help the task force committees sort through the existing information and still meet the statutory deadline. The Committee may wish to consider whether SB 907 gives the new Commission enough time to fulfill the bill's ambitious goals. 4. Fill in the blanks . The new Commission's stars are its full-time chair and full-time executive director. The other commissioners, task force committees, and borrowed staff play supporting roles. SB 907 provides modest per diem payments and expenses for the other commissioners. The Commission's chair and executive director will receive salaries, although the bill does not say how much. The Committee may wish to consider amendments that either fill in those blanks or remove them, leaving the salary decisions up to the Commission itself. The Legislature retains budgetary control because it appropriates the SB 907 -- 4/25/11 -- Page 8 operating funds. 5. Legislative history . SB 907 is similar to AB 2579 (Evans, 2010) which died in the Assembly Appropriations Committee. Support and Opposition (4/21/11) Support : State Treasurer Bill Lockyer; American Council of Engineering Companies; American Society of Civil Engineers-Region 9; Associated General Contractors of California Chapters; California Alliance for Jobs; California's Coalition for Adequate School Housing; California Tax Reform Association; Engineering & Utility Contractors Association; Transportation California; Self-Help Counties Coalition. Opposition : Unknown.