BILL ANALYSIS �
AB 164
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Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 164 (Wieckowski) - As Introduced: January 23, 2013
SUBJECT : Infrastructure financing.
SUMMARY : Requires the use of performance bonds and payment
bonds in local government infrastructure projects that are
financed through public-private partnerships. Specifically,
this bill :
1)Requires public-private partnership (P3) agreements between
local government agencies and private entities for the
construction of specified infrastructure projects to include
the following:
a) Performance bonds as security to ensure completion of
the construction of the facility; and,
b) Payment bonds to secure the payment of claims of
laborers, mechanics, and materialmen employed on the work
under the contract.
2)Requires payment bonds to conform to the requirements of
current law governing payment bonds in public works projects.
EXISTING LAW :
1)Authorizes local government agencies to use P3s for specified
types of infrastructure projects, and requires P3 agreements
to contain a number of elements, including security for the
construction of the facility to ensure its completion.
2)Requires a direct contractor that is awarded a public works
contract involving an expenditure in excess of twenty-five
thousand dollars ($25,000) to, before commencement of work,
give a payment bond to and approved by the officer or public
entity by whom the contract was awarded, as specified.
FISCAL EFFECT : None
COMMENTS :
AB 164
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1)This bill requires local agency P3 agreements to include
performance bonds to ensure completion of the project and
payment bonds to secure the payment of claims of laborers,
mechanics, and materialmen employed on the project. This bill
is sponsored by the American Subcontractors Association of
California.
2)A performance bond is a surety bond issued by an insurance
company or a bank to guarantee satisfactory completion of a
project by a contractor. A payment bond is a surety bond
posted by a contractor to guarantee that sub-contractors and
material suppliers on the project will be paid.
3)According to the author's office, P3s "can make public
construction possible, especially in times of bare public
coffers. However, unlike traditional public projects, these
P3s have no bond protections to ensure contractors and
suppliers will be paid for their work. The private entity
could run out of money midway through a project and walk away,
leaving the municipality with an only partially completed
structure and subcontractors and laborers without a paycheck."
4)California's statutes governing the use of P3s by local
agencies were enacted in1996 when the legislature passed AB
2660 (Aguiar), Chapter 1040, Statutes of 1996. The law allows
local government agencies to solicit proposals and enter into
agreements with private entities for the design, construction
or reconstruction by private entities for specific types of
fee-producing infrastructure projects that could provide for
private entities to lease or operate these fee-producing
infrastructure facilities for a period of up to 35 years.
These provisions have been essentially unchanged since their
enactment.
5)Current law requires P3 agreements to include security for the
construction of the facility to ensure its completion, but
does not specify what that security is. This bill specifies
that a performance bond is required to secure the completion
of the project.
Current law requires public works contractors to provide a
payment bond on projects costing more than $25,000. This bill
imposes the same requirement on local agency P3 projects.
6)Recent attempts to alter the state's P3 statutes include:
AB 164
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a) AB 878 (Caballero, 2009) was nearly identical to AB 1261
(see below). AB 878 was referred to this Committee, but
was never heard;
b) AB 1261 (Caballero, 2007) would have made a number of
changes to local government P3 statutes, such as: extending
the allowable lease period from 35 years to 50 years;
altering the criteria local governments must use to select
a contractor; and, allowing sanitary sewer systems, power
transmission facilities, and power distribution facilities
to be constructed under P3 agreements. AB 1261 passed this
Committee on a 7-0 vote on April 18, 2007, but subsequently
died on the Senate Floor; and,
c) AB 345 (La Malfa, 2005) and AB 1520 (Niello, 2005) would
have allowed state agencies to use P3 agreements. Both
bills failed passage on April 26, 2005, in the Assembly
Business and Professions Committee.
7)This bill contains an incorrect code reference, which the
author's office has indicated will be corrected as the bill
moves forward.
8)Support arguments : Supporters argue that this bill will
protect the public and subcontractors when they invest in, or
provide materials and labor for, local agency P3
infrastructure projects.
Opposition arguments : None
REGISTERED SUPPORT / OPPOSITION :
Support
American Subcontractors Association of California [SPONSOR]
Air Conditioning Trade Association
Building Industry Credit Association
California Chapter of the National Electrical Contractors
Association
California Concrete Contractors Association
California Landscape Contractors Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
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California Precast Concrete Association
California State Association of Electrical Workers
California State Pipe Trades Council
Painting and Decorating Contractors of California
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
Western States Council of Sheet Metal Workers
Opposition
None on file
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958