BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 730
                                                                  Page  1

          Date of Hearing:  May 8, 2013

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                           K.H. "Katcho" Achadjian, Chair
                     AB 730 (Alejo) - As Amended:  April 1, 2013
           
          SUBJECT  :  Monterey-Salinas Transit District.

           SUMMARY  :  Expands the Monterey-Salinas Transit District's  
          authority to issue revenue bonds.  Specifically,  this bill  :  

          1)Authorizes the Monterey-Salinas Transit District (MST) to  
            issue revenue bonds by a two-thirds vote of the governing  
            board thereby deleting the provisions in statute that require  
            a vote of the electorate.  

          2)Limits the bond issuance to $50,000,000, payable in whole or  
            in part from revenues of any enterprise acquired, constructed,  
            or completed, or to be acquired, constructed, or completed by  
            MST.  

          3)Limits the use of revenue bonds to a project or projects not  
            located on or adjacent to the former Fort Ord, with the  
            exception of a project or projects located entirely within the  
            existing right of way of State Highway Route 1 owned by the  
            Department of Transportation (Caltrans) or within the existing  
            right of way of the Monterey branch rail line, owned by the  
            Monterey County Transportation Agency.  

          4)Makes changes to the definition of "enterprise" to expand the  
            use of revenue bonds to include transit equipment, including  
            vehicles.  

          5)Deems as revenue, for the purposes of the Revenue Bond Law of  
            1941, any revenues or other income, receipts, or amounts made  
            available to MST, including, but not limited to, the proceeds  
            of a transactions and use tax imposed under specified  
            provisions of existing law.  

          6)Makes technical and clarifying changes.

           EXISTING LAW  :

          1)Establishes the Revenue Bond Law of 1941.  









                                                                  AB 730
                                                                  Page  2

          2)Establishes MST with specified powers and duties relative to  
            providing transit services in the Monterey region.  

          3)Authorizes MST to issue revenue bonds under the Revenue Bond  
            Law of 1941, payable from revenue of any enterprise including  
            facilities of MST.  

          4)Authorizes MST to temporarily borrow money in accordance with  
            various provisions of the Government Code applicable to local  
            agencies.  

           FISCAL EFFECT  :  None

           COMMENTS  :   

          1)AB 644 (Caballero), Chapter 460, Statutes of 2009, transformed  
            the MST joint powers authority into a transit district, and  
            authorized MST to issue revenue bonds under the Revenue Bond  
            Law of 1941, which establishes uniform procedures for public  
            agencies in California to use when issuing revenue bonds,  
            including the requirement for a two-thirds vote of the  
            electorate within the district's area of jurisdiction to issue  
            bonds.  Revenue bonds are long-term debt instruments that are  
            designed to be self-supported using earnings from the  
            operations of a revenue-producing enterprise to repay debt.  

          2)This bill seeks to expand MST's Enabling Act.  The bill  
            authorizes MST to issue revenue bonds with a two-thirds vote  
            of their governing board, thereby, foregoing the need to have  
            a vote of the electorate, as is currently required.  The bill  
            limits the bond amount to no more than $50,000,000.  The bill  
            expands current law which authorizes MST to issue revenue  
            bonds payable from revenue of any enterprise (meaning transit  
            facilities) to also include revenue of equipment, including  
            vehicles.  This bill also limits the use of revenue bonds to a  
            project not located on or adjacent to the former Fort Ord,  
            except when a project is located entirely within the existing  
            right of way of State Highway 1 owned by Caltrans or within  
            the existing right of way of the Monterey branch rail line  
            owned by the Monterey County Transportation Agency.  The bill  
            expands what can be deemed as "revenue" for purposes of the  
            Revenue Bond Law of 1941, in order to include other revenues  
            for income, receipts, or amounts made available to MST,  
            including proceeds from a transactions and use tax.  This bill  
            is sponsored by MST.  








                                                                  AB 730
                                                                  Page  3


          3)According to the author, "Monterey County does not have a  
            local sales tax dedicated to public transit purposes and, as a  
            result, MST receives far less local tax support and is more  
            dependent upon state and federal sources than its peers.  MST  
            maintenance facilities are 35 years-old, 50% over their  
            original design capacities and in need of upgrade or  
            replacement in order to meet growing demands for transit  
            within the community.  Additionally, of MST's full-sized bus  
            fleet of 80 vehicles, one-third are operating beyond their  
            federally-designated 'useful life' resulting in higher  
            maintenance costs, lower fuel efficiency, and decreased  
            reliability."  

          4)This bill removes the current requirement of a two-thirds  
            approval by the voters for MST to issue bonds.  The sponsor  
            argues that the "general public is not paying back the bond.   
            The funds used to pay back the bonds are, in essence, the  
            fares collected only from the users of the buses and  
            facilities.  In a traditional sales-tax guaranteed bond  
            issuance, all voters would be paying back the bonds through  
            every purchase they make over the life of the tax so it makes  
            sense that all voters should have a say in what they are  
            voting for."  Additionally, the author and sponsor point to  
            the several other transit districts the Legislature has  
            granted the authority to issue revenue bonds with a two-thirds  
            vote of the board and without a vote of the electorate, most  
            recently to the Sacramento Regional Transit District [AB 1143  
            (Dickinson), Chapter 537, Statutes of 2011].  

          5)This bill is substantially similar to AB 1143 (Dickinson)  
            which also deemed as revenue income, receipts, or other  
            amounts available including proceeds from a transactions and  
            use tax for the purposes of Revenue Bond Law.  However, the  
            Sacramento Regional Transit District has a transactions and  
            use tax.  MST does not.  Given this language, the Committee  
            may wish to ask the sponsor if they plan to place a  
            transactions and use tax on the ballot.  
          6)According to  The California Municipal Revenue Sources Handbook  
             compiled by the League of California Cities, "Revenue bonds  
            are designed to finance facilitates that provide benefits to a  
            group of readily identifiable users.  They are secured  
            primarily by a pledge and lien on gross or net revenue  
            received from the operation of the project.  The credit is  
            strongest if the issuer is a monopoly provider of the service,  








                                                                  AB 730
                                                                  Page  4

            the customer base is large and the service is of high  
            essentiality."  This bill also seeks to use revenue from bus  
            fares to repay bond debt.  The Committee may wish to note that  
            addition is unique to the definition of "enterprise" as  
            defined by current law.  Although some sources of revenue bond  
            repayment include leases, service charges, or admission fees  
            generally that revenue is from projects like buildings,  
            housing, or freeway interchanges.  

          7)The Committee may wish to note that MST has not gone to the  
            voters to exercise the authority currently granted to them by  
            AB 644 (Caballero).  An April 29, 2009, analysis of AB 644 by  
            this Committee stated the following:

            "This bill transforms the MST JPA into a transit district  
            which will give MST the flexibility that it currently lacks to  
            ask the voters of Monterey County to approve a continuous  
            local funding source for public transit services. Moreover,  
            this bill will also allow the District to have bonding  
            capabilities. As a JPA, MST has secured financing in the  
            private markets to fund its bus replacement program. While MST  
            has received competitive rates from the private markets, it is  
            possible that interest rates would be even lower through bond  
            financing."

            The sponsor argues, "The taxing authority provided in AB 644  
            was contemplated to be used for long-term sales tax  
            initiatives to fund ongoing operations and large-scale capital  
            infrastructure projects.  Typically MST equipment replacement  
            needs between five million to twenty-five million for  
            equipment and facility related procurements.  The cost of  
            placing a measure on the ballot for these smaller types of  
            procurement would be inefficient as any saving generated by  
            lower interest rates garnered through a public bond sale  
            versus private financing would not offset the costs needed to  
            finance an election and pay the county elections office to put  
            it on the ballot."

           8)Support arguments  :  Supporters argue this bill expands the  
            financing tools available to MST to be consistent with the  
            authority of numerous other districts in California to allow  
            MST to purchase much needed transit buses and build transit,  
            maintenance, and other facilitates to address outdated and  
            over-capacity buildings. 









                                                                  AB 730
                                                                  Page  5

             Opposition arguments  :  Opposition may argue while this bill  
            gives additional flexibility to MST and MST's ability to issue  
            revenue bonds, it does, however, remove the current  
            requirement for the electorate to approve the issuance of  
            those bonds.  

          9)This bill was heard in the Transportation Committee on April  
            8, 2013, and passed with a 10-6 vote. 







           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Monterey-Salinas Transit [SPONSOR]
          City of Salinas
          Fort Ord Reuse Authority
          Monterey County Board of Supervisors
          Monterey County Transportation Agency

           Opposition 
           
          None on file
           
          Analysis Prepared by :    Misa Yokoi-Shelton / L. GOV. / (916)  
          319-3958