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.
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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.
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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,
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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.
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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