Amended in Assembly April 11, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 749

Introduced by Assembly Member Gorell

February 21, 2013

An act to amend Section 143 of the Streets and Highways Code, relating to transportation.

LEGISLATIVE COUNSEL’S DIGEST

AB 749, as amended, Gorell. Public-private partnerships.

Existing law, until January 1, 2017, authorizes the Department of Transportation and regional transportation agencies, as defined, to enter into comprehensive development lease agreements with public and private entities, or consortia of those entities, for certain transportation projects that may charge certain users of those projects tolls and user fees, subject to various terms and requirements. These arrangements are commonly known as public-private partnerships. Existing law provides for the Public Infrastructure Advisory Commission, an organization established by the Business, Transportation and Housing Agency, to perform various functions relative to projects identified as suitable for development and delivery under these provisions, including the review of a proposed agreement submitted to it by the department or a regional transportation agency, and to charge a fee for certain of those functions.

This bill would begin delete delete the reference to the Public Infrastructure Advisory Commission established by the Business, Transportation and Housing Agency. The bill would instead create a new Public Infrastructure Advisory Commission, with 12 members, of which 5 would be appointed by the Governor, 3 by the Senate Committee on Rules, and 2 by the Speaker of the Assembly. In addition, the Treasurer and the Director of General Services, or their representatives, would serve on the commission. The bill would assign additional duties to the commission, including a requirement for the commission to make a determination for each agreement submitted to it relative to whether the public-private partnership procurement method is suitable for the project, or whether another procurement method should be used, as specified. This determination would be binding on the department or regional transportation agency. The bill would require the commission to establish best practices for public-private partnerships, and to identify other state departments that would benefit from similar contracting authority. The bill would authorize the commission to charge a fee for certain of these new duties. The bill would also end delete extend the operation of the provisions governing public-private partnerships from January 1, 2017, to January 1, begin delete 2019 end delete begin insert 2022 end insert begin insert . The bill would also state the intent of the Legislature for a project developed under these provisions to have specified characteristics end insert .

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.  

Section 143 of the Streets and Highways Code
is amended to read:

143.  

(a) (1) “Best value” means a value determined by
objective criteria, including, but not limited to, price, features,
functions, life-cycle costs, and other criteria deemed appropriate
by the department or the regional transportation agency.

(2) “Contracting entity or lessee” means a public or private
entity, or consortia thereof, that has entered into a comprehensive
development lease agreement with the department or a regional
transportation agency for a transportation project pursuant to this
section.

(3) “Design-build” means a procurement process in which both
the design and construction of a project are procured from a single
entity.

(4) “Regional transportation agency” means any of the
following:

(A) A transportation planning agency as defined in Section
29532 or 29532.1 of the Government Code.

(B) A county transportation commission as defined in Section
130050, 130050.1, or 130050.2 of the Public Utilities Code.

(C) Any other local or regional transportation entity that is
designated by statute as a regional transportation agency.

(D) A joint exercise of powers authority as defined in Chapter
5 (commencing with Section 6500) of Division 7 of Title 1 of the
Government Code, with the consent of a transportation planning
agency or a county transportation commission for the jurisdiction
in which the transportation project will be developed.

(5) “Public Infrastructure Advisory Commission” means begin delete the
commission created pursuant to paragraph (1) of subdivision (b) end delete
begin insert a unit or auxiliary organization established by the Business and
Transportation Agency that advises the department and regional
transportation agencies in developing transportation projects
through performance-based infrastructure partnerships end insert .

(6) “Transportation project” means one or more of the following:
planning, design, development, finance, construction,
reconstruction, rehabilitation, improvement, acquisition, lease,
operation, or maintenance of highway, public street, rail, or related
facilities supplemental to existing facilities currently owned and
operated by the department or regional transportation agencies
that is consistent with the requirements of subdivision (c).

(b) (1) The Public Infrastructure Advisory Commission begin delete is
hereby created. The commission shall have 12 members, with five
members appointed by the Governor, three members appointed
by the Senate Committee on Rules, two members appointed by
the Speaker of the Assembly, the Treasurer or his or her
representative, and the Director of General Services or his or her
representative. The members appointed by the Governor and the
Legislature shall have a broad mix of expertise related to
public-private partnerships and shall serve for four-year terms
commencing on January 1, 2014. The commission end delete shall do all of
the following:

(A) Identify transportation project opportunities begin delete through
performance-based infrastructure partnerships end delete throughout the state.

(B) Research and document similar transportation projects
throughout the state, nationally, and internationally, and further
identify and evaluate lessons learned from these projects.

(C) Assemble and make available to the department or regional
transportation agencies a library of information, precedent,
research, and analysis concerning infrastructure partnerships and
related types of public-private transactions for public infrastructure.

begin delete

(D) Develop a set of best practices for public-private partnership
projects in California that are eligible to be developed pursuant to
this section, and advise the department and regional transportation
agencies, upon request, regarding infrastructure partnership
suitability.

end delete begin insert

(D) Advise the department and regional transportation agencies,
upon request, regarding infrastructure partnership suitability and
best practices.

end insert

(E) Provide, upon request, procurement-related services to the
department and regional transportation agencies for infrastructure
partnership.

begin delete

(F) Make a determination, with respect to proposed agreements
submitted to it for review pursuant to paragraph (5) of subdivision
(c), whether a proposed project is best procured using the method
authorized by this section or by another authorized method. The
determination shall be binding on the department or regional
transportation agency. In order for the Public Infrastructure
Advisory Commission to make a determination that a project that
is the subject of a proposed agreement is suitable for the
procurement method authorized pursuant to this section, it shall
find that the project meets all of the following criteria:

(i) The project is technically complex.

(ii) The project can transfer risks from a public agency to a
private partner.

(iii) The project can benefit from nonstate financing.

(iv) The project has a revenue source.

(G) Identify state agencies other than the department that would
benefit from similar legal authority to develop partnerships to that
provided for transportation projects pursuant to this section.

end delete

(2) The Public Infrastructure Advisory Commission may charge
a fee to the department and regional transportation agencies for
the services described in subparagraphs (D) begin delete , end delete begin insert and end insert (E) begin delete , and (F) end delete of
paragraph (1), the details of which shall be articulated in an
agreement entered into between the Public Infrastructure Advisory
Commission and the department or the regional transportation
agency.

(c) (1) Notwithstanding any other provision of law, only the
department, in cooperation with regional transportation agencies,
and regional transportation agencies, may solicit proposals, accept
unsolicited proposals, negotiate, and enter into comprehensive
development lease agreements with public or private entities, or
consortia thereof, for transportation projects.

(2) Projects proposed pursuant to this section and associated
lease agreements shall be submitted to the California Transportation
Commission. The commission, at a regularly scheduled public
hearing, shall select the candidate projects from projects nominated
by the department or a regional transportation agency after
reviewing the nominations for consistency with paragraphs (3)
and (4). Approved projects may proceed with the process described
in paragraph (5).

(3) The projects authorized pursuant to this section shall be
primarily designed to achieve the following performance
objectives:

(A) Improve mobility by improving travel times or reducing
the number of vehicle hours of delay in the affected corridor.

(B) Improve the operation or safety of the affected corridor.

(C) Provide quantifiable air quality benefits for the region in
which the project is located.

(4) In addition to meeting the requirements of paragraph (3),
the projects authorized pursuant to this section shall address a
known forecast demand, as determined by the department or
regional transportation agency.

(5) At least 60 days prior to executing a final lease agreement
authorized pursuant to this section, the department or regional
transportation agency shall submit the agreement to the Legislature
and the Public Infrastructure Advisory Commission for review.
Prior to submitting a lease agreement to the Legislature and the
Public Infrastructure Advisory Commission, the department or
regional transportation agency shall conduct at least one public
hearing at a location at or near the proposed facility for purposes
of receiving public comment on the lease agreement. Public
comments made during this hearing shall be submitted to the
Legislature and the Public Infrastructure Advisory Commission
with the lease agreement. The Secretary of Business, Transportation
and Housing or the chairperson of the Senate or Assembly fiscal
committees or policy committees with jurisdiction over
transportation matters may, by written notification to the
department or regional transportation agency, provide any
comments about the proposed agreement within the 60-day period
prior to the execution of the final agreement. The department or
regional transportation agency shall consider those comments prior
to executing a final agreement and shall retain the discretion for
executing the final lease agreement.

(d) For the purpose of facilitating those projects, the agreements
between the parties may include provisions for the lease of
rights-of-way in, and airspace over or under, highways, public
streets, rail, or related facilities for the granting of necessary
easements, and for the issuance of permits or other authorizations
to enable the construction of transportation projects. Facilities
subject to an agreement under this section shall, at all times, be
owned by the department or the regional transportation agency,
as appropriate. For department projects, the commission shall
certify the department’s determination of the useful life of the
project in establishing the lease agreement terms. In consideration
therefor, the agreement shall provide for complete reversion of the
leased facility, together with the right to collect tolls and user fees,
to the department or regional transportation agency, at the
expiration of the lease at no charge to the department or regional
transportation agency. At the time of the reversion, the facility
shall be delivered to the department or regional transportation
agency, as applicable, in a condition that meets the performance
and maintenance standards established by the department or
regional transportation agency and that is free of any encumbrance,
lien, or other claims.

(e) Agreements between the department or regional
transportation agency and the contracting entity or lessee shall
authorize the contracting entity or lessee to use a design-build
method of procurement for transportation projects, subject to the
requirements for utilizing such a method contained in Chapter 6.5
(commencing with Section 6800) of Part 1 of Division 2 of the
Public Contract Code, other than Sections 6802, 6803, and 6813
of that code.

(f) (1) (A) Notwithstanding any other provision of this chapter,
for projects on the state highway system, the department is the
responsible agency for the performance of project development
services, including performance specifications, preliminary
engineering, prebid services, the preparation of project reports and
environmental documents, and construction inspection services.
The department is also the responsible agency for the preparation
of documents that may include, but need not be limited to, the size,
type, and desired design character of the project, performance
specifications covering the quality of materials, equipment, and
workmanship, preliminary plans, and any other information deemed
necessary to describe adequately the needs of the department or
regional transportation agency.

(B) The department may use department employees or
consultants to perform the services described in subparagraph (A),
consistent with Article XXII of the California Constitution.
Department resources, including personnel requirements, necessary
for the performance of those services shall be included in the
department’s capital outlay support program for workload purposes
in the annual Budget Act.

(2) The department or a regional transportation agency may
exercise any power possessed by it with respect to transportation
projects to facilitate the transportation projects pursuant to this
section. The department, regional transportation agency, and other
state or local agencies may provide services to the contracting
entity or lessee for which the public entity is reimbursed, including,
but not limited to, planning, environmental planning, environmental
certification, environmental review, preliminary design, design,
right-of-way acquisition, construction, maintenance, and policing
of these transportation projects. The department or regional
transportation agency, as applicable, shall regularly inspect the
facility and require the contracting entity or lessee to maintain and
operate the facility according to adopted standards. Except as may
otherwise be set forth in the lease agreement, the contracting entity
or lessee shall be responsible for all costs due to development,
maintenance, repair, rehabilitation, and reconstruction, and
operating costs.

(g) (1) In selecting private entities with which to enter into
these agreements, notwithstanding any other provision of law, the
department and regional transportation agencies may utilize, but
are not limited to utilizing, one or more of the following
procurement approaches:

(A) Solicitations of proposals for defined projects and calls for
project proposals within defined parameters.

(B) Prequalification and short-listing of proposers prior to final
evaluation of proposals.

(C) Final evaluation of proposals based on qualifications and
best value. The California Transportation Commission shall
develop and adopt criteria for making that evaluation prior to
evaluation of a proposal.

(D) Negotiations with proposers prior to award.

(E) Acceptance of unsolicited proposals, with issuance of
requests for competing proposals. Neither the department nor a
regional transportation agency may award a contract to an
unsolicited bidder without receiving at least one other responsible
bid.

(2) When evaluating a proposal submitted by the contracting
entity or lessee, the department or the regional transportation
agency may award a contract on the basis of the lowest bid or best
value.

(h) The contracting entity or lessee shall have the following
qualifications:

(1) Evidence that the members of the contracting entity or lessee
have completed, or have demonstrated the experience, competency,
capability, and capacity to complete, a project of similar size,
scope, or complexity, and that proposed key personnel have
sufficient experience and training to competently manage and
complete the design and construction of the project, and a financial
statement that ensures that the contracting entity or lessee has the
capacity to complete the project.

(2) The licenses, registration, and credentials required to design
and construct the project, including, but not limited to, information
on the revocation or suspension of any license, credential, or
registration.

(3) Evidence that establishes that members of the contracting
entity or lessee have the capacity to obtain all required payment
and performance bonding, liability insurance, and errors and
omissions insurance.

(4) Evidence that the contracting entity or lessee has workers’
compensation experience, history, and a worker safety program
of members of the contracting entity or lessee that is acceptable
to the department or regional transportation agency.

(5) A full disclosure regarding all of the following with respect
to each member of the contracting entity or lessee during the past
five years:

(A) Any serious or willful violation of Part 1 (commencing with
Section 6300) of Division 5 of the Labor Code or the federal
Occupational Safety and Health Act of 1970 (P.L. 91-596).

(B) Any instance where members of the contracting entity or
lessee were debarred, disqualified, or removed from a federal,
state, or local government public works project.

(C) Any instance where members of the contracting entity or
lessee, or its owners, officers, or managing employees submitted
a bid on a public works project and were found to be nonresponsive
or were found by an awarding body not to be a responsible bidder.

(D) Any instance where members of the contracting entity or
lessee, or its owners, officers, or managing employees defaulted
on a construction contract.

(E) Any violations of the Contractors’ State License Law
(Chapter 9 (commencing with Section 7000) of Division 3 of the
Business and Professions Code), including, but not limited to,
alleged violations of federal or state law regarding the payment of
wages, benefits, apprenticeship requirements, or personal income
tax withholding, or Federal Insurance Contributions Act (FICA)
withholding requirements.

(F) Any bankruptcy or receivership of any member of the
contracting entity or lessee, including, but not limited to,
information concerning any work completed by a surety.

(G) Any settled adverse claims, disputes, or lawsuits between
the owner of a public works project and any member of the
contracting entity or lessee during the five years preceding
submission of a bid under this article, in which the claim,
settlement, or judgment exceeds fifty thousand dollars ($50,000).
Information shall also be provided concerning any work completed
by a surety during this five-year period.

(H) If the contracting entity or lessee is a partnership, joint
venture, or an association that is not a legal entity, a copy of the
agreement creating the partnership or association that specifies
that all general partners, joint venturers, or association members
agree to be fully liable for the performance under the agreement.

(i) No agreement entered into pursuant to this section shall
infringe on the authority of the department or a regional
transportation agency to develop, maintain, repair, rehabilitate,
operate, or lease any transportation project. Lease agreements may
provide for reasonable compensation to the contracting entity or
lessee for the adverse effects on toll revenue or user fee revenue
due to the development, operation, or lease of supplemental
transportation projects with the exception of any of the following:

(1) Projects identified in regional transportation plans prepared
pursuant to Section 65080 of the Government Code.

(2) Safety projects.

(3) Improvement projects that will result in incidental capacity
increases.

(4) Additional high-occupancy vehicle lanes or the conversion
of existing lanes to high-occupancy vehicle lanes.

(5) Projects located outside the boundaries of a public-private
partnership project, to be defined by the lease agreement.

However, compensation to a contracting entity or lessee shall
only be made after a demonstrable reduction in use of the facility
resulting in reduced toll or user fee revenues, and may not exceed
the difference between the reduction in those revenues and the
amount necessary to cover the costs of debt service, including
principal and interest on any debt incurred for the development,
operation, maintenance, or rehabilitation of the facility.

(j) (1) Agreements entered into pursuant to this section shall
authorize the contracting entity or lessee to impose tolls and user
fees for use of a facility constructed by it, and shall require that
over the term of the lease the toll revenues and user fees be applied
to payment of the capital outlay costs for the project, the costs
associated with operations, toll and user fee collection,
administration of the facility, reimbursement to the department or
other governmental entity for the costs of services to develop and
maintain the project, police services, and a reasonable return on
investment. The agreement shall require that, notwithstanding
Sections 164, 188, and 188.1, any excess toll or user fee revenue
either be applied to any indebtedness incurred by the contracting
entity or lessee with respect to the project, improvements to the
project, or be paid into the State Highway Account, or for all three
purposes, except that any excess toll revenue under a lease
agreement with a regional transportation agency may be paid to
the regional transportation agency for use in improving public
transportation in and near the project boundaries.

(2) Lease agreements shall establish specific toll or user fee
rates. Any proposed increase in those rates not otherwise
established or identified in the lease agreement during the term of
the agreement shall first be approved by the department or regional
transportation agency, as appropriate, after at least one public
hearing conducted at a location near the proposed or existing
facility.

(3) The collection of tolls and user fees for the use of these
facilities may be extended by the commission or regional
transportation agency at the expiration of the lease agreement.
However, those tolls or user fees shall not be used for any purpose
other than for the improvement, continued operation, or
maintenance of the facility.

(k) Agreements entered into pursuant to this section shall include
indemnity, defense, and hold harmless provisions agreed to by the
department or regional transportation agency and the contracting
entity or lessee, including provisions for indemnifying the State
of California or the regional transportation agency against any
claims or losses resulting or accruing from the performance of the
contracting entity or lessee.

(l) The plans and specifications for each transportation project
on the state highway system developed, maintained, repaired,
rehabilitated, reconstructed, or operated pursuant to this section
shall comply with the department’s standards for state
transportation projects. The lease agreement shall include
performance standards, including, but not limited to, levels of
service. The agreement shall require facilities on the state highway
system to meet all requirements for noise mitigation, landscaping,
pollution control, and safety that otherwise would apply if the
department were designing, building, and operating the facility.
If a facility is on the state highway system, the facility leased
pursuant to this section shall, during the term of the lease, be
deemed to be a part of the state highway system for purposes of
identification, maintenance, enforcement of traffic laws, and for
the purposes of Division 3.6 (commencing with Section 810) of
Title 1 of the Government Code.

(m) Failure to comply with the lease agreement in any significant
manner shall constitute a default under the agreement and the
department or the regional transportation agency, as appropriate,
shall have the option to initiate processes to revert the facility to
the public agency.

(n) The assignment authorized by subdivision (c) of Section
130240 of the Public Utilities Code is consistent with this section.

(o) A lease to a private entity pursuant to this section is deemed
to be public property for a public purpose and exempt from
leasehold, real property, and ad valorem taxation, except for the
use, if any, of that property for ancillary commercial purposes.

(p) Nothing in this section is intended to infringe on the authority
to develop high-occupancy toll lanes pursuant to Section 149.4,
149.5, or 149.6.

(q) Nothing in this section shall be construed to allow the
conversion of any existing nontoll or nonuser-fee lanes into tolled
or user fee lanes with the exception of a high-occupancy vehicle
lane that may be operated as a high-occupancy toll lane for vehicles
not otherwise meeting the requirements for use of that lane.

(r) The lease agreement shall require the contracting entity or
lessee to provide any information or data requested by the
California Transportation Commission or the Legislative Analyst.
The commission, in cooperation with the Legislative Analyst, shall
annually prepare a report on the progress of each project and
ultimately on the operation of the resulting facility. The report
shall include, but not be limited to, a review of the performance
standards, a financial analysis, and any concerns or
recommendations for changes in the program authorized by this
section.

(s) Notwithstanding any other provision of this section, no lease
agreement may be entered into pursuant to the section that affects,
alters, or supersedes the Memorandum of Understanding (MOU),
dated November 26, 2008, entered into by the Golden Gate Bridge
Highway and Transportation District, the Metropolitan
Transportation Commission, and the San Francisco County
Transportation Authority, relating to the financing of the U.S.
Highway 101/Doyle Drive reconstruction project located in the
City and County of San Francisco.

(t) No lease agreements may be entered into under this section
on or after January 1, begin delete 2019 end delete begin insert 2022 end insert .

begin insert

(u) It is the intent of the Legislature that a project developed
under this section should have the following characteristics:

end insert begin insert

(1) A revenue source.

end insert begin insert

(2) The purpose of constructing additional capacity for the
transportation system.

end insert begin insert

(3) To the extent the project is proposed solely by a regional
transportation agency and does not involve the use of any state
funds, the proposing regional transportation agency and its private
sector partners should be entirely responsible for the risks
associated with the project, and the state should be protected from
any liability associated with the project.

end insert