BILL ANALYSIS Ó
AB 749
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Date of Hearing: April 29, 2013
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 749 (Gorell) - As Amended: April 11, 2013
SUBJECT : Public-private partnership agreements for
transportation
SUMMARY : Extends the sunset date on provisions that authorize
public-private partnership (P3s) agreements for transportation;
sets forth legislative intent that P3 projects have the
following characteristics:
1)Projects should have revenue sources;
2)Projects should be for the purpose of constructing additional
capacity for the transportation system; and,
3)For projects that are regionally sponsored and funded without
state funds, project risks and liability should be borne
entirely by the regional transportation agency and its P3
partner.
EXISTING LAW :
1)Until January 1, 2017, grants the California Department of
Transportation (Caltrans) and regional transportation
agencies, as defined, authority to enter into P3
agreements--that is, comprehensive development lease
agreements with public or private entities, or consortia
thereof, under the following conditions:
a) The California Transportation Commission (CTC) must
review and approve proposed P3 projects;
b) Proposed projects must be primarily designed to improve
mobility, improve the operations or safety of the affected
corridor, and provide quantifiable air quality benefits;
and,
c) Proposed projects must also address known forecast
demands.
2)Prescribes the review and approval process for proposed P3
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agreements.
3)For projects on the state highway system, requires Caltrans to
be the responsible agency for project development work,
including the development of performance specifications,
preliminary engineering, prebid services, environmental
documents, and construction inspection services; authorizes
Caltrans to do the work using in-house employees or
contractors.
4)Requires all P3 agreements to authorize the use of tolls and
user fees for the use of the facility being constructed.
FISCAL EFFECT : Unknown
COMMENTS : California's first venture into P3s for
transportation was with AB 680 (Baker), Chapter 107, Statutes of
1989, which authorized Caltrans to enter into P3 agreements for
up to four projects. Under this authorization, as well as that
provided in related follow-up legislation, Caltrans built ten
miles of tolled express lanes in the median of the existing
State Route (SR) 91 in Orange County. In addition, the
department built SR 125 in San Diego County that connects the
area near the Otay Mesa border crossing with the state highway
system. For each project, Caltrans used a single contract with
a private partner to design, construct, finance, operate, and
maintain the facility.
In 2009, authority to enter into P3 agreements for
transportation was expanded. Specifically, SB 2X 4, (Cogdill),
Chapter 2, Statutes of 2009, authorized Caltrans and regional
transportation agencies to enter into an unlimited number of P3
agreements for a broad range of highway, road, and transit
projects, through December 31, 2016. In January 2011, Caltrans
entered into its first P3 under this new authority for the
Presidio Parkway project. This particular P3 requires the
private partner to complete the second phase of the design and
reconstruction of the southern approach to the Golden Gate
Bridge and to operate and maintain the roadway for 30 years. In
exchange, the state will make payments estimated to total
roughly $1.1 billion to the private partner over the life of the
contract.
In a recent report entitled "Maximizing State Benefits from
Public-Private Partnership," the Legislative Analyst's Office
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(LAO) examined the two state infrastructure projects undertaken
in recent years using P3 agreements, one of them being the
Presidio Parkway project which used the authority granted under
SB 2X 4. In this examination, the LAO cites a number of
potential benefits of successful P3 agreements, including:
1)They can transfer project risks to the private partner;
2)They may provide greater price and schedule certainty;
3)They allow for more innovative design and construction
techniques;
4)They can free up public funds for other purposes;
5)They can provide quicker access to project financing; and,
6)They can provide a higher level of maintenance than might
otherwise be provided.
The LAO also, noted, however, that P3 agreements are not without
their potential drawbacks, including:
1)Increased financing costs;
2)Greater possibility of unforeseen challenges (due primarily to
the extended time periods involved in P3 agreements);
3)Limits to government's flexibility;
4)Greater risks due to more complex procurement processes; and,
5)Fewer bidders.
The CTC also recently reflected on the state's use of P3s,
notably its experience with the Presidio Parkway Project. In
its 2012 annual report to the Legislature, the CTC noted that
the existing process for approving P3s, as set forth in SB 2X 4,
lacks clarity and creates uncertainty that may lead to
diminished interest by private and public sectors in pursuing
additional P3 projects. The CTC recommended that the
Legislature and the Administration should, among other things,
provide a clearer understanding of which projects are
appropriate for P3s and which are not and whether P3 projects
should be limited to those that generate new revenue, either
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through a toll or some other user fee.
(In the process of approving the Presidio Parkway project, the
lack of clarity with regard to whether the project was required
to include tolls or not was the subject of multiple conflicting
legal opinions. Ultimately, the court ruled that the project
was eligible as a P3 project despite the fact that it did not
include tolls.)
With this bill, the author seeks to encourage the use of P3s by
extending the sunset date for provisions that grant authority to
Caltrans and to others to enter into P3s for transportation
projects. Furthermore, the author seeks to provide some of the
clarity the CTC recommends by specifying that P3 projects have
to have a revenue source, must be capacity-adding projects, and,
for non-state projects, must appropriately transfer risk to a
regional transportation agency and its private partner.
Writing in opposition to AB 749, the Professional Engineers in
California Government (PECG) asserts that there is ample
evidence that P3s are a failure for California taxpayers. They
cite the Presidio Parkway project as an example of such a
failure, citing that project used $1 billion in "availability
payments" as an alternative to tolling--$1 billion that will
come out of the State Highway Account and would have otherwise
been available for transportation projects statewide.
PECG also takes umbrage with what it characterizes as the
court's "tortured legal opinion" regarding provisions in SB 2X 4
that required Caltrans to be the responsible agency for, among
other things, construction inspection. The court ultimately
opined that Caltrans fulfilled this requirement not by doing the
work but simply by virtue of its oversight role as owner of the
state highway system. PECG asserts that this misreading of the
statute should be rectified before additional authorities are
granted.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
AB 749
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Professional Engineers in State Government
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093