BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2395
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          Date of Hearing:  April 23, 2014

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                           K.H. "Katcho" Achadjian, Chair
                  AB 2395 (Lowenthal) - As Amended:  April 10, 2014
           
          SUBJECT  :  Oxnard Harbor District: infrastructure projects:   
          funding.

           SUMMARY  :  Raises, for the Oxnard Harbor District (District), the  
          amount it can borrow and incur indebtedness from $1 million to  
          15% of the District's total assets.  Specifically,  this bill  :  

          1)Prohibits the District from borrowing an amount over 15% of  
            its total assets, as determined based on the estimated values  
            of the assets included in the Port of Hueneme Comprehensive  
            Annual Financial Report (CAFR).  

          2)Requires the District, prior to commencing any action to  
            borrow funds, to conduct a public hearing to consider the  
            proposed borrowing.  

          3)Prohibits the District from borrowing any funds unless the  
            proposed borrowing is approved by a two-thirds vote of the  
            board.  

          4)Authorizes the District to expend any funds made available by  
            borrowing pursuant to 1), above, for the acquisition of any  
            interest in lands pursuant to current law, for the  
            acquisition, construction, development, ownership, and leasing  
            of port facilities, infrastructure and, other projects,  
            including, but not limited to, harbor deepening, and for any  
            other buildings, plants, equipment, aids, facilities, and  
            improvements necessary for, or incident to, the accommodation  
            and promotion of commerce and fisheries in the District.  

          5)Authorizes the District to borrow money and incur indebtedness  
            and to accept financial or other assistance from the state or  
            federal government.  

          6)Finds and declares that the District owns and operates the  
            Port of Hueneme (Port), and that the District needs to finance  
            several significant infrastructure projects over the next  
            several decades to expand the limited capacity of the port.  









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          7)Finds and declares that the existing one million dollar limit  
            on the borrowing of money impedes the District's ability to  
            develop the infrastructure and systems necessary to continue  
            the development of the Port to expand the Port's limited  
            capacity and meet anticipated demands.  

          8)Finds and declares that the District does not levy, or expend  
            funds generated by local taxes as most of its operations are  
            funded directly through fees and other revenue that the port  
            generates from its users or tenants, and from occasional state  
            and federal grants.  

          9)Makes other findings and declarations regarding the District's  
            activities.  

          10)Finds and declares that a special statute is necessary  
            because of the unique circumstances applicable only to the  
            District.  

           EXISTING LAW  :

          1)Authorizes the board of a harbor district to borrow money, up  
            to one million dollars, by issuance of promissory notes, or  
            execute a conditional sales contract to purchase personal  
            property for the purpose of acquiring land for and  
            constructing or operating any work project, or facility, as  
            specified or for making improvement or the purchase of  
            equipment or for the maintenance.  

          2)Requires the indebtedness to be authorized by a resolution  
            adopted by a two-thirds vote of the board of a harbor  
            district.  Prohibits any moneys borrowed from being borrowed  
            for a term exceeding five years and from incurring a rate of  
            interest exceeding 12%.  

           FISCAL EFFECT  :  None

           COMMENTS  :   

           1)Purpose of this bill  .  This bill changes the borrowing cap for  
            the District from a hard cap 
          of one million dollars to 15% of the District's total assets as  
            determined based on the estimated value included in the  
            District's CAFR (Port of Hueneme Comprehensive Annual  
            Financial Report).  For example, in the most recent financial  








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            report the District's total assets are listed at $95,306,826.   
            Under this bill, the District's borrowing cap would then be  
            $14,296,023.  Current law allows the District to incur  
            indebtedness with a two-thirds vote 
          of the board.  This bill will not change that requirement.  This  
            bill is sponsored by the District.  

           2)Oxnard Harbor District  :  The District was created in 1937 and  
            is a political subdivision of the state operating as an  
            independent special district.  The District owns and manages  
            the commercial Port and is governed by a five-member Board of  
            Harbor Commissioners elected at large to four-year terms from  
            the District's service area.  The District's boundaries are  
            comprised of the City of Oxnard, the City of Port Hueneme, and  
            some unincorporated areas within Ventura County.  

            The Port is empowered to acquire, construct, own, operate,  
            control or develop any and all harbor works or facilities  
            necessary to the efficient undertaking of its mission.  The  
            Port prepares and controls its own budget, administers and  
            controls its fiscal activities, and is responsible for all  
            Port construction and operations.  The Port does not assess  
            taxes for operations or capital expansion.  Its operating  
            expenses are funded by the revenues generated by tariff  
            charges, leases and other contract revenues assessed upon Port  
            users.  The Port's commercial facilities are primarily located  
            within the City of Port Hueneme, with one facility located in  
            the City of Oxnard.

            Pursuant to current law the District publishes an annual CAFR,  
            including audited financial statements within a six-month  
            period of the close of each fiscal year.  According to the  
            District's most recent Comprehensive Annual Financial Report  
            for the Fiscal Years Ended June 30, 2013 and 2012, "The Port  
            has a $12.9 million operating budget and $6 million in  
            available unrestricted reserves to support critical capital  
            repairs for the Port's $70 million in net capital assets.   
            Major capital investments of the Port have been historically  
            financed throughout the use of revenue bonds issued by the  
            Port pursuant to the California Harbors and Navigation Code.   
            At the close of the fiscal year 2013, the Port holds $21.2  
            million in outstanding revenue bond debt.

            The fiscal years 2013 and 2014 Capital Outlay Program calls  
            for $12.2 million to support various infrastructure projects.   








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            The sources of funds for this year's capital program include:  
            (1) General Fund 55% (2) Revenue Bonds 8% and (3)  
            State/Federal Grants 37%."  

           3)Author's statement  .  According to the author, "This bill  
            authorizes the District to incur indebtedness beyond a $1  
            million cap set in statute 30 years ago. This limitation does  
            not accurately or adequately account for the needs and  
            escalated project costs of a modern port competing in a global  
            market.  

            "The Port of Hueneme is the only deep water port on the  
            Pacific between the major ports of southern and northern  
            California.  Although a deep water port, at a depth of only 35  
            feet MLLW (mean lower low water), the Port is limited in its  
            activities and applications.  At least 40 feet MLLW is  
            necessary to accommodate the Port's anticipated needs into the  
            next several decades.  

            "The Port has identified the following growth goals, all of  
            which are attainable and will result in the noted job growth  
            if the Port could undertake several significant infrastructure  
            projects, including harbor deepening.

                     Containers (50,000 Units) 836 jobs, $6.5m in taxes,  
                 $69.4m in local revenue
                     Break-bulk (350,000 tons) 114 direct jobs, $15.6m in  
                 local revenue
                     Auto/Roll-on Roll-off (120,000 autos) 724 jobs,  
                 $6.0m in taxes, $36.5m in local revenue
                     Liquid Bulk (50,000 tons) 80 jobs, $600,000 in  
                 taxes, $3.2m in local revenue
                     Aggregate (200,000 tons) 56 jobs, $464,000 in taxes,  
                 $72m in local revenue
                     Fish (Existing Operation) 1,375 jobs, $10.8m in  
                 taxes, $55.5m in local revenue

            "Meeting these goals will require that the Oxnard Harbor  
            District execute several critical infrastructure projects, all  
            of which will require debt financing well beyond the  
            limitation set forth in existing law."   

            According to the District, estimates for the following  
            infrastructure projects, exemplifies the need to raise the  
            borrowing cap.  Deepening dredge and associated wharf  








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            improvements at 
            $8 to $12 million, shore power phase 2 at $2 million,  
            dockside/ tank farm rail at $1 to $3 million, life cycle  
            repairs costs to restore capability to wharfs, parking areas  
            and structures at $10 million, and high mast lighting upgrades  
            at $500,000.  

           1)Policy considerations .   

              a)   The Committee may wish to consider if it is appropriate  
               to base the amount that the District can borrow on a  
               percentage of total assets that are estimated in a CAFR.   
               This amount of total assets does not reflect the capacity  
               for the District to repay debt or loans because the assets  
               may not be liquid or disposable and the amount of total  
               assets does not include any outstanding debt or liabilities  
               of the District.  Additionally, the Committee may wish to  
               consider if it is appropriate to base the amount the  
               District can borrow on an estimate that changes from year  
               to year.   

              b)   The author may wish to clarify that the most recent  
               annual financial report should be used to determine 15% of  
               total assets for the borrowing cap.   

          2)Arguments in support  .  Supporters argue that this bill will  
            adjust the 30-year-old debt limitation set forth in existing  
            law and will allow the District to undertake vital and  
            necessary projects, including an anticipated harbor deepening  
            project.  

           3)Arguments in opposition  .  None on file.  

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Oxnard Harbor District [SPONSOR] 

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








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