BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 2395
          Author:   Lowenthal (D), et al.
          Amended:  7/2/14 in Senate
          Vote:     21

           
           SENATE NATURAL RESOURCES AND WATER COMMITTEE  :  8-0, 6/10/14
          AYES:  Pavley, Cannella, Evans, Hueso, Jackson, Lara, Monning,  
            Wolk
          NO VOTE RECORDED:  Fuller
           
          SENATE GOVERNANCE & FINANCE COMMITTEE  :  6-0, 6/25/14
          AYES:  Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu
          NO VOTE RECORDED:  Walters  

          ASSEMBLY FLOOR  :  76-0, 5/23/14 - See last page for vote


           SUBJECT  :    Oxnard Harbor District:  infrastructure projects:   
          funding

           SOURCE  :     Author


           DIGEST  :    This bill allows the Oxnard Harbor District  
          (District), aside from the $1 million borrowing limit for land  
          acquisition as specified in existing law, to borrow money by  
          issuance of promissory notes, or execute conditional sales  
          contracts to purchase personal property, in an amount or of a  
          value not exceeding $10 million at any one time, for the  
          purposes of acquiring land for and constructing or operating any  
          work, project, or facility authorized by existing law, or for  
          the making of improvement or the purchase of or maintenance of  
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          the equipment.  This does not apply to any money borrowed from  
          any agency or department of the United State government or of  
          the State of California.  

           ANALYSIS  :    

          Existing law:

          1.Establishes procedures for harbor districts to borrow up to $1  
            million for the purposes of acquiring land for constructing or  
            operating any work, project, or facilities.  This level of  
            indebtedness must be authorized by a resolution adopted by a  
            two-thirds vote of the board of a harbor district.  Prohibits  
            the term of a loan of funds from exceeding five years and from  
            incurring a rate of interest exceeding 12%. 

          2.Requires a proposed harbor district to provide a petition  
            which contains, among other things, a general description of  
            the improvement and development work proposed to be done in  
            the harbor, which work may include the dredging of channels,  
            shipways, berths, anchorage places and turning basins, the  
            construction of jetties, breakwaters, bulkheads, seawalls,  
            wharves, ferry slips, warehouses, roads and spur tracks or  
            belt line railways, together with any other work necessary for  
            the development and improvement of the harbor.

          3.Requires a harbor district, notwithstanding #2 above, to  
            acquire, construct, own, operate, control, or develop any and  
            all harbor works or facilities within the limits of its  
            established boundaries.  No interest in lands may be acquired,  
            either by lease, purchase, or the exercise of the power of  
            eminent domain within any port district, chartered port,  
            harbor improvement district, incorporated city, or  
            recreational harbor district without the prior consent to the  
            acquisition by resolution of the governing body of each  
            district, port, or city in which the lands are located. 

          4.Authorizes, notwithstanding #3 above, a harbor district that  
            does not operate on tide and submerged lands that have been  
            granted by legislative enactment to acquire, construct, own,  
            operate, control, or develop any and all harbor works or  
            facilities within or outside the boundaries of the district.   
            Specifies that no interest in lands may be acquired, either by  
            lease, purchase, or the exercise of the power of eminent  

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            domain within any port district, chartered port, harbor  
            improvement district, incorporated city, county, or  
            recreational harbor district without the prior consent to the  
            acquisition by resolution of the governing body of the  
            district, port, city, or county in which the lands are  
            located.

          This bill: 

          1.Allows the District, aside from the $1 million borrowing limit  
            for land acquisition as specified in existing law, to borrow  
            money by issuance of promissory notes, or execute conditional  
            sales contracts to purchase personal property, in an amount or  
            of a value not exceeding $10 million at any one time, for the  
            purposes of acquiring land for and constructing or operating  
            any work, project, or facility authorized by existing law, or  
            for the making of improvement or the purchase of or  
            maintenance of the equipment.  This does not apply to any  
            money borrowed from any agency or department of the U.S  
            government or of the State of California.  

          2.Prohibits monies borrowed pursuant to this bill, from  
            exceeding a term of five years and from incurring a rate of  
            interest exceeding 12%.  This level of indebtedness must be  
            authorized by a resolution adopted by a two-thirds vote of the  
            board of the District.  

          3.Provides that as a condition precedent to the borrowing of any  
            money or the execution of any conditional sales contract, as  
            provided, in excess of $100,000, the board of the District  
            must first authorize a resolution adopted by a two-thirds  
            vote, and have on file a report on the engineering and  
            economic feasibility relating to the project contemplated for  
            the expenditure of the borrowed money or conditional sales  
            contract.  The report shall be prepared and signed by an  
            engineer or engineers licensed and registered under the laws  
            of the State of California. 

          4.Requires the District to budget, levy and collect taxes and  
            pay for all indebtedness without limitation by any other  
            provision of current law.

          5.Makes legislative findings and declarations regarding the need  
            to finance several significant infrastructure projects, the  

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            constraints that the $1 million limit places on the District,  
            and the District's accomplishments.

           Background 
           
          The California Constitution prevents counties and cities from  
          creating multi-year general obligation debt without two-thirds  
          voter approval.  School districts need 55% voter approval.   
          Because the constitutional ban does not mention special  
          districts, the Legislature has allowed many types of special  
          districts to borrow money without voter approval by issuing  
          promissory notes.

          Unlike bonds, promissory notes are usually short-term debts that  
          are not backed by a specified revenue source.  This lack of  
          identified revenue makes them relatively more risky for private  
          investors, which drives up borrowing costs.  However, because  
          promissory notes do not need voter approval, they are  
          politically more attractive than bonds.  Districts use  
          promissory notes to finance office buildings and other  
          facilities that do not generate revenues.  State laws limit most  
          promissory notes from $5 million to $10 million, repaid over 2  
          to 10 years. 

          Securitized limited obligation notes (SLONs) are like promissory  
          notes, but state law requires the special district to securitize  
          them by pledging a dedicated stream of revenues.  State law also  
          imposes more stringent disclosure requirements (SB 1561, Soto,  
          Chapter 288, Statutes of 2002).  While SLONs do not need voter  
          approval, they require a four-fifths vote of a district's  
          governing board.  Typically, special districts can use SLONs to  
          borrow up to $2 million for 10 years, to be paid back from  
          pledged revenue.

          State law authorized harbor districts to borrow money by the  
          issuance of promissory notes for the purposes of acquiring land  
          for constructing and/or operating any work, project, or  
          facility, or for making improvements, and purchasing and  
          maintaining equipment.  Harbor districts may issue promissory  
          notes for up to $1 million dollars that must be repaid in five  
          years and with interest rate that cannot exceed 12% per year.   
          Districts can also issue SLONs for up to $10 million to be paid  
          back in 10 years. 


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          The District in Ventura County is one of five independent harbor  
          special districts.  The District owns and manages the commercial  
          Port of Hueneme.  A five-member Board of Harbor Commissioners,  
          elected at-large from the District, sets the policies for the  
          Port.  The Port does not levy, collect or spend local taxes, but  
          instead relies on revenue generated from its operation to  
          support its activities, in conjunction with occasional state and  
          federal funding.  Major capital investments of the Port have  
          been historically financed through revenue bonds.  The District  
          argues that the $1 million cap for promissory notes takes away a  
          valuable financing option to cover the costs of important  
          infrastructure projects to accommodate the Port's anticipated  
          needs in the next several decades.  The District wants the  
          Legislature to increase its general borrowing authority from $1  
          million to 15% of the District's total assets.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No

           SUPPORT  :   (Verified  7/2/14)

          California Special Districts Association
          Port of Hueneme/Oxnard Harbor District


           ARGUMENTS IN SUPPORT  :    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." 

          She continues, "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."


           ASSEMBLY FLOOR  :  76-0, 5/23/14
          AYES:  Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  

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            Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,  
            Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,  
            Gorell, Gray, Grove, Hagman, Hall, Holden, Jones,  
            Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,  
            Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian,  
            Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, Quirk,  
            Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,  
            Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,  
            Williams, Yamada, Atkins
          NO VOTE RECORDED:  Harkey, Roger Hernández, V. Manuel Pérez,  
            Vacancy 


          RM:k  7/2/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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