California Legislature—2015–16 First Extraordinary Session

Assembly BillNo. 2

Introduced by Assembly Members Perea, Alejo, and Olsen

(Coauthors: Assembly Members Achadjian, Baker, Brough, Burke, Campos, Chang, Chávez, Cooper, Dababneh, Dahle, Daly, Frazier, Roger Hernández, Mayes, Obernolte, Patterson, Rendon, Salas, and Waldron)

June 25, 2015

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


AB 2, as introduced, Perea. Transportation projects: comprehensive development lease agreements.

Existing law 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 that a lease agreement may not be entered into under these provisions on or after January 1, 2017.

This bill would extend this authorization indefinitely and would include within the definition of “regional transportation agency” the Santa Clara Valley Transportation Authority, thereby authorizing the authority to enter into public-private partnerships under these provisions. The bill would also delete obsolete cross-references and make technical changes to these provisions.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1


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



(a) (1) “Best value” means a value determined by
4objective criteria, including, but not limited to, price, features,
5functions, life-cycle costs, and other criteria deemed appropriate
6by the department or the regional transportation agency.

7(2) “Contracting entity or lessee” means a public or private
8entity, or consortia thereof, that has entered into a comprehensive
9development lease agreement with the department or a regional
10transportation agency for a transportation project pursuant to this

12(3) “Design-build” means a procurement process in which both
13the design and construction of a project are procured from a single
14 entity.

15(4) “Regional transportation agency” means any of the

17(A) A transportation planning agency as defined in Section
1829532 or 29532.1 of the Government Code.

19(B) A county transportation commission as defined in Section
20130050, 130050.1, or 130050.2 of the Public Utilities Code.

21(C) Any other local or regional transportation entity that is
22designated by statute as a regional transportation agency.

23(D) A joint exercise of powers authority as defined in Chapter
245 (commencing with Section 6500) of Division 7 of Title 1 of the
25Government Code, with the consent of a transportation planning
26agency or a county transportation commission for the jurisdiction
27in which the transportation project will be developed.

begin insert

28(E) The Santa Clara Valley Transportation Authority established
29pursuant to Part 12 (commencing with Section 100000) of Division
3010 of the Public Utilities Code.

end insert

31(5) “Public Infrastructure Advisory Commission” means a unit
32or auxiliary organization established by thebegin delete Business,end delete
33 Transportationbegin delete and Housingend delete Agency that advises the department
34and regional transportation agencies in developing transportation
35projects through performance-based infrastructure partnerships.

P3    1(6) “Transportation project” means one or more of the following:
2planning, design, development, finance, construction,
3reconstruction, rehabilitation, improvement, acquisition, lease,
4operation, or maintenance of highway, public street, rail, or related
5facilities supplemental to existing facilities currently owned and
6operated by the department or regional transportation agencies
7that is consistent with the requirements of subdivision (c).

8(b) (1) The Public Infrastructure Advisory Commission shall
9do all of the following:

10(A) Identify transportation project opportunities throughout the

12(B) Research and document similar transportation projects
13throughout the state, nationally, and internationally, and further
14identify and evaluate lessons learned from these projects.

15(C) Assemble and make available to the department or regional
16transportation agencies a library of information, precedent,
17research, and analysis concerning infrastructure partnerships and
18related types of public-private transactions for public infrastructure.

19(D) Advise the department and regional transportation agencies,
20upon request, regarding infrastructure partnership suitability and
21best practices.

22(E) Provide, upon request, procurement-related services to the
23department and regional transportation agencies for infrastructure

25(2) The Public Infrastructure Advisory Commission may charge
26a fee to the department and regional transportation agencies for
27the services described in subparagraphs (D) and (E) of paragraph
28(1), the details of which shall be articulated in an agreement entered
29 into between the Public Infrastructure Advisory Commission and
30the department or the regional transportation agency.

31(c) (1) Notwithstanding any other provision of law, only the
32department, in cooperation with regional transportation agencies,
33and regional transportation agencies, may solicit proposals, accept
34unsolicited proposals, negotiate, and enter into comprehensive
35development lease agreements with public or private entities, or
36consortia thereof, for transportation projects.

37(2) Projects proposed pursuant to this section and associated
38lease agreements shall be submitted to the California Transportation
39Commission. The commission, at a regularly scheduled public
40hearing, shall select the candidate projects from projects nominated
P4    1by the department or a regional transportation agency after
2reviewing the nominations for consistency with paragraphs (3)
3 and (4). Approved projects may proceed with the process described
4in paragraph (5).

5(3) The projects authorized pursuant to this section shall be
6primarily designed to achieve the following performance

8(A) Improve mobility by improving travel times or reducing
9the number of vehicle hours of delay in the affected corridor.

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

11(C) Provide quantifiable air quality benefits for the region in
12which the project is located.

13(4) In addition to meeting the requirements of paragraph (3),
14the projects authorized pursuant to this section shall address a
15known forecast demand, as determined by the department or
16regional transportation agency.

17(5) At least 60 days prior to executing a final lease agreement
18authorized pursuant to this section, the department or regional
19transportation agency shall submit the agreement to the Legislature
20and the Public Infrastructure Advisory Commission for review.
21Prior to submitting a lease agreement to the Legislature and the
22Public Infrastructure Advisory Commission, the department or
23regional transportation agency shall conduct at least one public
24hearing at a location at or near the proposed facility for purposes
25of receiving public comment on the lease agreement. Public
26comments made during this hearing shall be submitted to the
27Legislature and the Public Infrastructure Advisory Commission
28with the lease agreement. The Secretary ofbegin delete Business,end delete Transportation
29begin delete and Housingend delete or the chairperson of the Senate or Assembly fiscal
30committees or policy committees with jurisdiction over
31transportation matters may, by written notification to the
32department or regional transportation agency, provide any
33comments about the proposed agreement within the 60-day period
34prior to the execution of the final agreement. The department or
35regional transportation agency shall consider those comments prior
36to executing a final agreement and shall retain the discretion for
37executing the final lease agreement.

38(d) For the purpose of facilitating those projects, the agreements
39between the parties may include provisions for the lease of
40rights-of-way in, and airspace over or under, highways, public
P5    1streets, rail, or related facilities for the granting of necessary
2easements, and for the issuance of permits or other authorizations
3to enable the construction of transportation projects. Facilities
4subject to an agreement under this section shall, at all times, be
5owned by the department or the regional transportation agency,
6as appropriate. For department projects, the commission shall
7certify the department’s determination of the useful life of the
8project in establishing the lease agreement terms. In consideration
9therefor, the agreement shall provide for complete reversion of the
10leased facility, together with the right to collect tolls and user fees,
11to the department or regional transportation agency, at the
12expiration of the lease at no charge to the department or regional
13transportation agency. At the time of the reversion, the facility
14shall be delivered to the department or regional transportation
15agency, as applicable, in a condition that meets the performance
16and maintenance standards established by the department or
17regional transportation agency and that is free of any encumbrance,
18lien, or other claims.

19(e) Agreements between the department or regional
20 transportation agency and the contracting entity or lessee shall
21authorize the contracting entity or lessee to use a design-build
22method of procurement for transportation projects, subject to the
23requirements for utilizing such a method contained in Chapter 6.5
24(commencing with Sectionbegin delete 6800)end deletebegin insert 6820)end insert of Part 1 of Division 2 of
25the Public Contract Code, other than Sectionsbegin delete 6802, 6803,end deletebegin insert 6821end insert
26 andbegin delete 6813end deletebegin insert 6822end insert of thatbegin delete code, if those provisions are enacted by the
27Legislature during the 2009-10 Regular Session, or a 2009-10
28extraordinary session.end delete
begin insert code.end insert

29(f) (1) (A) Notwithstanding any other provision of this chapter,
30for projects on the state highway system, the department is the
31responsible agency for the performance of project development
32services, including performance specifications, preliminary
33engineering, prebid services, the preparation of project reports and
34environmental documents, and construction inspection services.
35The department is also the responsible agency for the preparation
36of documents that may include, but need not be limited to, the size,
37type, and desired design character of the project, performance
38specifications covering the quality of materials, equipment, and
39workmanship, preliminary plans, and any other information deemed
P6    1necessary to describe adequately the needs of the department or
2regional transportation agency.

3(B) The department may use department employees or
4consultants to perform the services described in subparagraph (A),
5consistent with Article XXII of the California Constitution.
6Department resources, including personnel requirements, necessary
7for the performance of those services shall be included in the
8department’s capital outlay support program for workload purposes
9in the annual Budget Act.

10(2) The department or a regional transportation agency may
11exercise any power possessed by it with respect to transportation
12projects to facilitate the transportation projects pursuant to this
13section. The department, regional transportation agency, and other
14state or local agencies may provide services to the contracting
15entity or lessee for which the public entity is reimbursed, including,
16but not limited to, planning, environmental planning, environmental
17certification, environmental review, preliminary design, design,
18right-of-way acquisition, construction, maintenance, and policing
19of these transportation projects. The department or regional
20transportation agency, as applicable, shall regularly inspect the
21facility and require the contracting entity or lessee to maintain and
22operate the facility according to adopted standards. Except as may
23otherwise be set forth in the lease agreement, the contracting entity
24or lessee shall be responsible for all costs due to development,
25maintenance, repair, rehabilitation, and reconstruction, and
26operating costs.

27(g) (1) In selecting private entities with which to enter into
28these agreements, notwithstanding any other provision of law, the
29department and regional transportation agencies may utilize, but
30are not limited to utilizing, one or more of the following
31procurement approaches:

32(A) Solicitations of proposals for defined projects and calls for
33project proposals within defined parameters.

34(B) Prequalification and short-listing of proposers prior to final
35evaluation of proposals.

36(C) Final evaluation of proposals based on qualifications and
37best value. The California Transportation Commission shall
38develop and adopt criteria for making that evaluation prior to
39evaluation of a proposal.

40(D) Negotiations with proposers prior to award.

P7    1(E) Acceptance of unsolicited proposals, with issuance of
2requests for competing proposals. Neither the department nor a
3regional transportation agency may award a contract to an
4unsolicited bidder without receiving at least one other responsible

6(2) When evaluating a proposal submitted by the contracting
7entity or lessee, the department or the regional transportation
8agency may award a contract on the basis of the lowest bid or best

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

12(1) Evidence that the members of the contracting entity or lessee
13have completed, or have demonstrated the experience, competency,
14capability, and capacity to complete, a project of similar size,
15scope, or complexity, and that proposed key personnel have
16sufficient experience and training to competently manage and
17complete the design and construction of the project, and a financial
18statement that ensures that the contracting entity or lessee has the
19capacity to complete the project.

20(2) The licenses, registration, and credentials required to design
21and construct the project, including, but not limited to, information
22on the revocation or suspension of any license, credential, or

24(3) Evidence that establishes that members of the contracting
25entity or lessee have the capacity to obtain all required payment
26and performance bonding, liability insurance, and errors and
27omissions insurance.

28(4) Evidence that the contracting entity or lessee has workers’
29compensation experience, history, and a worker safety program
30of members of the contracting entity or lessee that is acceptable
31to the department or regional transportation agency.

32(5) A full disclosure regarding all of the following with respect
33to each member of the contracting entity or lessee during the past
34five years:

35(A) Any serious or willful violation of Part 1 (commencing with
36Section 6300) of Division 5 of the Labor Code or the federal
37Occupational Safety and Health Act of 1970begin delete (P.L.end deletebegin insert end insertbegin insert(Public Lawend insert
38 91-596).

P8    1(B) Any instance where members of the contracting entity or
2lessee were debarred, disqualified, or removed from a federal,
3state, or local government public works project.

4(C) Any instance where members of the contracting entity or
5lessee, or its owners, officers, or managing employees submitted
6a bid on a public works project and were found to be nonresponsive
7or were found by an awarding body not to be a responsible bidder.

8(D) Any instance where members of the contracting entity or
9lessee, or its owners, officers, or managing employees defaulted
10on a construction contract.

11(E) Any violations of the Contractors’ State License Law
12(Chapter 9 (commencing with Section 7000) of Division 3 of the
13Business and Professions Code), including, but not limited to,
14alleged violations of federal or state law regarding the payment of
15wages, benefits, apprenticeship requirements, or personal income
16tax withholding, or Federal Insurance Contributions Act (FICA)
17withholding requirements.

18(F) Any bankruptcy or receivership of any member of the
19contracting entity or lessee, including, but not limited to,
20information concerning any work completed by a surety.

21(G) Any settled adverse claims, disputes, or lawsuits between
22the owner of a public works project and any member of the
23contracting entity or lessee during the five years preceding
24submission of a bid under this article, in which the claim,
25settlement, or judgment exceeds fifty thousand dollars ($50,000).
26Information shall also be provided concerning any work completed
27by a surety during this five-year period.

28(H) If the contracting entity or lessee is a partnership, joint
29venture, or an association that is not a legal entity, a copy of the
30agreement creating the partnership or association that specifies
31that all general partners, joint venturers, or association members
32agree to be fully liable for the performance under the agreement.

33(i) No agreement entered into pursuant to this section shall
34infringe on the authority of the department or a regional
35transportation agency to develop, maintain, repair, rehabilitate,
36operate, or lease any transportation project. Lease agreements may
37provide for reasonable compensation to the contracting entity or
38lessee for the adverse effects on toll revenue or user fee revenue
39due to the development, operation, or lease of supplemental
40transportation projects with the exception of any of the following:

P9    1(1) Projects identified in regional transportation plans prepared
2pursuant to Section 65080 of the Government Code.

3(2) Safety projects.

4(3) Improvement projects that will result in incidental capacity

6(4) Additional high-occupancy vehicle lanes or the conversion
7of existing lanes to high-occupancy vehicle lanes.

8(5) Projects located outside the boundaries of a public-private
9partnership project, to be defined by the lease agreement.

10However, compensation to a contracting entity or lessee shall
11only be made after a demonstrable reduction in use of the facility
12resulting in reduced toll or user fee revenues, and may not exceed
13the difference between the reduction in those revenues and the
14amount necessary to cover the costs of debt service, including
15principal and interest on any debt incurred for the development,
16operation, maintenance, or rehabilitation of the facility.

17(j) (1) Agreements entered into pursuant to this section shall
18authorize the contracting entity or lessee to impose tolls and user
19fees for use of a facility constructed by it, and shall require that
20over the term of the lease the toll revenues and user fees be applied
21to payment of the capital outlay costs for the project, the costs
22associated with operations, toll and user fee collection,
23administration of the facility, reimbursement to the department or
24other governmental entity for the costs of services to develop and
25maintain the project, police services, and a reasonable return on
26investment. The agreement shall require that, notwithstanding
27Sections 164, 188, and 188.1, any excess toll or user fee revenue
28either be applied to any indebtedness incurred by the contracting
29entity or lessee with respect to the project, improvements to the
30project, or be paid into the State Highway Account, or for all three
31purposes, except that any excess toll revenue under a lease
32agreement with a regional transportation agency may be paid to
33the regional transportation agency for use in improving public
34transportation in and near the project boundaries.

35(2) Lease agreements shall establish specific toll or user fee
36rates. Any proposed increase in those rates not otherwise
37established or identified in the lease agreement during the term of
38the agreement shall first be approved by the department or regional
39transportation agency, as appropriate, after at least one public
P10   1hearing conducted at a location near the proposed or existing

3(3) The collection of tolls and user fees for the use of these
4facilities may be extended by the commission or regional
5transportation agency at the expiration of the lease agreement.
6However, those tolls or user fees shall not be used for any purpose
7other than for the improvement, continued operation, or
8maintenance of the facility.

9(k) Agreements entered into pursuant to this section shall include
10indemnity, defense, and hold harmless provisions agreed to by the
11department or regional transportation agency and the contracting
12entity or lessee, including provisions for indemnifying the State
13of California or the regional transportation agency against any
14claims or losses resulting or accruing from the performance of the
15contracting entity or lessee.

16(l) The plans and specifications for each transportation project
17on the state highway system developed, maintained, repaired,
18rehabilitated, reconstructed, or operated pursuant to this section
19shall comply with the department’s standards for state
20transportation projects. The lease agreement shall include
21performance standards, including, but not limited to, levels of
22service. The agreement shall require facilities on the state highway
23system to meet all requirements for noise mitigation, landscaping,
24pollution control, and safety that otherwise would apply if the
25department were designing, building, and operating the facility.
26If a facility is on the state highway system, the facility leased
27pursuant to this section shall, during the term of the lease, be
28deemed to be a part of the state highway system for purposes of
29 identification, maintenance, enforcement of traffic laws, and for
30the purposes of Division 3.6 (commencing with Section 810) of
31Title 1 of the Government Code.

32(m) Failure to comply with the lease agreement in any significant
33manner shall constitute a default under the agreement and the
34department or the regional transportation agency, as appropriate,
35shall have the option to initiate processes to revert the facility to
36the public agency.

37(n) The assignment authorized by subdivision (c) of Section
38130240 of the Public Utilities Code is consistent with this section.

39(o) A lease to a private entity pursuant to this section is deemed
40to be public property for a public purpose and exempt from
P11   1leasehold, real property, and ad valorem taxation, except for the
2use, if any, of that property for ancillary commercial purposes.

3(p) Nothing in this section is intended to infringe on the authority
4to develop high-occupancy toll lanes pursuant to Section 149.4,
5149.5, or 149.6.

6(q) Nothing in this section shall be construed to allow the
7conversion of any existing nontoll or nonuser-fee lanes into tolled
8or user fee lanes with the exception of a high-occupancy vehicle
9lane that may be operated as a high-occupancy toll lane for vehicles
10not otherwise meeting the requirements for use of that lane.

11(r) The lease agreement shall require the contracting entity or
12lessee to provide any information or data requested by the
13California Transportation Commission or the Legislative Analyst.
14The commission, in cooperation with the Legislative Analyst, shall
15annually prepare a report on the progress of each project and
16ultimately on the operation of the resulting facility. The report
17shall include, but not be limited to, a review of the performance
18standards, a financial analysis, and any concerns or
19recommendations for changes in the program authorized by this

21(s) Notwithstanding any other provision of this section, no lease
22agreement may be entered into pursuant to the section that affects,
23alters, or supersedes the Memorandum of Understanding (MOU),
24dated November 26, 2008, entered into by the Golden Gate Bridge
25Highway and Transportation District, the Metropolitan
26Transportation Commission, and the San Francisco County
27Transportation Authority, relating to the financing of the U.S.
28Highway 101/Doyle Drive reconstruction project located in the
29City and County of San Francisco.

begin delete

30(t) No lease agreements may be entered into under this section
31on or after January 1, 2017.

end delete


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