BILL ANALYSIS Ó
AB 422
Page 1
Date of Hearing: March 23, 2015
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 422
(McCarty) - As Amended March 17, 2015
SUBJECT: Sacramento Regional Transit District: line of credit
SUMMARY: Authorizes the Sacramento Regional Transit District
(RT) to obtain a short-term revolving line of credit for
operating purposes. Specifically, this bill:
1)Authorizes RT to seek and obtain a short-term revolving line
of credit for operating purposes in anticipation of receipt of
operating grants, with the extension of credit evidenced by a
note.
2)Authorizes RT to pledge anticipated grants and any other funds
available, including fare revenues and any other revenues,
income, or receipts, as security for repayment of the note,
the interest on the note, and the related obligations
evidenced by the note.
3)Requires the note to have a maturity date of not more than 60
months from the date of issuance.
4)Authorizes RT to pledge anticipated operating grants and other
AB 422
Page 2
available funds over a multiyear period.
5)Caps the maximum indebtedness under the note at 85% of the
amount of the anticipated grants and other funds pledged to
repay the note, the interest on the note, and the related
obligations evidenced by the note.
EXISTING LAW: Authorizes local agencies, including transit
districts, to engage in short-term borrowing, but generally
requires full repayment by the end of the fiscal year in which
the note was issued, and in some cases allows repayment within
15 months of the date of issuance of the note.
FISCAL EFFECT: Unknown.
COMMENTS: Like most transit agencies in California, RT receives
a significant percentage of its operating budget from the
Federal Transit Administration (FTA). The FTA dollars arrive on
a reimbursement basis. RT begins spending the money at the
start of its fiscal year (July 1), but has to wait for
congressional action on the FTA budget before it can receive the
funds. In the past, this meant receiving the FTA funds within
12 months of the start of RT's fiscal year. More recently, the
receipt of funds has taken as long as 18 months.
State law allows local governments to use short-term borrowing
to bridge funding gaps under what is typically referred to as
the temporary revenue anticipation note (TRAN) statute. Under
this law, a local agency takes out a line of credit at the start
of the fiscal year and must pay the note in full by the end of
the same fiscal year, although in some cases the maturity date
can be extended from 12 to 15 months. RT has relied on the TRAN
statute to address the cash flow issue created by the FTA
funding process for the last decade, but banks are now hesitant
AB 422
Page 3
to lend to RT under TRAN because the gap between the start of
RT's fiscal year and the actual receipt of FTA funds continues
to grow and there is no guarantee that the FTA dollars will come
in within the necessary 12 to 15 months to meet statutory
requirements for repayment.
This bill would give RT greater flexibility to negotiate a
short-term line of credit with banks that reflects the reality
of its financial situation. The bill allows RT to borrow
through a revolving line of credit with a maturity date of up to
60 months from the date of issuance. This longer-term credit
line will enable RT to obtain the best possible interest rate
and, according to RT, "will result in budgetary improvements and
will save RT in costs over time."
REGISTERED SUPPORT / OPPOSITION:
Support
Sacramento Regional Transit District (Sponsor)
Opposition
None on file
Analysis Prepared by:Anya Lawler / TRANS. / (916) 319-2093
AB 422
Page 4