BILL ANALYSIS Ó
AB 422
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ASSEMBLY THIRD READING
AB
422 (McCarty)
As Amended April 20, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+-----------------------+--------------------|
|Transportation |13-3 |Frazier, Achadjian, |Baker, Kim, |
| | |Bloom, Campos, Chu, |Melendez |
| | |Daly, Dodd, Eduardo | |
| | |Garcia, Gomez, Linder, | |
| | |Medina, Nazarian, | |
| | |O'Donnell | |
| | | | |
|----------------+------+-----------------------+--------------------|
|Local |7-0 |Maienschein, Gonzalez, | |
|Government | |Alejo, Chiu, Cooley, | |
| | |Holden, Linder | |
| | | | |
| | | | |
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SUMMARY: Authorizes the Sacramento Regional Transit District (RT)
to obtain a short-term revolving line of credit for operating
purposes. Specifically, this bill:
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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
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: None
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
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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 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. This 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."
Analysis Prepared by:
Anya Lawler / TRANS. / (916) 319-2093 FN: 0000190
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