BILL ANALYSIS Ó AB 581 Page 1 Date of Hearing: April 15, 2015 ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW Rudy Salas, Chair AB 581 (Gomez) - As Amended March 25, 2015 SUBJECT: State Facilities Renewal Bond Act of 2016 SUMMARY: Authorizes the issuance of $2 billion in general obligation bonds for deferred maintenance projects on state-owned buildings, if approved by the voters at the June 7, 2016, statewide primary election. Specifically, this bill: 1)Authorizes the issuance of $2 billion in general obligation bonds for the purpose of addressing deferred maintenance projects on state-owned property. 2)Creates the State Facilities Renewal Bond Fund (Fund) and requires the proceeds of bonds issued and sold pursuant to this bill to be deposited in the fund. 3)Requires bonds deposited in the Fund to be appropriated annually by the Legislature and appropriated to state agencies as part of their respective budgets. 4)Clarifies that monies appropriated to a state agency must supplement, not supplant, the agency's existing deferred maintenance spending and expresses legislative intent that the projects funded by these bonds have a useful life of at least 20 years. AB 581 Page 2 5)Directs the Governor to propose appropriations from the Fund as part of his or her January budget proposal. 6)Requires the Department of Finance to report specified information about bond funding allocations and criteria to the fiscal committees of the Legislature within 10 days after the release of the Governor's budget proposal. 7)Directs an agency for which the Governor proposes an appropriation from the Fund to report specified information about its deferred maintenance to the fiscal committees of the Legislature within 30 days after the release of the Governor's budget proposal. 8)Contains the usual fiscal and procedural provisions governing the application of the state's bond laws and the sale of the bonds. 9)Requires this measure to be submitted to the voters at the June 7, 2016, statewide primary election. EXISTING LAW establishes the Building and Property Management Branch within the Department of General Services (DGS) to provide building management and administration, operations, maintenance, janitorial, grounds keeping, and repair services necessary to support the state's real estate assets. FISCAL EFFECT: Unknown COMMENTS: This bill would place a $2 billion general obligation bond measure on the June 2016 ballot to fund deferred maintenance in state-owned facilities. According to the author, if approved by voters, the bond funds would enable the state to make a significant dent in its deferred maintenance backlog. The author notes that the Governor's 2015 Five-Year Infrastructure Plan estimates the state's current backlog at AB 581 Page 3 about $6.1 billion, not including the state highway system. The author states that addressing the most critical infrastructure needs in state buildings, such as roof and boiler repairs or water and sewer line replacements, will lead to long-term savings by avoiding more expensive emergency repairs and disruption to program delivery. The Governor's proposed 2015-16 Budget includes $125 million from the General Fund for one-time deferred maintenance infrastructure needs, including a one-time increase of $5 million towards addressing DGS' backlog of maintenance projects. According to a March 2015 report by the Legislative Analyst's Office (LAO) of deferred maintenance in state office buildings, DGS has struggled to consistently maintain the 58 state office buildings it owns and its current maintenance backlog totals $138 million. The LAO report notes that the proposed $5 million allocation to DGS is a step in the right direction, given that deferred maintenance from improperly maintained buildings can result in significant repair costs in the future and a shorter useful life of the buildings. The LAO recommends that DGS develop a long-term strategy for maintaining state facilities by addressing a number of other factors that have contributed to the accumulation of delayed projects, such as understaffing, reduced maintenance funding, inadequate preventive maintenance, and limited ability for DGS to contract for maintenance staff to fill ongoing vacancies. This bill envisions the bond funding to be used for projects with a useful life of at least 20 years and requires the bond funds to be repaid within that time. The allocation of bond funds would occur as part of the annual budget process. Any state agency with state property would have to report to the Legislature on its deferred maintenance funding priorities and the extent to which its current maintenance budget is inadequate. The funds appropriated from the Legislature would AB 581 Page 4 have to be used to supplement, not supplant, the agency's existing deferred maintenance expenditures. REGISTERED SUPPORT / OPPOSITION: Support Associated General Contractors Construction Employers' Association Opposition None on file Analysis Prepared by:Cassie Royce / A. & A.R. / (916) 319-3600 AB 581 Page 5