BILL ANALYSIS Ó
AB 1265
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Date of Hearing: April 13, 2015
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 1265
(Perea) - As Introduced February 27, 2015
SUBJECT: Transportation projects: comprehensive development
lease agreements
SUMMARY: Deletes the sunset date on provisions that authorize
public-private partnership (P3s) agreements for transportation,
thereby extending the authority indefinitely; deletes obsolete
references.
EXISTING LAW:
1)Defines key terms, most notably "transportation project" to
mean one or more of the following: planning, design,
development, finance, construction, reconstruction,
rehabilitation, improvement, acquisition, lease, operation, or
maintenance of highway, public street, rail, or related
facilities supplemental to existing facilities currently owned
and operated by the California Department of Transportation
(Caltrans) or regional transportation agencies.
2)Until January 1, 2017, grants Caltrans and regional
transportation agencies, as defined, authority to enter into P3
agreements--that is, comprehensive development lease agreements
with public or private entities, or consortia thereof, under
the following conditions:
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a) The California Transportation Commission (CTC) must
review and approve proposed P3 projects;
b) Proposed projects must be primarily designed to improve
mobility, improve the operations or safety of the affected
corridor, and provide quantifiable air quality benefits; and
c) Proposed projects must also address known forecast
demands.
1)Prescribes the review and approval process for proposed P3
agreements.
2)For projects on the state highway system, requires Caltrans to
be the responsible agency for performance of project
development work, including the development of performance
specifications, preliminary engineering, prebid services,
environmental documents, and construction inspection services;
authorizes Caltrans to do the work using in-house employees or
contractors.
3)Requires all P3 agreements to authorize the use of tolls and
user fees for the use of the facility being constructed.
4)Provides that all P3 agreements must require that any excess
toll or user fee revenue be paid to the State Highway Account
except that any excess revenue under a lease agreement with a
regional transportation agency may be paid to the regional
transportation agency for use in improving public
transportation near the project.
FISCAL EFFECT: Unknown
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COMMENTS: California's first venture into P3s for transportation
was with AB 680 (Baker), Chapter 107, Statutes of 1989, which
authorized Caltrans to enter into P3 agreements for up to four
projects. Caltrans built two projects under this authorization.
The first project was ten miles of tolled express lanes in the
median of the existing State Route (SR) 91 in Orange County and
the subsequent project was SR 125 in San Diego County to connect
the area near the Otay Mesa border crossing with the state
highway system. For each project, Caltrans used a single
contract with a private partner to design, construct, finance,
operate, and maintain the facility.
In 2009, authority to enter into P3 agreements for transportation
was expanded. Specifically,
SB 2X 4, (Cogdill), Chapter 2, Statutes of 2009, authorized
Caltrans and regional transportation agencies to enter into an
unlimited number of P3 agreements for a broad range of highway,
road, and transit projects, through December 31, 2016. In
January 2011, Caltrans entered into its first P3 under this new
authority for the Presidio Parkway project, a 1.6-mile segment of
SR 101 that connects the Golden Gate Bridge to city streets in
San Francisco. This particular P3 requires the private partner
to complete the second phase of the design and reconstruction of
the southern approach to the Golden Gate Bridge and to operate
and maintain the roadway for 30 years. In exchange, the state
will make payments estimated to total roughly $1.1 billion to the
private partner over the life of the contract.
In a recent report entitled "Maximizing State Benefits from
Public-Private Partnerships," the Legislative Analyst's Office
(LAO) examined the two state infrastructure projects undertaken
in recent years using P3 agreements, one of them being the
Presidio Parkway project which used the authority granted under
SB 2X 4. In this examination, the LAO cites a number of
potential benefits of successful P3 agreements, including:
1)They can transfer project risks to the private partner;
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2)They may provide greater price and schedule certainty;
3)They allow for more innovative design and construction
techniques;
4)They can free up public funds for other purposes;
5)They can provide quicker access to project financing; and,
6)They can provide a higher level of maintenance than might
otherwise be provided.
The LAO also, noted, however, that P3 agreements are not without
their potential drawbacks, including:
1)Increased financing costs;
2)Greater possibility of unforeseen challenges (due primarily to
the extended time periods involved in P3 agreements);
3)Limits to government's flexibility;
4)Greater risks due to more complex procurement processes; and,
5)Fewer bidders.
It would be difficult to argue that California's experiences with
P3 transportation projects have been unqualified successes. Each
was heavily embroiled in litigation and each was subjected to
criticisms of excessive costs, insufficient risk transference,
and prolonged delays. In fairness, however, these same
criticisms could be applied to virtually all of California's
large, complex transportation projects, independent of the
procurement or financing methods used to develop and construct
them.
The author has introduced this bill so that P3 agreements can
continue as a viable option for state and regional transportation
agencies to fund transportation infrastructure when other funds
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are not readily available. AB 1265 is supported by over two
dozen engineering firms, transportation agencies, construction
firms, and trade unions.
Writing in opposition of the bill unless it is amended, the
Professional Engineers California Government (PECG) argues that
AB 1265 lacks clarity regarding Caltrans' responsibilities for
construction inspection, environmental review, and a variety of
other functions. PECG is requesting amendments to AB 1265 that
borrow from previous legislation [AB 401 (Daly), Chapter 586,
Statutes of 2013] in which these responsibilities were clarified.
PECG's proposed amendments are meant to address a 2011 court
ruling in response to litigation it prompted regarding P3
statutes. In its lawsuit, PECG alleged that Caltrans did not
have authority to enter into a P3 agreement on the Presidio
Parkway project. As evidence, PECG pointed to existing law that
reads, in part, "?for projects on the state highway system, the
department is the responsible agency for the performance of
project development services..." PECG argued that, because
Caltrans did not perform pre-development work on this project,
the department did not, therefore, have the authority to enter
into a P3 agreement. The court disagreed with PECG and ruled
that existing law does not require Caltrans to actually perform
the work, only to be responsible for the performance of the work,
as in, exert supervisory control of the work. The court found
that Caltrans fulfilled this requirement by virtue of being the
owner of the system and by entering into cooperative agreements
for any work done by others on the system.
PECG's proposed amendments would explicitly state that Caltrans
shall perform pre-development work and construction inspection
services, using either employees or contractors.
Related legislation: AB 227 (Alejo) includes provisions to
extend the authority for P3 agreements to some unspecified date.
AB 227 is scheduled to be heard in this committee on April 13,
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2015.
Previous legislation: AB 749 (Gorell) of 2013, would have
extended the sunset date for provisions that grant authority to
Caltrans and to others to enter into P3s for transportation
projects. AB 749 was referred to this committee but was not
heard at the request of the author.
SBX2 4 (Cogdill), Chapter 2, Statutes of 2009, authorized, until
January 1, 2017, Caltrans and regional transportation agencies to
enter into an unlimited number of P3 agreements. To date, only
one project, the Presidio Parkway, has been approved under this
authority.
AB 1467 (Nunez), Chapter 32, Statutes of 2006, authorized, until
January 1, 2012, Caltrans and regional transportation agencies to
enter into P3 agreements for certain transportation projects.
AB 680 (Baker), Chapter 107, Statutes of 1989, authorized
Caltrans to enter into P3 agreements for up to four projects.
Caltrans built two projects under this authorization.
REGISTERED SUPPORT / OPPOSITION:
Support
ACS Infrastructure Development
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American Council of Engineering Companies
Associated General Contractors
Blackburn Consulting
California Alliance for Jobs
California State Council of Laborers
California Transportation Commission
CEI Engineering Associates, Inc.
Dimensions 4 Engineering, Inc.
EFS Engineering, Inc.
Fluor
Granite Construction Incorporated
HMH Engineers
Holdrege & Kull
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Kennedy & Associates
Lane Engineers, Inc.
Leptien, Cronin, Cooper, Morris & Poore, Inc.
Los Angeles County Metropolitan Transportation Authority
Michael Baker International
Mortonpitalo
Rick Engineering Company.
See's Consulting and Testing
Shannon & Wilson, Inc.
Skanska
Stantec Consulting Services
State Building and Construction Trades Council of California
The Covello Group
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Towill, Inc.
Transportation California
Tri City Engineering
Yeh and Associates, Inc.
Opposition
Professional Engineers in California Government
Analysis Prepared by:Janet Dawson / TRANS. / (916) 319-2093