BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 1455 |Hearing |7/8/15 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Rodriguez |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |6/30/15 |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Weinberger | |: | | ----------------------------------------------------------------- ONTARIO INTERNATIONAL AIRPORT Allows the City of Ontario to issue revenue bonds to pay for acquiring Ontario International Airport from the City of Los Angeles. Background and Existing Law The City of Los Angeles's Board of Airport Commissioners, referred to as Los Angeles World Airports (LAWA), owns and operates Ontario International Airport (ONT), which is located in the City of Ontario in San Bernardino County. ONT is about 35 miles east of downtown Los Angeles between Interstate 10 and State Route 60, two significant regional highways. ONT was established in 1929. On October 18, 1967, Ontario and Los Angeles entered into a joint powers agreement in which they agreed that Los Angeles would operate ONT. The agreement required Los Angeles to use its best efforts to attract and obtain additional regular scheduled airline service for ONT. In 1985, the two cities agreed to transfer ownership of ONT from Ontario to Los Angeles. In recent years, the Los Angeles World Airport Authority's (LAWA's) continued operation of ONT has generated disputes between the Ontario and Los Angeles. Specifically, since 2013, the City of Ontario has pursued legal claims against the City of Los Angeles alleging that LAWA's financial and operational AB 1455 (Rodriguez) 6/30/15 Page 2 of ? management of ONT has violated the terms of agreements between the two cities and has harmed ONT's economic condition. The City of Los Angeles disputes these claims. A trial date is set for August 17 to hear the City of Ontario v. City of Los Angeles case in Riverside County Superior Court. Aside from their ongoing legal dispute, the two cities are engaging in discussions about transferring the ownership and operations of ONT back to the City of Ontario. In anticipation of any agreement that might result from those discussions, City of Ontario officials want the Legislature to provide the city with revenue bond authority that will help to facilitate the City's acquisition of ONT from Los Angeles. Proposed Law Assembly Bill 1455 allows the City of Ontario to issue revenue bonds to finance the acquisition of the Ontario International Airport from the City of Los Angeles. AB 1455 requires that the revenue bonds must be secured solely by future revenues and charges from that airport. AB 1455 directs that the public agency that acquires the Ontario International Airport from the City of Los Angeles must be known as the successor agency and requires that: The successor agency and successor contractors must hire or retain incumbent workers who have been employed for the preceding twelve months or longer by Los Angeles World Airports or contractors at the Ontario International Airport. Incumbent workers must be retained for a period of at least 90 days unless there is cause to terminate their employment earlier. Incumbent workers must be employed under the terms and conditions established by the successor agency and successor contractors, or as required by law. The successor agency and successor contractors must maintain a preferential hiring list of incumbent workers who were not initially hired or retained. AB 1455 (Rodriguez) 6/30/15 Page 3 of ? The bill specifies that the requirements listed above do not apply to: A successor contractor that is a small business that operates with less than ten employees. Management positions. Specialized skill positions. State Revenue Impact No estimate. Comments 1. Purpose of the bill . In the context of ongoing discussions between Ontario and Los Angeles about transferring ownership of ONT back to Ontario, AB 1455 is a vehicle to facilitate that transfer. The bill's proponents note that ONT is the only unconstrained commercial service airport in Southern California. Other airports in the region are constrained by noise, passenger caps or by facility and/or access constraints. Because ONT has the potential to handle far more passengers than any other airport in Southern California except for Los Angeles International Airport (LAX), its potential growth is virtually limitless. AB 1445 lays the groundwork for the City of Ontario to regain control of ONT and restore one of Southern California's most important economic and jobs engines. 2. Unnecessary ? It is unclear whether AB 1455 grants the City of Ontario any revenue bond powers that are not already available to the city under existing law. The Revenue Bond Law of 1941 gives cities full authority to issue revenue bonds for the acquisition, construction, or improvement of any enterprise. The Act defines the term enterprise to include any revenue-producing improvement, building, system, plant, works, facilities, or undertaking used for or useful for public airports and appurtenant facilities. Under this statutory authority, with the approval of city voters granted at an election on September 11, 1956, the City of Ontario issued $2 million in airport revenue bonds to help pay for terminal and runway improvements at the airport, which was owned by the city AB 1455 (Rodriguez) 6/30/15 Page 4 of ? at that time. Furthermore, a joint powers agreement that the City of Ontario entered into with the County of San Bernardino in 2012 to form the Ontario International Airport Authority, explicitly includes the issuance of airport revenue bonds as one of the joint powers that the two governments can exercise through that JPA. This suggests that the City already has sufficient statutory authority to issue airport revenue bonds, making AB 1455's grant of airport revenue bond powers to the City of Ontario seem redundant. 3. Ambiguous ? AB 1455 does not specifically cross-reference the Revenue Bond Law of 1941, leaving state law ambiguous about what statutes govern the bonds that would be issued by the City of Ontario to acquire ONT from the City of Los Angeles. If the bill's purpose is to allow the City of Ontario to issue revenue bonds under rules other than those specified in the Revenue Bond Law of 1941, the Committee may wish to consider amending AB 1455 to specify exactly what rules will apply to the bonds issued by Ontario. In the absence of any specific statutory restrictions on the bonds, AB 1455's grant of revenue bond authority could be misinterpreted. For example, without any specific guidance, it is unclear whether AB 1455 could be interpreted to allow Ontario to issue revenue bonds without the majority-voter approval that is required by the Revenue Bond Law of 1941. 4. Definition . AB 1455 imposes specified worker retention requirements on both the "successor agency," which the bill defines as the public entity that assumes ownership of the Ontario International Airport from the City of Los Angeles, and "successor contractors." The bill does not define a "successor contractor," which is a phrase that is not used anywhere else in the Public Utilities Code. It is unclear whether a successor contractor means any contractor that provides services to the successor agency, regardless of whether the contractor provided the same services under contract with the City of Los Angeles. Or, successor contractor may only refer to those contractors that the successor agency engages to provide services in the place of an existing contractor. To avoid any potential ambiguity, the Committee may wish to consider amending AB 1455 to define the phrase "successor contractor." 5. Related legislation . SB 446 (Dutton, 2012) would have established the Ontario International Airport Authority and would have authorized the Authority to enter into an agreement AB 1455 (Rodriguez) 6/30/15 Page 5 of ? with the City of Los Angeles to facilitate the transfer of management and operational control of ONT from the City of Los Angeles to the Authority. SB 446 passed out of the Senate, but died in the Assembly Local Government Committee without a hearing. 6. Back to Rules . Other Senate policy committees may want to review AB 1455. If the Senate Governance & Finance Committee approves the bill on July 8, the Senate Rules Committee has directed this Committee to send the bill back to Rules for further review and possible re-referral. Assembly Actions Assembly Local Government Committee 9-0 Assembly Floor 75-0 Support and Opposition (7/2/15) Support : Air Fair; Airport Working Group of Orange County; Alliance for a Regional Solution to Airport Congestion; Brea Chamber of Commerce; California Contract Cities; Cities of Adelanto, Apple Valley, Azusa, Canyon Lake, Chino, Chino Hills, Colton, Diamond Bar, Eastvale, Glendora, Grand Terrace, Highland, Jurupa Valley, Lakewood, Montclair, Monterey Park, Newport Beach, Norco, Ontario, Palmdale, Rancho Cucamonga, Riverside, San Gabriel, Upland, Victorville, and Whittier; Corona Chamber of Commerce; El Monte/South El Monte Chamber of Commerce; Fullerton Chamber of Commerce; La Verne Chamber of Commerce; Omnitrans; North Orange County Legislative Alliance; Ontario International Airport Authority; AB 1455 (Rodriguez) 6/30/15 Page 6 of ? Ontario Professional Firefighters, Local 1430; Orange County Council of Governments; Regional Chamber of Commerce of San Gabriel Valley; San Bernardino County; San Gabriel Valley Council of Governments; San Gabriel Valley Economic Partnership; SEIU California; SEIU United Service Workers West; Southwest California Legislative Council; Western Riverside Council of Governments. Opposition : Unknown. -- END --