BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 2620 (Dababneh) - Passenger rail projects: funding
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|Version: April 11, 2016 |Policy Vote: T. & H. 11 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: June 27, 2016 |Consultant: Mark McKenzie |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 2620 would authorize the California Transportation
Commission (CTC) to reallocate Proposition 116 general
obligation bond funds that are not encumbered or expended by
July 1, 2020 to any other existing passenger rail projects.
Fiscal
Impact:
Reallocation of up to $12.8 million in general obligation bond
funds, potentially resulting in additional General Fund costs
for debt service payments in the mid hundreds of thousands
annually for 30 years, to the extent these bonds remain unsold
absent the bill. See staff comments below.
Background: Proposition 116 (The Clean Air and Transportation Improvement
Act), which was approved by voters on June 5, 1990, authorized
$1.99 billion in general obligation bonds for a variety of
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intercity passenger rail, commuter rail, transit, and other
projects. Specifically, $1.852 billion was authorized for the
preservation, acquisition, construction, or improvement of rail
rights-of-way, rail terminals and stations, rolling stock
acquisition, grade separations, rail maintenance facilities, and
other capital expenditures for rail purposes. The remaining
funds were authorized to be used for specified expenditures in
non-urban counties, capital projects for bicycle improvements,
water-borne ferry projects, and administrative costs.
Proposition 116 is administered by the California Department of
Transportation (Caltrans) and CTC and funding is programmed and
allocated in a two-step process analogous to the process used
for the State Transportation Improvement Program (STIP). First,
CTC programs the funds for projects eligible under the original
authorization, which it does by approving project applications
that define the project scope, schedule, and funding. The CTC
then allocates funds when the project is ready to proceed.
According to the CTC's 2015 annual report to the Legislature,
approximately $12.8 million in Proposition 116 funds were
unallocated as of June 30, 2015. At that time, the CTC
recommended that the Legislature act to sunset the Proposition
116 program and reallocate any remaining funds to other
passenger rail projects. Existing law, as enacted by
Proposition 116, authorizes the Legislature to reallocate funds
that are not expended or encumbered by July 1, 2010 for any
other passenger rail projects in the state by passing a statute
passed in each house by a two-thirds vote.
Proposed Law:
AB 2620 would reallocate funds allocated pursuant to
Proposition 116 that are not expended or encumbered by July 1,
2020 to any other existing passenger rail project within
existing rail service, as determined by CTC. Pursuant to
Proposition 116, the bill must be approved by a two-thirds vote
of each house of the Legislature.
Staff
Comments: The current market for California general obligation
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bonds is very favorable. The State Treasurer recently sold
$2.95 billion in general obligation bonds which enjoyed
extremely high demand and the lowest borrowing costs on 30-year
bonds in the last three decades, with yields of 3.05%. For
purposes of estimating potential debt service payments as a
result of this bill, staff notes that bonds could be sold with
an interest rate between 3.5% and the historical average of
about 5%. If the full $12.8 million in bond authority remains
as of July 1, 2020, this bill could result in increased General
Fund debt service payments in the range of $696,000 (at 3.5%) to
$833,000 (at 5%) annually for 30 years. This estimate assumes
the bonds would not otherwise be sold, absent the bill. The
potential debt service payments would be lower if some of the
funds are allocated to current projects by July 1, 2020. To the
extent this bill accelerates the sale of all remaining
Proposition 116 bonds, there could be minor CTC administrative
cost savings since they would no longer be required to
administer the program or include information in its annual
report.
Staff notes that, regardless of the potential for increased debt
service costs, the bill is consistent with the will of the
voters, since they anticipated that there may be residual
amounts that could be allocated to other projects 20 years after
passage of the measure.
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