BILL ANALYSIS                                                                                                                                                                                                    



          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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