BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 317 |Hearing | 5/6/15 |
| | |Date: | |
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|Author: |De León |Tax Levy: |No |
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|Version: |4/23/15 |Fiscal: |Yes |
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|Consultant|Grinnell |
|: | |
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THE SAFE NEIGHBORHOOD PARKS, RIVERS, AND COASTAL PROTECTION
BOND ACT OF 2016 (URGENCY)
Enacts the Safe Neighborhood Parks, Rivers, and Coastal
Protection Bond Act of 2016, which places a $2.45 billion bond
on the November, 2016, ballot.
Background and Existing Law
I. Bond Acts. When public agencies issue bonds, they
essentially borrow money from investors, who provide cash in
exchange for the agencies' commitment to repay the principal
amount of the bond plus interest. Bonds are usually either
revenue bonds, which repay investors out of revenue generated
from the project the agency buys with bond proceeds, or general
obligation bonds, which the public agency pays out of general
revenues and are guaranteed by its full faith and credit.
Section 1 of Article XVI of the California Constitution and the
state's General Obligation Bond Law guide the issuance of the
state's general obligation debt. The Constitution allows the
Legislature to place general obligation bonds on the ballot for
specific purposes with a two-thirds vote of the Assembly and
Senate. Voters also can place bonds on the ballot by
initiative, as they have for parks, water projects, high-speed
rail, and stem cell research, among others. Either way, general
obligation bonds must be ratified by majority vote of the
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state's electorate. Unlike local general obligation bonds, the
state's electorate doesn't automatically trigger an increased
tax to repay the bonds when they approve a state general
obligation bond. Article XVI of the California Constitution
commits the state to repay investors from general revenues above
all other claims, except payments to public education.
California voters approved $38.4 billion of general obligation
bonds between 1974 and 1999, but approximately $95 billion since
2000. Additionally, the Legislature enacted and voters approved
Proposition 1, which authorized $7.1 billion in bonds for water
quality and supply infrastructure (AB 1471, Rendon, 2014).
Bond acts have standard provisions that authorize the Treasurer
to sell a specified amount of bonds, and generally include
several uniform provisions that:
Establish the state's obligation to repay them, and
pledge its full faith and credit to repayment,
Set forth issuance procedures, and link the bond act to
the state's General Obligation Bond Law,
Create a finance committee with specified membership,
chaired by the State Treasurer,
Charge the committee to determine whether it is
"necessary or desirable" to issue the bonds,
Add other mechanisms necessary for the Treasurer and the
Department of Finance to implement the bond act, including
allowing the board to re-quest a loan from the Pooled Money
Investment Board to advance funds for bond-funded programs
prior to the bond sale, among others.
In bond acts, the Legislature generally:
Sets forth categories of projects eligible for bond
funds, such as library construction or school facility
modernization,
Chooses an administrative agency to award the funds,
such as the State Librarian or the State Allocation Board,
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Details the criteria to guide the administrative
agency's funding in each category,
Enacts enforcement and audit provisions, and
Provide for an election to approve the bond act.
Should the voters approve the bond act, the Legislature then
appropriates funds to the chosen agencies to fund projects
consistent with the criteria, generally as part of the Budget
Act. The Department of Finance then surveys agencies to
determine need for bond funds based on a project's readiness,
and then asks the Treasurer to sell bonds in a specified amount.
After the bond sale, the Department of Finance determines which
bond acts and agencies receive bond proceeds.
In recent years, the Legislature has enacted, and voters
approved the following bonds for parks:
Safe Neighborhood Parks, Clean Water, Clean Air, and
Coastal Protection Act of 2000 of $2.1 billion (AB 18,
Villaraigosa), and
California Clean Water, Clean air, Safe neighborhood
parks, and Coastal Protection Act of 2002 of $2.6 billion
(AB 1602, Keeley),
The following bond act was placed on the ballot by initiative:
The Safe Drinking Water, Water Quality and Supply, Flood
Control, River and Coastal Protection Bond Act of 2006 of
$5.4 billion (Proposition 84).
Proposed Law
Senate Bill 317 enacts the Safe Neighborhood Parks, Rivers, and
Coastal Protection Bond Act of 2016, which places a $2.45
billion bond on the November, 2016, ballot. After bonds are
issued and sold, the measure allows the Legislature to
appropriate funds according to the following schedule:
$1.45 billion for parks in the following categories:
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o $800 million to the Department of Parks and
Recreation for creating and expanding safe
neighborhood parks in park-poor neighborhoods, in
accordance with the Safe Park Development and
Community Revitalization Act of 2008 (AB 31, De Leon,
2008)
o $200 million for grants for local governments
for local park rehabilitation and improvement,
allocated on a per capita basis,
o $200 million to the Department for grants for
the restoration, preservation, and protection of
regional parks and parklands,
o $200 million to the Department for restoration
and preservation of existing state park facilities,
and units to preserve and increase public access and
to protect natural resources, and
o $50 million to the Department for enterprise
activities to increase revenue generation to support
the department.
$370 million for rivers, lakes, and streams in the
following categories:
o $100 million to the Natural Resources Agency
to restore, protect, and expand river parkways,
o $100 million to the Agency to implement the
Lake Tahoe Environmental Improvement Program,
o $100 million for restoration and protection
projects, and the development of river parkway
projects on the Los Angeles River and its tributaries,
o $50 million for deposit into the Salton Sea
Restoration Fund.
o $20 million for urban stream restoration
pursuant to AB 2704 (Aroner, 2002).
$350 million for coast and ocean protection to fund
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protection in two categories:
o $300 million to the state coastal conservancy
to protect beaches, bays, and coastal watershed
resources, including agricultural resources and to
complete the California Coastal Trail,
o $50 million to the Santa Monica Mountains
Conservancy to protect Santa Monica Mountain coastal
watersheds,
$280 million for climate resilience in three categories:
o $100 million to the Strategic Growth Council
to develop or implement regional or local greenprint
or climate adaption plans, or update or develop a
climate adaptation element for a general plan. The
Council can also use funds to protect agricultural and
open-space resources that support adopted sustainable
communities strategies.
o $150 million to the wildlife conservation
board for grants to protect and expand wildlife
corridors,
o $30 million to the Department of Forestry and
Fire Protection for grants to complement existing
urban forestry expenditures by covering areas not
included from funding in SB 1018 (Committee on Budget
and Fiscal Review, 2012).
The measure incorporates standard provisions in general
obligation bond law either explicitly or by reference, including
charging the finance committee with determining whether it's
necessary and desirable to issue the bonds; however, the measure
neither specifies the members of the finance committee, nor its
Chair.
State agencies must seek to achieve wildlife conservation
objectives through projects on public lands or voluntary
projects on private land to the extent feasible. State agencies
can use funds for payments to create measureable habitat or
other improvements in consultation with the Department of Fish
and Wildlife, including habitat exchanges. Priority shall be
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given to projects that implement Natural Community Conservation
Plans and endangered species recovery plans. Restoration
projects must include planning, monitoring, and reporting
necessary to ensure successful implementation.
The measure defines many of its terms, and also makes
legislative finding and declarations supporting its purposes.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "SB 317 enacts
into law the Safe Neighborhood Parks, Rivers, and Coastal
Protection Act of 2016, otherwise referred to as the Parks Bond.
The bond is a $2.45 billion measure that would appear on the
November 2016 ballot if it becomes law. If enacted, SB 317
would be the first parks bond passed by this legislature in over
15 years (Proposition 84 of 2006 had some parks funding in it,
but it was a broader water and climate bond as well). Investing
in community parks and infrastructure is vital to communities
throughout the state. It is particularly important in areas
where children have no green space and few recreational
opportunities. The last time the Legislature provided funding
to help communities in parks poor areas, there were four times
as many requests as there were dollars. Over time, that need
has only become greater. SB 317 is focused on underserved
communities but it also provides funds for all areas, from San
Diego to Crescent City. It reflects the fact that every region
of our state has different needs but all regions need parks and
open space."
2. Sixteen tons . Debt is an essential part of almost every
government, business, and personal balance sheet, as borrowers
seek funds from lenders in exchange for a future commitment to
repay them. However, evaluating the State's general obligation
debt is difficult; both the State Treasurer and the Legislative
Analyst's Office suggest there's no correct amount. Instead,
experts suggest that states should look at three criteria:
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affordability, comparability, and optimality<1>:
California's debt is affordable. The State Treasurer estimates
that the state will spend $6.4 billion in 2014-15, and $6.8
billion in 2015-16. However, these costs reduce the funding
that is available for other priorities. Debt service is one of
the fastest growing state costs, expected to reach $8.6 billion
in 2017-18 assuming no new authorizations, according to the
Governor's Five-Year Infrastructure Plan. The Plan proposes no
new general obligation bonds, instead relying on more limited
lease-revenue bonds because of this increased debt burden.
California's comparability to other states is less favorable,
but improving. The State Treasurer's 2014 Debt Affordability
Report contains the following chart, adjusted for recent
upgrades:
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|Debt Ratios Of 10 Most Populous States, Ranked By Ratio Of Debt |
|To Personal Income |
| |
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|-----------------+------------+---------+---------+------------|
| State | Moody's/ | Debt To |Debt Per |Debt As A % |
| | S&P/ |Personal |Capita(b)| |
| | Fitch(a) |Income(b)| | Of State |
| | | | | GDP(b)(c) |
|-----------------+------------+---------+---------+------------|
|Texas |Aaa/AAA/AAA | 1.5% | $614 | 1.2% |
| | | | | |
|-----------------+------------+---------+---------+------------|
|Michigan |Aa2/AA-/AA | 2.1% | $785 | 1.9% |
|-----------------+------------+---------+---------+------------|
|North Carolina |Aaa/AAA/AAA | 2.1% | $806 | 1.7% |
| | | | | |
|-----------------+------------+---------+---------+------------|
|Florida |Aa1/AAA/AAA | 2.5% | $1,088 | 2.5% |
|-----------------+------------+---------+---------+------------|
|Pennsylvania | Aa3/AA/AA | 2.6% | $1,172 | 2.5% |
|-----------------+------------+---------+---------+------------|
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<1> Robert Wassmer and Ronald Fisher "Debt Burdens of California
State and Local Governments: Past, Present and Future." As
requested and supported by the California Debt and Investment
Advisory Commission. July 2011.
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|Ohio |Aa1/AA+/AA+ | 2.7% | $1,087 | 2.5% |
| | | | | |
|-----------------+------------+---------+---------+------------|
|Georgia |Aaa/AAA/AAA | 2.9% | $1,064 | 2.5% |
|-----------------+------------+---------+---------+------------|
|California | Aa3/A+/A+ | 5.3% | $2,465 | 4.7% |
|-----------------+------------+---------+---------+------------|
|Illinois | A3/A-/A- | 5.6% | $2,580 | 4.8% |
|-----------------+------------+---------+---------+------------|
|New York |Aa1/AA+/AA+ | 6.0% | $3,204 | 5.2% |
|-----------------+------------+---------+---------+------------|
| | | | | |
|-----------------+------------+---------+---------+------------|
|Moody's Median | | 2.6% | $1,054 | 2.4% |
|All States | | | | |
|-----------------+------------+---------+---------+------------|
|Median For The | | 2.7% | $1,076 | 2.5% |
|10 Most Populous | | | | |
|States | | | | |
|-----------------+------------+---------+---------+------------|
| | | | | |
|(a) Moody's, | | | | |
|Standard & | | | | |
|Poor's, and | | | | |
|Fitch Ratings as | | | | |
|of August 2014 | | | | |
| | | | | |
|(b) Figures as | | | | |
|reported by | | | | |
|Moody's in its | | | | |
|2013 State Debt | | | | |
|Medians Report | | | | |
|released May | | | | |
|2014. As of | | | | |
|calendar year | | | | |
|end 2012. | | | | |
| | | | | |
| State GDP | | | | |
|numbers have a | | | | |
|one-year lag. | | | | |
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Determining optimality or whether government is investing in the
quantity and quality of public capital desired by residents, and
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financing the appropriate share with debt, is very difficult.
LAO recommends that the Legislature consider the recently
released Five-Year Infrastructure Plan as a starting point to
developing a coordinated approach to infrastructure funding, and
establish a committee to focus on statewide infrastructure.
3. The good news . Investors ultimately determine a state's
creditworthiness and the interest rate paid on a bond when they
bid to purchase one. However, ratings issued from the three
major ratings agencies often inform investors and the public
regarding the investment risk of purchasing a California general
obligation bond. These ratings change over time in response to
a state's fiscal situation and economy, among other factors.
Last year, ratings agencies Standard and Poor's and Moody's both
raised its ratings, and ratings agency Fitch has increased the
state's rating twice in the last three years. Agencies
identified improving revenues and fiscal discipline when making
the upgrade. Additionally, California sold $1.2 billion of
general-obligation bonds in November with its lowest relative
borrowing cost measured by interest rate since 2007.
4. The bad news . SB 317's bond authorization amount of $2.45
billion is consistent with the two most recent legislatively
enacted park bonds, less than half of the last bond enacted by
initiative, and modest compared with other recently enacted
bonds. However, California has a distinct problem: of the $135
billion that voters have authorized, almost $30.4 billion hasn't
been issued yet. The state hasn't issued almost $4.5 billion in
transportation bonds, and $9 billion in high speed rail bonds,
plus $7.5 billion from the recent water bond. The principal
reason for this amount is that many bond-funded projects have
not received required approvals. The Treasurer generally sells
about $1 billion in new money bonds twice per year, so even if
the Legislature enacts and the voters approve SB 317, many of
its purposes may have to wait several years for funding as
projects funded by previously authorized bonds get up and
running.
5. Consistent ? California generally repays general obligation
bonds over a 30 year period, reflecting sound public finance
principles whereby a borrower repays debt incurred to construct
an asset over its useful life. Many projects Californian built
with bond proceeds are still in use long after the bonds have
been repaid. While SB 317's funds parks with that will provide
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long-term benefits to many communities across the state, it does
propose to fund planning efforts by the Strategic Growth
Councilv (SGC) and local agencies to implement regional or local
greenprint plans, climate adaptation plans, or to update or
develop a climate adaptation element for a general plan. While
these plans will have long-term impacts, they're not a
traditional use of bond proceeds, which have typically been for
infrastructure projects like high speed rail, levees, and
housing. The Legislature could more easily fund these planning
efforts by appropriating funds in the Budget Act.
6. Another . The Committee approved SB 114 (Liu) at its April
15th hearing, which places a bond of an unspecified amount on
the November, 2016, ballot to fund K-12 school facilities.
7. Incoming ! The Senate Committee on Natural Resources
approved SB 317 on April 28th, 2015 by a vote of 7 to 1.
8. Urgency . On April 23rd, the author amended SB 317 to
insert an urgency clause. As an urgency statute, SB 317 would
take effect immediately.
Support and Opposition (4/30/15)
SUPPORT
Advanced California Park & Recreation Profession
Amigos de Bolsa Chica
Amigos de los Rios
Anahuak Youth Sports Association
Anderson Marsh Interpretive Association
Association of California Water Agencies
Audubon California
Anza-Borrego Foundation
Audubon California
Benicia State Parks Association
Benicia Tree Foundation
Big Sur Land Trust
Bolsa Chica Land Trust
California Association of Local
California Association of Commissioners & Board Members
California Association of Recreation and Park District
Conservation Corps
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California Climate and Agriculture Network
California Council of Land Trusts
California League of Conservation Voters
California League of Parks Associations
California ReLeaf
California State Parks Foundation
California State Railroad Museum Foundation
California Tahoe Alliance
California Trout
California Urban Forests Council
California Yacht Brokers Association
Californians for Western Wilderness
Canopy
Central Coast Lighthouse Keepers
Chino Hills State Park interpretive Association
City of Benicia
City of Encinitas
Clean Water Action
Common Vision
Community Services Employment Training
Conejo Recreation and Park District
County of Placer
Crystal Cove Alliance
Defenders of Wildlife
Ducks Unlimited
East Bay Regional Park District
Eco Farm
Empire Mine Park Association
Environment California
Environmental Defense Fund
Environmental Justice Coalition for Water
Fiesta de Reyes
Fort Tejon Historical Association
Friends of Balboa Park
Friends of China Camp
Friends of Lakes Folsom and Natoma
Friends of Mt. Tam
Friends of Palomar State Park
Friends of Pico State Park
Friends of Santa Cruz State Parks
Friends of Sutter's Fort
Friends of the Folsom Powerhouse Association
Friends of the Urban Forest
Hills for Everyone
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Hollywood Beautification Team
Humboldt Redwoods Interpretive Association
Huntington Beach Tree Society
John Marsh Historic Trust
Just one Tree
Keep Eureka Beautiful
Koreatown Youth and Community Center
Land Trust of Santa Cruz County
Latino Outdoors
Los Angeles Conservation Corps
Malibu Creek Docents
Marina Recreation Association
Marin Agricultural Land Trust
Mendocino Woodlands Camp Association
Mid Peninsula Regional Open Space
Mojave River Natural History Association
Mono Lake Committee
Mountains Recreation and Conservation Authority
Napa County Regional Park and Open Space District
National Marine Manufacturers Association
National Parks Conservation Association
National Trust for Historic Preservation
Natural Resources Defense Council
Nature Conservancy
North East Trees
Occidental Arts and Ecology Center
Open Space Authority Santa Clara Valley
Our City Forest
Outdoor Afro
Outdoor Outreach
Pacific Forest Trust
Palos Verdes South Bay Audubon
Paradise Recreation and Park District
Peninsula Open Space Trust
Pine Ridge Association
Plumas-Eureka State Park Association
Point Cabrillo Lightkeepers Association
Poppy Reserve/Mojave Desert Interpretive Association
Portola and Castle Rock Foundation
Rails to Trails Conservancy
Regional Parks Sonoma County
Richmond Trees
Roseville Urban Forest Foundation
Sacramento Tree Foundation
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Santa Ana River Trail and Parkway
Santa Clara County Parks Partnership
San Francisco Parks Alliance
San Francisco Recreation & Parks
Santa Clara Valley Open Space Authority
Save Our Forest
Save Our Shores
Save the Bay
Save the Redwoods League
Sea and Desert Interpretive Association
Shasta historical Society
Sierra Club California
Sierra State Parks Foundation
Solano Advocates Green Environments
Sonoma County Trails Council
Sonoma Ecology Center
Sonoma Land Trust
South Yuba River Citizens League
Southern California Mountains Foundation
Sports Leisure Vacations, LLC
State Parks Partner Coalition
Stewards of the Coast and Redwoods
Sustainable Tahoe
Tahoe Resource Conservation District
Team Sugarloaf
The Malibu Adamson House Foundation
The Trust for Public Land
Topanga Canyon Docents
Torrey Pines Association
Tree Davis
Tree Foundation of Kern
Tree Fresno
Tree Lodi
Tree Musketeers
Tree Partners Foundation
Tree People
Tree San Deigo
Trout Unlimited
Urban Conservation Corps of the Inland Empire
Urban ReLeaf
Urban Tree Foundation
Valley of the Moon Observatory Association
Victoria Avenue Forever
Waddell Creek Association
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Watershed Conservation Authority
West Hollywood Tree Preservation Society
West Marine Environmental Action Committee
Western Chapter, international Society of Aboriculture
Will Rogers Ranch Foundation
Woodland Tree Foundation
Worldwide Boaters Safety Group
Your Children's Trees
Support in Concept or with Concerns
Bear Yuba Land Trust
California Association of Park and Recreation Commissioners and
Board Members
California Association of Recreation and Park Districts
California Park and Recreation Society
Carbon Cycle Institute
County of Kern
County of Santa Clara
East Bay Regional Park District
Latino Outdoors
Midpeninsula Regional Open Space District
OutDoor Afro
Placer Land Trust
San Francisco Parks Alliance
San Francisco Recreation and Park District
Sequoia Riverlands Trust
Sierra Business Council
Sierra Foothill Conservancy
Sonoma County Regional Parks
State Park Partners Coalition
Truckee Donner Land Trust
Watershed Conservation Authority
Western Region, Tail-to-Trails Conservancy
OPPOSITION
Unknown
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