BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 798
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: Nava
VERSION: 6/24/09
Analysis by: Jennifer Gress FISCAL: yes
Hearing date: July 7, 2009
SUBJECT:
California Transportation Financing Authority
DESCRIPTION:
This bill establishes the California Transportation Financing
Authority to assist transportation agencies in obtaining
financing, primarily through issuing bonds backed by specified
sources of revenue, to develop transportation projects. In
doing so, this bill allows the authority to permit agencies to
impose tolls for use of facilities constructed.
ANALYSIS:
Existing law regarding the authority to impose and collect tolls
for the use of a highway contains a hodgepodge of disparate
authorities, all of which are limited either in number, scope,
duration, or geographic area. Toll facilities authorized under
existing law fall under three categories: publicly-operated
toll roads and bridges, privately-operated toll roads, and
high-occupancy toll (HOT) lanes.
Publicly-operated toll roads
Existing law allows the County of Orange or a city therein to
enter into a joint exercise of powers agreement with other local
agencies for the purpose of developing and operating toll roads.
The result of that statute is two joint powers authorities
collectively known as the Transportation Corridor Agencies,
which operate four toll roads on the state highway system in
Orange County.
Existing law also establishes the Bay Area Toll Authority to
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operate seven state-owned bridges and the Golden Gate Bridge,
Highway and Transportation District to operate the Golden Gate
Bridge connecting the City and County of San Francisco to Marin
County.
Privately-operated toll roads
In 1989, AB 680 (Baker), Chapter 107, authorized the California
Department of Transportation (Caltrans) to enter into up to four
lease agreements with private entities for the design, finance,
construction, maintenance, or operation of transportation
projects (i.e., public-private partnerships or PPPs). Only two
projects have been constructed with this authority: The State
Highway Route (SR) 91 Express Lanes in Orange County, the rights
to which the Orange County Transportation Authority subsequently
acquired, and SR 125 in San Diego County.
AB 1010 (Correa), Chapter 688, Statutes of 2002, reduced the
number of PPP agreements authorized under AB 680 from four to
two and prohibited Caltrans from entering into any new
agreements after January 1, 2003.
In 2006, AB 1467 (N??ez), Chapter 32, Statutes of 2006,
authorized up to four transportation facilities to be developed
through PPPs with the condition that projects "be primarily
designed to improve goods movement." This authority was then
expanded with the passage of SB 4xx (Cogdill), Chapter 2,
Statutes of 2009, Second Extraordinary Session. This measure
allows regional transportation agencies and Caltrans to enter
into an unlimited number of PPPs for highway, street, or rail
projects, subject to specified terms and conditions. The
authority to enter into these PPPs sunsets on January 1, 2017.
HOT lanes
HOT lanes are high-occupancy vehicle lanes located in the median
or adjacent to free lanes that single-occupant vehicles may
access for a fee. California's first HOT lane was on Interstate
15 in San Diego, authorized by AB 713 (Goldsmith), Chapter 962,
Statutes of 1993. The project was part of a federal
demonstration program to assess the application of congestion
pricing and to increase revenues for transit development in the
I-15 corridor.
In 2004, AB 2032 (Dutra), Chapter 418, authorized the Sunol
Smart Carpool Lane Joint Powers Authority, the Alameda County
Congestion Management Agency, the Santa Clara Valley
Transportation Authority, and SANDAG to develop and operate HOT
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lane facilities using value or congestion pricing on a specified
number of transportation corridors within their jurisdictions,
subject to certain conditions. AB 574 (Torrico), Chapter 498,
Statutes of 2007, authorized those agencies to issue bonds
backed by projected toll revenues in order to pay for the costs
of developing the facilities.
AB 1467 (N??ez), Chapter 32, Statutes of 2006, allowed, until
January 1, 2012, regional transportation agencies, in
cooperation with Caltrans, to apply to the California
Transportation Commission (CTC) to develop and operate HOT
lanes, including the administration and operation of a value
pricing program and exclusive or preferential lane facilities
for public transit. The number of projects that may be approved
is limited to four, two in Northern California and two in
Southern California, and are subject to approval by the
Legislature.
This bill establishes the California Transportation Financing
Authority (authority) to assist transportation agencies in
obtaining financing to construct transportation projects. In
doing so, this bill allows the authority to permit agencies,
subject to specified conditions, to impose tolls for use of
facilities constructed through the authority. More
specifically, this bill:
Establishes the authority within the Office of the Treasurer
and specifies the membership, as follows:
o The Treasurer, who shall serve as the chair of the
authority
o The Director of Finance
o The Controller
o The Director of Transportation
o The executive director of the California
Transportation Commission
o A local agency representative appointed by the
Senate Committee on Rules
o A local agency representative appointed by the
Speaker of the Assembly
States as the objective of the authority "to increase the
construction of new capacity or improvements for the state
transportation system in a manner that is consistent with and
will help meet the state's greenhouse gas reduction goals, air
quality improvement goals, and natural resource conservation
goals, through the issuance of, or the approval of the
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issuance of, bonds" that are backed, in whole or in part, by
specified transportation-related revenues.
Specifies the powers of the authority as they pertain to
accepting moneys; employing, contracting for, and fixing
compensation for professional services; making loans; issuing
debt; charging administrative fees; obtaining insurance;
entering into agreements; and investing moneys.
Allows the authority to borrow moneys as necessary for the
purposes of initial organization. Any moneys borrowed,
including interest, shall subsequently be charged to and
apportioned among project sponsors in an equitable manner.
Defines "project" to mean all or a portion of the planning,
design, development, finance, construction, reconstruction,
rehabilitation, improvement, acquisition, lease, operation, or
maintenance of highway, public street, rail, bus, or related
facilities.
Defines "costs" to include items that are necessary or
incident to the construction, rehabilitation, acquisition, or
financing of any project.
Defines "project sponsor" to include Caltrans, a regional
transportation planning agency, county transportation
commission, any other local or regional transportation entity
designated in statute as a regional transportation agency, a
joint exercise of powers authority, or an agency designated to
provide the county transportation plan in the Bay Area region.
Provides that all expenses incurred by the authority for a
project shall be payable solely from funds received for the
project. Under no circumstances shall the authority create
any debt, liability, or obligation on the part of the state.
Specifies the revenue sources that may be pledged as security
for revenue bonds issued by the authority, including:
o Local transportation funds, including, but not
limited to, fuel taxes, Proposition 42 moneys, local
transportation sales taxes, state revenues approved
for this purpose by the Legislature or by initiative,
and developer fees.
o Tolls
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Provides that revenues sources within the control of a state
agency may only be pledged with approval by Caltrans or CTC.
Specifies the requirements that a project must meet in order
to be financed or refinanced by the authority, including:
o The project complies with all relevant
statutes applicable to the planning, programming, and
construction of transportation projects.
o The project is contained in the constrained
portion of a conforming regional transportation plan
that is consistent with the greenhouse gas reduction
targets assigned by the Air Resources Board.
o For highway projects, the project sponsor has
secured the support of Caltrans and is consistent with
the needs and requirements of the state's highway
system.
o The project is financially and technically
feasible.
o The project meets or exceeds environmental
requirements and has all necessary permits approved.
o Performance measures have been developed for
the project to monitor its progress.
o The project has community support, which shall
be demonstrated through a public review and comment
process.
o For highway projects, the project sponsor
submits to CTC a plan that demonstrates how transit
service or alternative modes of transportation will be
enhanced in the corridor concurrent with the operator
of a toll facility.
Prohibits the authority from assuming any planning,
programming, or allocation authority possessed by Caltrans or
CTC.
Requires the authority to determine that the revenues and
other moneys available for a project will be sufficient to pay
debt service on the bonds and to operate and maintain the
project over the life of the bonds.
Allows a project sponsor to be the issuer of bonds if the
authority determines the revenues available for the project
will be sufficient to pay debt service on the bonds and to
operate and maintain the project over the life of the bonds.
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Allows the authority to authorize a project sponsor to impose
and collect tolls as one source of funding, if the project
meets the following requirements:
o The governing body of the project sponsor
approves the imposition of tolls by a majority vote of
the governing body, or if Caltrans is the sponsor by a
majority vote of the CTC, or the majority of voters
within the jurisdiction of the project sponsor has
approved a ballot measure authorizing tolls.
o Each highway project for which tolls are
imposed has nontolled alternative lanes available for
public use in the same corridor as the toll project.
A project sponsor may not convert any existing
nontolled lane into a tolled lane, except for the
conversion of an HOV lane into a HOT lane.
o For highway projects, the project is on the
state highway system.
o Tolls are set and maintained at a level
expected to be sufficient to pay debt service,
operations, and maintenance of the project over the
life of the bonds.
o The project's financial pro forma incorporates
life-cycle costs, including maintenance, operation,
and rehabilitation.
o Excess revenues from the project shall be used
exclusively in the corridor from which the revenue was
generated to pay for the following expenditures:
Acquisition, construction,
improvements, maintenance, or operation of
high-occupancy vehicle facilities
Other transportation purposes
Transit service, including transit
operations
o The project sponsor, in consultation with
Caltrans, adopts an expenditure plan, updated
annually, that describes the transportation
improvements planned for the corridor, including the
projected costs, use of toll revenues, and a proposed
completion schedule.
o Tolls are not set to generate more revenue
than is necessary to pay debt service, fund reserves,
operate, maintain, repair, or rehabilitate the
project, and provide funding for transportation
improvements identified in the expenditure plan.
AB 798 (NAVA) Page 7
Allows a project sponsor to implement variable or dynamic
pricing to manage congestion on the tolled facilities.
Requires the authority and CTC to develop a cooperative
process for approving projects such that a project is approved
by CTC and the project's financing is approved by the
authority at approximately the same time. Both CTC and the
authority are required to work with project sponsors to ensure
that projects are brought forward in a manner that is
consistent with the CTC's project requirements and the
authority's financing requirements.
Requires CTC and the authority to make available for public
review and comment a description of the project and its
financing plan.
Establishes provisions regarding the issuance and purchase of
bonds, as well as the management of bond sale proceeds and any
net earnings the authority may accrue.
Requires the authority to report to CTC, beginning June 30,
2011 and annually thereafter, regarding actions it has taken,
to be included in the CTC's annual report to the Legislature.
This bill also deletes the requirement that HOT lane projects
authorized under AB 1467 be approved by the Legislature.
COMMENTS:
1.Purpose . By establishing the California Transportation
Financing Authority, the author and sponsor, the State
Treasurer's Office, argue that this bill creates a method for
local, regional, and state agencies to finance projects in the
municipal bond market and to ensure that projects and funding
are consistent with state transportation policy objectives and
public finance criteria that reflect "best practices." The
bill recognizes the need for transportation funding and
provides a way for those willing and able to pay for new
capacity to build it. Explaining why the bill is needed, the
author and sponsor state:
Capacity demands of transportation infrastructure in our
state combined with declining revenue streams for
transportation project financing have severely eroded our
transportation systems. Population increases of the state
have far outpaced transportation project construction. The
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state gasoline excise tax, the major state source of
transportation construction funding, has depreciated in
value and remains unchanged since 1994 at 18 cents per
gallon. New and creative funding sources to meet our
transportation funds must be found.
2.Previous legislation . This bill is nearly identical to the
version of AB 3021 (Nava) that passed this committee last year
on an 8 to 1 vote. That bill was subject to the Governor's
blanket veto in which he applied this generic message:
The historic delay in passing the 2008-2009 State Budget
has forced me to prioritize the bills sent to my desk at
the end of the year's legislative session. Given the
delay, I am only signing bills that are the highest
priority for California. This bill does not meet that
standard and I cannot sign it at this time.
3.Consistent with or alternative to public-private partnerships
(PPPs) . The prospect of public entities entering into
agreements with private companies to develop and operate
transportation infrastructure has received much attention in
recent years. The lure of such arrangements arises from their
potential to raise private capital at a time when public
sources of funding are diminishing. In such arrangements,
investors are typically repaid through toll revenues. Some
elected officials and public agencies are reluctant to embrace
PPPs due to the state's previous experience with such
arrangements, concerns about the restrictions imposed by
non-compete or just compensation clauses, and the potential
that drivers would be charged higher tolls to ensure that
investors earned their required rate of return.
Publicly-operated toll roads also have the ability to attract
private capital. According to the state's annual Debt
Affordability Report, issued by the Treasurer's Office, much
of state and local infrastructure is already financed by
private capital, capital which is typically raised by
governmental entities selling tax-exempt bonds to investors.
According to the report, private investors held $2.4 trillion
of state and local municipal debt at the end of 2006, which
represented a 50 percent increase over 2001. In this way,
public toll roads, which would include those financed through
the financing authority, present an opportunity to harness
private capital for transportation projects without the
potential pitfalls that may accompany PPPs.
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4.Concerns about tolling . In establishing a financing authority,
this bill permits the authority to authorize a project sponsor
to impose and collect tolls for transportation facilities.
The principal criticism of toll roads, relative to non-tolled
roads, is that users of the facility are being "double-taxed."
Members of the public have already paid taxes on fuel to
support transportation; by paying a toll, users would be
burdened by an additional fee. Others are concerned about the
burden tolls place on low-income households, particularly in
today's economic climate with increased fuel and food costs.
Finally, by facilitating the movement of people and goods, an
effective transportation system supports the economy as a
whole. Is it appropriate for individual users of a facility
to bear the full costs of a facility that ultimately benefits
the local, regional, and state economies?
5.Need for a financing authority ? The extent to which the
services of the financing authority would be utilized is
unclear. Toll roads are feasible principally on roads that
attract high traffic volumes, which are typically located in
urban areas. The transportation agencies in areas where there
is interest in tolling are relatively sophisticated in their
own right but also have the resources to contract for any
additional financial and legal expertise they may need.
Smaller transportation agencies in less populated areas of the
state would perhaps benefit most from this bill, but these
agencies are less likely to undertake a toll project.
On the other hand, the authority could ease the burden a
transportation agency may face in navigating the complex
financial landscape, making it easier for any local agency to
undertake a toll project. More importantly, a financing
authority could help to ensure that toll facilities are in
fact financially feasible with a high likelihood of success.
6.Not impacted by state's current fiscal crisis . The state's
inability to adopt a balanced budget and the state's lowered
credit rating has challenged the state's ability to issue
general obligation bonds. This situation will not affect the
financing authority's ability to issue bonds as authorized by
this bill because it will be the project sponsor's credit and
pledged revenue stream (e.g., tolls) that bond underwriters
will examine, not the state's. Bonds issued by the authority
will not be considered state debt.
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RELATED LEGISLATION
AB 744 (Torrico) authorizes BATA to finance and develop a
region-wide system of HOT lanes referred to as the Bay Area
Express Lane Network.
AB 1175 (Torlakson), among other provisions, adds the Antioch
and Dumbarton bridges to the state toll bridge seismic retrofit
program and allows BATA to increase bridge toll rates for
purposes of completing those projects.
Assembly Votes:
Floor: 51-25
Appr: 12-5
Trans: 11-3
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
July 1, 2009)
SUPPORT: State Treasurer Bill Lockyer (sponsor)
Associated General Contractors of California
California Association of Councils of Governments
California Labor Federation
Los Angeles County Metropolitan Transportation
Authority
Riverside County Transportation Commission
Santa Clara Valley Transportation Authority
State Building and Construction Trades Council
Transportation Agency for Monterey County
Ventura County Transportation Commission
OPPOSED: None received.