BILL NUMBER: AB 878 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Caballero
FEBRUARY 26, 2009
An act to amend Sections 5956, 5956.1, 5956.2, 5956.3, 5956.4,
5956.5, 5956.6, 5956.7, 5956.8, 5956.9, and 5956.10 of, and to add
Section 5956.11 to, the Government Code, relating to infrastructure
financing.
LEGISLATIVE COUNSEL'S DIGEST
AB 878, as introduced, Caballero. Infrastructure financing.
Existing law permits a governmental agency to solicit proposals
and enter into agreements with private entities for the design,
construction, or reconstruction by, and may lease to, private
entities, for specified types of fee-producing infrastructure
projects. Existing law permits these agreements to provide for the
lease of, or ownership of, infrastructure facilities owned by a
governmental entity, but constructed by a private entity, to that
private entity for a period of up to 35 years.
This bill would authorize a local governmental agency, as defined,
to enter into an agreement with a private entity for financing for
specified types of revenue-generating infrastructure projects. The
bill would require an agreement entered into under these provisions
to include adequate financial resources to perform the agreement, and
would permit the agreements to lease, license, or provide other
permitted uses by the governmental agency to extend for a term of up
to 50 years, after which time the project would revert to the
governmental agency.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 5956 of the Government Code is amended to read:
5956. Local governmental agencies have experienced a significant
decrease in available tax revenues to fund necessary infrastructure
improvements. If local governmental agencies are going to maintain
the quality of life that this infrastructure provides, they must find
new funding sources. One source of new money is private sector
investment capital financing utilized
to study, plan, design, develop, finance,
construct, maintain, improve, rebuild, repair,
and operate , or any combination thereof,
infrastructure facilities. Private sector financing may be used
with public and private financing pursuant to this chapter and
projects may be financed by a combination of public and private
financing under this chapter. Private sector financing for a project
under this section may include, but is not limited to, cash and cash
equivalents, loans, debt assumption, letters of credit, capital
investment, in-kind contributions of materials or equipment,
construction or equipment financing, carrying of costs during
construction, and any combination thereof. Unless private
sector investment capital financing
becomes available to study, plan, design, construct, develop,
finance, maintain, rebuild, improve, repair, or operate, or any
combination thereof, fee-producing infrastructure facilities, some
local governmental agencies will be unable to replace deteriorating
infrastructure. Further, some local governmental agencies will be
unable to expand and build new infrastructure facilities to serve the
increasing population.
SEC. 2. Section 5956.1 of the Government Code is amended to read:
5956.1. It is the intent of the Legislature that local
governmental agencies have the authority and flexibility to utilize
private investment capital private financing
or public financing, and any combination thereof, to study,
plan, design, construct, develop, finance, maintain, rebuild,
improve, repair, or operate, or any combination thereof,
fee-producing infrastructure facilities. Without the ability to
utilize private sector investment capital
these sources of financing to study, plan, design,
construct, develop, finance, maintain, rebuild, improve, repair, or
operate, or any combination thereof, fee-producing infrastructure
facilities, the Legislature finds that some local governmental
agencies will not be able to adequately, competently, or
satisfactorily retrofit, reconstruct, repair, or replace existing
infrastructure and will not be able to adequately, competently, or
satisfactorily design and construct new infrastructure.
SEC. 3. Section 5956.2 of the Government Code is amended to read:
5956.2. It is the intent of the Legislature that this chapter be
construed as creating a new and independent authority for local
governmental agencies to utilize private sector investment
capital financing or public financing to study,
plan, design, construct, develop, finance, maintain, rebuild,
improve, repair, or operate, or any combination thereof,
fee-producing infrastructure facilities. To that end, this authority
is intended to supplement and be independent of any existing
authority and does not limit, replace, or detract from existing
authority. This chapter may be used by local governmental entities
when they deem it appropriate in the exercise of their discretion. It
is the intent of the Legislature that this act create no new
governmental entities.
SEC. 4. Section 5956.3 of the Government Code is amended to read:
5956.3. (a) For purposes of this chapter, "governmental agency"
includes a city, county, city and county, including a
chartered charter city or county, school
district, community college district, public district, county board
of education, joint powers authority, transportation commission or
authority, or any other public or municipal corporation.
(b) For purposes of this chapter, "private entity" includes a
person, business entity, combination of persons and business
entities, or a combination of business entities.
(c) For purposes of this chapter, "fee-producing infrastructure
project" or "fee-producing infrastructure facility" means the
operation of the infrastructure project or facility will be paid for
, in whole or in part, by the persons or entities
benefited by or utilizing the project or facility.
SEC. 5. Section 5956.4 of the Government Code is amended to read:
5956.4. A governmental agency may solicit proposals and enter
into agreements with private entities for the design, construction,
or reconstruction by, and may lease to, private entities for the
following types of fee-producing infrastructure projects:
(a) Irrigation.
(b) Drainage and sanitary sewer systems .
(c) Energy or power production.
(d) Water supply, treatment, and distribution.
(e) Flood control.
(f) Inland waterways.
(g) Harbors.
(h) Municipal improvements.
(i) Commuter and light rail.
(j) Highways or bridges.
(k) Tunnels.
(l) Airports and runways.
(m) Purification of water.
(n) Sewage treatment, disposal, and water recycling.
(o) Refuse disposal.
(p) Structures or buildings, except structures or buildings that
are to be utilized primarily for sporting or entertainment events.
SEC. 6. Section 5956.5 of the Government Code is amended to read:
5956.5. Notwithstanding Chapter 10 (commencing with Section 4525)
of Division 5, or Part 2 (commencing with Section 10100) or Part 3
(commencing with Section 20100) of Division 2 of the Public Contract
Code, the governmental agency soliciting proposals and entering into
agreements with private entities for the studying, planning, design,
developing, financing, construction, maintenance, rebuilding,
improvement, repair, or operation, or any combination thereof, by
private entities for fee-producing infrastructure projects shall
ensure that the contractor is selected pursuant to a competitive
negotiation process. Projects may be proposed by the private entity
and selected by the governmental agency at the discretion of the
governmental agency. Projects may be proposed and selected
individually or as part of a related or larger project. The
competitive negotiation process shall utilize, as the
a primary selection criteria, the demonstrated
competence and qualifications for the studying, planning,
design, developing, financing, construction, maintenance, rebuilding,
improvement, repair, or operation, or any combination thereof, of
the facility of the private entity to perform the
services required under the agreement, including prior experience in
performing similar services . The selection criteria shall also
ensure that the facility be operated at fair and reasonable prices
to the user of the infrastructure facility services. The competitive
negotiation process shall not require competitive bidding. The
competitive negotiation process shall specifically prohibit practices
that may result in unlawful activity including, but not limited to,
rebates, kickbacks, or other unlawful consideration, and shall
specifically prohibit governmental agency employees from
participating in the selection process when those employees have a
relationship with a person or business entity seeking a contract
under this section that would subject those employees to the
prohibition of Section 87100. Other than these criteria and
applicable provisions related to providing security for the
any required construction and completion of the
facility, the governmental agency soliciting proposals is not subject
to any other code provisions of the Public
Contract Code or this code that relates relating
to public procurements.
SEC. 7. Section 5956.6 of the Government Code is amended to read:
5956.6. (a) For purposes of facilitating projects, the agreements
specified in Section 5956.4 may include provisions for the lease
of , license, or permissive use of
rights-of-way in, and airspace over, property owned by a governmental
agency, for the granting of necessary easements, and for the
issuance of permits or other authorizations to enable the private
entity to construct , maintain, rebuild, improve, or repair
infrastructure facilities supplemental to existing
government-owned facilities. Infrastructure constructed by a private
entity pursuant to this chapter shall, at all times, be owned by a
governmental agency , unless the governmental agency, in its
discretion, elects to provide for ownership of the facility by the
private entity during the term of the agreement . All
public works constructed pursuant to this section shall comply with
Chapter 1 (commencing with Section 1720) of Part 7 of Division 2 of
the Labor Code. The agreement shall may
provide for the lease , license, or other permissive use
of those facilities to , or ownership by,
the private entity for up to 35 50
years. In consideration therefor, the agreement shall provide for
complete reversion of the privately constructed facility to the
governmental agency at the expiration of the lease , license, or
other permissive use at no charge to the governmental agency.
Subsequent to the expiration of the lease or ownership
period , license, or other permissive use period,
the governmental agency may continue to charge fees for use of
the infrastructure facility. If, after the expiration of the lease
or ownership period , license, or other
permissive use period, the governmental agency continues to
lease airspace rights to the private entity, it shall do so at fair
market value.
(b) The agreement between the governmental agency and the private
entity shall include, but need not be limited to, provisions to
ensure the following:
(1) Compliance with the California Environmental Quality Act
(Division 13 (commencing with Section 21000) of the Public Resources
Code). Neither the act of selecting a proposed project or a private
entity, nor the execution of an agreement with a private entity,
shall require prior compliance with the act. However, appropriate
compliance with the act shall thereafter occur before project
development commences.
(2) Security for the construction of the facility to ensure its
completion, and contractual provisions that are necessary to protect
the revenue streams of the project.
(2) Security for performance of the agreement and contractual
provisions that are necessary to protect the funding and financial
terms of the agreement.
(3) Adequate financial resources of the private entity to
design, build, and operate the facility, after the date of
perform the agreement.
(4) Authority for the governmental agency to impose user fees
, in whole or in part, for use of the facility in an amount
sufficient to protect the revenue streams necessary for projects or
facilities undertaken pursuant to this chapter. User fee revenues
, in whole or in part, may be paid to the governmental agency or
the private entity and shall be dedicated exclusively to
payment of the private entity's and governmental agency's
direct and indirect capital outlay costs for the project, direct
and indirect costs associated with financing of the facility,
including interest, principal, repayment, issuance, and refinancing
costs, direct and indirect costs associated with operations,
direct and indirect user fee collection costs, direct and indirect
costs of administration of the facility, reimbursement for the direct
and indirect costs of maintenance, other project-related costs,
and a negotiated reasonable return
on investment to the private entity as set forth
specifically in the agreement, or included as part of the costs and
fees, as negotiated or determined during the procurement process
.
(5) As a precondition to the imposition or increase of a user fee,
the governmental agency shall conduct at least one public
hearing two public hearings at which public
testimony will be received regarding a proposed user fee revenue or
increase in user fee revenues. The public hearing shall precede the
action by the governmental agency to actually impose a user fee or to
increase an existing user fee. The governmental agency shall
consider the public testimony prior to imposing a new or increased
user fee. The governmental agency shall provide the following notices
and utilize the following procedures:
(A) Notice of the date, time, and place of the meeting, including
a general explanation of the matter to be considered, shall be mailed
at least 14 days prior to the meeting to any interested party who
files a written request with the governmental agency for mailed
notice of the meeting on new or increased fees or service charges.
Any written request for mailed notices shall be valid for one year
from the date on which it is filed unless a renewal request is filed
prior to the expiration of the one-year period for which the written
request was filed. The legislative body may establish a reasonable
annual charge for sending notices based on the estimated cost of
providing the service.
(B) At least 10 days prior to the meeting, the governmental agency
shall make available to the public data that supports the amount of
the fee or the increase in the fee.
(C) (i) At least 10 days prior to the meeting, the governmental
agency shall publish a notice in a newspaper of general circulation
in that agency's jurisdiction stating the date, time, and place of
the meeting, including a general explanation of the matter to be
considered.
(ii) Any costs incurred by the governmental agency in conducting
the meeting or meetings required by this section may be recovered
from fees charged for the services that are the subject of the fee.
(iii) For transportation infrastructure
projects specifically authorized by this
chapter, at least 10 days prior to the meeting, the governmental
agency shall publish for four consecutive times, a notice in the
newspaper of general circulation in the affected area stating in no
smaller that 10-point type a notice specifying the subject of the
hearing, the date, time, and place of the meeting, and in at least
8-point type a general explanation of the matter to be considered.
(D) No local agency shall levy a new fee or service charge or
increase an existing fee or service charge to an amount that exceeds
the estimated amount required to provide the service for which the
fee or service charge is levied and a reasonable rate of return on
investment, pursuant to paragraph (4). Any action by a local agency
to levy a new fee or service charge or to approve an increase in an
existing fee or service charge pursuant to this chapter shall be
taken only by ordinance or resolution. The legislative body of a
local agency shall not delegate the authority to adopt a new fee or
service charge, or to increase a fee or service charge.
(6) Require that if the legislative body of the governmental
agency determines that fees or service charges create revenues in
excess of the actual cost for which the user fee revenues are
dedicated and a reasonable rate of return on investment
, pursuant to paragraph (4), those revenues shall either be
applied to any indebtedness incurred by the private entity or
the governmental agency with respect to the project, be paid
into a reserve account in order to offset future operation costs, be
paid into the appropriate government account, be used to reduce the
user fee or service charge creating the excess, or a combination of
these sources.
(7) Require If the private entity operates
the facility, require the private entity to maintain the
facility in good operating condition at all times, including the time
the facility reverts to the governmental agency.
(8) Preparation by the private entity of an annual audited report
accounting for the income received and expenses to operate the
facility. The private entity shall make that report available to any
member of the public for a cost not to exceed the cost of
reproduction of the report.
(9) Provision for a buyout of the private entity
entity's capital investment by the governmental entity in
the event of termination or default before the end of the lease
term.
(10) Provision for appropriate indemnity promises between the
governmental agency and the private entity.
(11) Provision requiring the private entity to maintain insurance
with those coverages and in those amounts that the governmental
agency deems appropriate.
(12) In the event of a dispute between the governmental agency and
the private entity, both parties shall be entitled to all available
legal or equitable remedies.
SEC. 8. Section 5956.7 of the Government Code is amended to read:
5956.7. (a) The governmental agency may exercise any power
possessed by it with respect to the development and construction of
infrastructure projects pursuant to this chapter. Agreements for the
maintenance and police operation
services entered into pursuant to this chapter shall provide for full
reimbursement for services rendered by the governmental agency in
accordance with the terms and conditions specified in the agreement.
The governmental agency may provide services for which it is
reimbursed with respect to preliminary planning, environmental
certification, and preliminary design of the infrastructure projects.
The governmental agency may consult with legal, financial, and other
consultants in the negotiation and development of the agreement. To
the extent existing public utility infrastructure is necessarily
required to be modified, relocated, or removed in order for an
infrastructure project authorized by this chapter to be constructed,
the cost of modification, relocation, or removal of the existing
infrastructure shall be borne by the private entity and included as a
recoverable capital cost of the project. This cost shall not be
construed to include costs of increasing the capacity, or upgrading,
or improving the existing public utility infrastructure.
(b) The private entity's responsibility to modify, relocate, or
remove existing public utility infrastructure shall not alter any
agreements that may be in place between the governmental agency and
any public utility regarding projects funded by the governmental
agency.
(c) In the event of a dispute regarding the reimbursement
required, a private entity may request an audit of the public utility'
s costs by a mutually acceptable certified public accountant. The
result of the audit shall determine the actual costs. If the audit
indicates that the public utility's actual costs were less than 95
percent of the cost claimed, the cost of the audit shall be borne by
the public utility. If the audit indicates that the public utility's
actual costs were 95 percent or more of the cost claimed, the cost of
the audit shall be borne by the private entity.
SEC. 9. Section 5956.8 of the Government Code is amended to read:
5956.8. The plans and specifications for each project constructed
pursuant to this chapter shall comply with all applicable
governmental design standards for that particular infrastructure
project. The private entity designing, constructing,
operating, and maintaining infrastructure facilities pursuant to this
chapter performing the agreement shall utilize
private sector design and construction firms to design and construct
the infrastructure facilities. However, a facility subject to this
chapter and leased , licensed, or permitted to a private
entity shall, during the term of the lease, be deemed to be public
property for purposes of identification,
maintenance, enforcement of laws and for purposes of Division 3.6
(commencing with Section 810). All public works constructed
construction, alteration, demolition, installation,
maintenance, and repair work performed pursuant to this chapter
shall comply with Chapter 1 (commencing with Section 1720) of Part 7
of Division 2 of the Labor Code.
SEC. 10. Section 5956.9 of the Government Code is amended to read:
5956.9. In order to use the authority conferred by this chapter
to the maximum extent, a governmental agency may use private
infrastructure financing pursuant to this chapter as the exclusive
funding or revenue source or as a supplemental
funding revenue source with federal or local funds. The
governmental agency involved may be a local governmental agency or a
combination of local governmental agencies. The governmental agency
may work cooperatively with the California Infrastructure and
Economic Development Board with regard to the design, construction,
operation, and financing of privately financed facilities, but the
projects will not be subject to the review or approval of that board.
SEC. 11. Section 5956.10 of the Government Code is amended to
read:
5956.10. Notwithstanding any provision of this chapter, neither
the state or nor any state agency may
directly or indirectly use the authority in this chapter, nor may any
governmental agency as defined in Section 5956.3, use the authority
in this chapter, to design, construct, finance, or operate a state
project. For purposes of this section, a state project includes any
of the following:
(a) Toll roads on state highways.
(b) State water projects.
(c) State park and recreation projects.
(d) State-financed projects.
These limitations shall not prohibit the state, any state agency,
or any governmental agency as defined in Section 5956.3, from
utilizing authorizations contained in other provisions of law.
SEC. 12. Section 5956.11 is added to the Government Code, to read:
5956.11. The governmental agency may determine the validity of
any permits, authorizations or approvals, contracts and agreements,
user fees, and other actions taken pursuant to this chapter, by
initiating a validating proceeding, as provided in Chapter 9
(commencing with Section 860) of Title 10 of Part 2 of the Code of
Civil Procedure. The validating action may also be initiated by
interested person as provided in Chapter 9 (commencing with Section
860) of Title 10 of Part 2 of the Code of Civil Procedure.
SEC. 13. Except as it amends Chapter 14 (commencing with Section
5956) of Division 6 of Title 1 of the Government Code, nothing in
this act shall be construed to affect the application of any other
law.