BILL ANALYSIS
Bill No: AB
1364
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 1364 Author: Evans
As Amended: April 29, 2009
Hearing Date: July 8, 2009
Consultant: Art Terzakis
SUBJECT
Public Contracts: state bonds: grant agreements
DESCRIPTION
AB 1364 is an urgency measure that authorizes any state
agency that has entered into a grant agreement for
expenditure of state bond funds-where either party may be
unable to comply with the agreement due to suspension of
bond funded programs by the Pooled Money Investment Board
(PMIB)-to, with the consent of the grant recipient, either
invalidate the agreement or renegotiate terms that may not
be met due to the PMIB action.
EXISTING LAW
Existing law permits the modification of contracts by state
agencies in specified instances.
BACKGROUND
On December 17, 2008, the PMIB froze all disbursements from
the Pooled Money Investment Account (PMIA) because of the
state's poor cash position. The PMIA has historically been
used to provide interim funding for all bond funded
projects until the State Treasurer's Office (STO) is able
to issue commerical paper and subsequently sell bonds. The
PMIB "freeze" affected approximately 5,700 projects across
the state. In the weeks that followed this action, the
Department of Finance authorized 276 projects to continue,
AB 1364 (Evans) continued
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but the remaining 5,400 projects were directed to be
shut-down unless other non-state funding sources were
available to enable them to continue.
Enactment of the 2009-10 Budget Act in February allowed the
STO to re-enter the bond market and resume issuing bonds.
Prior to the March 2009 bond sale, the state was unable to
sell bonds since June of 2008. A mismatch remains,
however, between the amount of bond resources committed
through state contracts and the amount of bond funds
available. Moreover, the Legislative Analyst's Office, in
its recent report, "California's Cash Flow Crisis: May 2009
Update," states that California's cash flow pressures are
likely to reemerge this summer and fall, and the short-term
borrowing requirement could reach $20 billion.
Purpose of AB 1364: According to the author's office, "On
April 3, the Department of Finance issued Budget Letter
09-09 which says, 'If projects continue with non-state
funding sources, the state intends to eventually pay the
costs to which it has committed through a valid agreement.'
While this passage brings important clarity regarding the
state's intentions relating to fiscal assurances,
uncertainty now shifts to the validity of contracts where
datelines for deliverables are passing. For these reasons,
as the state moves ahead with its contract partners, the
grey area centers on what constitutes a valid contract.
This raises the inevitable question: Since the timetables
for deliverables are passing and not being met, are such
contracts valid? AB 1364 proposes an affirmative solution
to validate these state contracts. The approach proposed
in AB 1364 is for state agencies to amend timetables for
these contracts."
Arguments in Support: Proponents state that AB 1364 takes
a straightforward approach to eliminating ambiguity on the
status of grant agreements affected by the bond freeze
implemented under Finance Budget Letter 08-33 on December
17, 2008.
Proponents contend that the ongoing freeze continues to
adversely impact hundreds of nonprofits, contractors, small
businesses, local governments and other public and private
agencies struggling to survive through this unprecedented
cash flow crisis which has impacted those who can afford it
the least. Proponents believe that this measure is an
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important step in providing some peace of mind to those
whose critical transportation, education, affordable
housing, flood control and resource conservation projects
hang in the balance.
PRIOR/RELATED LEGISLATION
AB 672 (Bass) of 2009-2010 Session . Would authorize
letters of no prejudice (LNOP) for certain bond-funded
transportation projects for which bond funding is not yet
available, thereby enabling projects to advance in the
meantime using other funds. (Pending in Senate
Transportation & Housing Committee)
SUPPORT: As of July 3, 2009:
California Council of Land Trusts (co-sponsor)
California State Parks Foundation (co-sponsor)
Planning and Conservation League (co-sponsor)
A Living Library
American Land Conservancy
Anza Borrego Foundation
Arroyo Seco Foundation
Association of California Construction Managers
Bay Area Open Space Council
Big Sur Land Trust
California Association of Nonprofits
California ReLeaf
California Urban Forest Council
SUPPORT (continued)
Canopy
Central Valley Land Trust Council
Community Alliance for Family Farmers
East Bay Regional Park District
Elkhorn Slough Foundation
Friends of the Urban Forest
Goleta Valley Beautiful
Housing California
Lake County Land Trust
Land Conservancy of San Luis Obispo County
Land Trust Council
Land Trust of Napa County
Land Trust for Santa Barbara County
Land Trust of Santa Cruz County
Lassen Land & Trails Trust
AB 1364 (Evans) continued
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Marin Agricultural Land Trust
Mattole Restoration Council
Mattole Salmon Group
Mountain Meadows Conservancy
Muir Heritage Land Trust
Napa, City of
Outdoor Heritage Alliance
Palos Verdes Peninsula Land Conservancy
Peninsula Open Space Trust
Placer Land Trust
Redwood Coast Land Conservancy
Sacramento Tree Foundation
Sacramento Valley Conservancy
San Joaquin River Parkway & Conservation Trust
San Diego River Park Foundation
San Francisco Bay Joint Venture
Save Mount Diablo
Sequoia Riverlands Trust
Sierra-Cascade Land Trust Council
Solano Land Trust
Sonoma Land Trust
Tree Davis
Tri-Valley Conservancy
OPPOSE: None on file as of July 3, 2009.
FISCAL COMMITTEE: Senate Appropriations Committee
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