BILL ANALYSIS
AB 1620
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CONCURRENCE IN SENATE AMENDMENTS
AB 1620 (Budget Committee)
As Amended October 6, 2010
2/3 vote. Urgency
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|ASSEMBLY: | |(April 22, |SENATE: |33-3 |(October 7, |
| | |2010) | | |2010) |
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(vote not relevant)
Original Committee Reference: BUDGET
SUMMARY : Contains necessary statutory and technical changes to
implement changes to the Budget Act of 2010.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Re-affirm the authority of the State Public Works Board
regarding oversight of capital outlay projects.
a) Many of these changes are technical in nature.
2)Provide the State with a new interim financing mechanism for
bond funded projects.
a) The Pooled Money Investment Board historically utilized
its large fund balance to finance lease revenue capitol
outlay projects, allowing the Board to sell the actual
bonds for the project towards the end of project
completion. This greatly decreased the costs of the bond,
as the revenue from tenant rents was available shortly
after bond sale, minimizing the need for capitalization.
b) Due to depleted funds and a sluggish bond market in
2009, the Pooled Money Investment Board stopped authorizing
interim financing loans for lease revenue financed capital
outlay projects, requiring projects to wait until bonds
could be sold. This requires capitalization of the bond
costs for the entire term of construction until rents are
available.
c) To provide an alternative, this legislation authorizes
"asset transfers".
AB 1620
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i) This would provide the Board with the ability to
capitalize one asset (generally a state owned building)
and use the proceeds to build another.
(1) The Board would be allowed to sell bonds on a
state-owned building that is not encumbered by debt.
(2) The Department/Agency who owns the building
would be required to pay rent for the building.
(3) The Board would then pledge those rental
revenues to make the debt service payments on the
bonds, and would use the proceeds from the bond sale
to design and or construct one or more buildings.
ii) This process is already authorized for California's
higher education segments, but has only been used in
limited situations.
iii) There are currently 50 projects stalled in the
design phase. The ability to utilize asset transfers
would enable the Public Works Board to restart some of
these projects and decrease the cost of financing these
assets by eliminating the need for capitalized interest
costs.
d) The portions of the bill relating to Asset Transfers
include a 5 year sunset, at which time they will return to
existing law prior to this legislation unless otherwise
amended by a future bill.
3)Urgency Clause. Declare this bill take effect immediately as
an urgency statute.
AS PASSED BY THE ASSEMBLY , this bill was a vehicle for 2010
Budget legislation.
Analysis Prepared by : Daisy Gonzales / BUDGET / (916)319-2099
FN: 0007221
AB 1620
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