BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1770
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: lowenthal
VERSION: 2/17/12
Analysis by: Eric Thronson FISCAL: yes
Hearing date: June 19, 2012
SUBJECT:
California Transportation Financing Authority
DESCRIPTION:
This bill makes two minor, clarifying changes to the types of
projects that the California Transportation Financing Authority
(CTFA) may assist.
ANALYSIS:
Existing law establishes the CTFA within the California State
Treasurer's Office to assist transportation agencies in
obtaining financing for transportation projects. The objective
of CTFA is to increase new capacity in the state transportation
system in a manner consistent with the state's greenhouse gas
reduction, air quality improvement, and natural resource
conservation goals. CTFA will accomplish this through issuing
bonds directly or through the approval of the issuance of bonds
that are backed by specified transportation-related revenues.
Further, existing law specifically defines parameters in which
projects can be eligible for CTFA assistance. For example, a
project sponsor is defined as either the California Department
of Transportation (Caltrans), a regional transportation planning
agency, a county transportation commission, any other local or
regional transportation entity designated in statute as a
regional transportation agency, or a joint powers authority. In
addition, only highway, public street, rail, bus, or related
facilities that are supplemental to or improvements upon
existing facilities Caltrans or another project sponsor
currently own and operate qualify for CTFA's assistance.
Finally, existing law lays out specific requirements that a
project must meet to qualify for CTFA assistance. Should a
project meet all identified requirements, then CTFA may, among
other things, authorize a project sponsor to impose and collect
AB 1770 (LOWENTHAL) Page 2
tolls as one source of project funding.
This bill makes two minor, clarifying changes to CTFA's enabling
statutes which determine eligibility for CTFA assistance:
1.Specifies that a rail project may consist of, or include,
rolling stock (i.e. buses, rail cars, or locomotives).
2.Specifies that a project must be a facility currently owned or
operated by Caltrans or other project sponsor (as opposed to a
facility owned and operated by Caltrans or other sponsor).
COMMENTS:
1.Purpose . This bill clarifies definitions contained in CTFA
enabling statutes. The author contends these clarifying
changes to law are technical in nature but necessary to
address some ambiguities identified by the Treasurer's staff.
First, existing law is not clear whether rolling stock is an
eligible expenditure, and this bill clarifies that it is.
Second, because transportation projects are complex and often
involve multiple entities, the author believes it is important
to broaden the universe of eligible projects by requiring that
a project sponsor is either the owner or operator of the
facility (and not necessarily both). By resolving these
ambiguities, CTFA will have maximum flexibility within its
original statutory parameters in order to help finance viable
transportation projects.
2.What impact might these changes have ? The clarifying changes
this bill makes appear technical and non-controversial, but
after only two years of existence it is still unclear what
role CTFA will play in the state's transportation
infrastructure development. Toll roads are feasible
principally in urban areas where the transportation agencies
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. Because CTFA has yet to
be called upon for assistance, it is difficult to know what
impact the changes proposed in this bill may have on
transportation financing and development.
AB 1770 (LOWENTHAL) Page 3
3.Using bond funds responsibly . One way CTFA can assist a
project sponsor to increase capacity in the transportation
system is to issue bonds to fund upfront project costs. A
basic principal of bond finance is to align repayment of the
debt with an asset over its lifetime, giving those who benefit
from the asset the opportunity to share its cost. Therefore,
when issuing bonds, it is important to weigh the value the
bond proceeds provide over time against the borrowing costs
associated with the bond issuance. For example, it may not be
prudent to issue bonds with 30-year terms in order to purchase
items with an expected useful life of only 12 to 15 years,
such as typical transit buses. In this case, it makes more
sense to sell bonds with shorter terms in order to align the
costs with the expected life of the purchased asset. By
including rolling stock in the definition of eligible projects
for CTFA assistance, this bill creates the possibility for
shorter-life assets to be purchased with longer-termed bonds.
It seems reasonable to expect the State Treasurer's office to
understand the drawbacks of such an action.
4.Double-referral . The Rules Committee has referred this bill
to both this committee and the Governance and Finance
Committee. Therefore, if this bill passes this committee, it
will be referred to the Committee on Governance and Finance.
Assembly Votes:
Floor: 69 - 4
Appr: 13 - 4
Trans: 14 - 0
POSITIONS: (Communicated to the Committee before noon on
Wednesday, June 13,
2012)
SUPPORT: California State Treasurer (sponsor)
Santa Clara Valley Transportation Authority
California Transit Association
OPPOSED: None received.
AB 1770 (LOWENTHAL) Page 4