BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 234
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: hancock
VERSION:
8/24/2012
Analysis by: Eric Thronson FISCAL: yes
Hearing date: August 30, 2012
SUBJECT:
Proposition 1B port infrastructure bond fund disbursement
DESCRIPTION:
This bill requires California Air Resources Board (ARB) to
reimburse, on a quarterly basis, its on-shore electrical power
grant recipients in substantial compliance with agreed-upon
milestones for eligible project costs.
ANALYSIS:
In November 2006, voters approved the Highway Safety, Traffic
Reduction, Air Quality, and Port Security Bond measure (Prop
1B), which authorizes the state to sell about $20 billion of
general obligation bonds to fund transportation projects that
relieve congestion, improve the movement of goods, improve air
quality, and enhance the safety and security of the
transportation system. Included in Prop 1B is $1 billion for
the Goods Movement Emission Reduction Program, administered in
partnership between ARB and local agencies to reduce emissions
from activities related to freight movement along California's
trade corridors. Among the projects eligible for the emission
reduction funding is the provision of on-shore electrical power
for ocean freight carriers calling at the state's seaports to
reduce the use of auxiliary and main engine ship power.
This bill requires ARB to reimburse, on a quarterly basis,
recipients of on-shore electrical power grants that are in
substantial compliance with agreed-upon milestones identified in
ARB's procedures for eligible project costs. Further, this bill
allows ARB to withhold the final ten percent of funding until
the recipient demonstrates that the project is capable of
powering a vessel docked at berth.
COMMENTS:
SB 234 (HANCOCK) Page 2
1.Purpose . According to the author, before ARB awards grants,
the state sells the bonds designated for all selected
projects. ARB then holds those funds and the state begins
paying interest on the bonds. ARB's Prop 1B grant recipients,
meanwhile, must borrow funds to complete their projects and
pay interest on this transaction until they receive ARB's bond
allocation to repay the loan. The author asserts that, when
the grant recipient is a state port, ARB's procedures require
the state to pay interest twice on the use of these Prop 1B
funds in contrast to other Prop 1B programs. If ARB
reimbursed the ports for eligible expenses by bond funds
throughout the project delivery process, the reimbursement
would effectively eliminate the ports' need to borrow
construction funds. By adopting a process similar to the way
the state funds other transportation-related projects, this
bill addresses the inefficiency described above while
maintaining appropriate oversight and incentives.
2.Bond-funded transportation projects are generally reimbursed .
The California Transportation Commission (CTC) administers the
vast majority of locally-administered Prop 1B projects. In
doing so, CTC does not wait until a project is completed
before providing the allocated bond funding, but reimburses
the local agency administering the project for eligible costs
on a periodic basis. For example, within the Corridor
Mobility Improvement Program, Los Angeles County Metropolitan
Transportation Authority (LACMTA) is delivering high-occupancy
vehicle lanes on Interstate Highway 405 with the help of $730
million in Prop 1B funds. It would be highly unrealistic for
CTC to withhold the bond funds until the project is completed,
as the interest costs involved in LACMTA borrowing the
necessary construction funds would represent an enormous waste
of resources. This bill proposes that the major
transportation infrastructure projects administered by ARB be
treated similar to the way other state agencies administer
Prop 1B bond funds.
3.Many completion assurances currently in place . Opponents are
concerned that this bill will allow recipients to receive 90
percent of allocated bond funding and then fail to complete
the project and achieve the expected emission reduction goals.
ARB guidelines and contractual grant agreements provide
significant remedies for administering agencies should the
expected emission reductions fail to occur, however. For
example, the grant agreement between the Port of Oakland and
SB 234 (HANCOCK) Page 3
the Bay Area Air Quality Management District includes a clause
which states: "Both the Air District and the ARB have the
authority to inspect the Project, enforce terms of the
Agreement, and pursue repayment of grant funds for? the Port's
failure to implement the Project, failure to comply with the
Project requirements, or non-performance." In this example
and others, it appears that should the grant recipients not
comply with their contractual agreements, the administering
agency has significant remedies available to recoup grant
funding.
4.Concurrence hearing . This bill is back in the Senate on
concurrence, and the Rules Committee referred it to this
committee pursuant to Rule 29.10 because Assembly amendments
deleted the version of the bill that passed the Senate earlier
this year and replaced it with the current language. At
today's 29.10 hearing, the committee may not amend the bill
further and may only hold the bill or return the bill as
approved by the committee to the Senate floor.
Assembly Votes:
Floor: 77 - 0
Appr: 17 - 0
Trans: 13 - 0
POSITIONS: (Communicated to the committee before noon on
Thursday, August 30,
2012)
SUPPORT: None received.
OPPOSED: None received.