BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2395|
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THIRD READING
Bill No: AB 2395
Author: Lowenthal (D), et al.
Amended: 7/2/14 in Senate
Vote: 21
SENATE NATURAL RESOURCES AND WATER COMMITTEE : 8-0, 6/10/14
AYES: Pavley, Cannella, Evans, Hueso, Jackson, Lara, Monning,
Wolk
NO VOTE RECORDED: Fuller
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-0, 6/25/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu
NO VOTE RECORDED: Walters
ASSEMBLY FLOOR : 76-0, 5/23/14 - See last page for vote
SUBJECT : Oxnard Harbor District: infrastructure projects:
funding
SOURCE : Author
DIGEST : This bill allows the Oxnard Harbor District
(District), aside from the $1 million borrowing limit for land
acquisition as specified in existing law, to borrow money by
issuance of promissory notes, or execute conditional sales
contracts to purchase personal property, in an amount or of a
value not exceeding $10 million at any one time, for the
purposes of acquiring land for and constructing or operating any
work, project, or facility authorized by existing law, or for
the making of improvement or the purchase of or maintenance of
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the equipment. This does not apply to any money borrowed from
any agency or department of the United State government or of
the State of California.
ANALYSIS :
Existing law:
1.Establishes procedures for harbor districts to borrow up to $1
million for the purposes of acquiring land for constructing or
operating any work, project, or facilities. This level of
indebtedness must be authorized by a resolution adopted by a
two-thirds vote of the board of a harbor district. Prohibits
the term of a loan of funds from exceeding five years and from
incurring a rate of interest exceeding 12%.
2.Requires a proposed harbor district to provide a petition
which contains, among other things, a general description of
the improvement and development work proposed to be done in
the harbor, which work may include the dredging of channels,
shipways, berths, anchorage places and turning basins, the
construction of jetties, breakwaters, bulkheads, seawalls,
wharves, ferry slips, warehouses, roads and spur tracks or
belt line railways, together with any other work necessary for
the development and improvement of the harbor.
3.Requires a harbor district, notwithstanding #2 above, to
acquire, construct, own, operate, control, or develop any and
all harbor works or facilities within the limits of its
established boundaries. No interest in lands may be acquired,
either by lease, purchase, or the exercise of the power of
eminent domain within any port district, chartered port,
harbor improvement district, incorporated city, or
recreational harbor district without the prior consent to the
acquisition by resolution of the governing body of each
district, port, or city in which the lands are located.
4.Authorizes, notwithstanding #3 above, a harbor district that
does not operate on tide and submerged lands that have been
granted by legislative enactment to acquire, construct, own,
operate, control, or develop any and all harbor works or
facilities within or outside the boundaries of the district.
Specifies that no interest in lands may be acquired, either by
lease, purchase, or the exercise of the power of eminent
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domain within any port district, chartered port, harbor
improvement district, incorporated city, county, or
recreational harbor district without the prior consent to the
acquisition by resolution of the governing body of the
district, port, city, or county in which the lands are
located.
This bill:
1.Allows the District, aside from the $1 million borrowing limit
for land acquisition as specified in existing law, to borrow
money by issuance of promissory notes, or execute conditional
sales contracts to purchase personal property, in an amount or
of a value not exceeding $10 million at any one time, for the
purposes of acquiring land for and constructing or operating
any work, project, or facility authorized by existing law, or
for the making of improvement or the purchase of or
maintenance of the equipment. This does not apply to any
money borrowed from any agency or department of the U.S
government or of the State of California.
2.Prohibits monies borrowed pursuant to this bill, from
exceeding a term of five years and from incurring a rate of
interest exceeding 12%. This level of indebtedness must be
authorized by a resolution adopted by a two-thirds vote of the
board of the District.
3.Provides that as a condition precedent to the borrowing of any
money or the execution of any conditional sales contract, as
provided, in excess of $100,000, the board of the District
must first authorize a resolution adopted by a two-thirds
vote, and have on file a report on the engineering and
economic feasibility relating to the project contemplated for
the expenditure of the borrowed money or conditional sales
contract. The report shall be prepared and signed by an
engineer or engineers licensed and registered under the laws
of the State of California.
4.Requires the District to budget, levy and collect taxes and
pay for all indebtedness without limitation by any other
provision of current law.
5.Makes legislative findings and declarations regarding the need
to finance several significant infrastructure projects, the
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constraints that the $1 million limit places on the District,
and the District's accomplishments.
Background
The California Constitution prevents counties and cities from
creating multi-year general obligation debt without two-thirds
voter approval. School districts need 55% voter approval.
Because the constitutional ban does not mention special
districts, the Legislature has allowed many types of special
districts to borrow money without voter approval by issuing
promissory notes.
Unlike bonds, promissory notes are usually short-term debts that
are not backed by a specified revenue source. This lack of
identified revenue makes them relatively more risky for private
investors, which drives up borrowing costs. However, because
promissory notes do not need voter approval, they are
politically more attractive than bonds. Districts use
promissory notes to finance office buildings and other
facilities that do not generate revenues. State laws limit most
promissory notes from $5 million to $10 million, repaid over 2
to 10 years.
Securitized limited obligation notes (SLONs) are like promissory
notes, but state law requires the special district to securitize
them by pledging a dedicated stream of revenues. State law also
imposes more stringent disclosure requirements (SB 1561, Soto,
Chapter 288, Statutes of 2002). While SLONs do not need voter
approval, they require a four-fifths vote of a district's
governing board. Typically, special districts can use SLONs to
borrow up to $2 million for 10 years, to be paid back from
pledged revenue.
State law authorized harbor districts to borrow money by the
issuance of promissory notes for the purposes of acquiring land
for constructing and/or operating any work, project, or
facility, or for making improvements, and purchasing and
maintaining equipment. Harbor districts may issue promissory
notes for up to $1 million dollars that must be repaid in five
years and with interest rate that cannot exceed 12% per year.
Districts can also issue SLONs for up to $10 million to be paid
back in 10 years.
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The District in Ventura County is one of five independent harbor
special districts. The District owns and manages the commercial
Port of Hueneme. A five-member Board of Harbor Commissioners,
elected at-large from the District, sets the policies for the
Port. The Port does not levy, collect or spend local taxes, but
instead relies on revenue generated from its operation to
support its activities, in conjunction with occasional state and
federal funding. Major capital investments of the Port have
been historically financed through revenue bonds. The District
argues that the $1 million cap for promissory notes takes away a
valuable financing option to cover the costs of important
infrastructure projects to accommodate the Port's anticipated
needs in the next several decades. The District wants the
Legislature to increase its general borrowing authority from $1
million to 15% of the District's total assets.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 7/2/14)
California Special Districts Association
Port of Hueneme/Oxnard Harbor District
ARGUMENTS IN SUPPORT : According to the author, "This bill
authorizes the District to incur indebtedness beyond a $1
million cap set in statute 30 years ago. This limitation does
not accurately or adequately account for the needs and escalated
project costs of a modern port competing in a global market."
She continues, "The Port of Hueneme is the only deep water port
on the Pacific between the major ports of southern and northern
California. Although a deep water port, at a depth of only 35
feet MLLW (mean lower low water), the Port is limited in its
activities and applications. At least 40 feet MLLW is necessary
to accommodate the Port's anticipated needs into the next
several decades."
ASSEMBLY FLOOR : 76-0, 5/23/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Ch�vez, Chesbro, Conway, Cooley,
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Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. P�rez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, Atkins
NO VOTE RECORDED: Harkey, Roger Hern�ndez, V. Manuel P�rez,
Vacancy
RM:k 7/2/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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