AB 18 (Garcia):
|
Title: |
Clean Water, Climate, and Coastal Protection Act |
|
Introduced: |
12/05/2016 |
|
Last Amend: |
02/23/2017 |
|
Disposition: |
Pending |
|
Location: |
SENATE |
|
Summary: |
Enacts the California Clean Water, Climate, Coastal Protection and Outdoor Access For All Act, which would authorize the issuance of bonds to finance a clean water, climate, and coastal protection and outdoor access for all program. Provides for the submission of these provisions to the voters at the statewide direct primary election. |
|
Status: |
|
03/20/2017 |
In ASSEMBLY. Read third time, urgency clause adopted. Passed ASSEMBLY. *****To SENATE. (54-19) |
|
Bill text can be found at: http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB18
2017 CA A 18: Bill Analysis - 03/09/2017 - Assembly Floor
ASSEMBLY THIRD READING
AB 18
(Eduardo Garcia, et al.)
As Amended February 23, 2017
2/3 vote. Urgency
Committee Votes Ayes Noes
Water 10-5 Eduardo Garcia, Gallagher,
Chu, Friedman, Bigelow, Choi,
Gloria, Gomez, Harper, Mathis
Levine, Rubio,
Salas, Thurmond,
Wood
Appropriations 12-5 Gonzalez Bigelow, Brough,
Fletcher, Bloom, Mathis,
Bocanegra, Melendez,
Bonta, Calderon, Obernolte
Chau, Eggman,
Friedman,
Eduardo Garcia,
Gray,
Muratsuchi,
Reyes
SUMMARY: Enacts the California Parks, Water, Climate, and Coastal Protection and Outdoor Access For All Act of 2016, which, if approved by the voters, would authorize issuance of State General Obligation bonds, in the amount of $3.105 billion, to finance parks, water, climate adaptation, coastal protection, and outdoor access programs. Specifically, this bill:
1) States legislative findings and declarations regarding California's parks, natural resources and outdoor opportunities, and the scale of unmet need and demand for, and lack of equal access to, those resources and activities. States findings and declarations regarding the benefits of investments for these purposes to public health, and to state and local economies.
2) States that it is the intent of the people of the state that:
a) Public investments authorized by this bill provide public benefits and address the most critical statewide needs and priorities.
b) Priority be given to projects that leverage other funding sources.
c) Projects receiving funding include signage informing the public of the bond investments.
3) Includes a number of general provisions that apply to all of the articles included in the Act, including:
a) Allows up to 12.5% of funds in each category to be used for planning and monitoring. Planning funds for projects in disadvantaged communities can exceed the 10% if needed.
b) Requires at least 20% of funds in each article to be allocated to severely disadvantaged communities.
c) Allows up to 10% of funds to go toward technical assistance. Technical assistance may exceed 10% for disadvantaged communities if needed.
a) Requires agencies administering the bond to develop project solicitation and evaluation guidelines, to conduct three public meetings, and to publish draft guidelines on the internet. These guidelines, where feasible, shall encourage, where feasible, efficient use of water, use of recycled water, and capture of storm water, and provision of drinking water to parks and open-space.
b) Requires the Department of Finance to provide for an independent audit of expenditures.
c) Reverts unexpended funds to the administering entity.
d) Requires projects that use California Conservation Corps services or certified community conservation corps to be given preference for grants where feasible.
e) Prohibits bond funds from fulfilling mitigation responsibilities.
f) Allows projects that include water efficiencies, storm water capture, or carbon sequestration features in the project design to be given priority for grant funding.
g) Exempts the provisions regarding wildlife conservation from the provisions regarding disadvantaged communities, for regional and local parks, and trails.
h) Requires conservancies to endeavor to fund projects that are complementary and not duplicative of authorized expenditures pursuant to the 2014 water bond.
i) Authorizes the Legislature to enact legislation necessary to implement programs funded by the bond.
j) Authorizes funds to be used by nonprofits to repay financing costs that are consistent with this chapter and allows 25% of grant awards as advance payments.
k) Creates the California Parks, Water, Climate, and Coastal Protection and Outdoor Access for All Fund.
4) Authorizes funds to be available, upon appropriation of the Legislature, for all of the following programs and purposes:
a) Article 2. Investments in Environmental and Social Equity, Enhancing California's Disadvantaged Communities. For creation and expansion of safe neighborhood parks in park-poor communities, $900 million dollars, in accordance with the Statewide Park Development and Community Revitalization Act of 2008 competitive grant program [AB 31 (De Leon), Chapter 623, Statutes of 2008]. At least 20% of this allocation is made available for rehabilitation and improvement of existing park infrastructure, and $40 million is made available for historic under-investments in central valley, Inland Empire, gateway, and desert communities.
b) Article 3. Investments in Protecting, Enhancing, and Accessing California's Local and Regional Outdoor Spaces.
a.i) For local park rehabilitation and improvement grants to local governments on a per capita basis, $425 million. $40 million is available to the department upon appropriation for grants to cities and districts of less than 200,000 population. Requires a 20% local match unless the entity is a disadvantaged community. Describes the formula to be used to allocate the per capita funds between cities, districts, counties, and regional park districts, based on population, including with a minimum county allocation of $400,000.
a.ii) $110 million for competitive grants to regional park districts, counties, and special districts for regional trails, regional sports complexes, low-cost accommodations in park facilities, and interpretative facilities that serve youth and communities of color.
c) Article 4. Restoring California's Natural, Historic, and Cultural Legacy. To the Department of Parks and Recreation (DPR) for restoration and preservation of existing state park facilities and units, to preserve and increase public access, and to protect natural, cultural and historic resources in the parks, $330 million. Of this amount, $15 million is available for enterprise projects and $15 million is available by the department for grants to local agencies that operate a unit of the state park to address urgent restoration needs of aging infrastructure. Specifies that unless a local agency has been identified as a disadvantaged community, a 20 % match is required.
d) Article 5. Trails and Greenway Investments. To the Natural Resources Agency for competitive grants to local agencies, conservancies, tribes, and nonprofit organizations for non-motorized access to parks, waterways, or other natural environments, to encourage health-related commuting, $45 million. Authorizes 25% of the total for this program to be made available for innovative transportation programs, for disadvantaged youth.
e) Article 6. Rural Recreation, Tourism, and Economic Enrichment Investment. For competitive grants to cities, counties and districts in non-urbanized areas, subject to specified considerations, $40 million. Requires a 20% local share match, unless the entity is a disadvantaged community.
f) Article 7. California River Recreation, Creek, Stormwater, and Water Improvement Program. To the Natural Resources Agency for River Parkway grants, $70 million for the following:
a.i) Lower American River Conservancy Program, not less than $5 million.
a.ii) Guadalupe River and its headwaters or contributing tributaries, including Los Gatos Creek, $5 million.
a.iii) Russian River $5 million.
a.iv) Santa Ana River Conservancy Program $5 million.
For appropriation by the Legislature, as follows:
a.i) To the Natural Resources Agency, for protection and enhancement or urban creeks and streams, $90 million for the Los Angeles and San Gabriel Rivers, to be divided equally, as specified, and with priority for projects in disadvantaged communities.
a.ii) For Urban Stream Programs, $10 million
a.iii) For the Salton Sea Authority, $30 million, for projects benefiting the Salton Sea, and not less than $10 million for New River projects.
a.iv) For competitive grants to cities, counties, regional park districts and other open space districts, for stormwater capture projects that have co-benefits of enhanced park, parkways and open space, $25 million.
g) Article 7.5. State Conservancies. To the following state conservancies and entities, with provisions to adopt a strategic master plan, $145 million, with priorities and specific criteria for funding:
a.i) Baldwin Hills Conservancy $5 million.
a.ii) California Tahoe Conservancy $20 million.
a.iii) Coachella Mountains Conservancy $10 million.
a.iv) Sacramento-San Joaquin Delta Conservancy $10 million.
a.v) San Diego River Conservancy $15 million.
a.vi) San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy $25 million.
a.vii) San Joaquin River Conservancy $10 million.
a.viii) Santa Monica Mountains Conservancy $25 million.
a.ix) Sierra Nevada Conservancy $25 million.
h) Article 8. Ocean, Bay, and Coastal Protection. For appropriation by the Legislature, $180 million, to fund projects that enhance and protect coastal and ocean resources as follows:
a.i) California Ocean Protection Trust Fund $45 million.
a.ii) San Francisco Bay Area Conservancy Program $40 million.
a.iii) State Coastal Conservancy $95 million.
i) Article 8.5. Investments in Lower Cost Coastal Accommodations. Provides $100 million to the Natural Resources Agency, upon appropriation by the Legislature, to fund projects that improve existing or develop new, lower cost, accommodations on coastal public lands and coastal lands owned or operated by nonprofit organizations, including parks and open space districts, among others.
j) Article 9. Climate Preparedness, Habitat Resiliency, Resource Enhancement, and Innovation. For climate adaptation and resiliency projects that improve a community's ability to adapt to climate change, including projects to improve and protect coastal and rural economies, agricultural viability, wildlife corridors, or habitat, develop recreational opportunities, or enhance drought tolerance and water retention, $600 million, including the following:
a.i) To the Wildlife Conservation Board (WCB) for wildlife corridors, to improve climate change adaptation, and for existing open space corridors and trail linkages, $400 million, including $55 million for natural community conservation plans; $5 million for competitive grants to wildlife rehabilitation facilities operated by nongovernmental entities, by the Department of Fish and Wildlife; not less than $40 million for restoration and protection of wildlife corridors and open space connectivity, including the Pacific Flyway and, of this amount, $5 million is available for the California Waterfowl Habitat Program.
a.ii) To the California Climate Resilience Account, for projects to assist coastal communities with climate change adaptation, including sea level rise and ocean acidification, and the Pacific Flyway, $30 million.
a.iii) For projects that improve agricultural and open-space soil health, improve carbon soil sequestration, water quality, and water retention, or to replace inefficient groundwater pumps, $10 million.
a.iv) For projects that reduce fire risk, improve forest health, and provide feedstock for compost, energy, or alternative fuels facilities, $50 million.
a.v) For the California Conservation Corps, to rehabilitate or improve parks, restore watersheds, and improve forest health, $35 million.
a.vi) For the Natural Resources Agency $75 million for various categories of projects including protection of Native American cultural sites and resources, repurposing fossil fuel plants to create open space, grants to areas not within the boundaries of state conservancies, science centers, community athletic sites, centers that recognize the contributions of California's diverse ethnic communities, and visitor centers to provide education about natural landscapes, aquatic species, or wildlife migratory patterns.
5) Includes related fiscal provisions regarding sales of bonds and implementation of the Act pursuant to the State General Obligation Bond Law. Establishes a finance committee for the bond composed of the Director of Finance, the Treasurer, and the Controller.
6) Requires the Secretary of State to submit the bond act to the voters at the June 2018 statewide general election, and includes related instructions regarding preparing ballot pamphlets and statements. Provides that this act shall take effect upon approval by the voters.
EXISTING LAW:
1) Authorizes the Legislature to pass legislation, by a two-thirds vote, to place a proposed general obligation bond measure before the voters on the statewide ballot, to authorize the sale of bonds to finance various state purposes. General obligation bonds have been one of the primary methods voters have used to fund the acquisition and improvement of parklands, open space, and wildlife areas; water conservation, recycling and infrastructure projects; and related purposes.
2) The California Clean Water, Clean Air, Safe Neighborhood Parks and Coastal Protection Act of 2002 (Proposition 40), a legislative ballot measure approved by the voters in 2002, authorized $2.6 billion in bond expenditures for parks and other resource related purposes.
3) The Safe Neighborhood Parks, Clean Water, Clean Air, and Coastal Protection Bond Act of 2000 (Proposition 12), a legislative ballot measure approved by the voters in 2000, authorized expenditures of $2.1 billion for parks and other resource related purposes.
4) The Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Act of 2006 (Proposition 84), an initiative measure approved by the voters in 2006, authorized bond expenditures of $5.4 billion, of which approximately $875 million was for parks.
5) Authorizes general obligation bonds which the state pays out of general revenues and that are guaranteed by the state's full faith and credit.
FISCAL EFFECT: According to the Assembly Appropriations Committee:
1) Annual (General Fund [GF]) principal and interest payments of approximately $198 million.
The state pays principal and interest during the repayment period. Cost will depend on factors such as the actual interest rate paid, the timing of the bond sales (bonds are often sold over a number of years), and the time period over which the bonds are repaid.
Assuming a 5% flat interest rate with a 30-year repayment period, the state would pay about $65 million annually in principal and interest costs for each $1 billion borrowed.
2) One-time GF costs of around $220,000 to include the text and analysis of the constitutional and other arguments for and against the measure in the statewide voter information guide.
COMMENTS: This bill proposes to place a park bond on the June 2018 statewide ballot, to fund parks, other outdoor open spaces, waterways, wildlife corridors, climate change adaptation, and other natural resource projects. A major priority focus of this bill is addressing the needs of park-poor and disadvantaged communities. The main categories of funding proposed in the bond are: 1) safe neighborhood parks in park-poor communities; 2) local and regional parks, with funds to be distributed both on a per capita basis (statewide, based on population ratios) and competitively; 3) state parks, with a focus on deferred maintenance in existing parks; 4) trails and waterfront access; 5) rural community recreational needs; 6) river parkways; 7) state conservancies; and 8) wildlife habitat needs, including wildlife corridors and climate change adaptation.
The author notes that, to maintain a thriving economy and high quality of life for California's growing population, the state requires a continuing investment in parks, recreation facilities, and protection of the state's natural and historical resources. It has been 15 years since California last approved a whole and substantive park bond. The 2008 economic downturn had a disproportionate impact on local, regional and state park infrastructure. Because of this impact, there is a high unmet demand for park investment, as witnessed by the 8-1 ratio of grant application requests vs. available grant dollars for park grants awarded under the AB 31 Statewide Parks Program.
Demand has been particularly high in both urban and rural disadvantaged communities where many still lack access to safe parks, trails, and recreation areas. The author notes that according to the Statewide Comprehensive Outdoor Plan of 2015 (SCORP), 38% of Californians still live in areas with less than three acres of parkland per 1,000 population, a recognized standard for adequate parks, and nine million people do not have a park within a half mile of their home. The action plan highlights the need for increasing park access to residents in underserved communities by encouraging park development within a half mile of park deficient neighborhoods, creating new trails and greenways to provide active transportation corridors for commuting, and expanding transportation opportunities to larger parks.
The author also notes the findings of the Parks Forward Commission which highlighted the need to prioritize protection of natural and cultural resources for future generations, expand access to parks for underserved communities and younger generations, and to address state park deferred maintenance. Investing in parks and trails will help ensure all Californians have access to safe places to exercise and recreate. Additionally, continued investment in the state's natural resources and greening of urban areas will help mitigate the impacts of climate change and provide access to natural resources for future generations.
Background: Park and water bonds have been a primary source of state funding for the acquisition and improvement of parks, open space, and wildlife areas in California; and for many water conservation, water recycling, flood management, and water supply needs. Past bond acts have funded a variety of state, regional, and local parks, recreation, conservation, and water-related projects. Bond acts have included funding for support of California's 280 unit state park system, for local and regional parks, for projects to provide public access to the coast and other public lands, and to fund wildlife habitat conservation needs. Bonds have also provided funding for state conservancies and for river restoration projects.
Prior Bond Act History: Since 2000, California voters have approved three park bonds. The last legislatively crafted park bond was Proposition 40, which was approved by the voters 14 years ago in 2002. The six park and/or water-related bonds approved by the voters since 2000 are:
1) Proposition 12 (2000-Legislative) Safe Neighborhood Parks, Clean Water, Clean Air and Coastal Protection Act. Total $2.1 billion, including $780 million for local, regional parks primarily through block grants, and $400 million for state parks deferred maintenance and acquisition.
2) Proposition 13 (2000-Legislative) Safe Drinking Water, Clean Water, Watershed Protection, and Flood Protection Act. Total $1.97 billion. Proposition13 was primarily a water bond.
3) Proposition 40 (2002-Legislative) California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act. Total $2.6 billion, including $964 million for local, regional parks through both block grants and competitive grant awards, and $250 million for state parks deferred maintenance and acquisition.
4) Proposition 50 (2002-Initiative) Water Quality, Supply, and Safe Drinking Water Projects Act. Total, $3.4 billion. Proposition 50 was primarily a water bond.
5) Proposition 84 (2006-Initiative) Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act. Total, $5.4 billion, including $457 million for safe neighborhood parks in park-poor and disadvantaged communities and nature centers, and $400 million for state park deferred maintenance and acquisition. Proposition 84 was primarily a water and flood control bond, but also included funding for watershed and ecosystem restoration, and for habitat conservation.
6) Proposition 1 (2014-Legislative) Water Quality, Supply, and Infrastructure Improvement Act. Total, $7.12 billion. Proposition 1 was primarily a water bond but also included funding for watersheds and ecosystem restoration.
Assessing unmet needs for park and natural resource investments: To measure the national need for public outdoor recreation facilities and parkland acquisitions at the state and local level, the National Park Service annually, as part of the Land and Water Conservation Fund program, requests each state partner to estimate the total cost of desired outdoor recreation facility development and parklands acquisition projects that cannot be met with available levels of funding. The 2012 report found there was a $3.6 billion total in unmet needs for state and local parks in California in 2011, and $4.9 billion in 2012.
1) State Parks: The DPR has estimated the state's backlog of deferred maintenance at state parks alone is over $1.2 billion.
2) Local and Regional Parks: The California Park & Recreation Society conducted a survey of local and regional park districts to assess unmet need. Forty-five out of 500 agencies responded to the survey (a 15% to 20% sampling) and estimated a total unmet need of $1.8 billion for local parks.
3) Park-Poor and Disadvantaged Communities: The DPR awarded $360 million in competitive grants for safe neighborhood parks in park-poor communities through Proposition 84 and the AB 31 (De Leon) Statewide Park Program. The DPR reported that they received applications for over $3 billion in funds for the program.
4) Rural Communities: While many park-poor communities are located in heavily populated urban areas, many rural communities also are park-poor and economically disadvantaged. As an example, the DPR in 2009 released a report called the Central Valley Vision, which assessed unmet park and recreation needs in the Central Valley. The report found that compared to other California regions, the Central Valley lacks parks for residents and visitors. Major trends, including population growth projected for the region, pointed to the need for significant investment in improving park and recreation access. Projected costs to implement the Central Valley Vision plan were $272 million over 20 years.
5) River Parkways, Trails and Active Transportation: The River Parkways Program, including Proposition 50 and Proposition 84 dollars combined, received applications totaling over $700 million for $151 million in awarded funds, a 5 to 1 ratio. The Recreation Trails Program in 2015 was able to fund $8.4 million out of $60 million requested. The Active Transportation Program received grant requests totaling over $1 billion for their first two rounds of funding, of which $300 million in available funding was awarded.
6) State Conservancies, Wildlife Corridors, Climate Change Adaptation, and other Natural Resource Needs: The total needs for wildlife habitat conservation, climate change adaptation, and other natural resource needs is unknown. Restoration of the Los Angeles River alone is anticipated to be in the billions of dollars. Proposition 1 provided $100 million for this purpose. The WCB receives a significant portion of its funding from state bond funds, in addition to the Habitat Conservation Fund and the Wildlife Restoration Fund. The Habitat Conservation Fund is set to expire in 2020 unless extended. The WCB's strategic plan indicates that available state bond funds for wildlife habitat from prior bonds are dwindling, and that future bond funds will be needed. Existing bond funds will likely be exhausted by the 2019/20 fiscal year. The WCB estimates the state's five year unmet and unfunded need for prioritized wildlife habitat conservation for the WCB alone at about $864 million. Proposition 1 provided some funding for watershed and ecosystem restoration, both within and outside the Delta. The climate change adaptation needs identified in this bill, such as sea level rise and ocean acidification, are unknown but also significant.
The funding in Proposition 1 for state conservancies was limited to water related needs. Other areas of the state not covered by conservancies also have natural resource conservation needs. For example, the Salton Sea, which is facing significant challenges in the very near future for habitat restoration needs as the Sea recedes. Estimated costs for restoration at the Salton Sea have ranged from $2 billion to $8 billion. Forest management needs throughout the state to reduce wild fire risk and for watershed restoration and maintenance are also significant.
SB 5 (De Leon) of the current legislative session proposes to authorize $3 billion in bond expenditures, including $1.45 billion for parks. The $1.45 billion is further divided to provide $600 million for safe neighborhood parks in park-poor communities, $80 million for oceans and coastal programs, $30 million for local park rehabilitation, $20 million for rural parks, $25 million for trails programs, and $100 million for state parks. SB 5 also proposes $125 million for river parkways programs, and allocates $75 million of this to the Santa Monica Mountains Conservancy (other funds in this chapter are subject to specified prioritization statewide). Further, $100 million in the approved 2014 Water Bond has not been appropriated due to a continuing debate about the sharing of the Los Angeles River funding between its upper and lower segments. SB 5 provides $1.5 billion to water quality, groundwater protection, integrated watershed funding, and recycled water programs, similar to Proposition 1 (2014).
Supporters assert that this bill will provide an important opportunity for California to invest in critically needed park and open space programs while providing climate and habitat resiliency in our natural systems. This bill provides a framework to infuse much needed financial resources into all neighborhood, regional and state parks. Supporters, in general, support the overall framework of the bond, and emphasize support for particular components. Some supporters highlight support for funding of local parks and recreation, including funding for both park-poor communities, and per capita funding. Several supporters express support for funding of wildlife corridors, coastal and sierra resources, state park deferred maintenance, and for the WCB. With regard to conservancies, some entities support this bill in concept, but point out large portions of the state fall outside of the boundaries of the existing state conservancies, and urge that an allocation be added to the WCB to be used for projects outside the boundaries of the named conservancies. The bill addresses this need by specifying other areas for funding, and by allocating funding outside of the traditional state conservancy boundaries.
Opponents raise concerns about the number of bonds that should be authorized for future state ballots given the state's debt service ratio, and the investment period of local parks.
Analysis Prepared by: Catherine Freeman / W., P., & W. / (916) 319-2096 FN: 0000016
SB 5 (De Leon)
|
Title: |
California Drought, Water, Parks, Climate |
|
Introduced: |
12/05/2016 |
|
Last Amend: |
03/28/2017 |
|
Disposition: |
Pending |
|
Location: |
Senate Appropriations Committee |
|
Summary: |
Enacts the California Drought, Water, Parks, Climate, Coastal Protection, and Outdoor Access For All Act of 2018. Authorizes the issuance of bonds in an amount of $3,000,000,000 pursuant to the State General Obligation Bond Law to finance a drought, water, parks, climate, coastal protection, and outdoor access for all program. |
|
Status: |
|
04/17/2017 |
In SENATE Committee on APPROPRIATIONS: Not heard. |
|
Bill text can be found at: http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB5
2017 CA S 5: Bill Analysis - 03/17/2017 - Senate Governance and Finance Committee
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Mike McGuire, Chair
2017 - 2018 Regular
Bill No: SB 5 Hearing Date: 3/22/17
Author: De LeA^3n Tax Levy: No
n
Version: 3/15/17 Fiscal: Yes
Consultant: Grinnell
California Drought, Water, Parks, Climate, Coastal Protection, and
Outdoor Access For All Act of 2018
Enacts the California Drought, Water, Parks, Climate, Coastal Protection, and Outdoor Access for All Act of 2018, which places a $3 billion bond before voters at the June, 2018 statewide direct primary election.
Background
When public agencies issue bonds, they borrow money from investors, who provide cash in exchange for the agencies' commitment to repay the principal amount of the bond plus interest. Bonds are usually either revenue bonds, which repay investors out of revenue generated from the project the agency buys with bond proceeds, or general obligation bonds, which the public agency pays out of general revenues and are guaranteed by its full faith and credit.
Section One of Article XVI of the California Constitution and the state's General Obligation Bond Law guide the issuance of the state's general obligation debt. The Constitution allows the Legislature to place general obligation bonds on the ballot for specific purposes with a two-thirds vote of the Assembly and Senate. Voters also can place bonds on the ballot by initiative, as they have for parks, water projects, high-speed rail, and stem cell research, among others. Either way, general obligation bonds must be ratified by majority vote of the state's electorate. Unlike local general obligation bonds, the state's electorate doesn't automatically trigger an increased tax to repay the bonds when they approve a state general obligation bond. Article XVI of the California Constitution commits the state to repay investors from general revenues above all other claims, except payments to public education. California voters approved $38.4 billion of general obligation bonds between 1974 and 1999, but approximately $112 billion since 2000.
Bond acts have standard provisions that authorize the State Treasurer to sell a specified amount of bonds, and generally include several uniform provisions that:
* Establish the state's obligation to repay them, and pledge its full faith and credit to repayment,
* Set forth issuance procedures, and link the bond act to the state's General Obligation Bond Law,
* Create a finance committee with specified membership, chaired by the State Treasurer,
* Charge the committee to determine whether it is "necessary or desirable" to issue the bonds, and
* Add other mechanisms necessary for the State Treasurer and the Department of Finance to implement the bond act, including allowing the board to request a loan from the Pooled Money Investment Board to advance funds for bond-funded programs prior to the bond sale, among others.
In bond acts, the Legislature generally:
* Sets forth categories of projects eligible for bond funds, such as library construction or school facility modernization,
* Chooses an administrative agency to award the funds, such as the State Librarian or the State Allocation Board,
* Details the criteria to guide the administrative agency's funding in each category,
* Enacts enforcement and audit provisions, and
* Provide for an election to approve the bond act.
Should the voters approve the bond act, the Legislature then appropriates funds to the chosen agencies to fund projects consistent with the criteria, generally as part of the Budget Act. The Department of Finance then surveys agencies to determine need for bond funds based on a project's readiness, and then asks the Treasurer to sell bonds to fund those projects. After the bond sale, the Department of Finance determines which bond acts and agencies receive bond proceeds. In recent years, the Legislature has enacted, and voters approved two bond acts for parks:
* Safe Neighborhood Parks, Clean Water, Clean Air, and Coastal Protection Act of 2000 of $2.1 billion, approved by voters as Proposition 12 (AB 18, Villaraigosa), and
* California Clean Water, Clean Air, Safe Neighborhood Parks, and Coastal Protection Act of 2002 of $2.6 billion, approved by voters as Proposition 40 (AB 1602, Keeley),
The following bond act was placed on the ballot by initiative:
* The Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Bond Act of 2006 of $5.4 billion (Proposition 84).
According to the State Treasurer, almost all of the Proposition 12 and 40 bonds have been sold; slightly more than $100,000 hasn't yet been issued. However, almost $2 billion from Proposition 84 has not yet been issued. Voters also enacted Proposition 1E of 2006 which authorized the sale of $4.09 billion in general obligation bonds for flood control, of which $1.7 remains unissued (AB 140, Nunez, 2006). Additionally, the Legislature enacted, and voters approved, Proposition 1, which authorized $7.1 billion in new bonds for water quality and supply infrastructure (AB 1471, Rendon, 2014). The Governor's bond accountability website (www.bondaccountability.ca.gov) indicates that only $278,939 of Proposition 1C funds, and $1.2 billion of Proposition 1 remain uncommitted. Seeking additional funds for these purposes, the author wants voters to authorize additional general obligation bonds to fund parks, water, and other purposes.
Proposed Law
Senate Bill 5 enacts the California Drought, Water, Parks, Climate, Coastal Protection, and Outdoor Access for All Act of 2018, which places a $3 billion bond before voters at the June 2018 statewide direct primary election. After bonds are issued and sold, the measure allows the Legislature to appropriate funds to the following categories:
* $600 million to the Department of Parks and Recreation (DPR) to create and expand safe neighborhood parks in park-poor communities, in accordance with the competitive grant program in the Statewide Park Development and Community Revitalization Act of 2008 (AB 31, De Leon, 2008). Of that amount, not less than 20% is available for rehabilitating, repurposing, or substantially improving existing park infrastructure in communities that will lead to enhances park use and enhanced user experiences. Additionally, $48 million is available for projects identified by DPR to correct historic underinvestments in the Inland Empire, Gateway, and Desert Communities (Chapter Two).
* $15 million to DPR for local park rehabilitation and improvement grants to local governments on a per capita basis, and $15 million more for the Legislature to appropriate to DPR for grants to cities and districts providing park and recreation services with populations of 200,000 or less, but in a county with a population of 500,000 or more. The bill requires a 20% local match unless the entity is a disadvantaged community (Chapter Three).
o For the two categories above, 60% of this allocation goes to cities and park districts using a formula provided in the bill, while 40% flows to counties, regional parks and open space districts, open space districts or authorities, and regional open space districts, pursuant to a formula set in the bill.
o The Director of DPR must prepare and adopt criteria and procedures for evaluating applications, which must contain a certification stating that the grant-funded project is consistent with the park and recreation element of the applicable city or county general plan. The Director must annually forward to the Director of Finance for inclusion in the annual Budget Act a statement of the total amounts appropriated each fiscal year under this category. Funds must be encumbered within three years of the effective date of the appropriation.
* $100 million to DPR to restore and preserve existing state park facilities to preserve and increase public access, and to protect natural, cultural and historic resources in the parks (Chapter Four).
o An unspecified amount is available for enterprise projects that facilitate new or enhanced park use and user experiences and increase revenue generation to support DPR.
o An unspecified amount is available for grants to local agencies that operate a unit of the State Parks system.
o The bill requires a 25% local match unless the entity is a disadvantaged community.
* $25 million to the Natural Resources Agency for competitive grants to local agencies, state conservancies, federally recognized Indian tribes, non-federally recognized tribes listed on the California Tribal Consultation List, and nonprofit organizations to provide nonmotorized infrastructure development and enhancements that promote new or alternate access to parks, waterways, outdoor recreational pursuits, and forested or other natural environments (Chapter Five).
o Up to 25% can be made available for communities for innovative transportation programs that provide new and expanded outdoor experiences for disadvantaged youth.
o The bill requires a 20% local match unless the entity is a disadvantaged community.
* $20 million to DPR to administer a competitive grant program for local agencies in nonurbanized areas. The bill requires a 20% local match unless the entity is a disadvantaged community (Chapter Six).
* $125 million to the Natural Resources Agency for grants for river parkways and urban creeks under the California River Parkways Act of 2004 and the Urban Streams Restoration Program (Chapter Seven).
o Of that amount, $75 million is available to the Santa Monica Mountains Conservancy.
o Not less than 5% is available to the Santa Ana River Conservancy Program.
o An unspecified amount for the Lower American River Conservancy Program.
o An unspecified amount for the Guadelupe River contingent on the enactment of future legislation.
o An unspecified amount for the Russian River contingent on the enactment of future legislation.
o Requires a 20% match unless the entity is a disadvantaged community.
* $120 million to conservancies, including $40 million to the Salton Sea Authority for capital outlay projects that provide air quality and habitat benefits, of which $10 million must be used for purposes consistent with the New River Water Quality, Public Health, and River Parkway Development Program. An unspecified amount is made available to the Wildlife Conservation Board. Unspecified amounts are available for the Legislature to appropriate to the following conservancies, contingent on the development of a master plan that identifies priorities and specific criteria for selecting projects for funding, including providing public access (Chapter Eight):
o Baldwin Hills Conservancy.
o California Tahoe Conservancy.
o Coachella Valley Mountains Conservancy.
o Sacramento-San Joaquin Delta Conservancy.
o San Diego River Conservancy.
o San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy.
o San Joaquin River Conservancy.
o Santa Monica Mountains Conservancy.
o Sierra Nevada Conservancy.
* $80 million to fund projects that enhance and protect coastal resources. An unspecified amount is available to the California Ocean Protection Fund for its projects, and another unspecified amount available to the State Conservancy for the protection of beaches, bays, wetlands, and coastal watershed resources. 25% must be available for the San Francisco Bay Area Conservation Program (Chapter Nine).
* $400 million to appropriate as competitive grants for projects that plan, develop, and implement climate adaptation and resiliency projects. Eligible activities include climate change adaptation, agricultural viability, landscape resilience, wildlife corridors, habitat protection, natural community conservation plans, wildlife rehabilitation centers, protection of wildlife habitats threatened by sea level rise or ocean acidification, preservation of the working character of the lands through conservation easements or similar actions, urban forestry, and several others. An unspecified amount is made available to the Wildlife Conservation Board (Chapter Ten).
* $1 billion to appropriate for clean water projects, $250 million for each of the following programs, created by Proposition 1 (2014): Clean, Safe, and Reliable Drinking Water; Regional Water Security, Climate, and Drought Preparedness, Water Recycling, and Groundwater Sustainability (Chapter 11).
* $500 million to appropriate for flood protection (Chapter 12):
o $300 million for flood protection facilities, levee improvements, and related investments that protect persons and property from flood damage.
o $100 million for levee repairs and restoration within the Sacramento-San Joaquin Delta.
o $100 million for stormwater, mudslide, and other flash-flood related protections.
o Funds cannot be used for the design, construction, operation, mitigation, or maintenance of delta conveyance facilities.
SB 5 also contains an advance payment process for integrated regional water management plan projects. To take advantage of the process, the regional water management group must provide the administering agency with a list of projects to be funded with grant funds if the project proponent is a nonprofit organization within 90 days of its inclusion and implementation within an integrated regional water management plan. The list must specify the manner in which the projects are consistent with the plan, and contain specified information. Within 60 days of receipt of the list, the agency shall provide advance payment of 50% of the grant award for projects meeting specified criteria.
The bill reserves 15% of total funds for projects serving severely disadvantaged communities under Chapters 9 and 10, and allows up to 10% of funding under each Chapter for technical assistance to disadvantaged communities. Agencies must operate a multidisciplinary technical assistance program for disadvantaged communities. SB 5 defines a "disadvantaged community" as a community with median household income of 80% statewide average, and a "severely disadvantaged community" as one with 60%.
Each state agency receiving funding from the bond act must:
* Develop and adopt project solicitation and evaluation guidelines, which must include monitoring and reporting requirements, unless they've previously developed and adopted them. Guidelines must encourage, where feasible, efficient use and conservation of water supplies, use of recycled water, stormwater capture, and provision of safe and reliable drinking water.
* Conduct three public meetings, one each in Northern, Central, and Southern California, to consider public comments before finalizing the guidelines. The agency must publish the draft solicitation and evaluation guidelines on its Internet Web site at least 30 days before the public meetings, and
* Submit the guidelines to the Secretary of the Natural Resources Agency.
The Secretary must verify that the guidelines are consistent with applicable statutes and purposes enumerated in this bill, and post an electronic form of the guidelines submitted by state agencies and the subsequent verifications on the Natural Resources Agency's internet web site. Upon adoption, the bill requires the Secretary to transmit copies of the guidelines to the fiscal committees and the appropriate policy committees of the Legislature. The Secretary must also publish a list of all bond-funded program and project expenditures pursuant at least annually, in written form, and electronically on the agency's internet web site in spreadsheet format that contains specified information.
Additionally, the measure requires the Department of Finance to provide for an independent audit of bond expenditures. The California State Auditor or the Controller may conduct a full audit of any or all of the activities of that entity if an audit required above reveals any impropriety. Any state agency issuing a bond-funded grant must require adequate reporting of the expenditures of the funding from the grant.
Wherever feasible, the bill grants a preference for grant projects whose application includes the use of the California Conservation Corps, and a priority to projects that include water efficiencies, stormwater capture, or carbon sequestration features. Funds may not be used to fulfill mitigation requirements imposed by law. For projects under Chapters 4, 7, 8, 9, and 10, the state agency receiving funds shall seek to achieve wildlife conservation goals through projects on public lands or voluntary projects on private lands. Of these, projects that provide permanent protections to ensure the durability of investments have priority.
SB 5 caps the administrative costs at 5 percent for any grant program. The bill allows up to 10 percent of funds allocated to each program to be used for necessary planning and monitoring, including feasibility studies and environmental site cleanup that would further the purpose of a project, this percentage can be exceeded for projects in disadvantaged communities if the administering agency determines the need exists. Grant or loan funding may be used to repay specified financing arrangements of nonprofit organizations. Agencies must provide advance payments to projects in disadvantaged communities to initiate the project in a timely manner, subject to additional requirements the agency may adopt to ensure proper use of funds.
The measure defines several of its terms, and states findings and declaration made by the people of California supporting its purposes, and contains an urgency clause giving the measure immediate effect if enacted.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill. According to the author, "California's aging infrastructure is in dire need of new investment. In December, the Senate proposed a comprehensive Infrastructure Investment Package. It calls from major new investments in transportation, good movement, housing, parks, water, and now flood protection. These last three items are the subject of SB 5 before you today. SB 5 is a $3.5 billion general obligation bond measure that allocates desperately needed funds for new parks and open space and for drought and water investments. Last week, in view of the serious flood damage we have seen throughout the state in the past few months, the bill was amended to add $500m for new flood protection investments. This measure could be doubled or tripled in size and still not fully address the funding needed. But we also need to be prudent about incurring new bonded indebtedness because it costs the General Fund. SB 5 attempts to strike that balance."
2. Sixteen tons. Setting the right amount of state general obligation debt is difficult; both the State Treasurer and the Legislative Analyst's Office state that there's no correct amount. Instead, experts suggest that states should look at three criteria: affordability, comparability, and optimality:[1]
California currently has $73.4 billion of general obligation and $9.6 billion of lease revenue debt outstanding, which is affordable. The Governor's 2017 Five-Year Infrastructure Plan states that the Debt Service Ratio, or the ratio between debt service and general fund revenues, as 6.48% in 2016-17 and 6.54% in 2017-18. The State Treasurer calculates a debt service ratio of 5.24% in 2016-17 and 5.01% in 2017-18; the percentages differ because the State Treasurer accounts for offsets of federal government subsidies or transfers from special funds. Annual expenditures on debt service have grown from $2.9 billion in 2000-01 to $7.7 billion in 2016-17. Additionally, 95% of outstanding debt is fixed rate, and the state holds no interest rate swaps or other derivatives. While debt service percentages are reasonable, every dollar spent on debt service reduces the funding that is available for other priorities, and debt service is one of the fastest growing state costs in recent years, according to the Plan. The Plan proposes only $338 million in new general obligation bonds.
California's comparability to other states is less favorable, but improving. The State Treasurer's 2016 Debt Affordability Report, issued last October, contains the following chart:
NOTE: THIS SECTION CONTAINS A FORM/CHART THAT IS NOT REPRODUCIBLE IN A TEXT FORMAT. PLEASE CALL STATE NET AT 1-800-726-4566 FOR ADDITIONAL INFORMATION. Determining optimality or whether government is investing in the quantity and quality of public capital desired by residents, and financing the appropriate share with debt, is more difficult. LAO recommends that the Legislature consider the Five-Year Infrastructure Plan as a starting point to developing a coordinated approach to infrastructure funding, and establish a committee to focus on statewide infrastructure.
3. The good news. Ratings issued from the three major credit ratings agencies often inform investors and the public regarding the state's creditworthiness, and assess any investment risk from investing in California general obligation bonds. Ratings agencies Fitch, Standard and Poor's, and Moody's praise California's deep and diverse economy, recent balanced and on-time budgets, reduced budget deficits, and improving reserves and liquidity. However, the agencies also state that California faces challenges: a highly volatile revenue system, constitutionally-imposed governance restrictions, lack of significant reserves, high housing costs that threaten economic growth, minimal prefunding of retiree health care benefits, and a large backlog of maintenance and infrastructure needs, among others. Once considered an outlier, the difference between California bonds and other states as measured by the benchmark 30-year Municipal Market Data Index has tightened from a high of more than 150 basis points at the end of 2009 to around 10 basis points at the end of June 2016. State Treasurer John Chiang states that this improvement reflects investors' increasing confidence in the state's credit relative to other highly-rated states and the reduced supply of the state's bonds offered in the market. On March 9th, the State Treasurer sold almost $2.8 billion in bonds: new borrowing accounted for $513.2 million, while refunding of existing bonds at lower interest rates totaled $2.279 billion, creating about $295 million in present value savings to taxpayers and $406 million in debt service nominal savings over the remaining lives of the bonds. With interest rates climbing recently, the State Treasurer stated that the sale was a success, with an overall true interest cost was 3.56 percent, and yields ranging from 0.6 percent for the 2017 bonds to 3.9 percent for the 2046 bonds.
4. The bad news. California has a distinct problem: of the $144 billion in general obligation bonds that voters have authorized, more than $39 billion hasn't been issued yet. The state hasn't issued more than $14 billion in transportation and resources bonds, almost $9 billion to fund high speed rail, plus $7.3 billion from AB 1471's water bond, and $7.5 billion more education bonds (Proposition 51, 2016). While the state has made great progress reducing the amount of unauthorized bonds in recent years, many bond-funded projects have not yet received required approvals. While the state issued $7.3 billion in general obligation bonds in 2015-16, $4.9 billion refunded existing bonds to achieve interest rate savings. As a result, even if the Legislature enacts and the voters approve this measure, many of its purposes may have to wait several years for funding as projects funded by previously authorized bonds get up and running.
5. Tax exemption. Ever since the inception of the federal income tax, the federal government has subsidized the cost of state and local agency-issued debt by excluding interest income from tax; the State does the same (Article XIII, Section 26). The tax exemption lowers the cost of capital for government agencies seeking to finance public improvements. However, federal law requires bond proceeds to be used for a public purpose for the tax exemption to apply, namely that less than 10% of the proceeds are used directly or indirectly by a non-governmental entity; or less than 10% of the bond proceeds are secured directly or indirectly by property used in a trade or business. States may still issue tax-exempt bonds not meeting these requirements, known as "qualified private activity bonds," under specified circumstances. The Internal Revenue Service applies additional rules: issuers must file informational returns, use proceeds within a specified period following the sale, and comply with arbitrage restrictions, among others. However, municipal bond experts warn that the federal government may be reconsidering allowing this interest exemption: former President Obama proposed limiting the exclusion for higher-income individuals, and most observers believe that the current Congress may pursue broad tax reform which may include ending the exemption.
6. Urgency. As an urgency statute, SB 5 must be approved by 2/3 vote of each house of the Legislature. Regular legislation takes effect on the January 1 following its passage, but urgency bills take effect as soon as they're passed, signed, and chaptered.
7. Related Legislation. SB 5 follows last year's park bond proposal, SB 317 (De Leon), which did not advance from the Senate Floor. Last year, the Assembly approved a parks bond, AB 2444 (Garcia), but the measure did not advance from the Senate. This year, AB 18 (Garcia) proposes a parks bond. Additionally, three other general obligation bond proposals have been introduced in the Senate:
* The Affordable Housing Bond Act of 2018, which the Committee will also hear at its 3/22 hearing (SB 3, Beall),
* The Goods Movement and Clean Trucks Bond Act (SB 4, Mendoza), and
* The Higher Education Facilities Bond Act of 2018 (SB 483, Glazer).
8. Incoming! On March 14th, the Committee on Natural Resources and Water approved SB 5 by a vote of seven to two. The Committee is hearing the bill as the Committee of second reference.
9. Technicals: Committee Staff recommend the following technical amendments:
* Add "issued and delivered" next to "sold" on P. 26, L. 38
* Disconnect GC 16727(a) and (b) to allow bond proceeds to be used for non-capital purposes at the end of L. 13, on P. 27
* Add "excluding refunding bonds authorized pursuant to 80172, less any amount withdrawn pursuant to this section and section 80169" on P. 28, L. 27 after "division"
* Add "excluding refunding bonds authorized pursuant to 80172" on P. 29, L. 9 after "division"
* Add "to be allocated in accordance with this division" after "fund" on P. 29, L. 11.
* Add "or reimbursed" after "paid" on P. 29, L.25
* Swap "allocated proportionately to" for "shared proportionately by" on P. 29 L. 28.
* Add defeasement language to the end of 80172 on P. 29, L. 37.
Support and Opposition
(3/16/17)
Support: American Heart Association; American Stroke Association; Arroyos & Foothills Conservancy; Big Sur Land Trust; Bolsa Chica Land Trust; California Association of Resource Conservation Districts; California Trout; California Wilderness Coalition; Community Nature Connection; Environmental Defense Fund; Friends of the River; Grassland Water District; Hills for Everyone; Laguna Greenbelt, Inc.; Los Angeles Neighborhood Land Trust; Midpeninsula Regional Open Space; Ocean Conservancy; Orange County Water District; Pathways for Wildlife; Prevention Institute; SC Wildlands; Santa Clara Valley Open Space Authority; Save the Redwoods League; Sierra Club California; Sonoma County Agricultural Preservation and Open Space District; Sonoma Land Trust; TRUST South LA; Water ReUse California
Opposition: None received.
[1] Robert Wassmer and Ronald Fisher "Debt Burdens of California State and Local Governments: Past, Present and Future." As requested and supported by the California Debt and Investment Advisory Commission. July 2011 |