BILL NUMBER: SB 475 AMENDED
BILL TEXT
AMENDED IN SENATE MARCH 21, 2011
INTRODUCED BY Senators Wright and Emmerson
FEBRUARY 17, 2011
An act to amend Sections 5956, 5956.1, 5956.2, 5956.3, 5956.4,
5956.5, 5956.6, 5956.7, 5956.8, 5956.9, and 5956.10 of, and to add
Sections 5956.11, 5956.12, 5956.12 and
5956.13 to, the Government Code, relating to infrastructure
financing.
LEGISLATIVE COUNSEL'S DIGEST
SB 475, as amended, Wright. Infrastructure financing.
Existing law authorizes a governmental agency, as defined, to
solicit proposals and enter into agreements with private entities for
the design, construction, or reconstruction by, and lease to,
private entities, for specified types of fee-producing infrastructure
projects. Existing law permits these agreements to provide for
infrastructure facilities owned by a governmental entity, but
constructed by a private entity, to be leased to or owned by that
private entity for a period of up to 35 years.
This bill would authorize a local governmental agency to enter
into an agreement with a private entity for financing for specified
types of revenue-generating infrastructure projects. The bill would
require an agreement entered into under these provisions to include
adequate financial resources to perform the agreement, and would
permit the agreements to lease or license to, or provide other
permitted uses by, the private entity for a term of up to 50 years,
after which time the project would revert to the governmental agency.
This bill would also require an unspecified entity to
advise and educate local agencies and other interested stakeholders
about the role that public-private partnerships can undertake in
planning, studying, designing, financing, constructing, operating,
maintaining, or managing local infrastructure projects.
Vote: majority. Appropriation: no. Fiscal committee: yes
no . State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 5956 of the Government Code is amended to read:
5956. Local governmental agencies have experienced a significant
decrease in available tax revenues to fund necessary infrastructure
improvements. If local governmental agencies are going to maintain
the quality of life that infrastructure provides, they must find new
funding sources. One source of new money is private sector financing
utilized to study, plan, design, develop, finance, construct,
maintain, improve, rebuild, repair, operate, or any combination
thereof, infrastructure facilities. Infrastructure projects may be
financed by a combination of public funding and private sector
financing under this chapter. Private sector financing for an
infrastructure project under this chapter may include, but is not
limited to, cash, cash equivalents, loans, debt assumption, letters
of credit, capital investment, in-kind contributions of materials or
equipment, construction or equipment financing, carrying of costs
during construction, or any combination thereof. Unless private
sector financing becomes available to study, plan, design, develop,
finance, construct, maintain, improve, rebuild, repair, or any
combination thereof, fee-producing infrastructure facilities, some
local governmental agencies will be unable to replace deteriorating
infrastructure. Further, some local governmental agencies will be
unable to expand and build new infrastructure facilities to serve an
increasing population.
SEC. 2. Section 5956.1 of the Government Code is amended to read:
5956.1. It is the intent of the Legislature that local
governmental agencies have the authority and flexibility to utilize
private sector financing or public financing, and any combination of
these financing sources, to study, plan, design, construct, develop,
finance, maintain, rebuild, improve, repair, or operate, or any
combination thereof, fee-producing infrastructure facilities. Without
the ability to utilize these sources of financing to study, plan,
design, construct, develop, finance, maintain, rebuild, improve,
repair, or operate, or any combination thereof, fee-producing
infrastructure facilities, the Legislature finds that some local
governmental agencies will not be able to adequately, competently, or
satisfactorily retrofit, reconstruct, repair, or replace existing
infrastructure and will not be able to adequately, competently, or
satisfactorily design and construct new infrastructure.
SEC. 3. Section 5956.2 of the Government Code is amended to read:
5956.2. It is the intent of the Legislature that this chapter be
construed as creating a new and independent authority for local
governmental agencies to utilize private sector financing or public
financing, and any combination of these financing sources, to study,
plan, design, construct, develop, finance, maintain, rebuild,
improve, repair, or operate, or any combination thereof,
fee-producing infrastructure facilities. To that end, this authority
is intended to supplement and be independent of any existing
authority and does not limit, replace, or detract from existing
authority. This chapter may be used by local governmental entities
when they deem it appropriate in the exercise of their discretion. It
is the intent of the Legislature that this act create no new
governmental entities.
SEC. 4. Section 5956.3 of the Government Code is amended to read:
5956.3. For purposes of this chapter, the following definitions
shall apply:
(a) "Fee-producing infrastructure project" or "fee-producing
infrastructure facility" means the operation of the infrastructure
project or facility will be paid for, in whole or in part, by the
persons or entities benefited by or utilizing the project or
facility.
(b) "Governmental agency" includes a city, county, city and
county, including a charter city or county, school district,
community college district, public district, county board of
education, joint powers authority, transportation commission or
authority, or any other public or municipal corporation.
(c) "Private entity" includes a person, business entity,
combination of persons and business entities, or a combination of
business entities.
SEC. 5. Section 5956.4 of the Government Code is amended to read:
5956.4. A governmental agency may solicit proposals and enter
into agreements as authorized under this chapter for the following
types of fee-producing infrastructure projects:
(a) Irrigation.
(b) Drainage and sanitary sewer systems.
(c) Energy or power production.
(d) Water supply, treatment, and distribution.
(e) Flood control.
(f) Inland waterways.
(g) Harbors.
(h) Municipal improvements.
(i) Commuter and light rail.
(j) Highways or bridges.
(k) Tunnels.
(l) Airports and runways.
(m) Purification of water.
(n) Sewage treatment, disposal, and water recycling.
(o) Refuse disposal.
(p) Structures or buildings, except structures or buildings that
are to be utilized primarily for sporting or entertainment events.
SEC. 6. Section 5956.5 of the Government Code is amended to read:
5956.5. Notwithstanding Chapter 10 (commencing with Section 4525)
of Division 5, or Part 2 (commencing with Section 10100) or Part 3
(commencing with Section 20100) of Division 2 of the Public Contract
Code, the governmental agency soliciting proposals and entering into
agreements with private entities for the studying, planning, design,
developing, financing, construction, maintenance, rebuilding,
improvement, repair, or operation, or any combination thereof, by
private entities for fee-producing infrastructure projects shall
ensure that the contractor is selected pursuant to a competitive
negotiation process. Projects may be proposed by the private entity
and selected by the governmental agency at the discretion of the
governmental agency. Projects may be proposed and selected
individually or as part of a related or larger project. The
competitive negotiation process shall utilize, as a primary selection
criterion, the demonstrated competence and qualifications of the
private entity to perform the services required under the agreement,
including prior experience in performing similar services. The
selection criteria shall also ensure that the facility be operated at
fair and reasonable prices to the user of the infrastructure
facility services. The competitive negotiation process shall not
require competitive bidding. The competitive negotiation process
shall specifically prohibit practices that may result in unlawful
activity including, but not limited to, rebates, kickbacks, or other
unlawful consideration, and shall specifically prohibit governmental
agency employees from participating in the selection process when
those employees have a relationship with a person or business entity
seeking a contract under this section that would subject those
employees to the prohibition of Section 87100. Other than these
criteria and applicable provisions related to providing security for
any required construction and completion of the facility, the
governmental agency soliciting proposals is not subject to any other
provisions of the Public Contract Code, this code, or any other
statutory provision that relates to public procurements.
SEC. 7. Section 5956.6 of the Government Code is amended to read:
5956.6. (a) For purposes of facilitating projects, the agreements
specified in Section 5956.4 may include provisions for the lease,
license, or other permissive use of rights-of-way in, and airspace
over, property owned by a governmental agency, for the granting of
necessary easements, and for the issuance of permits or other
authorizations to enable the private entity to construct, maintain,
rebuild, improve, or repair infrastructure facilities supplemental to
existing government-owned facilities. Infrastructure constructed by
a private entity pursuant to this chapter shall, at all times, be
owned by a governmental agency. All public works constructed pursuant
to this section shall comply with Chapter 1 (commencing with Section
1720) of Part 7 of Division 2 of the Labor Code. The agreement may
provide for the lease or license of those facilities to, or their
other permissive use by, the private entity for up to 50 years. In
consideration therefor, the agreement shall provide for complete
reversion of the privately constructed facility to the governmental
agency at the expiration of the lease, license, or other permissive
use at no charge to the governmental agency. Subsequent to the
expiration of the period of the lease, license, or other permissive
use, the governmental agency may continue to charge fees for use of
the infrastructure facility. If, after the expiration of the period
of the lease, license, or other permissive use, the governmental
agency continues to lease airspace rights to the private entity, it
shall do so at fair market value.
(b) The agreement between the governmental agency and the private
entity shall include, but need not be limited to, provisions to
ensure the following:
(1) Compliance with the California Environmental Quality Act
(Division 13 (commencing with Section 21000) of the Public Resources
Code). Neither the act of selecting a proposed project or a private
entity, nor the execution of an agreement with a private entity,
shall require prior compliance with the act. However, appropriate
compliance with the act shall thereafter occur before project
development commences.
(2) Security for the performance of the agreement and contractual
provisions that are necessary to protect the funding and financial
terms of the agreement.
(3) Adequate financial resources of the private entity to perform
the agreement.
(4) Authority for the governmental agency to impose user fees, in
whole or in part, for use of the facility in an amount sufficient to
protect the revenue streams necessary for projects or facilities
undertaken pursuant to this chapter. User fee revenues, used in whole
or in part, may be paid to the governmental agency or the private
entity and shall be dedicated exclusively to payment of the private
entity's and the governmental agency's direct and indirect capital
outlay costs for the project, direct and indirect costs associated
with financing of the facility, including interest, principal,
repayment, issuance, and refinancing costs, direct and indirect costs
associated with operations, direct and indirect user fee collection
costs, direct and indirect costs of administration of the facility,
direct and indirect costs of maintenance, other project-related
costs, and a reasonable return to the private entity as set forth
specifically in the agreement, or included as part of the costs and
fees, as negotiated or determined during the procurement process.
(5) As a precondition to the imposition or increase of a user fee,
the governmental agency shall conduct at least two public hearings
at which public testimony will be received regarding a proposed user
fee revenue or increase in user fee revenues. The public hearings
shall precede the action by the governmental agency to actually
impose a user fee or to increase an existing user fee. The
governmental agency shall consider the public testimony prior to
imposing a new or increased user fee. The governmental agency shall
provide the following notices and utilize the following procedures:
(A) Notice of the date, time, and place of the meeting, including
a general explanation of the matter to be considered, shall be mailed
at least 14 days prior to the meeting to any interested party who
files a written request with the governmental agency for mailed
notice of the meeting on new or increased fees or service charges.
Any written request for mailed notices shall be valid for one year
from the date on which it is filed unless a renewal request is filed
prior to the expiration of the one-year period for which the written
request was filed. The legislative body may establish a reasonable
annual charge for sending notices based on the estimated cost of
providing the service.
(B) At least 10 days prior to the meeting, the governmental agency
shall make available to the public data that supports the amount of
the fee or the increase in the fee.
(C) (i) At least 10 days prior to the meeting, the governmental
agency shall publish a notice in a newspaper of general circulation
in that agency's jurisdiction stating the date, time, and place of
the meeting, including a general explanation of the matter to be
considered.
(ii) Any costs incurred by the governmental agency in conducting
the meeting or meetings required by this section may be recovered
from fees charged for the services that are the subject of the fee.
(iii) For infrastructure projects specifically authorized by this
chapter, at least 10 days prior to the meeting, the governmental
agency shall publish for four consecutive times, a notice in the
newspaper of general circulation in the affected area stating in no
smaller that 10-point type a notice specifying the subject of the
hearing, the date, time, and place of the meeting, and in at least
8-point type a general explanation of the matter to be considered.
(D) No governmental agency shall levy a new fee or service charge
or increase an existing fee or service charge to an amount that
exceeds the estimated cost for which the user fee revenues are
dedicated, including a reasonable rate of return on investment,
pursuant to paragraph (4). Any action by a governmental agency to
levy a new fee or service charge or to approve an increase in an
existing fee or service charge pursuant to this chapter shall be
taken only by ordinance or resolution. The legislative body of a
governmental agency shall not delegate the authority to adopt a new
fee or service charge, or to increase a fee or service charge.
(6) Require that if the legislative body of the governmental
agency determines that fees or service charges create revenues in
excess of the actual cost for which the user fee revenues are
dedicated, including a reasonable rate of return, pursuant to
paragraph (4), those revenues shall either be applied to any
indebtedness incurred by the private entity or the governmental
agency with respect to the project, be paid into a reserve account in
order to offset future operation costs, be paid into the appropriate
government account, be used to reduce the user fee or service charge
creating the excess, or a combination of these sources.
(7) If the private entity operates the facility, require the
private entity to maintain the facility in good operating condition
at all times, including the time the facility reverts to the
governmental agency.
(8) Preparation by the private entity of an annual audited report
accounting for the income received and expenses to operate the
facility. The private entity shall make that report available to any
member of the public for a cost not to exceed the cost of
reproduction of the report.
(9) Provision for a buyout of the private entity's capital
investment by the governmental entity in the event of termination or
default before the end of the lease term.
(10) Provision for appropriate indemnity promises between the
governmental agency and the private entity.
(11) Provision requiring the private entity to maintain insurance
with those coverages and in those amounts that the governmental
agency deems appropriate.
(12) In the event of a dispute between the governmental agency and
the private entity, both parties shall be entitled to all available
legal or equitable remedies.
SEC. 8. Section 5956.7 of the Government Code is amended to read:
5956.7. (a) The governmental agency may exercise any power
possessed by it with respect to the development and construction of
infrastructure projects pursuant to this chapter. Agreements for the
maintenance and operation of services entered into pursuant to this
chapter shall provide for full reimbursement for services rendered by
the governmental agency in accordance with the terms and conditions
specified in the agreement. The governmental agency may provide
services for which it is reimbursed with respect to preliminary
planning, environmental certification, and preliminary design of the
infrastructure projects. The governmental agency may consult with
legal, financial, and other consultants in the negotiation and
development of the agreement. To the extent existing public utility
infrastructure is necessarily required to be modified, relocated, or
removed in order for an infrastructure project authorized by this
chapter to be constructed, the cost of modification, relocation, or
removal of the existing infrastructure shall be borne by the private
entity and included as a recoverable capital cost of the project.
This cost shall not be construed to include costs of increasing the
capacity, or upgrading, or improving the existing public utility
infrastructure.
(b) The private entity's responsibility to modify, relocate, or
remove existing public utility infrastructure shall not alter any
agreements that may be in place between the governmental agency and
any public utility regarding projects funded by the governmental
agency.
(c) In the event of a dispute regarding the reimbursement
required, a private entity may request an audit of the public utility'
s costs by a mutually acceptable certified public accountant. The
result of the audit shall determine the actual costs. If the audit
indicates that the public utility's actual costs were less than 95
percent of the cost claimed, the cost of the audit shall be borne by
the public utility. If the audit indicates that the public utility's
actual costs were 95 percent or more of the cost claimed, the cost of
the audit shall be borne by the private entity.
SEC. 9. Section 5956.8 of the Government Code is amended to read:
5956.8. The plans and specifications for each project constructed
pursuant to this chapter shall comply with all applicable
governmental design standards for that particular infrastructure
project. The private entity performing the agreement shall utilize
private sector design and construction firms to design and construct
the infrastructure facilities. However, a facility subject to this
chapter and leased, licensed, or permitted to a private entity shall,
during the term of the lease, license, or permit, be deemed to be
public property for purposes of identification, maintenance,
enforcement of laws , and for purposes of Division 3.6
(commencing with Section 810). All construction, alteration,
demolition, installation, and repair work pursuant to this chapter
shall comply with Chapter 1 (commencing with Section 1720) of Part 7
of Division 2 of the Labor Code.
SEC. 10. Section 5956.9 of the Government Code is amended to read:
5956.9. In order to use the authority conferred by this chapter
to the maximum extent, a governmental agency may use private
infrastructure financing pursuant to this chapter as the exclusive
funding or revenue source or as a supplemental funding or revenue
source with federal or local funds. The governmental agency involved
may be a local governmental agency or a combination of local
governmental agencies. The governmental agency may work cooperatively
with the California Infrastructure and Economic Development Board
with regard to the design, construction, operation, and financing of
privately financed facilities, but the projects will not be subject
to the review or approval of that board.
SEC. 11. Section 5956.10 of the Government Code is amended to
read:
5956.10. Notwithstanding any provision of this chapter, neither
the state or any state agency may directly or indirectly use the
authority in this chapter, nor may any governmental agency as defined
in Section 5956.3, use the authority in this chapter, to design,
construct, finance, or operate a state project. For purposes of this
section, a state project includes any of the following:
(a) Toll roads on state highways.
(b) State water projects.
(c) State park and recreation projects.
(d) State financed projects.
These limitations shall not prohibit the state, any state agency,
or any governmental agency as defined in Section 5956.3, from
utilizing authorizations contained in other provisions of law. This
section shall not be construed to prohibit a governmental agency from
using this chapter to accomplish projects that are not expressly
prohibited in this section.
SEC. 12. Section 5956.11 is added to the
Government Code, to read:
5956.11. (a) For the purposes of this section, the following
terms have the following meanings, unless the context clearly
requires otherwise:
(1) "Adjusted private party bid" means the estimated bid by a
private entity for an infrastructure project adjusted for risks
retained by the public sector under alternative financing and
procurement and for ancillary costs.
(2) "Alternative financing and procurement (AFP)" means a range of
infrastructure project delivery methods that use private expertise
and financing to build, repair, or rebuild infrastructure, on time
and on budget, while ensuring appropriate public control and
ownership.
(3) "Estimated private sector bid" means an estimate of the
expected bid by a private entity, including financing costs, for a
particular project using alternative financing and procurement
delivery methods.
(4) "Public-private partnership" means a contractual agreement
between a public agency and a private sector entity that utilizes
private sector capital to study, plan, design, construct, develop,
finance, maintain, rebuild, improve, repair, or operate, or any
combination thereof, infrastructure facilities, if the facilities
remain a public good.
(5) "Public sector comparator" means the estimated total costs,
including adjustments for risks retained and ancillary costs, to the
public sector of delivering an infrastructure project using
traditional procurement processes.
(6) "Value for money" means the difference between the public
sector comparator and the estimated private sector bid. A positive
value for money occurs for a project using alternative financing and
procurement when the adjusted private sector bid is less than the
public sector comparator.
(b) The ____ shall advise and educate local agencies and other
interested stakeholders about the role that public-private
partnerships can play in planning, studying, designing, financing,
constructing, operating, maintaining, or managing local
infrastructure projects.
(c) Assistance provided by the ____ pursuant to subdivision (b)
shall include, but is not limited to, all of the following:
(1) Developing information that would help a local governmental
agency determine whether a local infrastructure project would benefit
from a public-private partnership that provides an alternative
financing and procurement approach. This information may include, but
is not limited to, all of the following:
(A) A description of the kinds of private party participation that
could be subject to an agreement, including, but not limited to,
study, planning, finance, design, construction, operations,
maintenance, or management.
(B) A public sector comparator to be used in conjunction with an
estimated private sector bid to help the local agency determine
whether an alternative financing and procurement approach would
result in a positive value for money, or whether the agency would
receive greater value by pursuing a traditional public sector
procurement approach.
(C) Guidelines to assist local agencies in following processes
that incorporate the following principles in all alternative
financing and procurement agreements:
(i) The public interest is paramount.
(ii) Value for money must be demonstrable.
(iii) Appropriate public control and ownership must be preserved.
(iv) Accountability must be maintained.
(v) All processes must be transparent while protecting the
confidentiality of trade secrets.
(D) Information regarding the state's goal of reducing greenhouse
gases by 25 percent by the year 2020, and the role, if any, that
well-designed and innovative infrastructure can play in helping to
achieve that goal.
(E) Case studies of the use of public-private partnerships in
completed public infrastructure projects, including case studies of
projects in which public sector employees retained their jobs or
otherwise benefited from the project.
(2) Providing the information described in paragraph (1) to local
agencies and other interested stakeholders through educational
seminars, factsheets, and other materials.
(3) Serving as a clearinghouse of information regarding the use of
public-private partnerships in infrastructure projects in this state
and elsewhere. Specific clearinghouse functions may include, but are
not limited to, the following:
(A) Establishing an Internet Web site to post information
regarding local agency public-private partnership projects.
(B) Establishing a service to link local agencies with technical
and legal resources to assist in developing and evaluating requests
for proposals for public-private partnership projects and to assist
in structuring agreements to protect a local agency's interests in a
public-private partnership.
SEC. 13. SEC. 12. Section 5956.12 is
added to the Government Code, to read:
5956.12. The governmental agency may determine the validity of
any permits, authorizations or approvals, contracts and agreements,
user fees, and other actions taken pursuant to this chapter, by
initiating a validating proceeding, as provided in Chapter 9
(commencing with Section 860) of Title 10 of Part 2 of the Code of
Civil Procedure. The validating action may also be initiated by
interested persons as provided in Chapter 9 (commencing with Section
860) of Title 10 of Part 2 of the Code of Civil Procedure.
SEC. 14. SEC. 13. Section 5956.13 is
added to the Government Code, to read:
5956.13. If a local governmental agency elects to proceed under
this chapter, the local governmental agency shall establish and
enforce for the project a
labor compliance program containing the requirements outlined in
Section 1771.5 of the Labor Code, or it shall contract with a third
party to operate a labor compliance program containing the
requirements outlined in Section 1771.5 of the Labor Code. This
requirement shall not apply to any project where the governmental
agency or private entity has entered into any collective bargaining
agreement or agreements that bind all of the contractors performing
work on the project.