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Home My WebLink About2000-02-08 - AGENDA REPORTS - ACA 24 INFRASTRUCTURE FUND (2)AGENDA REPORT City Manager Approval Zkx� Item to be presented by: aria Rountree CONSENT CALENDAR DATE: February 8, 2000 SUBJECT: ASSEMBLY CONSITUTIONAL AMENDMENT (ACA) 24 DEPARTMENT: City Manager RECOMMENDED ACTION Approve letter of support. BACKGROUND Assembly Republican Leader Scott Baugh (R-67) introduced ACA 24, which would create the California Twenty -First Century Infrastructure Investment Fund (Infrastructure Fund). Also known as the 20/20 Vision Plan, this measure was introduced as an alternative to raising taxes to pay for infrastructure needs. Specifically, a specified percentage of revenues from the General Fund would be transferred to the Infrastructure Fund beginning with one percent from the 2000- 01 fiscal year to five percent from the 2019-20 fiscal year. Through this proposal, eventually, five percent of the state budget would be dedicated for school facilities, roads, parks, and resources infrastructure. It is projected that ACA 24 would produce between $75 and $125 billion. The statute would provide: (a) that 75 percent of these moneys shall be annually distributed to cities and counties, on a continuously appropriated basis, for local infrastructure expenses; (b) for the formation of an oversight panel to ensure that locally allocated funds are spent for eligible infrastructure projects; and (c) that the remaining 25 percent of the revenues in the Infrastructure Fund shall be subject to annual appropriation by the Legislature. ACA 24 would also shift the state's sales tax revenue on gasoline to the State Highway Account, thereby increasing the share of gas tax revenues going to cities and counties for local road repairs. The proposal is written to adjust to economic conditions in order to protect existing general fund programs. If General Fund revenues increase by less than 3 percent from the prior year, the increase in the amount of General Fund revenues that are transferred to the Infrastructure Fund compared to the transfer in the prior year shall not exceed an amount equivalent to twenty-five percent of the increase in General Fund revenues relative to the prior year. In addition to the Republican 20/20 Vision Plan, other statewide efforts are underway to fund infrastructure in California. Last year, the Governor's Infrastructure Commission recommended $5 billion in new bonds and Senator Burton (D-3) introduced Senate Constitutional Amendment (SCA) 3, which would reduce the voter threshold for local transportation sales taxes from a 2/3rds to majority vote and SB 315, which would authorize the sale of an as -yet undecided amount of money in general obligation bonds. It is anticipated that negotiations to develop a bi- partisan approach will continue over the next several months. ALTERNATIVE ACTIONS 1. Oppose ACA 24. 2. Remain neutral. 3. Other action as determined by Council. FISCAL IMPACT It is estimated that an additional $27 billion would be available to local agencies in Los Angeles County for infrastructure projects over the next twenty years. ATTACHMENT Letter of support for ACA 24. Full text of ACA 24 — available in the City Clerk's Reading File. MR:= S:\MS\CCAGENDA\2_S_OO\CCACA24.DOC City of Santa Clarita 23920 Valencia Blvd. Phone Suite 300 (661) 259-2489 Santa Clarita Fax California 91355-2196 (661) 259-8125 Website: www.santa-clarita.com February 8, 2000 Assembly Member Scott R. Baugh California State Assembly Capitol Bldg. #4162 Sacramento, CA 95814 Dear Assemblymember Baugh: This letter is to inform you that the Santa Clarita City Council voted on February 8, 2000 to support ACA 24. It is clear that the State of California must re -invest in the future and devote additional resources to needed infrastructure. Through ACA 24, investments out of the growth in the state budget on an ongoing basis will produce a sizable amount of money to pay for priority capital outlay projects. The City is particularly supportive of the three-quarters of the revenues to be controlled by local government agencies on our highest priority capital outlay. We look forward to working with you to support this important legislation. If you have any questions, please contact Maria Rountree, Intergovernmental Relations Officer, at 661-255-4384. Sincerely, Jo Anne Darcy Mayor MR= S:\MS\CCAGENDA\2_8_00\CCACA24.DOC PRINTED ON RECYCLED PAPER CALIFORNIA LEGISLATURE -1999-2000 REGULAR SESSION Assembly Constitutional Amendment No. 24 Introduced by Assembly Member Baugh (Coauthors: Assembly Members Aanestad Ackerman, Ashburn, Baldwin, Bates, Battin, Brewer, Briggs, Campbell, Cox, Cunneen, Dickerson, Frusetta, Granlund, House, Kaloogian, Leach, Leonard, Maddox, Maldonado, Margett, McClintock, Olberg, 011er, Robert Pacheco, Rod Pacheco, Pescetti, Runner, Strickland, Thompson, and Zettel) September 9, 1999 Assembly Constitutional Amendment No. 24—A resolution to propose to the people of the State of California an amendment to the Constitution of the State, by adding Article XVI A thereto, relating to state funding of infrastructure. LEGISLATIVE COUNSELS DIGEST ACA 24, as introduced, Baugh. Transportation funding. Existing statutory law requires the Director of Finance to prepare a report projecting the state's potential need for the financing of major capital outlay projects and infrastructure projects from 1991 to 2000, inclusive, and requires this report to be updated annually. This measure would create the California Twenty -First Century Infrastructure Investment Fund (Infrastructure Fund) in the State Treasury. The measure would transfer a specified percentage of revenues from the General Fund to the Infrastructure Fund from the 2000-01 fiscal year to the 2019-20 fiscal year, inclusive, for appropriation by the Legislature. The measure would provide that primary 99 ACA 24 —2— responsibility for preparing an annual plan to expend these funds shall be in the Department of Finance unless the Governor directs another state agency to carry out this responsibility. The measure would also provide that the Infrastructure Fund and its related provisions shall not become operative until the Legislature enacts a statute to allocate the revenues in the fund. Vote: 2/3. Appropriation: no. Fiscal committee: yes. State -mandated local program: no. Resolved by the Assembly, the Senate concurring, That the Legislature of the State of California at its 1999-2000 Regular Session commencing on the seventh day of December 1998, two-thirds of the membership of each house concurring, hereby proposes to the people of the State of California that the Constitution of the State be amended by as follows: First—That Article XVI A is added thereto, to read: ARTICLE XVI A INFRASTRUCTURE INVESTMENT FUND{/CNH} SECTION 1. The California Twenty -First Century Infrastructure Investment Fund is created in the State Treasury for the purpose of funding capital outlay expenses that are related to corrections, education, parks, transportation, and water, or other natural resources related projects. The Department of Finance, or a successor agency, shall prepare an annual plan to expend these funds, unless the Governor directs another state agency to prepare the plan. SEC. 2. (a) Except as provided in subdivisions (b) and (c), revenues shall be transferred from the General Fund to the Infrastructure Fund, on an annual basis, according to the following schedule: Percentage of Fiscal Year General Fund 2000-01 .......................... 1.0% 2001-02 .......................... 1.5% 200243 .......................... 2.0% W 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 -3— ACA 24 2003-04 .......................... 2.5% 2004-05 .......................... 3.0% 2005-06 .......................... 3.5% 2006-07 .......................... 4.0% 2007-08 .......................... 4.5% 2008-09 .......................... 5.0% 2009-10 .......................... 5.0% 2010-11 .......................... 5.0% 2011-12 .......................... 5.0% 2012-13 .......................... 5.0% 2013-14 .......................... 5.0% 2014-15 .......................... 5.0% 2015-16 .......................... 5.0% 2016-17 .......................... 5.0% 2017-18 .......................... 5.0% 2018-19 .......................... 5.0% 2019-20 .......................... 5.0% (b) If General Fund revenues increase by less than 3 percent from the prior year, the increase in the amount of General Fund revenues that are transferred to the Infrastructure Fund compared to the transfer in the prior year shall not exceed an amount equivalent to 25 percent of the increase in General Fund revenues relative to the prior year. (c) If General Fund revenues do not increase compared to the prior year, then the percentage of the General Fund revenues transferred to the Infrastructure Fund shall be the same as for the prior year. SEC. 3. This article shall not become operative until the Legislature enacts a statute to allocate the revenues in the Infrastructure Fund. The statute shall provide (a) that 75 percent of these moneys shall be annually distributed to cities and counties, on a continuously appropriated basis, for local infrastructure expenses, (b) for the formation of an oversight panel to ensure that locally allocated funds are spent for eligible infrastructure projects, and (c) that the remaining 25 percent of the revenues in the Infrastructure Fund shall be subject to annual appropriation by the Legislature. 99 ACA 24 —4- 1 4- 1 Second—That the Legislature finds and declares the 2 following: 3 (a) An investment in California's infrastructure is an 4 investment in California's future. The quality of life in 5 California depends on the quality of our children's 6 education and on the condition of the state's 7 transportation network, water system, and parks. 8 (b) California's education, transportation, and 9 resource infrastructure is critically underfunded. The 10 State Department of Education estimates a thirty-six 11 billion dollar ($36,000,000,000) need to build classrooms 12 for our school children. While the population of the state 13 has increased by 50 percent, and the number of vehicles 14 on the road has doubled, the state highway system is the 15 same size today as it was 25 years ago. The California 16 Transportation Commission has documented one 17 hundred eighteen billion dollars ($118,000,000,000) in 18 unmet transportation needs. 19 (c) Over the course of the next 10 years, California 20 faces an eighty-two billion dollar ($82,000,000,000) to 21 ninety billion dollar ($90,000,000,000) shortfall in its 22 infrastructure investment, as estimated by the 23 Department of Finance and the California Business 24 Round Table. 25 (d) California has often used bonds to pay for 26 infrastructure investments. However, bonds alone 27 cannot dent the magnitude of California's infrastructure 28 investment deficit. According to the Department of 29 Finance's 1999 Capital Outlay and Infrastructure Report, 30 if California issued thirty-two billion dollars 31 ($32,000,000,000) in new bonds, 6 percent of the state's 32 future annual budgets would be committed to repay the 33 debt. 34 (e) In addition, bonds are the most costly and most 35 dangerous way to pay for improvements. For every two 36 dollars ($2) California raises to improve our 37 infrastructure, an additional one dollar ($1) must be 38 spent to pay the bankers and investors who finance the 39 bonds. The total cost to repay thirty-two billion dollars 40 ($32,000,000,000) in bonds would exceed fifty billion 99 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 -5— ACA 24 dollars ($50,000,000,000). If California's economic growth again slows down, bonds must still be repaid, squeezing out investments in education, child care, and other important programs. (f) According to the Legislative Analyst's 1998 report, Overhauling the State's Infrastructure Planning and Financing Process, the state needs to take two main steps to provide a more stable funding source for our infrastructure needs: dedicate a given level of General Fund resources for infrastructure, and reserve a greater proportion of the spending for pay as you go financing. (g) In the 1960s, when California created the nation's finest education and transportation systems, the state routinely committed seven to 10 times more of the General Fund to capital outlays than we do today. (h) Establishing a California Twenty -First Century Infrastructure Fund and slowly increasing the amount of the General Fund committed to capital outlays is the only realistic prospect California has to reverse 25 years of neglect of our infrastructure. Such a program could conservatively be expected to raise over seventy-five billion dollars ($75,000,000,000) in the next 20 years. (i) The California Twenty -First Century Infrastructure Fund will also protect against the risks of bonded indebtedness. By limiting the annual growth of the Infrastructure Fund to no more than 25 percent of annual General Fund growth, education, child care, and other necessary services will be protected during periods of economic recession. C 99 N