2010 California Code
Government Code
Chapter 14. Infrastructure Financing

GOVERNMENT CODE
SECTION 5956-5956.10



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 this infrastructure provides, they must find
new funding sources. One source of new money is private sector
investment capital utilized to design, construct, maintain, rebuild,
repair, and operate infrastructure facilities. Unless private sector
investment capital becomes available to study, plan, design,
construct, develop, finance, maintain, rebuild, improve, repair, or
operate, 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 the increasing population.



5956.1.  It is the intent of the Legislature that local governmental
agencies have the authority and flexibility to utilize private
investment capital 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 private sector investment capital 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.


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 investment capital 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.



5956.3.  (a) For purposes of this chapter, "governmental agency"
includes a city, county, city and county, including a chartered 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.
   (b) For purposes of this chapter, "private entity" includes a
person, business entity, combination of persons and business
entities, or a combination of business entities.
   (c) For purposes of this chapter, "fee-producing infrastructure
project" or "fee-producing infrastructure facility" means the
operation of the infrastructure project or facility will be paid for
by the persons or entities benefited by or utilizing the project or
facility.


5956.4.  A governmental agency may solicit proposals and enter into
agreements with private entities for the design, construction, or
reconstruction by, and may lease to, private entities for the
following types of fee-producing infrastructure projects:
   (a) Irrigation.
   (b) Drainage.
   (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.




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 the primary
selection criteria, the demonstrated competence and qualifications
for the studying, planning, design, developing, financing,
construction, maintenance, rebuilding, improvement, repair, or
operation, or any combination thereof, of the facility. 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
the construction and completion of the facility, the governmental
agency soliciting proposals is not subject to any other provisions of
the Public Contract Code or this code that relates to public
procurements.



5956.6.  (a) For purposes of facilitating projects, the agreements
specified in Section 5956.4 may include provisions for the lease 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 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, unless the governmental agency, in
its discretion, elects to provide for ownership of the facility by
the private entity during the term of the agreement. The agreement
shall provide for the lease of those facilities to, or ownership by,
the private entity for up to 35 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 at no charge to the governmental agency. Subsequent to the
expiration of the lease or ownership period, the governmental agency
may continue to charge fees for use of the infrastructure facility.
If, after the expiration of the lease or ownership period, 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 construction of the facility to ensure its
completion, and contractual provisions that are necessary to protect
the revenue streams of the project.
   (3) Adequate financial resources of the private entity to design,
build, and operate the facility, after the date of the agreement.
   (4) Authority for the governmental agency to impose user fees 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 shall be dedicated exclusively to
payment of the private entity's direct and indirect capital outlay
costs for the project, direct and indirect costs associated with
operations, direct and indirect user fee collection costs, direct and
indirect costs of administration of the facility, reimbursement for
the direct and indirect costs of maintenance, and a negotiated
reasonable return on investment to the private entity.
   (5) As a precondition to the imposition or increase of a user fee,
the governmental agency shall conduct at least one public hearing at
which public testimony will be received regarding a proposed user
fee revenue or increase in user fee revenues. The public hearing
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 transportation 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 local agency shall levy a new fee or service charge or
increase an existing fee or service charge to an amount that exceeds
the estimated amount required to provide the service for which the
fee or service charge is levied and a reasonable rate of return on
investment, pursuant to paragraph (4). Any action by a local 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
local 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 and a reasonable rate of return on investment, pursuant to
paragraph (4), those revenues shall either be applied to any
indebtedness incurred by the private entity 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) 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 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.



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 police 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.



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 designing, constructing, operating, and
maintaining infrastructure facilities pursuant to this chapter shall
utilize private sector design and construction firms to design and
construct the infrastructure facilities. However, a facility subject
to this chapter and leased to a private entity shall, during the term
of the lease, 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 public works
constructed pursuant to this chapter shall comply with Chapter 1
(commencing with Section 1720) of Part 7 of Division 2 of the Labor
Code.


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
revenue source or as a supplemental 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.



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.



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