Brief⁽¹⁾

S.B. 648, as amended, would establish a new, statewide program that would be administered by the Secretary of Transportation, and could, if implemented, provide an alternative mechanism to finance the planning, developing, and operating of various transportation modes and systems.

The proposed program is intended to fund qualified activities, which could include any public or private project associated with roads, rails, ports, and air transportation facilities, in order to:

increase the state and local partnerships for transportation projects either on or off the State Highway System;

facilitate the state projects on the State Highway System; and

allow the receipt of federal financial aid, including anticipated new annual federal allocations intended to capitalize state infrastructure bank programs in all 50 states.

Establishment of a new Transportation Capital Enhancement Fund would occur on July 1, 1998. A primary purpose of the new Fund would be to provide assistance to local units of government for transportation projects that would:

substantially improve safety;

preserve transportation facilities;

relieve congestion or improve accessibility; and

enhance economic development.

The bill would authorize the Secretary of Transportation to adopt rules and regulations to carry out the purposes and provisions of this program. Among the provisions that the bill would authorize the Secretary to administer are:

managing the Fund's financial activities and providing for adequate funding;

developing a priority system for qualified projects in conformity with federal law;

making awards and administering the program; and

reporting annually to the Legislature on the program's activities and expenditures.

In regard to the Fund's financial activity, the Secretary would be authorized to:

expend moneys for purposes identified in the bill;

transfer money between the State Highway Fund and the new Fund, subject to limitations established in appropriations bills and the proviso that residual equity transfers to capitalize the Fund shall not exceed the total amount authorized for transfer in appropriations bills;

issue revenue bonds or enter into agreements with KDFA to issue revenue bonds;

invest the Fund's assets; and

repay the principal and interest.

In regard to administering the program, the Secretary would be subject to appropriations acts, and would have responsibility for the management of the Fund in:

contracting with qualified borrowers, including public and private sector entities, and

providing financial assistance in the form of loans, credit enhancements, or subsidies.

A provision in the bill would clarify that nothing in this new act shall be construed to authorize anything that would constitute an internal improvement.

Background

The Senate Ways and Means Committee originally reported the bill as introduced. Subsequently, the bill was rereferred to the Committee, and amendments were adopted after a further hearing with Department of Transportation staff.

The bill was requested by the Secretary of Transportation who explained that the proposed legislation was permissive and supplemental to existing aid programs. It was noted that the concept of a state infrastructure bank has been suggested by the Federal Highway Administration as part of the federal effort to increase transportation investment at the local level. It also was noted that pending federal legislation could provide additional federal aid to the 43 or more states that either have or will adopt the concept, which in Kansas would be implemented through the Transportation Capital Enhancement Fund. The proposed Fund could make loans, provide credit enhancements, and allow pooling of debt.

A representative of the Kansas League of Municipalities also appeared in support of the proposed bill.

The Senate Committee amendments deleted bond authority for issuing up to $50 million to capitalize the Fund; established guidelines for transfers; provided for special reports; and addressed the constitutional issue of internal improvements.

The Senate Committee of the Whole added a definition for residual equity transfer and deleted a reference to State Finance Council approval being required before expenditures could be made.

Fiscal Note. One of the pending federal transportation reauthorization proposals known as NEXTEA, the National Economic Crossroads Transportation Efficiency Act proposed by the Clinton Administration, expands the state infrastructure bank (SIB) program to all 50 states. The SIB program originally was authorized as a pilot program in the National Highway System Designation Act of 1995. It allowed up to ten states to establish SIBs, using federal capital apportionment aid. The FFY 1997 Appropriations Act allowed all remaining states to compete for designation as SIB states. That Act also provided $150 million in federal funding authority to capitalize SIBs designated by the Federal Transit Administration. NEXTEA eliminates the need for competition between states by expanding the eligibility to all the states and Puerto Rico. It would make $150 million available each year from the federal Highway Trust Fund to capitalize the SIBs.

The Kansas Department of Transportation and the Budget Director both indicate that the bill has no net fiscal impact because the bill is permissive and does not require any action by the Secretary of Transportation. However, the bill would authorize the Secretary to transfer money out of the State Highway Fund into the new Fund, subject to appropriation by the Legislature. Expenditures from the new Fund also would be subject to legislative appropriation.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.