BILL ANALYSIS                                                                                                                                                                                                    




                    Appropriations Committee Fiscal Summary
          
                                           653 (Nunez)
          
          Hearing Date:  8/16/04          Amended: 1/7/04        
          Consultant:  Lisa Matocq            Policy Vote: E, U & C  
          7-1                      
          ____________________________________________________________ 
          ___
          BILL SUMMARY:  AB 653 repeals the January 1, 2005 sunset  
          date on the program that authorizes the State Public Works  
          Board (SPWB) to issue revenue bonds, notes, and bond  
          anticipation notes to finance cogeneration, alternative  
          energy equipment, and conservation projects in public  
          buildings, and broadens the spectrum of projects that are  
          eligible for financing. 
           
                              Fiscal Impact (in thousands)
           Major Provisions           2004-05             2005-06              
           2007-06            Fund  
          
          Bond authority                   Unknown, potentially $6,300 in  
          2004-05,        Bond
                                                 and $12,600 annually in  
          subsequent years
          DGS administration        Up to $2,000 annually, should be offset     
               Special*
                                 by long-term energy cost savings

          *Service Revolving Fund (SRF)   
          
          STAFF COMMENTS: SUSPENSE FILE. The Energy Conservation in  
          Public Buildings program was established in 1982, and  
          authorized the SPWB to issue bonds to finance energy and  
          water conservation projects in state buildings that would  
          ultimately save the state money.  It is administered by the  
          Department of General Services (DGS).  AB 1551 (Pescetti,  
          Ch. 981, St. of 1999) extended the program until January 1,  
          2005 and limited the SPWB's bonding authority to $500  
          million. As of 8/28/03, an estimated $265 million (avg.  
          $12.6 million annually) in revenue bonds had been issued.  

          This bill expands the scope of program by (1) authorizing  
          the financing of projects that combine energy efficiency  
          measures and alternative energy equipment, and (2)  
          requiring the SWPB, in determining whether to finance a  










          project, to evaluate the project in its entirety and  
          analyze the costs and financial and energy cost savings  
          over the full life of the project (rather than the  
          administrative requirement that a project pay for itself  
          within 10 years).  It also allows the board to consider the  
          value added by a product warranty. These changes could  
          result in additional types of projects, such as  
          photovoltaics being financed, and longer repayment periods.

          DGS's annual program administration costs vary depending on  
          the number and scope of projects evaluated each year, but  
          average about $2 million annually.  This bill would  
          continue those costs, beg. 2004-05.  The projects financed  
          by these revenue bonds must demonstrate the ability to  
          generate suffcient annual cost energy savings to pay the  
          debt service and related program costs.  Thus, DGS's  
          administrative costs should be recovered from bond  
          proceeds.