Legislative Analyst's Office Analysis of the 2002-03 Budget Bill

Department of Forestry and Fire Protection (3540)

The budget proposes $52.8 million for capital outlay for the California Department of Forestry and Fire Protection (CDFFP). This amount includes $52.3 million for 21 major capital outlay projects from lease-payment bonds and $485,000 for one minor capital outlay project (less than $500,000 per project) to be funded from the General Fund. With regard to the major projects, the request includes 16 projects that have previously been funded for preliminary plans and/or working drawings, and five projects that were previously funded for acquisition and for which preliminary plans, working drawings, and construction are now proposed.

Projects Recommended for Approval

We recommend the Legislature approve $25 million of funding requests for working drawings and/or construction of 15 continuing projects that are consistent with project scope and cost previously recognized by the Legislature.

The Governor's budget includes funding requests for construction of 15 continuing projects totaling $25 million for which preliminary plans were funded in prior years. The projects, funding requested, and completion dates are detailed in Figure 1. In the past, the CDFFP's capital outlay program has had chronic problems related to inadequate planning, projects exceeding approved budgets, and delays in completing approved projects. However, we note that the projects listed are all consistent with cost and scope previously recognized by the Legislature.

South Operations Area Headquarters Recommend Approval Contingent on Review of Preliminary Plans

We recommend the Legislature approve $16.4 million to fund working drawings and construction for the South Operations Area Headquarters Relocate Facility project contingent on receipt and review of preliminary plans consistent with prior legislative approval.

The Governor's budget includes a funding request for working drawings and construction of the South Operations Area Headquarters relocation project for which preliminary plans were funded in the 2001-02 Budget Act. However, the Supplemental Report of the 2001-02 Budget Act indicates that the preliminary plans for this project are not scheduled for completion until June 2002. The amount included in the Governor's budget is consistent with the supplemental report adopted by the Legislature and, pending completion of preliminary plans, the project should proceed. Given the critical need to relocate this facility because of an encroaching freeway interchange project, we recommend the Legislature approve the requested amount contingent on receipt and review of completed, or substantially completed, preliminary plans and cost estimates consistent with prior legislative approval.

Five Lease-Payment Bond Projects Are Proposed for Full Funding of All Project Phases

The Governor's budget proposes to fund preliminary plans, working drawings, and construction for five California Department of Forestry and Fire Protection capital outlay projects. We recommend the Legislature only fund preliminary plans and working drawings--contingent on review of completed budget packages--and delete $9.7 million because these projects will not proceed to construction in 2002-03. (Delete $1.3 million from Item 3540-301-0660 [2]; $1.8 million from Item 3540-301-0660 [9]; $2.3 million from Item 3540-301-0660 [18]; $1.4 million from Item 3540-301-0660 [19]; and $2.9 million from Item 3540-301-0660 [20].)

The Governor's budget proposes to use lease-payment bonds for the five capital outlay projects shown in Figure 2. We do not have any issue with the programmatic need for these projects, as they are consistent with CDFFP's ongoing program of replacing its aging facilities. We note that sites have been selected for the four relocation projects and acquisitions will be completed by June 2002. Also, project budget package estimates will be completed by the end of February 2002 for the four relocation projects, and preliminary plans have been partially completed for the Bautista Conservation Camp project. In sum, by the time budget hearings are held, project scope and cost for all five projects will be finalized and available for legislative review and approval. Accordingly, we recommend approval of funds for preliminary plans and working drawings for all five projects, contingent on review of the completed budget packages. None of the projects, however, is scheduled to proceed to construction until 2003-04. Thus, none of the projects in Figure 2 will require a construction appropriation in 2002-03.

We understand that the Governor's budget proposal to fund all three phases of these projects was done to secure interim financing loans, cash needed for the project before lease-payment bonds are sold, from the Pooled Money Investment Account (PMIA). According to the State Public Works Board (SPWB) staff, the Pooled Money Investment Board (PMIB) is reluctant to authorize a PMIA loan without a construction appropriation to assure the PMIB the project will be completed, the bonds sold, and the loan repaid with bond proceeds. Notwithstanding the PMIB's reluctance, Section 4.80 of the budget bill sets forth the state's commitment to repay interim financing costs. Specifically, the section states that if bonds are not sold for a project, and interim financing costs have been incurred, departments that have incurred those costs shall commit a sufficient portion of their support budget appropriations to repay the interim financing costs. Given the existence of Section 4.80, we question the PMIB's reluctance to provide interim financing to a project that does not yet have a construction appropriation.

In addition, budget bill language authorizes the SPWB to obtain interim financing from any appropriate source including, but not limited to, the PMIA. As authorized by Government Code Section 15849.1, the other source of interim financing for a lease-payment bond project is the General Fund. We note that General Fund loans have been used in the past by the SPWB for interim financing. Assuming there is a critical need for these five projects and a commitment set forth in Section 4.80 to repay interim financing costs, the SPWB can obtain a General Fund loan for interim financing if it is unable to secure a PMIA loan.

Thus, we are not aware of any reason to appropriate the construction costs at this time. As such, we recommend the Legislature delete $9.7 million in construction funds for the five projects.