Purpose of the Bill

The bill aims to ensure the longevity and maintenance of capital projects funded by the state. It requires local governments that receive state funding for capital projects to create special accounts dedicated to the replacement, expansion, or rehabilitation of these projects.

Main Provisions

• Mandatory Replacement Accounts: Local governments receiving state funds for capital projects must establish a replacement account. This fund is to be used for significant repairs, expansion, replacement, or preservation of the project after its useful life.

• Policy Requirements: Grantees must adopt policies that define the risks mitigated by the fund, its intended uses (such as major repairs or preservation), and criteria for using the fund for other capital improvements.

• Minimum Deposits: The state commissioner will determine the minimum annual deposit amounts for these accounts based on factors like depreciation and inflation. Grantees are not required to maintain a fund balance higher than their original state grant or appropriation.

• Audit and Oversight: These accounts may be subject to auditing by the state auditor during regular audits of local governments to ensure compliance.

Significant Changes to Existing Law

• New Replacement Account Requirement: This bill introduces a new financial mechanism for local governments to sustain capital projects over time, by mandating the creation and maintenance of dedicated replacement accounts.
• Penalty for Non-compliance: If a local government fails to comply, it faces a penalty fee of 1% of the state-funded amount per non-compliant year, which will be directed to the state’s general fund.

Relevant Terms

capital project, replacement fund, state funding, major rehabilitation, preservation, grantee, annual deposit, state auditor, penalty fee, compliance.