Governor Newsom’s Infrastructure Package of Budget Trailer Bills Down But Not Out

Nossaman LLP

Last month, through the annual process known as the “May Revise,” California Governor Gavin Newsom released an update to the 2023-24 state budget proposal that he first introduced in January. The updated budget proposal sets forth a $306.5 billion spending plan that seeks to tackle the state’s growing budget deficit while maintaining key investments in education, healthcare, housing, climate and infrastructure.

Regarding infrastructure, the Governor noted that, due to unprecedented local, state, and federal investments, the state will spend more than $180 billion over the next decade on clean energy, roads, bridges, public transit, water storage and conveyance and broadband. To further underscore the state’s commitment to infrastructure, the updated budget included proposals to streamline the approval and completion of public works projects in order to maximize federal infrastructure spending opportunities and expedite projects that will help the state achieve its social, climate and economic goals.

In connection with the Governor’s proposed budget, the Department of Finance released a package of ten infrastructure trailer bills that sets forth statutory changes needed to implement the policies and initiatives identified in the budget. Among them is a trailer bill that would authorize the Department of Water Resources and the California Department of Transportation to use the progressive design-build model to deliver up to eight projects each before January 1, 2031.

Under a progressive design-build delivery model, the project owner retains a design-builder through a qualifications-based selection process during the earliest stages of the owner’s project development. The owner and the selected design-builder then work collaboratively to develop the project design to a point where the owner is satisfied with the design and the design-builder can submit a proposal and guaranteed maximum price to the owner for completion of the design and construction. If the owner and the design-builder reach agreement on such a proposal, the parties will amend the existing contract for the negotiated scope and budget or enter into a new contract for the completion of the work. The trailer bill language also mandates contractual “off‑ramps” in case the parties fail to reach an agreement. Use of progressive design-build is intended to shorten project delivery schedules and result in potential cost savings for the state.

The Governor’s infrastructure package of trailer bills also includes proposed amendments to the California Environmental Quality Act (CEQA) to streamline environmental review of specified water, transportation, clean energy, and semiconductor or microelectronic projects. A detailed discussion of current proposals for streamlining CEQA review for infrastructure projects can be found in the following eAlert published by Nossaman’s Environment & Land Use Group.

Late last month, the Senate budget committee voted down the Governor’s infrastructure trailer bill package, citing concerns that the bills were too complex for the fast-tracked budget trailer bill process, which follows a different, more lax set of legislative rules than regular policy bills. Despite the setback, Committee Chair Sen. Josh Becker made clear that the budget committee’s rejection of the Governor’s infrastructure package was based on process rather than substance and expressed continued support for the Governor’s overarching infrastructure goals.

Both houses of the Legislature passed their version of the budget recently to meet a June 15 constitutional deadline. In the coming weeks, Legislative leaders and the Governor will continue to negotiate and finalize the budget before the Governor must sign it into law prior to the start of the new fiscal year on July 1. The Governor’s package of infrastructure trailer bills could return to Senate or Assembly committees for consideration during these negotiations or be re-introduced through the Legislature’s policy committees and be subject to the typical legislative process.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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