BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Tom Torlakson, Chairman 974 (Lowenthal) Hearing Date: 5/14/07 Amended: 4/30/07 Consultant: Mark Mckenzie Policy Vote: T.&H. 6-4, E.Q. 6-0 _________________________________________________________________ ____ BILL SUMMARY: SB 974 would impose a $30 fee on each shipping container processed at the Ports of Los Angeles, Long Beach, and Oakland for congestion management and air quality improvements related to the ports. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2007-08 2008-09 2009-10 Fund CARB (3-1/2 PY startup)$200 $200 Special* (ongoing costs funded with fee revenue) CTC (2PY startup) $100 $100 Special** (ongoing costs funded with fee revenue) I-Bank administration costs funded through financing agreementsSpecial*** Fee revenue ($250,000) ($500,000) ______________ * Air Pollution Control Fund ** State Highway Account *** CA Infrastructure and Economic Development Bank Fund _________________________________________________________________ ____ STAFF COMMENTS: This bill meets the criteria for referral to the Suspense File. This bill is intended to make investments in port infrastructure and air quality to accommodate the growing freight volumes at the Ports of Los Angeles, Long Beach, and Oakland by imposing a user fee on the source of the growth. Specifically, SB 974 would impose a fee of $30 for each "twenty-foot equivalent unit" (TEU) shipping container that is processed at the L.A./Long Beach port complex and the Port of Oakland. The fee revenues would be collected beginning on January 1, 2009 and deposited into accounts for northern and southern California, based on the source of the fee, and divided evenly in each region into congestion management and air quality improvement accounts. Funds would be allocated by the California Transportation Commission (CTC), and the California Air Resources Board. These revenues would be available, upon appropriation, to fund identified congestions management projects that improve the flow and efficiency of container cargo moving to and from the Ports of Long Beach, Los Angeles, and Oakland, and to fund identified projects for mitigating the environmental pollution caused by commercial motor vehicles, oceangoing vessels, and trains moving cargo to and from the ports. Contractors that construct these projects would be required to ensure the use of "clean construction" equipment, as specified, and state highway projects are not eligible for funding. The bill would also allow the Infrastructure Bank to enter into financing agreements with project sponsors to issue revenue bonds to finance eligible projects. Fee revenue used to secure revenue bonds would be continuously appropriated. -1- Page 2 SB974 (Lowenthal) Ports are local agencies governed by port commissions that are responsible for developing, maintaining, and overseeing the operation of shoreside facilities for the transfer of cargo between ships, trucks, and railroads. The Ports of Los Angeles, Long Beach, and Oakland are the nation's first, second, and fourth largest ports, respectively, accounting for almost half of the seaborne cargo entering the United States. The LA/Long Beach Port complex currently processes approximately 15 million containers per year, and is expected to process 47 million TEUs by 2020. Oakland processed approximately 2 million containers last year. The transportation system supporting the movement of goods to and from these seaports are overwhelmed and local communities near the ports and along trade corridors experience significant pollution and health impacts associated with goods movement. Staff notes that charging a $30 fee on each of the 15 million TEUs processed annually through the Los Angeles/Long Beach port complex would generate approximately $500 million annually, growing to over $1.5 billion annually by 2020 if the projected container volume growth continues as expected. The fees would discontinue after the eligible projects are constructed and any revenue bonds are paid off. Staff notes that SB 974 authorizes CTC and CARB to recover administrative costs from the container fee revenue. However, both CTC and CARB would be required to hold public hearings and consult with relevant entities throughout the 2008 calendar year in developing a final list of eligible projects, requiring approximately 2 PY for CTC and 3-1/2 PY for CARB at a cost of at least $200,000 and $400,000 respectively (split between the first two fiscal years). To the extent that CTC and CARB are already performing some of the tasks required by this bill in efforts related to the implementation of Proposition 1B, however, these staffing requirements and costs would be reduced. This is also dependent upon staff yet to be allocated in the 2007-08 budget act. Staff notes that the provisions of the bill pertaining to the functions of the Infrastructure Bank contain inconsistencies when compared to later provisions specifying the allocation of fee revenue to CTC and CARB. Specifically, page 8, lines 17-31, and page 9, lines 18-32 specify that funds that are not necessary to secure revenue bonds issued by the I-Bank would be continuously appropriated. Staff recommends an amendment to clarify that fee revenue shall only be available to CTC and CARB upon appropriation by the Legislature, as specified on page 13, lines 19 and 28, and page 14, lines 15 and 24.