BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1446| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1446 Author: Feuer (D), et al. Amended: 8/7/12 in Senate Vote: 21 SENATE TRANSPORTATION & HOUSING COMM. : 7-2, 6/26/12 AYES: DeSaulnier, Harman, Kehoe, Lowenthal, Pavley, Rubio, Simitian NOES: Gaines, Wyland SENATE GOVERNANCE & FINANCE COMMITTEE : 5-2, 7/3/12 AYES: Wolk, DeSaulnier, Hernandez, Kehoe, Liu NOES: Fuller, La Malfa NO VOTE RECORDED: Dutton, Yee SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 54-17, 5/21/12 - See last page for vote SUBJECT : Sales and use tax: Los Angeles County SOURCE : Author DIGEST : This bill authorizes the Los Angeles County Metropolitan Transportation Authority (MTA) to place before the voters an ordinance to extend Los Angeles Measure R sales tax indefinitely. ANALYSIS : AB 2321 (Feuer), Chapter 302, Statutes of 2008, authorized MTA to place before the voters an CONTINUED AB 1446 Page 2 ordinance to increase the local transportation sales tax for 30 years by 0.5%. The statute also requires MTA to allocate 20% of the sales tax revenue for bus operations and 5% for rail operations, authorizes MTA to incur bonded indebtedness, and requires MTA to adopt an expenditure plan prior to submitting the ordinance to the voters. Existing law identifies 18 projects that MTA must include in the expenditure plan and in its Long Range Transportation Plan. Although state law identifies the minimum level of funding for each project, MTA is allowed to increase funds to a project if any funds are available after debt service payments. The expenditure plan must also anticipate the completion date for each project. MTA placed a sales tax ordinance, referred to as Measure R, on the November 2008 ballot. 67% of the voters approved the sales tax increase. This bill: 1. Authorizes MTA to place before the voters a permanent 0.5% sales tax and requires that 2/3 of the voters vote in favor for it to be adopted. 2. Requires the proposing ordinance be accompanied by a new expenditure plan for the net revenues derived from the tax. 3. Requires this new expenditure plan identify the years in which the MTA anticipates net revenues derived from the tax will be available to each project or program in the new expenditure plan. 4. Authorizes MTA to incur bonded indebtedness payable from the revenue from the new sales tax. 5. Requires proceeds from the tax authorized by this bill, including proceeds from bonds issued, after payment of the bonded indebtedness, be used to accelerate the completion of the projects and programs identified in AB 2321, and for the expenditure plan adopted by the MTA board on July 24, 2008. 6. Continues the set aside of 20% of sales tax revenue for bus operations in Los Angeles County and 5% for rail CONTINUED AB 1446 Page 3 transit operations. 7. Requires MTA, upon completion of the specified projects and the payment of outstanding debt service, to spend unencumbered sales tax revenue on other projects and programs in its Long Range Transportation Plan or its successor plans. 8. Requires MTA, to the extent that it deems it necessary to accelerate the completion of a project or program in a new expenditure plan adopted pursuant to this bill, to expend funds derived from the sales tax authorized by Measure R according to the schedule described in the new expenditure plan adopted pursuant to this section. Requires MTA make this determination by a majority vote of the MTA board. Comments Purpose . 67% of Los Angeles County voters authorized the imposition of a 30 year, 1/2% local transportation sales tax in 2008. The decline in the state and national economy, the diminishment of state and federal funding, the increasing need to rely upon various debt financing strategies, and unanticipated cost increases have delayed project implementation. According to the author's office, this bill provides the voters an opportunity to endorse the Measure R program by asking them to approve converting the existing tax to a permanent tax. Background When Measure R was adopted, MTA estimated that the 30-year program was about $40 billion. Because of the recession and general economic malaise, MTA is now estimating that Measure R will generate about $36 billion by 2038. When Los Angeles Mayor Antonio Villaraigosa proposed to accelerate the construction of all 12 rail transit projects so that they would be completed in 10 years and not the usual 30 years, MTA began a search for additional revenue or funding mechanisms. This bill endeavors to solve the problem of insufficient revenue by removing the sunset on Measure R. Should the voters approve a new sales tax without a sunset, MTA may be able to issue additional debt CONTINUED AB 1446 Page 4 and take advantage of the federal credit assistance program included in The Transportation Infrastructure Finance and Innovation Act. Foothill Extension Construction Authority (Authority) amendment . The Authority contends that MTA's current adopted expenditure plan incorrectly characterizes Metro Gold Line Foothill Extension. AB 2321 describes the extension from east Pasadena to Claremont. The expenditure plan provides $735 million from east Pasadena to Azusa. The Authority believes the termination of the project is defined as Claremont and that should be reflected in the expenditure plan. The Authority proposes to amend this bill to allow any sponsor of a project to submit its expenditure plan for its project to MTA. The expenditure plans will include the projects' cost and construction schedule. The amendment requires MTA to include the expenditure plans submitted by project sponsors in its countywide expenditure plan without modification. MTA's expenditure plan endeavors to harmonize competing demands among projects and the revenue generated by the sales tax. It appears the amendment would allow the Authority and other project sponsors to develop their project expenditure plans. The amendment requires MTA to incorporate these plans into the countywide expenditure plan. It is unclear exactly how the projects would be harmonized with the limited sales tax revenues. It essentially removes MTA from being the referee among competing projects and appears to balkanize the project development process in Los Angeles County. Previous legislation . SB 314 (Murray), Chapter 785, Statutes of 2003, established a list of projects that MTA was to construct with proceeds from a voter approved six and one-half years half percent sales tax. AB 2321 superseded SB 314. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/13/12) American Council of Engineering Companies CONTINUED AB 1446 Page 5 American Jewish Committee Associated General Contractor California Chamber of Commerce California Labor Federation Los Angeles Area Chamber of Commerce Los Angeles Business Council Los Angeles County Federation of Labor Move LA Sierra Club South Bay Cities Council of Governments Southern California Contractors Association State Building and Construction Trades Council of California OPPOSITION : (Verified 8/13/12) California Taxpayers Association City of Cerritos Howard Jarvis Taxpayers Association Metro Gold Line Foothill Extension Construction Authority ASSEMBLY FLOOR : 54-17, 5/21/12 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes, Furutani, Galgiani, Gatto, Gordon, Gorell, Hall, Hayashi, Hill, Huber, Hueso, Huffman, Lara, Bonnie Lowenthal, Ma, Mitchell, Monning, Nestande, Norby, Pan, V. Manuel Pérez, Portantino, Skinner, Smyth, Solorio, Swanson, Torres, Wieckowski, Williams, Yamada, John A. Pérez NOES: Conway, Donnelly, Beth Gaines, Garrick, Grove, Halderman, Harkey, Jeffries, Jones, Knight, Logue, Mansoor, Morrell, Nielsen, Olsen, Silva, Wagner NO VOTE RECORDED: Bill Berryhill, Cook, Fletcher, Hagman, Roger Hernández, Mendoza, Miller, Perea, Valadao JJA:k 8/13/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE CONTINUED AB 1446 Page 6 **** END **** CONTINUED