BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 1257 HEARING: 5/2/12
AUTHOR: Hernandez FISCAL: No
VERSION: 4/25/12 TAX LEVY: No
CONSULTANT: Weinberger
UTILITY USER TAX EXEMPTION FOR ELECTRIC BUSES
Prohibits a local government from levying a utility user
tax on the consumption of electricity as a motor vehicle
fuel for an electric public transit bus.
Background and Existing Law
The constitutional municipal affairs doctrine allows
charter cities to levy taxes which are not preempted by the
state or federal governments. In 2009, 65 charter cities
levied a utility user tax (UUT) on the consumption of
utility services, like electricity, gas, water, sewer, and
telephone services.
A general law city can impose only those taxes that are
allowed by state statutes. However, the Government Code
allows all general law cities to levy any tax which may be
levied by any charter city unless a different general law
limits or prohibits such a tax (SB 1326, Alquist, 1982).
In 2009, 84 general law cities levied a UUT.
Counties can levy only those taxes that are allowed by
state statutes. A county board of supervisors can levy a
UUT on the consumption of electricity, gas, water, sewer,
telephone, telegraph, and cable television services in the
unincorporated area of the county (SB 2557, Maddy, 1990).
In 2009, Alameda, Los Angeles, and Sacramento counties were
the only counties to levy a UUT using this statute.
The Mills-Hayes Act prohibits a tax imposed upon fuel used
by any transit district, transit authority, or city owning
and operating a local transit system (SB 202, Mills, 1968).
State law provides that the consumption of compressed
natural gas dispensed by a gas compressor, within a local
jurisdiction, that is separately metered and provides
SB 1257 -- 4/25/12 -- Page 2
compressed natural gas as a motor vehicle fuel for use by a
local agency or public transit operator is not to be
construed as the consumption of gas for the purposes of a
county-imposed UUT (AB 2009, Hernandez, 2008).
Public transit agency officials worry that their agencies'
consumption of electricity to recharge battery-powered
buses may be subject to a city or county's UUT. They want
the Legislature to make transit agencies' consumption of
electricity exempt from any UUT and clarify that the UUT
exemption for transit agencies' consumption of compressed
natural gas applies to both county- and city-imposed UUTs.
Proposed Law
Senate Bill 1257 exempts from any utility user tax imposed
by any local jurisdiction:
A local agency or public transit operator's
consumption of compressed natural gas dispensed by a
gas compressor, within a local jurisdiction, that is
separately metered and is dedicated to providing
compressed natural gas as a motor vehicle fuel for use
by the local agency or public transit operator.
A local agency or public transit operator's
consumption of electricity used to charge electric bus
propulsion batteries, within a local jurisdiction,
that is separately metered and is dedicated to
providing electricity as a motor vehicle fuel for use
by an electric public transit bus.
SB 1257 defines "local jurisdiction" as any city, county,
city and county, including any chartered city, county, or
city and county, district, or public or municipal
corporation.
The bill defines "public transit operator" as a local or
regional transit agency or a joint powers agency operating
bus transportation service as described pursuant to a
specified statute.
State Revenue Impact
No estimate.
SB 1257 -- 4/25/12 -- Page 3
Comments
1. Purpose of the bill . For more than four decades, state
law has provided local transit operators with relief from
the payment of fuel taxes. To provide vital public
transportation services to California residents while
meeting air quality objectives and reducing greenhouse gas
emissions, many public transit operators are considering
using vehicles that rely on electricity as their primary
fuel. Because state law allows cities and counties to tax
the consumption of electricity as a utility service,
transit operators may have to pay taxes on the "fuel" they
put into rechargeable battery-powered electric buses. By
ensuring that electric buses qualify for the same fuel tax
relief that state law applies to buses powered by fossil
fuels, SB 1257 will help transit agencies to deploy the
next generation of clean public transit vehicles.
2. Solution without a problem ? Currently, the Foothill
Transit Agency (Los Angeles County) is the only local
agency that pays a UUT for its consumption of electricity
as a fuel in public transit buses. SB 1257's proponents
suggest that the lack of additional UUTs on transit
agencies' electricity consumption reflects the fact that
rechargeable battery-powered electric buses are not yet
widespread. Transit officials worry that as more
communities deploy battery-powered electric public transit
buses, additional cities and counties will levy UUTs on
transit agencies. However, city and county officials would
still have the option of waiving the tax for transit
districts within their jurisdictions regardless of whether
SB 1257 becomes law. With little evidence that UUTs will
become a widespread problem for local governments that
operate electric public transit buses, the Committee may
wish to consider whether it is necessary to enact a UUT
exemption for electric buses.
3. Clarification . The 2008 Hernandez bill amended the UUT
exemption for transit agencies' compressed natural gas
consumption into a statute that specifically authorizes a
county to levy a UUT in its unincorporated area. As a
result, it exempted the consumption of compressed natural
gas for transit vehicles from only county-imposed UUTs. To
clarify that the compressed natural gas exemption for
transit applies to UUTs imposed by cities as well as
SB 1257 -- 4/25/12 -- Page 4
counties, SB 1257 removes the UUT exemption language for
compressed natural gas from Revenue & Taxation Code §7284.2
and places it into a new statute along with the new UUT
exemption for transit agencies' electricity consumption.
Support and Opposition (4/26/12)
Support : Foothill Transit.
Opposition : Unknown.