BILL ANALYSIS Ó
SB 1257
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Date of Hearing: July 2, 2012
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
SB 1257 (Hernandez) - As Amended: June 11, 2012
Majority vote.
SENATE VOTE : 38-0
SUBJECT : Utility user tax: exemption: public transit vehicles
SUMMARY : Exempts from utility user taxes (UUTs) the consumption
of compressed natural gas (CNG) and electricity as a motor
vehicle fuel for public transit vehicles by local agencies or
public transit operators. Specifically, this bill :
1)States that it is the Legislature's intent to recognize that
public transit operators are moving towards the use of
electricity as a primary fuel source to meet air quality
objectives at the state and regional levels, as well as to
provide vital public transportation services to
transit-dependent citizens in California.
2)Notes that the Mills-Hayes Act ŬRevenue and Taxation Code
(R&TC) Section 8655] provides that a tax shall not be imposed
upon the use of fuel by public transit operations.
3)States that this legislation will clarify that, pursuant to
the Mills-Hayes Act, the consumption of electricity as a motor
vehicle fuel by an electric public transit bus shall be exempt
from any taxes imposed upon the consumption of electricity.
4)Exempts from any UUT, imposed by a local jurisdiction, a local
agency's or public transit operator's consumption of:
a) CNG dispensed by a gas compressor, within a local
jurisdiction, that is separately metered and is dedicated
to providing CNG as a motor vehicle fuel for use by the
local agency or public transit operator; and,
b) 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
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bus.
5)Defines a "local jurisdiction" to mean "any city, county, city
and county, including any chartered city, county, or city and
county, district, or public or municipal corporation."
6)Defines a "public transit operator" to mean a local or
regional transit agency or a joint powers agency operating bus
transportation service as described pursuant to Public
Utilities Code Section 99200 et seq.
7)Finds and declares that this UUT exemption will ensure
statewide uniformity and fairness in the overall cost of
providing vital public transportation services to transit
dependent citizens in California. Therefore, the exemption is
a matter of statewide concern, and not a municipal affair, as
that term is used in California Constitution Article XI,
Section 5.
EXISTING LAW :
1)Allows charter cities to levy taxes that are not preempted by
the state or federal governments.
2)Authorizes any county to levy a UUT on the consumption of
electricity, gas, water, sewer, telephone, telegraph, and
cable television services in the county's unincorporated area.
ŬR&TC Section 7284.2(a)]. For purposes of this
authorization, "gas" does not refer to the consumption of CNG
dispensed by a gas compressor, within a local jurisdiction,
that is separately metered and is dedicated to providing CNG
as a motor vehicle fuel for use by the local agency or public
transit operator. ŬR&TC Section 7284.2(b)].
3)Prohibits the imposition of use fuel tax upon fuel used by any
transit district, transit authority, or city owning and
operating a local transit system itself or through a wholly
owned nonprofit corporation. ŬR&TC Section 8655(b)(1)].
FISCAL EFFECT : Unknown. Committee Staff estimates that this
bill will not impact General Fund revenues.
COMMENTS :
1)The author has provided the following statement in support of
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this bill:
SB 1257 will clarify that electricity is a fuel used by
public transit agencies, and therefore is exempt from any
tax as per the Mills-Hayes Act. Foothill Transit operates
not only in SD 24, but throughout the San Gabriel and
Pomona Valleys. It recently acquired a specific type of
electric bus, and is currently being charged a UUT on this
particular type of bus. SB 1257 is a district bill, and
specifically applies only to the fast-charging electric
buses used by Foothill Transit. They are the only transit
agency in the state that uses it. Thus, this bill has very
limited applicability and impact. It has no general fund
impact, because the UUT is strictly a local tax.
2)This bill is sponsored by the Board of Directors for Foothill
Transit (Foothill Transit). By way of background, Foothill
Transit notes:
In 2008, Foothill Transit sponsored AB 2009 that was
carried by then Assemblyman Ed Hernandez which was enacted
exempting a public transit agency's use of compressed
natural gas (CNG) to power its buses from local utility
users' taxes (UUT). SB 1257 by Senator Hernandez would
exempt a public transit agency's use of in-route battery
charged electricity to power its buses from local UUT's.
The introduction of the Ecoliner and Foothill Transit's
goal of continuing to convert a portion of our fleet to
zero emission all electric battery charged buses has
prompted us to seek legislation that would exempt a public
transit agency's use of electricity to power its buses from
being charged local electric UUT's .
Foothill Transit's operation is centered in the San Gabriel
Valley, in eastern Los Angeles County. We provide regional
transit services encompassing the Valley, Downtown Los
Angeles and parts of Orange and San Bernardino Counties.
With the introduction last year of our Ecoliner, Foothill
Transit became the first public transit operator to use
fast-charging electric buses as part of its fleet.
Unfortunately, under current law, we could be charged a
utility users tax for the consumption of electricity as a
fuel in the operation of our Ecoliner buses. SB 1257 would
clarify (as currently exists for CNG fueled buses) that we
would be exempt from the UUT under the Mills-Hayes Act.
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3)Committee Staff Comments:
a) UUTs : Cities may impose a UUT on the consumption of
utility services, including electricity, gas, water, sewer,
telephone, sanitation, and cable services. The rate of the
tax and the use of its revenues are determined by the local
agency. A UUT may be imposed as a special tax, earmarked
for specific purposes, or as a general tax.
Existing law also authorizes counties to levy a UUT on the
consumption of specified services in the county's
unincorporated area. As of 2008, it was estimated that
city and county UUTs generate about $2 billion in revenues
each year.
b) AB 2009 : AB 2009 (Hernandez), Chapter 221, Statutes of
2008, provided that,
for purposes of the statute permitting counties to impose a
UUT on the consumption of gas, the term "gas" shall not be
construed to refer to CNG used as a motor vehicle fuel by a
local agency or public transit operator. Like the present
bill, AB 2009 was sponsored by Foothill Transit, which
noted at the time:
ŬA]gencies that use diesel would not be subject to a
utility user tax. This presents an uneven financial
playing field between agencies who have determined
using natural gas better suits their needs than those
using diesel fuels. Also, if we are required to pay a
UUT, operating expenses will increase leading to
likely service reductions and fewer travel options for
the transit customer.
c) What would this bill do? : As noted by the Assembly
Local Government Committee, this bill takes the exemption
provided by AB 2009 a few steps further. First, this bill
expands the current exemption for CNG. Currently, the
exemption applies only to county-imposed UUTs. This bill
would bar any local jurisdiction (i.e., both counties and
cities) from imposing a UUT on the consumption of CNG used
as a motor vehicle fuel by a local agency or public transit
operator. Second, this bill would bar local jurisdictions
from imposing a UUT on electricity used to charge electric
bus propulsion batteries, as specified.
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d) Double-referral : This bill was double-referred to the
Assembly Local Government Committee, which voted the bill
out on a 9-0 vote on June 20, 2012. For additional
discussion of this bill, please refer to that committee's
analysis.
REGISTERED SUPPORT / OPPOSITION :
Support
Board of Directors of Foothill Transit
California Transit Association
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098