BILL ANALYSIS Ó SB 1257 Page 1 SENATE THIRD READING SB 1257 (Ed Hernandez) As Amended June 11, 2012 Majority vote SENATE VOTE :38-0 LOCAL GOVERNMENT 9-0 REVENUE & TAXATION 9-0 ------------------------------------------------------------------ |Ayes:|Smyth, Gordon, Williams, |Ayes:|Perea, Harkey, Beall, | | |Bradford, Beall, Davis, | |Charles Calderon, Cedillo, | | |Hueso, Knight, Norby | |Fletcher, Fuentes, Gordon, | | | | |Nestande | | | | | | ------------------------------------------------------------------ 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 SB 1257 Page 2 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 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)]. SB 1257 Page 3 FISCAL EFFECT : Unknown. The Assembly Revenue and Taxation Committee staff estimates that this bill will not impact General Fund revenues. COMMENTS : The author has provided the following statement in support of 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 ŬSenate District 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. 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 SB 1257 Page 4 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. Assembly Revenue and Taxation Committee staff comments: 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. 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. 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 SB 1257 Page 5 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. Analysis Prepared by : M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0004370