BILL ANALYSIS Ó
AB 574
Page 1
Date of Hearing: April 22, 2013
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 574 (Lowenthal) - As Amended: April 15, 2013
SUBJECT : Sustainable Communities Infrastructure Program
SUMMARY : Creates the Sustainable Communities Infrastructure
Program to fund sustainable communities strategies (SCSs) and
equivalent greenhouse gas (GHG) reducing strategies using
cap-and-trade auction revenues. Specifically, this bill:
1)Makes legislative findings and declarations regarding the
transportation sector being the largest source of GHG
emissions in California and the need to fund integrated
transportation and public infrastructure investments with
changes in land use if the state is going to meet its GHG
emissions reduction goals.
2)Directs the appropriation of funds from the Greenhouse Gas
Reduction Fund (GHGR Fund) for projects that do all of the
following:
a) Provide cost-effective and feasible reductions in GHG
emissions;
b) Combine transportation investments with local land use
modifications and other local policy changes to provide GHG
emissions reductions and, where feasible, to achieve other
public benefits, as identified;
c) Implement either an approved SCS or alternative planning
strategy within existing urbanized or developed areas in
regions with a metropolitan planning organization (MPO).
For regions that do not have an MPO, projects must reduce
GHG emissions consistent with the regional transportation
plan or other regional plan;
d) Meet specified criteria that govern the newly created
Sustainable Communities Infrastructure Program; and,
e) Comply with existing requirements to benefit
economically disadvantaged communities.
AB 574
Page 2
3)Provides that projects are to be selected through a
competitive process based on cost-effective GHG emissions
reductions using criteria established by the California Air
Resources Board (ARB).
4)Directs the California Transportation Commission (CTC), in
consultation with the ARB, to designate a regional granting
authority to administer, as prescribed, the Sustainable
Communities Infrastructure Program within each region.
5)Requires that the regional granting authority to be the same
agency responsible for preparing the regional transportation
plan.
6)Provides that money in the Sustainable Communities
Infrastructure Program should be allocated to regional
granting authorities on a per capita basis.
7)Vests the Business, Transportation and Housing Agency, in
consultation with CTC and the High-speed Rail Authority, with
responsibility for allocating moneys for areas of the state
not included by an MPO.
8)Directs ARB, in consultation with CTC and the Strategic Growth
Council, to establish criteria for the development and
implementation of regional grant programs that do the
following:
a) Require projects to be selected through a competitive
public process based on GHG emissions reductions;
b) Provide criteria for evaluating long-term GHG impacts;
c) Establish methods for evaluating, monitoring, and
verifying project effectiveness, as prescribed;
d) Encourage flexibility, collaboration, and innovation at
the local level to address local transportation and
community needs;
e) Provide for the development and implementation of
projects that integrate infrastructure investment with land
use to achieve the maximum GHG emissions reductions.
f) Provide for public participation in the review of
AB 574
Page 3
proposed projects.
g) Provide for consultation and coordination with air
pollution control and air quality management districts.
9)Directs ARB, in consultation with the Strategic Growth Council
and MPOs, to establish standards for integrated modeling
systems and measurement methods to ensure consistency in
evaluating the potential effectiveness of projects and
verifying actual benefits realized when projects are
completed.
10) Requires ARB annually to review the program's
implementation and revise the program as needed.
11) Directs ARB, in consultation with CTC and the Strategic
Growth Council, to establish standards for the use of program
funds to ensure compliance with prescribed criteria.
12) Delineates the following eligible uses of program funds:
a) Transportation network and demand management, including,
but not limited to, trip-reduction programs, congestion
pricing, and roadway modifications, such as roundabouts;
b) Public transportation, including operations,
maintenance, and capital costs;
c) Road and bridge maintenance; operations and retrofits
for complete streets, bike, and pedestrian safety
enhancements; safe routes to schools; and urban greening;
d) Clean transportation fueling infrastructure and support;
e) Multimodal network connectivity to reduce travel
distances and improve access to parks, schools, jobs,
housing, and markets for rural and urban communities,
including neighborhood scale planning;
f) Development and adoption of local plans and land use
policies that help to implement regional plans;
g) Community infrastructure, including public works and
municipal improvements necessary to support
transit-oriented development, affordable housing, infill in
AB 574
Page 4
existing urbanized areas, and small walkable communities in
rural neighborhoods;
h) Multiuse facilities and accommodations for bicyclists,
pedestrians, and neighborhood electric vehicles;
i) Interregional rail modernization and related community
infrastructure; and,
j) Administrative costs and development and use of
evaluation, monitoring, and verification systems.
13) Authorizes ARB, in consultation with CTC, to identify
additional eligible uses of the funds that provide GHG
emission reductions.
14) Specifies legislative intent that all cap-and-trade
revenues are to be appropriated consistent with the California
Global Warming Solutions Act of 2006, the Greenhouse Gas
Reduction Fund Investment Plan and Communities Revitalization
Act, and other related provisions of existing law.
15) Makes ARB's work to develop standards and guidelines and
the provision of grant money contingent on the Legislature
appropriating funds for these purposes.
EXISTING LAW:
1)Enacts the Global Warming Act of 2006 (AB 32 (Nunez), Chapter
488, Statutes of 2006) that requires ARB to adopt a statewide
GHG emissions limit equivalent to the statewide GHG emissions
levels in 1990 to be achieved by 2020.
2)Requires ARB to provide each region of the state with GHG
emission reduction targets for the automobile and light truck
sector.
3)Requires a regional transportation plan to include a SCS
designed to achieve the targets for GHG emission reduction.
2)Requires ARB to adopt regulations to achieve maximum
technologically feasible and cost-effective GHG emission
reductions; to this end, authorizes ARB to permit the use of
market-based compliance mechanisms (cap-and-trade program) to
comply with greenhouse reduction regulations.
AB 574
Page 5
4)Requires cap-and-trade auction proceeds be used to reduce GHG
emissions in the state.
5)Requires the Department of Finance (DOF), in consultation with
ARB, to develop and submit a three-year investment plan to the
Legislature to guide the use of auction proceeds.
6)Requires auction proceeds to be appropriated through the
annual Budget Act.
FISCAL EFFECT : Unknown
COMMENTS : ARB's cap-and-trade program was established to help
the state meet its AB 32 goals. In the cap-and-trade program,
ARB places a cap on GHG emissions by issuing a limited number of
tradable permits (called allowances) equal to the cap. Each
year, the number of allowances declines in proportion to the cap
to achieve the intended emission reductions. Businesses that
aggressively reduce their emissions can trade their surplus
allowances to firms that find it more expensive to reduce their
emissions. In distributing the emissions allowances, ARB
allocates a portion of the allowances for free to covered
entities, places some in a cost containment reserve, and
auctions the remainder. The price of auctioned allowances is set
by the marketplace. Over time, program regulations require a
greater reliance on auctioning, which will, among other things,
help maximize incentives for sources to reduce their emissions
and provide proceeds (auction revenues) that can be reinvested
for public benefit to further the purposes of AB 32.
For Fiscal Year 2012-13, ARB's auctions are estimated to
generate roughly $660 million to upwards of $3 billion. The
Governor's budget for Fiscal Year 2012-13 assumes that the state
will receive $1 billion from such auctions. Of this amount, the
budget assumes that $500 million of the total revenue will be
used to offset existing General Fund costs of current GHG
mitigation activities, and the remaining revenues will be used
on new or expanded programs intended to reduce GHG emissions.
Legislation enacted last session, AB 1532 (John A. Pérez),
Chapter 807, Statutes of 2012, requires development of an
investment plan to guide the state's investments of auction
revenues. ARB just released the draft investment plan and will
provide the final version of the plan to the Legislature in time
AB 574
Page 6
for proposed budget adjustments next month. The plan is
intended to support the appropriation of cap-and-trade auction
proceeds during the three-year period from Fiscal Year 2013-14
to 2015-16.
In its draft plan, ARB states that auction revenue investments
should be governed by the following principles.
1)Investments must further the purposes of AB 32.
2)Investments should focus on near-term and long-term benefits.
3)Investments should be prioritized toward sectors with both the
highest greenhouse emissions and the greatest need for future
reductions to meet greenhouse goals.
4)State agencies should seek to maximize investments in and
benefits to disadvantaged communities wherever possible.
5)Investments should foster job creation, including
opportunities for training to amplify investment benefits, and
maximize economic benefits for California wherever possible.
6)Investments should consider the state's planning principles to
promote infill development and equity; to protect
environmental and agricultural resources; and to encourage
efficient development patterns.
7)Investments should be coordinated with other local, state, and
federal funding programs and avoid duplicative efforts. The
state should coordinate its clean energy, transportation, and
climate change investments to maximize their impacts and,
where possible, utilize existing programs and processes.
8)Funding should leverage private and other government
investment to the maximum extent possible.
AB 574 establishes the Sustainable Communities Investment
Program to fund implementation of SCSs using cap-and-trade
auction proceeds. According to the author, the program is
designed to implement GHG reducing plans in the most cost
effective way while encouraging innovation, collaboration, and
flexibility.
The author asserts that a key method to reduce transportation
AB 574
Page 7
emissions is the development of SCSs and other regional plans
but notes that local governments tasked with implementing these
strategies lack sufficient funds. The author contends that, by
funding investments that integrate transportation and other
public infrastructure investments with changes in land use, the
state can achieve significantly greater greenhouse emission
reductions than single purpose investment strategies.
Proponents of AB 574 contend that the proposed Sustainable
Communities Investment Program is consistent with the investment
principles set forth by ARB. For example, they assert that
program is squarely focused on attaining the goals of AB 32 and
is structured to withstand rigid scrutiny under a "Sinclair
nexus test." (This test requires that a clear nexus must exist
between an activity for which a mitigation fee is used and the
adverse effects related to the activity on which that fee is
levied.) Furthermore, by focusing on transportation
investments, proponents point out that the program targets the
sector with the highest greenhouse emissions and the greatest
need for future reductions to meet greenhouse goals.
The author cites several key aspects of the proposed program:
1)Every region of the state receives its per capita share of
sustainable communities funding.
2)The locally administered competitive grant program will
incentivize local land use strategies to be integrated with a
full range of transportation investments to achieve the
highest greenhouse emission reductions, advance SCS
objectives, and result in the greatest number of public
co-benefits (such as housing, air quality, health, etc.).
3)The program features a performance-based approach to maximize
regional flexibility but includes modeling and verification
systems approved by ARB to ensure the program's consistency
and effectiveness.
Writing in opposition to AB 574, the California Chamber of
Commerce opposes AB 574 based on what it believes to be
substantial legal uncertainties surrounding ARB's authority to
withhold and sell auction allowances.
Related legislation: This year, there are over two dozen bills
pending that are related in one way or another to sustainable
AB 574
Page 8
communities strategies, including:
AB 1051 (Bocanegra) establishes the Sustainable Communities for
All Program; directs the Department of Housing and Community
Development to allocate cap-and-trade funds to provide loans for
the development and construction of housing development projects
within close proximity to transit stations, and for other
specified projects and programs intended to reduce GHG
emissions. AB 1051 is in the Assembly Housing Committee and is
double-referred to this committee.
AB 431 (Mullin) allows specified MPOs, subject to voter
approval, to impose a transaction and use tax of no more than
0.5% for the purpose of achieving the goals of the sustainable
communities strategy. AB 431 was approved by the Assembly Local
Government Committee and is scheduled to be heard in this
committee on April 29, 2013.
AB 1002 (Bloom) imposes a $6 vehicle registration tax for local
and regional agency implementation. AB 1002 is scheduled to be
heard in this committee on April 22, 2013.
AB 416 (Gordon) requires ARB to establish the Local Emission
Reduction Program to provide grants and other financial
assistance to eligible local government recipients for the
purposes of developing and implementing GHG emissions reduction
projects. That bill is in Assembly Appropriations Committee.
Previous legislation: AB 1532 (John A. Pérez), Chapter 807,
Statutes of 2012, creates the Greenhouse Gas Reduction Fund
Investment Plan and Communities Revitalization Act to set
procedures for the investment of auction revenues.
SB 535 (De Leon), Chapter 830, Statutes of 2012, provides that
the required investment plan for cap-and-trade revenue is to
allocated funds as follows: 1) a minimum of 25% of the
available moneys in the fund to projects that provide benefits
to identified disadvantaged communities; and, 2) a minimum of
10% of the available moneys in the fund to projects located
within identified disadvantaged communities.
SB 1018 (Committee on Budget and Fiscal Review), Chapter 89,
Statutes of 2012, among other things, establishes new
legislative oversight and controls over the ARB including: the
creation of a separate expenditure fund for proceeds from the
AB 574
Page 9
auction or sale of allowances pursuant to cap-and-trade program.
Double referred : This bill is also referred to the Assembly
Committee on Natural Resources.
REGISTERED SUPPORT / OPPOSITION :
Support
California Alliance for Jobs
California Association of Councils of Governments
California Center for Sustainable Energy
California State Association of Counties
California Transit Association
Capitol Corridor Joint Powers Authority
Cobblestone Placemaking
County of Marin
County of Napa
Environmental Defense Fund
Foothill Transit
Glendale City Employees Association
League of California Cities
Livermore Amador Valley Transit Authority
Metropolitan Transportation Commission
Monterey-Salinas Transit
Natural Resources Defense Council
Organization of SMUD Employees
Peninsula Corridor Joint Powers Board
Riverside Transit Agency
Sacramento Area Council of Governments
Sacramento Metropolitan Air Quality Management District
San Bernardino Public Employees Association
San Diego Association of Governments
San Luis Obispo County Employees Association
San Mateo County Transit District
San Mateo County Transportation Authority
Santa Clara County Board of Supervisors
Santa Clara Valley Transportation Authority
Santa Rosa City Employees Association
Self-Help Counties Coalition
Sonoma County Transportation Authority
Southern California Association of Governments
Southern California Association of Governments
The Met Sacramento High
Transportation California
AB 574
Page 10
Urban Counties Caucus
Victor Valley Transit Authority
Opposition
California Chamber of Commerce
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093