BILL ANALYSIS Ó AB 1447 Page 1 Date of Hearing: April 28, 2014 ASSEMBLY COMMITTEE ON TRANSPORTATION Bonnie Lowenthal, Chair AB 1447 (Waldron) - As Amended: April 22, 2014 SUBJECT : California Global Warming Solutions Act of 2006: Greenhouse Gas Reduction Fund: traffic signal synchronization SUMMARY : Adds traffic signal synchronization to the list of sustainable infrastructure projects eligible to receive money from cap-and-trade auction proceeds if the project is designed and implemented to achieve cost-effective reductions in greenhouse gas emissions and includes specific reduction targets and metrics to evaluate the project's effect. EXISTING LAW : 1)Enacts the Global Warming Solutions Act of 2006 (AB 32 (Nunez), Chapter 488, Statutes of 2006) that requires the Air Resources Board (ARB) to adopt a statewide greenhouse gas emissions limit equivalent to the statewide greenhouse gas emissions levels in 1990 to be achieved by 2020. 2)Requires ARB to provide each region of the state with greenhouse gas emission reduction targets for the automobile and light truck sector. 3)Requires a regional transportation plan to include a sustainable communities strategy designed to achieve the regional targets for greenhouse gas emission reduction. 4)Requires ARB to adopt regulations to achieve maximum technologically feasible and cost-effective greenhouse gas 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. 5)Requires cap-and-trade auction proceeds be used to reduce greenhouse gas emissions in the state through investments related to, but not limited to: a) Energy efficiency and renewable energies; b) State-of-the-art systems to move goods and freight, AB 1447 Page 2 advanced technology vehicles and vehicle infrastructure, advanced biofuels, and low-carbon and efficient public transportation; c) Water use and supply, land and natural resource conservation and management, forestry, and sustainable agriculture; d) Strategic planning and development of sustainable infrastructure projects, such as transportation and housing; e) In-state diversion of municipal solid waste and disposal through waste reduction, division, and reuse; f) Programs implemented by local and regional agencies, local and regional collaboratives, and nonprofit organizations coordinating with local governments; and, g) Research, development, and deployment of innovative technologies, measures, and practices. 6)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. 7)Requires the investment plan to allocate: (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. FISCAL EFFECT : Unknown COMMENTS : ARB's cap-and-trade program was established to help the state meet its AB 32 goals. Under the cap-and-trade program, ARB places a cap on greenhouse gas 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 AB 1447 Page 3 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. To guide investment of auction proceeds, the Legislature passed and the Governor signed AB 1532 (John A. Pérez), Chapter 807, Statutes of 2012, which created the Greenhouse Gas Reduction Fund Investment Plan and Communities Revitalization Act. Among other provisions, AB 1532 requires DOF and ARB to develop and submit a three-year investment plan to identify priority investments that will help achieve greenhouse gas reduction goals. Auction proceeds are to be appropriated to state agencies by the Legislature consistent with the investment plan. The first investment plan, for fiscal years 2013-14 through 2015-16 was released in May last year. The 2013-14 Budget Act, however, did not appropriate any funds pursuant to the investment plan. Instead it loaned $500 in auction proceeds to the General Fund. For the 2014-15 Budget, the Governor proposed spending $850 million on a variety of programs, including $250 million for high-speed rail and approximately $350 million for other transportation-related investments. No funds have been proposed specifically for traffic signal synchronization. In addition to the Governor's proposal, Senator Steinberg recently announced his proposed strategy for investing auction proceeds. The specifics of his plan have not yet been released, but the plan reportedly calls for 10% of an estimated $5 billion annually in auction proceeds to be used as a permanent source of funding for state highway road rehabilitation and for complete streets for traffic management, repair, deferred maintenance, bikeways, and road and highway retrofit. It is unclear if traffic signal synchronization would be allowed under the Senator's proposal. The City of Los Angeles was the first major city in the world to synchronize all of its 4,500 traffic lights. This effort to reduce congestion, pollution, and wasted time took 30 years and AB 1447 Page 4 cost roughly $400 million, $150 million of which came from transportation bonds authorized by the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of 2006, a nearly $20 billion bond measure approved by the voters as Proposition 1B in November 2006. That measure provided $250 million to fund traffic signal synchronization or other technology-based improvements to improve safety, operations, and the effective capacity of local streets and roads. Of the $250 million available for this effort, $150 million was allocated to the City of Los Angeles. The effort reportedly has had great success reducing traffic congestion and associated air pollution. The author introduced this bill to provide a means of funding future traffic signal synchronization projects, funding for which has diminished along with transportation bond dollars. These projects would be eligible to use auction proceeds assuming data support projected reductions in greenhouse gas emissions as a result. Arguably, traffic signal synchronization projects are already eligible for funding as part of sustainable transportation infrastructure projects called for in the investment plan. However, they are not specifically identified. AB 1447 would specifically clarify that these projects are, indeed, eligible. Writing in opposition to this bill, the California Municipal Utilities Association discourages calling out the traffic signal synchronization program instead preferring broad funding categories consistent with current law. Others argue that the ARB lacks the authority to raise revenue through auction proceeds and, therefore, authority to spend the proceeds is premature. Double-referral : This bill passed out of the Natural Resources Committee on April 21, 2014, with a vote of 9-0. Previous legislation: AB 32 (Nunez), Chapter 488, Statutes of 2006, enacted the Global Warming Act of 2006 that requires ARB to adopt a statewide greenhouse gas emissions limit equivalent to the statewide greenhouse gas emissions levels in 1990 to be achieved by 2020. AB 1447 Page 5 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. REGISTERED SUPPORT / OPPOSITION : Support None on file Opposition California Chamber of Commerce California Municipal Utilities Association Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093