BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1077|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 1077
Author: DeSaulnier (D)
Amended: 4/21/14
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 4/29/14
AYES: DeSaulnier, Gaines, Beall, Galgiani, Hueso, Lara, Liu,
Pavley, Roth
NO VOTE RECORDED: Cannella, Wyland
SENATE APPROPRIATIONS COMMITTEE : 6-1, 5/23/14
AYES: De León, Gaines, Hill, Lara, Padilla, Steinberg
NOES: Walters
SUBJECT : Mileage-based fee pilot program
SOURCE : Transportation California
DIGEST : This bill requires the Transportation Agency to
develop a pilot program by January 1, 2016, to explore various
methods for using a mileage-based fee (MBF) to replace the
state's existing fuel excise tax.
ANALYSIS : The state derives its transportation funding
primarily from a variety of excise and sales taxes on gasoline
and diesel fuel. Existing law requires that the state spend the
revenue from the base 18-cent-per-gallon fuel excise tax to
maintain and operate the state highway system. Excise tax
revenue from gasoline above the base revenue is used primarily
for local streets and roads as well as new capacity projects. A
CONTINUED
SB 1077
Page
2
statewide sales tax on diesel is dedicated to supporting transit
operations in the state.
In addition, existing law establishes in state government the
Transportation Agency, which oversees and directs policy for a
number of transportation-related departments, including the
California Highway Patrol, the Department of Motor Vehicles
(DMV), and the Department of Transportation (Caltrans).
Section 1 of Article I of the California Constitution declares
that all people have certain inalienable rights, including but
not limited to the right to individual privacy.
This bill:
1.Requires the Transportation Agency to develop a pilot program
by January 1, 2016, to explore various methods for using an
MBF to replace the state's existing fuel excise tax. This
bill requires the agency, at a minimum, to assess the
following issues related to implementing an MBF in California:
A. Different methods for calculating mileage and collecting
road usage information that include alternatives to using
electronic vehicle location data. Any methods considered
shall collect the minimum amount of personal information
necessary to accomplish the goals of the MBF.
B. Processes for managing, storing, transmitting, and
destroying data to protect the integrity of the data and
ensure the privacy of drivers.
C. Types of equipment that may be required of the state and
of drivers in order to implement an MBF, including a
discussion of the advantages and disadvantages of the
equipment, the privacy implications of the equipment, and
contingencies in the event of equipment failure.
D. Estimated costs, both public and private, associated
with the initial implementation and ongoing operation of an
MBF system.
E. Processes and security measures necessary to minimize
fraud and tax evasion rates.
CONTINUED
SB 1077
Page
3
F. The appropriate government entities to collect data and
handle revenue collection, and the frequency at which
charges should be billed or collected.
1.Requires that the Transportation Agency consult with entities
such as DMV, Caltrans, the Institute of Transportation Studies
at the University of California, or any other entity that has
expertise in automotive technology, revenue collection, and
protecting the public's private information.
2.Requires the Transportation Agency to submit a report of its
findings to the Legislature no later than June 30, 2017. The
report shall include, but not be limited to, all of the
following elements:
A. Recommendations regarding how to best implement an MBF
in a manner that minimizes confusion and inconvenience to
California's drivers while also providing safeguards that
ensure their privacy.
B. Recommendations regarding public and private agency
access, including law enforcement access, to the data
collected and stored for purposes of the MBF that ensures
individual privacy rights as protected by Section 1 of
Article I of the California Constitution.
C. Given the technological and institutional demands
associated with implementing an MBF, a discussion of
different processes that may be used to transition from the
fuel tax to an MBF over time.
D. A discussion of issues the Legislature may wish to
consider when evaluating whether and how to implement an
MBF, including the potential impact of new, rapidly
changing technology, such as cars electronically connected
to each other and the infrastructure around them, which
could provide new and possibly more efficient options for
collecting mileage data while protecting the privacy of
drivers.
E. With the transition from a fuel tax to an MBF, a
discussion of protections and safeguards that can be put in
place to ensure that the MBF has at least the same level of
protection from being diverted and used for
CONTINUED
SB 1077
Page
4
non-transportation purposes and the same eligible uses as
the fuel taxes being replaced, including consideration of
voter approval.
1.Sunsets on January 1, 2018.
Background
Why do we need to replace the fuel excise tax? The excise tax
on fuels was originally created in the early 20th century to
serve as a substitute user fee for the construction,
maintenance, and operation of the transportation system. At the
time, it was technologically very difficult to track actual
usage of the roadway by vehicle, but most vehicles on the road
were very similar and experienced similar mileage. Therefore, a
tax on fuels served as a suitable stand-in for usage.
Today, a trifecta of circumstances is combining to undermine the
sustainability of the fuel excise tax. First, the fuel excise
tax is not indexed to inflation, and therefore its value erodes
over time. The last increase to the base fuel excise tax was in
1994; due to inflation, a dollar in 1995 is only worth 55 cents
today. Second, both state and federal governments have adopted
policies requiring vehicles to become significantly more fuel
efficient over time. Simply speaking, this means that as
vehicles drive farther on less fuel, they do more damage to the
roadway system per dollar available to maintain that system.
Third, demographic trends and state policies are encouraging
Californians to drive fewer miles per capita. With fewer miles
driven in more fuel-efficient cars, less fuel is purchased. The
dire result of this combination of factors is that government is
left with dwindling resources to address growing transportation
problems.
Not only is the fuel excise tax unsustainable, but today's
varied vehicle marketplace is leading to significant distortions
in the market. Many drivers today travel exceedingly long
distances on a gallon of fuel, or without purchasing any fuel at
all, and therefore contribute little or nothing to the
maintenance of the road system necessary for that travel.
Further, nearly all of these highly efficient vehicles are new
models and relatively expensive, suggesting that high-income
individuals are more able to use public infrastructure without
contributing requisite tax revenue. Meanwhile, many of the
CONTINUED
SB 1077
Page
5
least efficient vehicles on the road are older, less-expensive
models typically driven by lower-income individuals. This often
means that those who can least afford to are increasingly
shouldering the burden of funding the maintenance and operation
of the public roadway system. If the state were to increase the
fuel excise tax to try and slow down the diminishing buying
power of today's principle funding mechanism, it might only
exacerbate this regressive tax situation.
Due to technological advances, the state can address this
downward pressure on the fuel excise tax by shifting to some
other fee that more accurately measures usage. Many states are
exploring, and advocates argue, that some sort of MBF would
effectively and fairly replace the fuel excise tax.
Recent studies raise and address potential issues with an MBF .
As the funding realities have become increasingly apparent, a
number of states and entities have conducted studies concerning
the challenges of implementing an MBF to replace existing
funding revenues. Some of the primary issues these studies have
raised and addressed include:
Privacy issues . One of the primary impediments to
implementing an MBF has been the concerns raised about the
government being able to track one's driving behavior and
movement. Studies suggest that four basic approaches are
available to help alleviate these concerns: (1) relying on
metering options that provide no information about the
location of travel, such as a flat annual fee; (2) relying on
a trusted third party as a clearinghouse to protect and secure
private data from governmental review; (3) designing the
metering technology with built-in privacy safeguards, if
possible; and (4) establishing privacy legislation that
clearly distinguishes between permissible and impermissible
uses of personal travel data. The State of Oregon has applied
many of these options jointly and has been so successful in
its efforts that its program has earned the endorsement of the
ACLU for its privacy protections.
Urban vs rural drivers . One central concern of implementing
an MBF is the notion that rural residents drive longer
distances and will therefore suffer an unfair burden from
mileage charges. Research suggests, however, that on average
there is no significant difference in the distance driven per
CONTINUED
SB 1077
Page
6
year between urban and rural residents. This is because,
although rural residents tend to drive longer distances for
typical errands, they also tend to engage in such activities
less frequently than their urban counterparts and are much
more likely to combine trips. In fact, when looking strictly
at miles driven on public roads, rural households on average
drive significantly fewer miles than urban drivers, according
to recent research.
Administrative costs . One significant advantage of the fuel
excise tax is that, because it is collected from a small
number of fuel wholesalers around the country, it is
relatively inexpensive to administer. An MBF, in contrast,
could involve collecting a fee from each individual driver or
vehicle owner, which would be inherently more complicated to
administer. The state expends roughly 1% of the revenue to
collect the fuel excise tax. Recent evidence and modeling
suggests that a state-level MBF system could cost around 5% of
the incoming revenue. It is important to remember that even
with greater administrative costs, however, an MBF may yield
far more net revenue over the coming decades than the fuel
excise tax given the shifts toward higher fuel economy and
alternative-fueled vehicles. The pilot program imagined in
this bill needs to consider this particular challenge and
adequately justify any increased costs with data supporting
the switch to an MBF.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Unknown, likely minor costs to assess specified issues and
develop a plan for conducting a pilot in 2014-15. Caltrans,
through administrative action, has initiated efforts to gather
information and make recommendations for developing a
mileage-based fee pilot program. (State Highway Account)
Unknown costs, likely over $1 million annually through
2016-17, to conduct lab and field testing of equipment and
implement the pilot program. (State Highway Account)
CONTINUED
SB 1077
Page
7
Estimated costs of $50,000 to $100,000 in 2016-17, to prepare
and submit the report to the Legislature. (State Highway
Account)
SUPPORT : (Verified 5/23/14)
Transportation California (source)
American Council of Engineering Companies of California
American Planning Association, California Chapter
Associated General Contractors
Auto Club of Southern California
California Asphalt Pavement Association
League of California Cities
ARGUMENTS IN SUPPORT : According to the author, today's
funding mechanism for our transportation system, the excise tax
on fuels, is unsustainable. In order to address this challenge,
other states have been considering various ways to replace the
gas tax with something that more closely aligns with a fee for
use. The author contends that this bill is a critical first
step toward California considering an MBF as an alternative to
the excise tax on fuels.
JA:e 5/23/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED