BILL ANALYSIS                                                                                                                                                                                                    

                                                                  SB 1077
                                                                  Page  1

          Date of Hearing:   June 23, 2014

                               Bonnie Lowenthal, Chair
                  SB 1077 (DeSaulnier) - As Amended:  June 25, 2014

           SENATE VOTE  :  23-11
          SUBJECT  :  Mileage-Based Fee Pilot Program 

           SUMMARY  :  Creates a Mileage-Based Fee (MBF) Task Force (task  
          force) to guide development and implementation of a pilot  
          program to study the potential for an MBF as an alternative to  
          the gas tax.  Specifically,  this bill  :  

          1)Makes legislative findings and declarations regarding the  
            inadequacy of the gas tax to meet California's long-term  
            revenue needs for transportation and the need to explore an  
            MBF program as an alternative to the antiquated gas tax system  
            now in place.  

          2)Creates a 15-member task force within the California  
            Transportation Commission (CTC)  and prescribes its membership  
            as follows:

             a)   Two members of the Assembly, appointed by the Speaker of  
               the Assembly;

             b)   Two members of the Senate, appointed by the Senate  
               Committee on Rules;

             c)   Two members of the CTC, appointed by the chairperson of  
               the CTC; and,

             d)   Nine members appointed by the Governor, representing the  
               telecommunications industry, highway user groups, the data  
               security and privacy industry, privacy rights advocacy  
               organizations, regional transportation agencies, and  
               national research and policymaking bodies.  

          3)Provides that task force members are entitled to compensation  
            and expenses as authorized by CTC.

          4)Directs the California Department of Transportation (Caltrans)  
            to provide staff to the task force.


                                                                  SB 1077
                                                                  Page  2

          5)Directs the task force to study MBF alternatives to the gas  
            tax and to guide development and evaluation of a pilot program  
            to test MBF approaches; specifically directs the task force to  
            take the following into consideration:

             a)   The availability, adaptability, reliability, and  
               security of methods that might be used in recording and  
               reporting highway use;

             b)   The necessity of protecting all personally identifiable  
               information used in reporting highway use;

             c)   The ease and cost of recording and reporting highway  

             d)   The ease and cost of administering the collection of  
               taxes and fees as an alternative to the current system of  
               taxing highway use through motor vehicle gas taxes;  

             e)   Effective methods of maintaining compliance;

             f)   The ease of re-identifying location data;

             g)   Risks for privacy concerns when used with other  
               technologies, such as automatic license plate readers; and,

             h)   Public and private agency access, including law  
               enforcement, to data collected and stored for purposes of  
               an MBF program.  
          6)Requires the task force to consult with highway users and  
            transportation stakeholders, including representatives of  
            vehicle users, vehicle manufacturers, and fuel distributors.

          7)Directs the California State Transportation Agency (CalSTA) to  
            develop and implement, by January 1, 2016, a pilot program,  
            based on guidance from the task force, to identify and  
            evaluate issues related to potential implementation of an MBF  

          8)Provides that, at a minimum, the pilot program should do the  

             a)   Analyze alternative means of collecting road usage data,  


                                                                  SB 1077
                                                                  Page  3

               including a least one alternative that does not rely on  
               electronic vehicle location data;

             b)   Collect a minimum amount of personal information; and,

             c)   Ensure appropriate processes are in place to collect,  
               manage, store, transmit, and destroy data.

          9)Prohibits the agency from disclosing information collected for  
            the MBF pilot program, with some exceptions.  

          10)Requires CalSTA to submit a report to the task force, CTC,  
            and the Legislature, by June 30, 2017, that includes  
            discussion on all the following:

             a)   Cost;

             b)   Privacy;

             c)   Jurisdictional issues; 

             d)   Feasibility;

             e)   Complexity;

             f)   Acceptance;

             g)   Use of revenues;

             h)   Security and compliance;

             i)   Data collection technology;
             j)   Potential for additional driver services; and,

             aa)  Implementation issues.

          11)Directs CTC to include its recommendations regarding the  
            pilot program in its annual report.  

          12)Sunsets and is repealed on January 1, 2018.  

           EXISTING LAW  :  

          1)Imposes an excise tax on gasoline, comprised of two parts:


                                                                  SB 1077
                                                                  Page  4

             a)   A price-based excise tax the rate of which is calculated  
               to generate revenue equal to what would have been generated  
               had sales and use tax been collected on gasoline.  The  
               current rate is 21.5[ per gallon until July 1, 2014, when   
               it will drop to 18[ per gallon; and,

             b)   The traditional excise tax of 18[ per gallon. 

          2)Vests CTC with responsibility to advise and assist the  
            Secretary of CalSTA and the Legislature in formulating and  
            evaluating state policies and plans for California's  
            transportation programs.  

           FISCAL EFFECT  :   Unknown.  The task force and pilot program set  
          forth in this bill are modeled after Oregon's MBF task force and  
          pilot program, which reportedly cost $3.5 million.  California,  
          with its much greater size and complexity, could easily exceed  
          this amount, depending on how the task force is convened and the  
          pilot program is conducted.  

           COMMENTS  :  Since 1923, California and the rest of the nation has  
          relied heavily on gas taxes to support its local streets and  
          roads and state highway system.  Gas taxes have the benefit of  
          being fairly inexpensive to administer.  Furthermore, until  
          recently, they have been a reasonably equitable means of  
          distributing the tax burden amongst drivers in rough proportion  
          to their use of the roadway system.  

          The gas tax is no longer a viable, sustainable revenue source,  
          however.  According to the Institute on Taxation and Economic  
          Policy, two important developments have combined to greatly  
          reduce the functionality of the gas tax:

          1)The purchasing power of gas tax revenues has declined  
            significantly due to inflation.  If current tax rates, set in  
            1994, remain unchanged through 2035, real gas tax revenue will  
            have declined by over 40%; and,

          2)Improvements in vehicle fuel efficiency have cut directly into  
            gas tax revenues by allowing drivers to travel farther  
            distances while buying less gasoline.  From an environmental  
            and energy policy standpoint, this is undeniably desirable.   
            Decreased fuel consumption reduces greenhouse gasses and our  
            dependence on foreign oil.  But with vehicle fuel efficiency  


                                                                  SB 1077
                                                                  Page  5

            set to nearly double in the next 20 years, gas tax revenues  
            will be cut nearly in half.  

          In the face of rapidly declining gas tax revenues, many have  
          implored state legislatures and Congress to raise state and  
          federal gas tax rates. However, raising the gas tax rate is not  
          a long-term viable funding solution nor does it support the  
          state's policies goals.  As Mary Peters, United States Secretary  
          of Transportation from 2007 to 2009, pointed out in response to  
          a suggestion that the federal gas tax be increased:

               "It would be virtual policy schizophrenia to increase our  
               reliance on gasoline tax revenue to improve and sustain our  
               nation's transportation systems while striving to reduce  
               U.S. oil consumption and promote the production and use of  
               alternative fuels. The success of one policy would by  
               definition mean the failure of the other."  

          An alternative to the gas tax must be found.  The alternative  
          most often cited across the nation is MBFs.  According to the  
          RAND Corporation, MBFs promise more stable revenue than gas  
          taxes and distribute the tax burden in proportion to travel,  
          with greater precision.  And because the fees are tied to travel  
          rather than gas consumption, the revenue stream is immune to  
          changes in fuel economy or even fuel type.  This is particularly  
          important in California where state policies are driving toward  
          a major overhaul of the fleet to near-zero or zero-emission  
          vehicles (i.e., non-gas vehicles).  

          Recognizing that California's current gas tax system is  
          unsustainable, last year as part of the Governor's proposed  
          budget the Governor directed CalSTA to convene a workgroup  
          consisting of state and local transportation stakeholders to,  
          among other tasks, explore long-term, pay-as-you-go funding  
          options.  As a result, CalSTA released in February of this year  
          its vision and interim recommendations in a report entitled  
          California Transportation Infrastructure Priorities:  Vision and  
          Interim Recommendations (commonly referred to as CTIP),  
          including the recommendation to explore a voluntary pilot  
          program to study, review, and consider the viability of an MBF  
          in California.  In response, CalSTA is working with stakeholders  
          to develop a strategy and recommendations for proceeding with  
          some sort of pilot program to explore an MBF program.  The  
          stakeholder group is expected to complete its initial review by  
          the end of the summer.  


                                                                  SB 1077
                                                                  Page  6

          Concurrent with this effort, Caltrans recently joined with other  
          western state departments of transportation in a consortium to  
          explore the technical and operational feasibility of a  
          multi-jurisdictional MBF system.  Oregon is at the forefront of  
          this charge, having just enacted the nation's first permanent  
          MBF program.  SB 1077 is modeled after legislation that guided  
          Oregon's MBF pilot program.  

          SB 1077 provides for a rigorous, independent review of a  
          potential MBF system and would complement the work already begun  
          by Caltrans and CalSTA.  Although the task force and pilot  
          program will likely consume substantial resources, the  
          significance of this effort should not be underestimated.   
          Billions of dollars of lost gas tax revenue are at stake.  For  
          more than a decade CTC has raised concerns with respect to the  
          decline and instability of gas tax revenues.  It has urged that  
          the Legislature and the Administration to consider  
          implementation of an MBF system to address California's  
          transportation needs. This bill will finally begin to answer  
          that call.  

           Previous legislation:   SB 1299 (Lowenthal) would have required  
          DMV to implement a similar MBF pilot program.  That bill died on  
          the Senate Appropriations suspense file.  

          AJR 5 (Lowenthal, Resolution Chapter 29, 2011) requested the  
          President and Congress to consider and enact legislation to  
          conduct a study regarding the feasibility of the collection  
          process for a transportation revenue source based on vehicle  
          miles traveled, in order to facilitate the creation of a  
          reliable and steady transportation funding mechanism for the  
          maintenance and improvement of surface transportation  


          AAA Northern California, Nevada & Utah
          Alameda County Transportation Commission


                                                                  SB 1077
                                                                  Page  7

          Alliance of Automobile Manufacturers
            American Council of Engineering Companies
          American Planning Association 
          American Society of Civil Engineers, Region 9
          Associated General Contractors
          Auto Club of Southern California
          California Asphalt Pavement Association
          California Councils of Government
          League of California Cities
          Metropolitan Transportation Commission
          Professional Engineers in California Government
          San Mateo County Transportation Authority
          Santa Clara Valley Transportation Authority
          Self-Help Counties Coalition
          Transportation Agency for Monterey County
          Transportation California
          5 individuals

           Analysis Prepared by  :    Janet Dawson / TRANS. / (916) 319-2093