BILL ANALYSIS Ó SB 1077 Page 1 Date of Hearing: June 23, 2014 ASSEMBLY COMMITTEE ON TRANSPORTATION 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 use; 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 program. 8)Provides that, at a minimum, the pilot program should do the following: 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 infrastructure. REGISTERED SUPPORT / OPPOSITION : Support 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 TransForm Transportation Agency for Monterey County Transportation California Opposition 5 individuals Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093