BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair SB 1298 (Hernandez) - High occupancy toll lanes. Amended: May 7, 2014 Policy Vote: T&H 11-0 Urgency: No Mandate: No Hearing Date: May 23, 2014 Consultant: Mark McKenzie SUSPENSE FILE. Bill Summary: SB 1298 would remove specified limitations on the state high-occupancy toll (HOT) lane program, thereby authorizing any regional transportation agency to apply to the California Transportation Commission (CTC) to develop and operate HOT lanes. The bill would also delete the January 15, 2015 sunset on the authority for the Los Angeles County Metropolitan Transportation Authority (MTA) to operate HOT lanes on State Highway Routes (SR) 10 and 110 in Los Angeles County, and revise and recast those provisions. Fiscal Impact: CTC costs of approximately $200,000 per application for due diligence reviews and approvals of HOT lane proposals. (State Highway Account) It is unlikely that more than one or two proposals would be submitted for approval in a single year. Caltrans costs for ongoing maintenance and California Highway Patrol (CHP) costs for ongoing enforcement of new HOT lane facilities would be fully recovered from toll revenues, pursuant to required agreements with local agencies. Unknown costs and revenue gains for local transportation agencies to develop and operate HOT lanes. For illustrative purposes, HOT lanes administered by MTA generate approximately $17 million annually. Background: HOT lanes allow single-occupancy vehicles to use designated HOV lanes at certain times of the day for a fee. They are designed to accomplish four main goals: (1) increase the use of HOV lanes; (2) relieve traffic congestion in other lanes; (3) fund new transportation projects; and (4) test the SB 1298 (Hernandez) Page 1 concept of "value pricing programs," whereby the toll varies depending on the time of day and level of congestion. Existing law, as enacted by AB 1467 (Nunez), Chap. 32/2006, established the HOT lane program, authorizing regional transportation entities to submit applications to the CTC until January 1, 2012 for the development and operation of HOT lanes. AB 1467 required the Legislature to select HOT lane projects by enacting legislation, and limited the authorization to four projects, two each in southern and northern California. The CTC's role is limited to establishing eligibility criteria, determining whether a particular project is eligible, holding public hearings in both northern and southern California on each eligible application, and submitting eligible applications to the Legislature for approval or rejection. Subsequently, the Legislature approved and the Governor signed AB 1954 (Jeffries), Chap. 421/2008, authorizing the Riverside County Transportation Commission to operate HOT lanes on SR 15 in Riverside County, and AB 1422 (Ridley-Thomas), Chap. 547/2008, authorizing MTA, in cooperation with Caltrans, to operate a value-pricing and transit development demonstration program on SR 10 and 110 in Los Angeles County. The authority to operate HOT lanes on SR 10 and 110 are subject to specified parameters, limits, and conditions. Existing law requires MTA and Caltrans to report specified information on the HOT lane demonstration program to the Legislature by December 31, 2014, and sunsets the authority for MTA to operate HOT lanes on SR 10 and 110 on January 15, 2015. Proposed Law: Regarding the state HOT lane program, SB 1298 would: Delete the 2012 deadline for regional transportation agencies to submit HOT lane applications to the CTC, and delete the limit on the number of facilities that may be approved by the CTC. Subject HOT lane proposals to CTC review and approval. Require the Governor to include resources for the CTC to fulfill the bill's requirements in the proposed annual budget. Regarding MTA's authority to operate HOT lanes on SR 10 and 110, SB 1298 would delete the authorizing statute and recast it by making the following changes: SB 1298 (Hernandez) Page 2 Deleting the sunset date, thereby authorizing MTA to operate the HOT lanes indefinitely. Deleting a prohibition against MTA issuing bonds for the demonstration program. Deleting a requirement that MTA get the consent of Caltrans to establish performance measures ensuring optimal use of the HOT lanes. Authorizing MTA to change the vehicle occupancy requirement for access to the HOT lanes. Deleting specified conditions under which MTA may implement a demonstration program. Requiring agreements between MTA, Caltrans, and CHP to identify obligations, liabilities, and responsibilities of each party, and to explicitly provide reimbursement of state agencies for costs related to implementation and operation of the program and maintenance of the state highway system in connection with the program. Delaying the deadline for a report to the Legislature by one month. Staff Comments: The statute that enacted the state HOT lane program required CTC to establish eligibility criteria, review applications to determine eligibility, and holding public hearings on the HOT lane proposals. SB 1298 would impose the additional duty of approving applications for new HOT lanes, which would require CTC to update program guidelines. As part of the approval process, CTC would need to analyze revenue and operational analyses submitted by applicants. CTC indicates that staffing responsibilities to administer the program could be absorbed, but the bill would likely require contracting with financial and technical consultants to conduct a robust review of proposals at a cost of approximately $200,000 per application.