BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1418 (DeSaulnier) - Vehicle weight fees: transportation bond  
          debt service.
          
          Amended: May 1, 2014            Policy Vote: T&H 11-0
          Urgency: Yes                    Mandate: No
          Hearing Date: May 12, 2014      Consultant: Mark McKenzie
          
          This bill meets the criteria for referral to the Suspense File. 

          
          Bill Summary: SB 1418, an urgency measure, would repeal  
          statutory provisions that transfer vehicle weight fees from the  
          State Highway Account to the Transportation Debt Service Fund,  
          which is used to reimburse the General Fund for payment of debt  
          service on transportation-related general obligation bonds.  As  
          such, the weight fees would be directed to the State Highway  
          Account for specified transportation purposes rather than  
          offsetting General Fund debt service expenditures.

          Fiscal Impact: 
              Loss of General Fund relief, approximately $1 billion  
              annually beginning in 2014-15, by redirecting vehicle weight  
              fees from the Transportation Debt Service Fund to the State  
              Highway Account.

              Revenue gains of a similar magnitude to fund transportation  
              programs pursuant to the following formula: 
               o      56% to the State Highway Account (approximately $560  
                 million annually), of which at least 21.43%  
                 (approximately $120 million) must be used to fund  
                 projects in the State Highway Operation and Protection  
                 Program (SHOPP)
               o      44% (approximately $440 million) for local streets  
                 and roads (Highway Users Tax Account)

          Background: As part of the 2010-11 budget, ABx8 6 (Committee on  
          Budget), Chap 11/2009-10 8th Ex. Session, enacted the original  
          gas tax swap, which eliminated the sales tax on gasoline and  
          replaced it with an increase in excise taxes on gasoline.   
          Although the mechanism was revenue neutral, a portion of  
          "swapped" gas tax revenues was redirected to pay  
          transportation-related general obligation debt service, and  








          SB 1418 (DeSaulnier)
          Page 1


          resulted in a reduction of revenues deposited into the State  
          Highway Account.  Subsequently, Proposition 22 was passed by the  
          voters in 2010, a part of which prohibited excise tax revenues  
          from being used to pay debt service on general obligation bonds.  
           As a result, a reconstituted gas tax swap was enacted as part  
          of the 2011-12 budget, AB 105 (Committee on Budget), Chap.  
          6/2011, directing vehicle weight fee revenues to the  
          Transportation Debt Service Fund, which is used to reimburse the  
          General Fund for payment of transportation-related general  
          obligation debt.

          Existing law, SB 85 (Committee on Budget and Fiscal Review),  
          Chap. 35/2013, authorizes the issuance of "designated bonds,"  
          which are general obligation bonds secured by vehicle weight  
          fees transferred to the Transportation Debt Service Fund.  If  
          revenues in this Fund are insufficient to meet the debt service  
          requirements, the General Fund would make up the shortfall.  To  
          date, the authority to issue designated bonds has not been  
          exercised.

          Proposed Law: SB 1418 would do the following:
              Delete provisions that direct vehicle weight fees to the  
              Transportation Debt Service Fund to pay for  
              transportation-related general obligation bond debt.
              Require those revenues to instead be redirected as follows:
               o      56% to the State Highway Account for eligible  
                 transportation-related expenditures, of which a minimum  
                 of 21.43% must be used to fund projects in the SHOPP.
               o      44% to local streets and road purposes.
              Delete the provisions that authorize the issuance of  
              "designated bonds" secured by vehicle weight fees, as  
              specified.
              Specify that the bill is an urgency measure, and that  
              certain provisions would take effect on July 1, 2014, should  
              it be enacted on or before that date.

          Related Legislation: AB 2728 (Perea/Linder), which is currently  
          on the Appropriations Committee Suspense File, would prohibit  
          vehicle weight fee revenue from being used to pay debt service  
          on transportation-related general obligation bonds until January  
          1, 2019.

          Staff Comments: By the end of the 2013-14 fiscal year,  
          approximately $3.9 billion in weight fees will have been  








          SB 1418 (DeSaulnier)
          Page 2


          transferred for transportation-related debt service and General  
          Fund relief.  An additional $957.5 million is projected to be  
          transferred in 2014-15.  This bill would prevent that transfer  
          and result in a corresponding increase in General Fund  
          expenditures.  Staff notes, that the mechanism for transferring  
          weight fees enacted by AB 105 has resulted in an accumulation of  
          "prepaid" weight fees (amounts not needed for immediate debt  
          service payments) of approximately $1.3 billion.  This bill  
          would not affect those prepayments, which could be used for  
          General Fund debt service relief until they are exhausted.   
          However, absent this bill, the prepayments are projected to be  
          exhausted by 2017-18.