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.