BILL ANALYSIS                                                                                                                                                                                                    

          |SENATE RULES COMMITTEE            |                         SB 16|
          |Office of Senate Floor Analyses   |                              |
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                                   THIRD READING 

          Bill No:  SB 16
          Author:   Beall (D)
          Amended:  6/1/15  
          Vote:     27  - Urgency

           SENATE TRANS. & HOUSING COMMITTEE:  6-1, 4/28/15
           AYES:  Beall, Allen, Leyva, McGuire, Mendoza, Wieckowski
           NOES:  Gaines
           NO VOTE RECORDED:  Cannella, Bates, Galgiani, Roth

           SENATE GOVERNANCE & FIN. COMMITTEE:  5-1, 5/6/15
           AYES:  Hertzberg, Beall, Hernandez, Lara, Pavley
           NOES:  Moorlach
           NO VOTE RECORDED:  Nguyen

           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SUBJECT:   Transportation funding

          SOURCE:    Author

          DIGEST:   This bill increases several taxes and fees to raise  
          roughly $3.5 billion in new transportation revenues annually for  
          five years with the funding used to address deferred maintenance  
          on the state highways and local streets and roads.   
          Specifically, this bill imposes (1) a $0.10 per gallon excise  
          tax on gasoline, (2) a $0.12 per gallon excise tax on diesel  
          fuel, and (3) increased vehicle license fees and registration  
          fees for five years.


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          ANALYSIS:   Existing law imposes state taxes and fees related to  
          transportation as follows:

           Gasoline excise tax:  $0.36/gallon;
           Diesel excise tax:  $0.11/gallon;
           Diesel sales tax:   $0.27/gallon;
           Vehicle license fee (VLF):  0.65% of market value;
           Vehicle registration fee (VRF):  $43 per vehicle; and
           Weight fees, for commercial vehicles only, up to a maximum  
            amount of $2,271.

          This bill:

          1)Increases taxes and fees, and creates new fees, over time as  

                 Gasoline excise tax:  $0.10/gallon;
                 Diesel excise tax:  $0.12/gallon;
                 VLF:  for non-commercial vehicles, 0.07% each year so  
               that the VLF is 1.00% by July 1, 2019; and
                 VRF:  $35 per vehicle plus an additional $100 for  
               zero-emission vehicles.

          2)Allocates the new funds formulaically to both state and local  
            projects.  Five percent is set aside for counties which pass  
            local sales and use taxes for transportation purposes, and  
            which have not previously passed such taxes.  The remainder is  
            split 50/50 between state and local projects.  The local  
            project funding is allocated pursuant to an existing statutory  
            formula where 50% goes to cities based on population and 50%  
            goes to counties based on a combination of the number of  
            registered vehicles and the miles of county roads.   

          3)Requires the city and county, in order to receive these funds,  
            to maintain their historic commitment to funding street and  
            highway purposes by annually expending not less than the  
            average of its expenditures for the 2009-10, 2010-11 and  
            2011-12 fiscal years.  

          4)Requires the California Transportation Commission (CTC) to  
            annually evaluate each agency receiving funds to ensure that  
            the funds are spent appropriately. 


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          5)Redirects truck weight fees from the General Fund to road  
            maintenance purposes, phased in over five years.  The loss to  
            the General Fund is backfilled by the VLF increase.

          The Governor, in his 2015 inaugural address, noted that the  
          state faces a $59 billion shortfall over the next 10 years to  
          adequately maintain the existing state highway system.  Local  
          governments have estimated the funding shortfall for maintaining  
          existing local streets, highways and bridges is $78 billion over  
          the same time period.

          Purpose of bill.  According to the author, this bill solves a  
          crisis that threatens our deteriorating streets and highways.   
          California faces a $59 billion backlog in deferred maintenance  
          that will grow by billions every year.  The state transportation  
          system is critical to California's economic well-being, as it  
          enables us to move goods, people, and ideas around the state.   
          SB 16 creates a much-needed, temporary funding plan to address  
          the maintenance backlog of our aging systems.  Under this bill,  
          everyone who uses the roads will share in paying for the cost of  
          these essential repairs.  

          What will this cost me?  For an average driver, using a typical  
          vehicle value, average fuel efficiency, and driving 12,000 miles  
          per year, the extra fees and taxes will result in direct cost  
          increases of about $120/year or $0.33/day.  Individuals with  
          more expensive cars or who use more gas or diesel will pay more.  

          Pay now or pay more later.  Engineers have observed that the  
          cost of fixing roads is relatively low initially, but at some  
          point the road wear starts to accelerate, greatly increasing the  
          cost of repair.  A study commissioned by the League of  
          California Cities and the California State Association of  
          Counties notes that many California streets are at the point of  
          accelerating road wear.  Without additional funding, the  
          percentage of roads in failed condition will increase from 6% to  
          25% by 2024, greatly increasing the cost of repair.  Inaction is  


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          A good start, not a final solution.  As vehicle fuel efficiency  
          rises and fossil fuel alternatives become available, gasoline  
          and diesel taxes become less reliable and less fair mechanisms  
          to pay for the cost of roads.  SB 1077 (DeSaulnier, Chapter 835,  
          Statutes of 2014) required the CTC to study alternatives to fuel  
          taxes, such as a road usage charge.  That effort is underway,  
          but new mechanisms for paying for roads aren't expected for  
          several years; legislation will be required.  The author's  
          expectation is that whatever mechanisms the California  
          Department of Transportation (Caltrans) develops will be ready  
          to be implemented statewide in time to take effect as this bill  
          sunsets.  In the meantime, the funding deficit for repairing and  
          maintaining existing roads and bridges continues to grow.  This  
          bill is an effort to stop the deterioration and start improving  
          the overall condition of state and local roads.  This bill will  
          not raise sufficient funds to bridge the entire combined $137  
          billion gap in state and local transportation maintenance needs.

          Sunset.  The road maintenance program established in this bill  
          sunsets at the end of the 2019-20 fiscal year.  If the  
          Legislature does not reauthorize the program beyond that fiscal  
          year, then the increases in the gasoline and diesel fuel taxes  
          and the $35 increase in the vehicle registration fee terminate.

          Other states.  California's transportation funding shortfalls  
          are shared by other states.  According to the American  
          Association of State Highway Transportation Officials database,  
          14 states have increased taxes and fees and dedicated that  
          funding to transportation projects, including Georgia, Iowa,  
          Pennsylvania, Utah and Wyoming.  Congress is also considering  
          the issue.

          Another idea.  In February, the Speaker of the Assembly  
          announced her plan to increase transportation funding by $2  
          billion annually by establishing a road user charge or a flat  
          annual fee for access to the road system, returning weight fees  
          to transportation purposes, and accelerating the repayment of  
          transportation loans.  A bill to enact that proposal has not yet  
          been introduced.

          Helping themselves.  As previously noted, this bill allocates 5%  
          of revenues to counties whose voters approve a sales tax for  
          transportation purposes, and who have not approved such a tax  
          before.  Each fiscal year, unallocated funds revert back and are  


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          split 50/50 between the state and local governments.  This  
          provision may need further work on its mechanisms and  
          FISCAL EFFECT:   Appropriation:    Yes         Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee:

           The Board of Equalization (BOE) estimates that total revenues  
            (excise and sales tax) from the gasoline and diesel tax rate  
            increases would lead to revenue gains of $1.048 billion in  
            2015-16 and $1.863 billion in 2016-17 (General Fund and  
            special funds).

           The proposed $100 fee on zero emission vehicles would generate  
            $10.8 million annually (special funds).

           The proposed $35 increase in the vehicle registration fee  
            would generate $1.085 billion annually (special funds).

           Assuming no other changes beyond the increased VLF rate  
            itself, the rate increase to 1.0% would generate $1.216  
            billion annually when fully phased-in (General Fund).

           BOE would incur one-time and ongoing administration costs to  
            implement this bill, at a minimum in the hundreds of thousands  
            of dollars annually (special funds).

           The Department of Motor Vehicles would incur one-time  
            programming costs of $350,000, and ongoing costs of under  
            $25,000 with each change in the VLF (special funds).

           This bill results in $577,000 (special funds) ongoing in new  
            administration costs to the CTC.

           Caltrans would incur one-time administration costs that are  
            unknown, but likely to be in the tens of thousands of dollars  

           The costs of administering the provisions of this bill are  
            paid out of the new revenues raised by the bill.


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          SUPPORT:   (Verified5/29/15)

          American Society of Civil Engineers
          Associated General Contractors 
          California Alliance for Jobs
          California Association of Councils of Governments
          California Contract Cities Association
          California State Association of Counties
          California Infill Federation
          City/County Association of Governments of San Mateo County
          City of Calexico
          City of Cathedral City
          City of Claremont
          City of Bellflower
          City of Brisbane
          City of Burbank
          City of Capitola
          City of Clearlake
          City of Cloverdale
          City of Daly City
          City of Downey
          City of Fountain Valley
          City of Fowler
          City of Gilroy
          City of Hanford
          City of Hayward
          City of Hercules
          City of Hughson
          City of Huntington Park
          City of Indian Wells
          City of Lafayette
          City of Lake Elsinore
          City of Lakeport
          City of Lakewood
          City of Los Altos
          City of Los Altos Hills
          City of Livermore
          City of Martinez
          City of Mill Valley
          City of Modesto
          City of Montclair
          City of Montebello
          City of Monterey Park


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          City of Morgan Hill
          City of Napa
          City of Novato
          City of Pacifica
          City of Palos Verdes Estates
          City of Pico Rivera
          City of Pleasant Hill
          City of Rancho Cucamonga
          City of Rancho Mirage
          City of Rosemead
          City of Sacramento
          City of San Jose
          City of Santa Ana
          City of Santa Clara
          City of Santa Maria
          City of San Gabriel
          City of Sanger
          City of San Mateo
          City of Santa Barbara
          City of Santa Rosa
          City of Seaside
          City of Shasta Lake
          City of Soledad
          City of South El Monte
          City of Temecula
          City of Thousand Oaks
          City of Turlock
          City of Ventura
          City of Watsonville
          City of West Sacramento
          City of Whittier
          County of Humboldt
          CTM Construction
          Glendale City Employees Association
          Laborers' International Union of North America
          Laborers' International Union of North America Locals 777 & 792
          League of California Cities
          Los Angeles County Division of the League of Cities
          Marin County Board of Supervisors
          Marin County Council of Mayors and Council Members
          Mendocino County Board of Supervisors
          Monterey County Board of Supervisors
          Northern California Carpenters Regional Council
          Organization of SMUD Employees


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          Professional Engineers in California Government
          Riverside County Board of Supervisors
          San Benito County Board of Supervisors
          San Bernardino Public Employees Association
          San Luis Obispo County Employees Association
          San Joaquin Valley Regional Transportation Authority
          San Diego County Court Employees Association
          Santa Clara County Board of Supervisors
          Santa Clara Open Space Authority
          Silicon Valley Leadership Group
          Town of Colma
          Town of Danville
          Town of Moraga

          OPPOSITION:   (Verified5/29/15)

          Association of California Car Clubs
          Howard Jarvis Taxpayers Association
          Six individuals

          Prepared by:Randy Chinn / T. & H. / (916) 651-4121
          6/1/15 18:52:14

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