BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: SB 9
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|Author: |Beall |
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|Version: |12/1/2014 |Hearing |3/18/2015 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Rebecca Newhouse |
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Subject: Greenhouse Gas Reduction Fund: Transit and Intercity
Rail Capital Program
ANALYSIS:
Existing law:
1. Under the California Global Warming Solutions Act of 2006,
requires the Air Resources Board (ARB) to determine the 1990
statewide greenhouse gas (GHG) emissions level and approve a
statewide GHG emissions limit that is equivalent to that
level, to be achieved by 2020, and to adopt GHG emissions
reductions measures by regulation. ARB is authorized to
include the use of market-based mechanisms to comply with
these regulations. (Health and Safety Code §38500 et seq.)
2. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the
State Treasury, requires all moneys, except for fines and
penalties, collected pursuant to a market-based mechanism be
deposited in the fund, and requires the Department of
Finance, in consultation with the state board and any other
relevant state agency, to develop, as specified, a three-year
investment plan for the moneys deposited in the GGRF.
(Government Code §16428.8)
3. Requires moneys from the GGRF be used to facilitate the
achievement of
reductions of GHG emissions in this state consistent with the
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California Global Warming Solutions Act of 2006, and
authorizes those
funds to be allocated for the purpose of reducing greenhouse
gas emissions. Annual budget appropriations of GGRF funds are
required to be consistent with the investment plan. (HSC
§39712)
4. Requires the GGRF investment plan to allocate, at a minimum,
25% of the funds to benefit disadvantaged communities, and to
allocate 10% of GGRF monies within disadvantaged communities.
(HSC §39713)
5. Requires the ARB, in consultation with the California
Environmental Protection Agency (CalEPA), to develop funding
guidelines for all agencies that are appropriated monies from
the GGRF. These guidelines must include a component for how
administering agencies should maximize benefits for
disadvantaged communities. (HSC §39715)
6. Requires agencies, prior to expending any GGRF monies, to
prepare an expenditure record describing the expenditure, and
to make other specified determinations. The ARB is required
to develop guidance on reporting and quantification methods
for state agencies expending GGRF to comply with the
expenditure record requirements. (HSC §16428.9)
7. Establishes the Transit and Intercity Rail Capital Program,
funded through a continuous appropriation of the GGRF, to
fund capital improvements and operational investments that
reduce GHG emissions and modernize California's intercity,
commuter, and urban rail systems to achieve specified goals.
The program establishes a programmatic goal to provide at
least 25% of available funding to projects that provide a
direct, meaningful, and assured benefit to disadvantaged
communities, and among other things, requires:
A. That eligible projects demonstrate they will achieve
greenhouse gas emissions reductions.
B. The California State Transportation Agency (CalSTA),
in evaluating grant applications for funding, consider:
(1) Specified cobenefits, including reduction of
auto vehicles miles traveled, promotion of housing
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development near rail stations, expanding existing
rail and transit systems, implementation of clean
vehicle technology, promotion of active
transportation, and improvements to public health.
(2) The project priorities developed through the
collaboration of two or more rail operators and any
memoranda of understanding between state agencies and
local or regional rail operators.
(3) Geographic equity.
(4) Consistency with the adopted sustainable
communities strategies and the recommendations of
regional agencies.
C. Applications for grants be submitted to the CalSTA
for evaluation in accordance with procedures and program
guidelines adopted by the agency and requires CalSTA to
submit a list of recommended projects to the California
Transportation Commission (CTC) for awarding grants.
D. CalSTA to develop draft program guidelines containing
selection criteria prior to adoption and specifies public
participation and notice requirements.
This bill:
1. Modifies the objective of the program to fund large
transformative capital improvements, instead of operational
investments, with a total cost exceeding one hundred million
dollars.
2. Requires CalSTA to consider the extent to which a project
reduces GHG emissions for prioritizing and recommending
projects for funding.
3. Removes the requirement for CalSTA, when considering an
applicant's consistency with adopted sustainable community
strategies, to also consider recommendations from regional
agencies.
4. Requires CalSTA to additionally consider the following when
evaluating grant applications:
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A. Other cobenefits including enhanced connectivity,
integration and coordination of state and local transit
systems, and whether the project provides a direct
connection to the high-speed rail system.
B. The extent to which a project has supplemental funding
from non-state sources.
C. The extent to which a project will increase ridership.
5. Authorizes an eligible applicant to submit a multiyear
funding application and authorizes CalSTA to make multiyear
funding commitments for projects.
6. Requires applicants:
A. Make determinations regarding project purpose, intended
scope, intended funding sources and project completion
schedule;
B. Specify the phases of work for which they are seeking
allocation;
C. Identify the sources and timing of all funds required
to undertake and complete any phase of a project, and
describe intended sources and timing of funds to complete
subsequent phases of the project.
7. Requires CalSTA, by July 1, 2016, to develop a five-year
estimate of revenues of the program in annual increments and
adopt an initial program of projects for those five years,
and requires CalSTA to adopt subsequent programs of projects,
as a statement of intent for allocation and expenditure, no
later than April 1 of each even-numbered year.
8. Requires CalSTA to enter into and execute a multiyear funding
agreement with an eligible applicant for a multiyear project,
and requires the agreement to include a proposed schedule of
funds expected by year, and authorizes that agreement to
extend beyond the five fiscal years covered by the program of
projects.
9. Authorizes a lead applicant agency to apply to CTC for a
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letter of no prejudice in order to allow the lead applicant
to expend their own funds for the project and be eligible for
future reimbursement from the GGRF.
10.Requires the lead applicant agency, if their letter of no
prejudice is granted by CTC, to be reimbursed for funds they
have expended for the project, under specified conditions.
11.Authorizes CTC, in consultation with other specified
entities, to develop guidelines to implement the no prejudice
provisions.
Background
Cap-and-trade auction revenue. ARB conducted nine cap-and-trade
auctions between November 2012 and November 2014, generating a
total of $970 million in proceeds to the state. A tenth auction
was held jointly with Quebec in February of this year, but the
proceeds have not yet been published.
Several bills in 2012, and one in 2014, provided legislative
direction for the expenditure of auction proceeds including SB
535 (de León) Chapter 830, Statutes of 2012, AB 1532 (J. Pérez)
Chapter 807, Statutes of 2012, SB 1018 (Budget Committee)
Chapter 39, Statutes 2012, and SB 862 (Budget Committee) Chapter
36, Statutes of 2014.
SB 535 (de León) Chapter 830, Statutes of 2012, requires that
25% of auction revenue be used to benefit disadvantaged
communities and requires that 10% of auction revenue be invested
in disadvantaged communities.
AB 1532 (J. Pérez) Chapter 807, Statutes of 2012, directs the
Department of Finance to develop and periodically update a
three-year investment plan that identifies feasible and
cost-effective GHG emission reduction investments to be funded
with cap-and-trade auction revenues. AB 1532 specifies that
reduction of greenhouse gas emissions through strategic planning
and development of sustainable infrastructure projects, are
eligible investments of GGRF.
SB 1018 (Budget Committee) Chapter 39, Statutes of 2012, created
the GGRF, into which all auction revenue is to be deposited. The
legislation requires that before departments can spend monies
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from the GGRF, they must prepare a record specifying: (1) how
the expenditures will be used, (2) how the expenditures will
further the purposes of AB 32 (Nuñez, Pavley) Chapter 488,
Statutes of 2006, (3) how the expenditures will achieve GHG
emission reductions, (4) how the department considered other
non-GHG-related objectives, and (5) how the department will
document the results of the expenditures.
SB 862 (Budget Committee) Chapter 36, Statutes of 2014, requires
the ARB to develop guidelines on maximizing benefits for
disadvantaged communities by agencies administering GGRF funds,
and guidance for administering agencies on GHG emission
reduction reporting and quantification methods.
Legal consideration of cap-and-trade auction revenues. The
2012-13 budget analysis of cap-and-trade auction revenue by the
Legislative Analyst's Office noted that, based on an opinion
from the Office of Legislative Counsel, the auction revenues
should be considered mitigation fee revenues, and their use
requires that a clear nexus exist between an activity for which
a mitigation fee is used and the adverse effects related to the
activity on which that fee is levied. Therefore, in order for
their use to be valid as mitigation fees, revenues from the
cap-and-trade auction must be used to mitigate GHG emissions or
the harms caused by GHG emissions.
In 2012, the California Chamber of Commerce filed a lawsuit
against the ARB claiming that cap-and-trade auction revenues
constitute illegal tax revenue. In November 2013, the superior
court ruling declined to hold the auction a tax, concluding that
it's more akin to a regulatory fee.
AB 32 auction revenue investment plan. The first three-year
investment plan for cap-and-trade auction proceeds, submitted by
Department of Finance, in consultation with ARB and other state
agencies in May of 2013, identified sustainable communities and
clean transportation as one of the key sectors that provide the
best opportunities for achieving the legislative goals and
supporting the purposes of AB 32. The plan recommended the
aforementioned sector receive the largest allocation of funds
from the GGRF, but did not specify a monetary amount.
Budget allocations. The 2014-15 budget allocates $832 million in
GGRF revenues to a variety of transportation, energy, and
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resources programs aimed at reducing GHG emissions. Various
agencies are in the process of implementing this funding. The
budget agreement specifies how the state will allocate most
cap-and-trade auction revenues in 2015-16 and beyond. For all
future revenues, the legislation appropriates 25% for the
state's high-speed rail project, 20% for affordable housing and
sustainable communities grants, 10% to intercity capital rail
projects, and 5% for low-carbon transit operations. The
remaining 40% is available for annual appropriation by the
Legislature.
The Governor's proposed 2015-16 budget assumes the receipt of
$650 million in cap-and-trade auction revenues in 2014-15 and $1
billion in 2015-16. The Governor's proposed 2015-16
cap-and-trade expenditures are largely the same as the 2014-15
plan, albeit with larger amounts allocated for affordable
housing and sustainable communities grants, the transit and
intercity rail capital program, and the low-carbon transit
operations.
SB 862 (Budget Committee), Chapter 36, Statutes of 2014, created
several statutory programs to implement the budget
appropriations, including the Transit and Intercity Rail Capital
Program and the Low-Carbon Transit Operations Program.
Low Carbon Transit Operations Program. This program provides
operating and capital assistance to transit agencies to reduce
GHG emissions and improve mobility, with a priority on serving
disadvantaged communities. Eligible projects include expanded,
new, or enhanced transit services; conversion or retrofit of
transit vehicles and equipment to zero-emission; expanded
intermodal transit facilities; and infrastructure to support
zero-emission or plug-in hybrid vehicles. The 2014-15 budget
provides for a continuous appropriation of 5% of cap-and-trade
funds for this program beginning in 2015-16. The California
Department of Transportation (Caltrans) and ARB are currently
reviewing applications. The Low Carbon Transit Operations
Program is not a competitive program, but based on project
eligibility according to statute and program guidelines and an
established transportation funding formula.
The Transit and Intercity Rail Capital Program. The Transit and
Intercity Rail Capital Program funds capital improvements for
GHG emission reductions that expand and improve rail service,
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and integrate state and local rail and other transit systems,
including the high-speed rail system. The 2014-15 budget
provided for a continuous appropriation of 10%, or $25 million,
of cap-and-trade funds to this program beginning in 2015-16.
With these funds, as well as the 10% of GGRF projected for the
2015-16 budget, CalSTA is currently soliciting applications for
almost $125 million in grants for the Transit and Intercity Rail
Capital Program. CalSTA is required to evaluate applications,
and then prepare a list of projects recommended for funding to
be used by the California Transportation Commission in awarding
grant monies.
CalSTA released draft guidelines for the program in December
2014, and finalized them on February 6th. The guidelines
describe the policy, standards, criteria, and procedures for the
development, adoption and management of the Transit and
Intercity Rail Capital Program.
The guidelines have project applications due to Caltrans by
April 10, of this year. By late August, CalSTA will present a
project list to the CTC for subsequent funding.
The guidelines state that it is CalSTA's intent to adopt an
initial multiyear program of projects covering a minimum of two
years of estimated funding.
The Division of Transportation Programming at Caltrans describes
"programming" as "the commitment of transportation funds to be
available over a period of several years to particular
projects." Given that transportation projects take a number of
years to develop and build, a multiyear program of projects
provides some level of predictability to allow agencies to plan
their projects. Thus, a program of projects is fairly common in
the world of transportation.
The guidelines also note that "CalSTA will also make some
funding available for demonstration projects that are smaller
scale efforts with great potential to be expanded. These may
include projects such as a novel approach to attracting new
riders or a test of a concept related to integrated ticketing,
as well as intercity rail or transit effectiveness or
operational studies that are expected to have elements that can
be implemented with little or no capital investment (such
studies must result in a reduction in net greenhouse gas
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emission)."
SB 862 establishes a goal for the Transit and Intercity Rail
Capital Program of providing at least 25% of available funding
to projects that provide a direct, meaningful, and assured
benefit to disadvantaged communities. SB 862 also requires the
ARB, in consultation with CalEPA, to develop funding guidelines
for all agencies that are appropriated monies from the GGRF.
These guidelines must include a component for how administering
agencies should maximize benefits for disadvantaged communities.
ARB draft SB 535 guidelines. ARB released a revised draft of
these SB 535 guidelines in August of last year. ARB guidance for
the Transit and Intercity Rail Capital Program specify criteria
for evaluating whether projects provide benefits to or within
disadvantaged communities. New transit lines, more frequent
service, greater capacity on existing lines that are nearing
capacity, improved reliability for routes in disadvantaged
communities, as well as bus rapid service for disadvantaged
community residents, all count towards the 10% of GGRF monies
that must be spent within disadvantaged communities.
The guidelines also specify criteria for determining whether
projects "provide benefits to disadvantaged communities." Some
of these criteria include whether projects provide improved
local bus transit service or improved connectivity for riders
using stations or stops that are accessible by walking within
onehalf mile of a disadvantaged community, or if the project
will increase intercity rail, commuter bus or rail transit
ridership, with at least 25% of new riders from disadvantaged
communities; or whether projects result in at least 25% of
project work hours performed by residents of a disadvantaged
community.
Comments
1. Purpose of Bill. According to the author, "Transportation
funding available under the Transit and Intercity Rail
Capital Program should be invested in projects that maximize
reductions in greenhouse gas emissions to ensure California
meets its climate goals set forth by AB 32.
"If California is to be successful in achieving significant
greenhouse gas emissions reductions from the transportation
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sector, a necessary outcome since the transportation sector
accounts for roughly 40% of these emissions, it is important
to ensure that cap-and-trade auction proceeds can be invested
in transit capital expansion projects that will have the most
impact. SB 9 is intended to focus the Transit and Intercity
Rail Capital Program on funding a smaller number of
large-scale transit expansion projects that would result in
substantial reductions in greenhouse gas emissions. The
changes proposed in SB 9 would result in a more desirable
outcome for the Transit and Intercity Rail Capital Program,
as opposed to scattering small amounts of money around to a
very large number of projects-an approach that typically gets
used for transportation competitive grant programs, but would
not be effective in the case of expending cap-and-trade
dollars, given the emphasis on reducing greenhouse gas
emissions.
"SB 9 would allow the Transit and Intercity Rail Capital
Program to accommodate large-scale transit expansion projects
seeking more substantive sums of cap-and-trade dollars by
enabling CalSTA to program, commit and allocate funding over
multiple fiscal years. Accommodating such projects would not
be possible if CalSTA were to initiate a new competitive
process for the Transit and Intercity Rail Capital Program
every single fiscal year and program only one year's worth of
funding at a time because a public transit agency would have
to resubmit an application for the same project and compete
year after year in order to obtain the amount of
cap-and-trade that it needs. In turn, this uncertainty would
not allow a public transit agency to use cap-and-trade
revenues to leverage federal dollars or to secure financing
for its large-scale project."
2. Prioritizing GHG emissions reductions. The program currently
requires that eligible projects require GHG emission
reductions. SB 9 expands on this requirement by ensuring that
CalSTA prioritizes projects for funding based on the extent
to which they will reduce GHG emission reductions.
3. Shifting the focus: larger, multiyear grants, but fewer
projects. According to the CalSTA guidelines, CalSTA intends
to fund a small number of transformational projects that
improve the statewide transportation network in the first
programming cycle. These may include, for example, both
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lowercost pr4.ojects focused on integration, reliability and
enhancement of service, and highercost capital expansion
projects. SB 9 shifts the focus away from lower-cost, smaller
projects, since the bill requires eligible projects be over
$100,000,000, and requires CalSTA to develop five-year plans
for the allocation and expenditure of funds. These amendments
are designed to concentrate funds among a few, large,
"transformative" projects, and to further differentiate the
program from the Low Carbon Transit Operations Program that
awards grants to reduce GHG emissions through operating and
capital assistance for transit agencies. Indeed, the $100
million threshold established by SB 9 would significantly
reduce the number of projects that can be funded with monies
available to the program through cap-and-trade auction
revenue (currently $125 million from the 2014-15 budget
appropriation and the 2015-16 budget proposal).
However, not all transformative projects to improve or
modernize intercity rail or transit may exceed $100,000,000.
Does the minimum expenditure requirement unnecessarily
disqualify less expensive, competitive projects that may
achieve the goals of the Transit and Intercity Rail Capital
Program, result in improved transit experiences, and
significantly reduce GHG emissions?
According to the author, they are currently in discussions
with stakeholders to address this concern.
5. Authorize, instead of require, multiyear funding. The bill
requires CalSTA to enter into and execute a multiyear funding
agreement with an eligible applicant for a multiyear project
from the five-year program of projects developed by CalSTA
(page 6, line 14). As this requirement does not allow for any
agency discretion, the Committee may wish to amend the bill
to authorize, not require, CalSTA to award multiyear funding
agreements for these projects.
6. Technical Amendment. An amendment is needed to correct a
drafting error on page 2, line 6, that incorrectly refers to
one hundred million dollars as $1,000,000.
Related/Prior Legislation
SB 862 (Committee on Budget, Chapter 36, Statutes of 2014)
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established requirements for ARB to develop guidelines for
agencies administering GGRF funds.
SOURCE: Author
SUPPORT:
Northern California Carpenters Regional Council
Santa Clara Valley Transportation Authority
Silicon Valley Leadership Council
OPPOSITION:
TransForm
ARGUMENTS IN SUPPORT: Supporters note that SB 9 would allow
CalSTA to accommodate larger-scale projects by programming and
allocating their funding over multiple fiscal years, and that
these types of projects could not be accommodated if CalSTA were
to initiate a new competitive process every single fiscal year
and program only one year's worth of funding at a time. They
also note that these larger scale projects would result greater
GHG emission reductions than the current design of the program,
which they describe as spreading a small amount of money around
to a large number of projects.
ARGUMENTS IN OPPOSITION: Opponents fear that requiring the
funds go to projects over $100 million, and giving priority to
nonstate funding will eliminate from eligibility many projects
within disadvantaged communities who currently lack the funding
for even smaller projects that target high propensity riders and
provide desperately needed transportation choices. They also
note that these changes would significantly alter the program,
and they urge the inclusion of a robust public process akin to
the process that took place when enacting the current program.
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