BILL ANALYSIS Ķ SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 9 (Beall) - Greenhouse Gas Reduction Fund: Transit and Intercity Rail Capital Program. ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: May 5, 2015 |Policy Vote: E.Q. 7 - 0, T. & | | | H. 10 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 18, 2015 |Consultant: Marie Liu | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 9 would make a number of changes to the Transit and Intercity Rail Capital Program (TIRCP) in order to refocus the program to fund large, transformative projects. Fiscal Impact: SB 9 (Beall) Page 1 of ? Unknown cost pressures, at least in the millions of dollars, to the Greenhouse Gas Reduction Fund (GGRF, special) by expanding eligibility of the TIRCP to include ferry transit systems. Potential relief of cost pressures to the Greenhouse Gas Reduction Fund by deleting operational expenditures from eligibility from the TIRCP. Background: The Legislature enacted AB 32 (Nuņez, Chapter 488), the Global Warming Act of 2006, which requires the California Air Resources Board (ARB) to establish a statewide greenhouse gas (GHG) emissions limit such that by 2020 California reduces its GHG emissions to the level they were in 1990. The Cap-and-Trade Program is one of ARB's key AB 32 implementation programs. Under this program, ARB establishes an overall limit - or "cap" - on GHG emissions from specified industries. As part of the Cap-and-Trade Program, ARB auctions off GHG emission allowances as mitigation fees. To date, ARB has completed 10 auctions, taking in a total of $1.6 billion in proceeds. These funds may only be used to facilitate the achievement of GHG emission reductions in California consistent with AB 32. In 2014, the Legislature enacted SB 862 (Committee on Budget and Fiscal Review, Chapter 36), a budget trailer bill which establishes a long-term cap-and-trade expenditure plan by continuously appropriating portions of the funds for designated programs or purposes. One of these programs is the Transit and Intercity Rail Capital Program (TIRCP), to which SB 862 commits 10% of the annual cap-and-trade revenues. Existing law specifies that the TIRCP fund both capital SB 9 (Beall) Page 2 of ? improvements and operational investments in order to modernize California's intercity, commuter, and urban rail systems as well as achieve the following specific policy goals: Reduce GHG emissions Expand and improve rail service to increase ridership Integrate various rail operators' systems, including high-speed rail Improve rail safety Existing law appropriates the funds to the California Transportation Agency (agency), and assigns the agency with the responsibility of evaluating funding applications and adopting a list of projects. Prior to commencing the program, the agency is required to develop draft program guidelines containing selection criteria. Finally, existing law requires the California Transportation Commission (CTC) to award grants pursuant to the list of projects chosen by the agency. In evaluating project applications, SB 862 requires the agency to consider: Specified cobenefits, including reduction of auto vehicle miles traveled, promotion of housing development near rail stations, expansion of existing rail and transit systems, implementation of clean-vehicle technology, promotion of active transportation, and improvements to public health. Whether the project was developed through the collaboration of two or more rail operators Geographic equity Consistency with the adopted sustainable communities strategies and the recommendations of regional agencies SB 9 (Beall) Page 3 of ? Finally, existing law establishes a programmatic goal for the TIRCP to provide at least 25% of available funding to projects that provide a direct, meaningful, and assured benefit to disadvantaged communities. Proposed Law: This bill makes a number of significant changes to the TIRCP, mostly towards the goal of focusing the program on large, transformative capital improvements. Specifically, this bill would: Recast the TIRCP mission to focus on large, transformative capital improvements and eliminating operations funding as an eligible use of the funds. Specify that the agency dedicate 90% of the funds to projects with a total cost of $100 million or more, and 10% to projects costing less than $100 million. Expand eligible applicants to include ferry transit systems and clarify that bus systems are eligible. Add the following specific cobenefits criteria that are to be considered when the agency is evaluating grants: o Reducing the number of auto trips in addition to reducing vehicle miles traveled, o Enhancing connectivity and coordination of all transit in a region, o Providing direct connectivity to the proposed high-speed rail system SB 9 (Beall) Page 4 of ? Require that the agency also consider the following when evaluating projects: o The extent to which a project reduces GHG emissions, o The extent to which a project leverages other sources of funding, o The extent to which a project will increase transit ridership. Create a process by which the agency may make multiyear funding commitments for projects. Require the agency to develop a five-year estimate of revenues reasonably expected to be available to the program from the GGRF and to adopt a program of projects for those five years. Require that the agency to award projects on even-numbered years for a five year period. Establish a process by which a grant recipient can receive a Letter of No Prejudice (LONP) from the agency, which enables the recipient to spend alternative funds on a project that has been awarded a TIRCP grant with the promise of future reimbursement from future cap-and-trade revenues. Staff Comments: This bill explicitly adds bus and ferry transit systems as eligible for funds under the TIRCP. In existing law, the language used in the policy statements guiding the formation of the TIRCP in §75220 is very focused on rail. However, existing law also explicitly includes bus rapid transit in a list of eligible projects in §75221(a). Therefore, the explicit addition of buses into various sections of code relevant to the SB 9 (Beall) Page 5 of ? TIRCP can be seen as clarifying amendments. However, because there is no existing mention of ferry transit systems under the existing law, the explicit addition of ferry service in this bill can be seen as an expansion of eligibility, which creates cost pressure on the funding source of the TIRCP, the GGRF. While there are only a few ferry systems in the state, building or expanding a ferry terminal can be of significant cost. Thus, staff estimates that this bill adds cost pressures to the GGRF in an unknown amount, but at least in the millions of dollars. This bill also removes operating costs operations funding as an eligible use of TIRCP funds. As this reduces demand for the program, it decreases cost pressures. It is unknown how large this reduction in cost pressures would be relative to the increase in cost pressures created making ferries eligible for funding. The agency estimates that it will have minor and absorbable costs to update their guidelines and implement the revamped program as envisioned by this bill. Staff notes that this estimate is based on the ability for the agency to calculate the five-year estimate of program funding by assuming past revenues will be indicative future revenues. Staff notes that this is a very rough calculation as the revenues to the TIRCP are based on cap-and-trade auction revenues, which are driven (by design) by the markets, and therefore are difficult to predict. The bill requires that the estimate be "reasonable." Assuming that this estimate is "reasonable," making a five year estimate should not be workload intensive for the agency. -- END -- SB 9 (Beall) Page 6 of ?