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.
          


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          |Version: May 5, 2015            |Policy Vote: E.Q. 7 - 0, T. &   |
          |                                |          H. 10 - 0             |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 18, 2015      |Consultant: Marie Liu           |
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          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: 







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           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  








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          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








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          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









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           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  








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          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.




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