BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 9|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: SB 9
Author: Beall (D), et al.
Amended: 6/2/15
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE: 7-0, 3/18/15
AYES: Wieckowski, Gaines, Bates, Hill, Jackson, Leno, Pavley
SENATE TRANS. & HOUSING COMMITTEE: 10-0, 4/28/15
AYES: Beall, Cannella, Bates, Gaines, Galgiani, Leyva,
McGuire, Mendoza, Roth, Wieckowski
NO VOTE RECORDED: Allen
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SUBJECT: Greenhouse Gas Reduction Fund: Transit and
Intercity Rail Capital Program
SOURCE: Author
DIGEST: This bill makes a number of changes to the Transit and
Intercity Rail Capital Program, including recasting the
program's mission to fund large, transformative, capital
improvement projects and requiring that 70% of the funding be
allocated to projects with a total cost of $100 million or more,
and 30% of the funding be allocated to projects costing less
than $100 million.
ANALYSIS:
SB 9
Page 2
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 moneys collected pursuant to a
market-based mechanism be deposited in the fund. (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 California Global Warming Solutions Act of
2006. (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)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) Eligible projects demonstrate they will achieve
greenhouse gas emissions reductions.
b) The California State Transportation Agency (CalSTA), in
evaluating grant applications for funding, consider:
SB 9
Page 3
i) Specified cobenefits, including reduction of auto
vehicles miles traveled, promotion of housing development
near rail stations, expanding existing rail and transit
systems, implementation of clean vehicle technology,
promotion of active transportation, and improvements to
public health.
ii) 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.
iii) Geographic equity.
iv) 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 transit improvements, including bus
and ferry transit systems, in addition to rail systems.
2) Requires that the 70% of the funds be programmed and
allocated to projects with a total cost of $100 million or
more, and 30% be programmed and allocated to projects
costing less than $100 million.
3) Requires CalSTA to consider the extent to which a project
reduces GHG emissions in selecting projects for funding.
4) Expands eligible applicants from only rail-system operators
SB 9
Page 4
to include bus and ferry systems.
5) Requires CalSTA to additionally consider the following when
evaluating grant applications:
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.
6) Authorizes an eligible applicant to submit a multiyear
funding application and authorizes CalSTA to make multiyear
funding commitments for projects.
7) Requires applicants to:
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; and
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.
8) 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 every other
year.
9) Authorizes CalSTA to enter into and execute a multiyear
funding agreement with an eligible applicant for a multiyear
project.
SB 9
Page 5
10)Authorizes a lead applicant agency to apply to CTC for a
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.
Background
Cap-and-trade auction revenue. ARB has conducted 11
cap-and-trade auctions. The first 10 have generated almost $1.6
billion in proceeds to the state.
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) 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 and Fiscal Review 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 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 and 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 and Fiscal Review Committee, Chapter 36,
SB 9
Page 6
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. The plaintiffs filed an
appeal with the 3rd District Court of Appeal in Sacramento in
February of last year.
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
resources programs aimed at reducing GHG emissions. Various
agencies are in the process of implementing this funding. SB
862 (Budget and Fiscal Review Committee), a budget trailer bill,
established a long-term cap-and-trade expenditure plan by
SB 9
Page 7
continuously appropriating portions of the funds for designated
programs or purposes. The legislation appropriates 25% for the
state's high-speed rail project, 20% for affordable housing and
sustainable communities grants, 10% to the Transit and Intercity
Rail Capital Program, and 5% for low-carbon transit operations.
The remaining 40% is available for annual appropriation by the
Legislature.
The Transit and Intercity Rail Capital Program. The Transit and
Intercity Rail Capital Program, created through SB 862 (Budget
and Fiscal Review Committee, Chapter 36, Statutes of 2014),
funds capital improvements for GHG emission reductions that
expand and improve rail service, 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. CalSTA is required to
evaluate applications, and then prepare a list of projects
recommended for funding to be used by the CTC in awarding grant
monies for the Transit and Intercity Rail Capital Program.
The Governor's 2015-16 budget proposal appropriates $265 million
to CalSTA for the Transit and Intercity Rail Capital Program.
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
SB 9
Page 8
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
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 approved a revised draft of
interim SB 535 guidelines in September of last year. The
guidance for the Transit and Intercity Rail Capital Program
specifies 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 moneys 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
SB 9
Page 9
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
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
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
SB 9
Page 10
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."
FISCAL EFFECT: Appropriation: Yes Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee:
Unknown cost pressures, at least in the millions of dollars,
to the GGRF (special) by expanding eligibility of the Transit
and Intercity Rail Capital Program to include ferry transit
systems.
Potential relief of cost pressures to the GGRF by deleting
operational expenditures from eligibility from the Transit and
Intercity Rail Capital Program.
SUPPORT: (Verified5/29/15)
International Longshore and Warehouse Union
Northern California Carpenters Regional Council
San Francisco Bay Area Water Emergency Transportation Authority
Santa Clara County Board of Supervisors
Santa Clara Valley Transportation Authority
Silicon Valley Leadership Group
OPPOSITION: (Verified5/29/15)
Alameda-Contra Costa Transit District
Antelope Valley Transit Authority
Napa County Transportation Planning Agency
TransForm
ARGUMENTS IN SUPPORT: Supporters note that SB 9 allows
CalSTA to accommodate larger-scale projects by programming and
SB 9
Page 11
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:Alameda-Contra Costa Transit District,
Napa County Transportation Planning Agency, and Antelope Valley
Transit Authority state that many transit improvement projects
identified in their areas that would significantly increase
service and improve transit do not exceed $100 million. Antelope
Valley Transit Authority also states that SB 9 reduces
competition to a few large transit agencies and that projects
need not cost over $100 million to be transformative in nature
and request a more equitable split of the funds between high
cost and lower cost projects. TransForm argues that SB 9 may
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.
Prepared by:Rebecca Newhouse / E.Q. / (916) 651-4108
6/2/15 21:37:43
**** END ****