BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
DEVELOPMENT
Senator Jim Beall, Chair
2015 - 2016 First Extraordinary
Bill No: SBX1 1 Hearing Date: 8/19/2015
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|Author: |Beall |
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|Version: |7/14/2015 Vote: |
| | 2/3 Required |
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|Urgency: |Yes |Fiscal: |Yes |
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|Consultant|Randy Chinn |
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SUBJECT: Transportation funding
DIGEST: This bill increases several taxes and fees to raise
roughly $4.3 billion in new transportation revenues annually,
with the funding used to address deferred maintenance on the
state highways and local streets and roads and to improve the
state's trade corridors.
ANALYSIS:
1)The need. 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.
2)Current taxes and fees. Existing law imposes state taxes and
fees related to transportation as follows:
a) Gasoline excise tax: $0.30/gallon
b) Diesel excise tax: $0.13/gallon
c) Diesel sales tax: $0.27/gallon
d) Vehicle license fee (VLF): 0.65% of market value
e) Vehicle registration fee (VRF): $43 per vehicle
f) Weight fees, for commercial vehicles only: up to a
maximum amount of $2,271
SBX1 1 (Beall) PageB of?
1)How current taxes and fees are spent. The details of how
transportation taxes and fees are spent are complicated and
confusing. In general, the gasoline and diesel excise taxes
are spent exclusively on road maintenance and construction as
provided for in the Constitution<1>; vehicle license fees are
spent on general fund obligations; vehicle registration fees
are spent on Department of Motor Vehicles and California
Highway Patrol operations; and weight fees are spent on paying
the debt service on transportation bonds.
2)Taxes and fees under this bill. This bill increases taxes and
fees, and creates new fees, as follows:
a) Gasoline excise tax: $0.12/gallon
b) Diesel excise tax: $0.22/gallon
c) Road access charge: $35 per vehicle annually
d) VRF increase: $35 per vehicle annually, plus an
additional $100 for zero-emission vehicles
Every three years, the fuel excise tax rates are adjusted
based on the Consumer Price Index.
The table below summarizes where the new funding comes from
and how much is forecast to be raised (assuming zero
inflation):
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| | RATE |PHASE|ADDITIONAL REVENUE BY YEAR (in |
| | | |millions) |
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|-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
| | INCREASE | IN (YRS) | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | |
|-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
|Excise on | 12| 1 | $1,752 | $1,752 | $1,752 | $1,752 | $1,752 | |
|Gasoline | | | | | | | | |
|(in cents) | | | | | | | | |
|-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
|Road | 35| 1 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | |
|Access Fee | | | | | | | | |
|-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
|VRF (in | 35| 1 | $1,000 | $1,000 | $1,000 | $1,000 | $1,000 | |
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<1> The Constitution also permits these taxes to be spent on the
construction and improvement of mass transit guideway systems.
SBX1 1 (Beall) PageC of?
|dollars) | | | | | | | | |
|-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
|Annual ZEV | 100| 1 | $ 10 | $ 12 | $ 15 | $ 20 | $ 25 | |
|Fees (in | | | | | | | | |
|dollars) | | | | | | | | |
|-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
|Excise on | 22| 1 | $ 572 | $ 572 | $ 572 | $ 572 | $ 572 | |
|Diesel (in | | | | | | | | |
|cents) | | | | | | | | |
|-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
|GF Loan | | 3 | $ 330 | $ 330 | $ 340 | $ | $ | |
|Paybacks | | | | | |- |- | |
|-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------+-----------|
| | | | | | | | | |
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| | Total New | $4,664 | $4,666 | $4,679 | $4,344 | $4,349 | |
| | Revenue | | | | | | |
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1)Where revenues are spent.
a) No effect on current taxes and fees. This bill does not
affect how revenues from existing gasoline excise taxes,
diesel excise taxes, VLF, and VRF are spent. It only
affects the new revenues raised by this bill.
b) Most new funds spent on maintenance. This bill creates
the Road Maintenance and Rehabilitation Program. All funds
raised by the tax and fee increases in this bill are
deposited into the Road Maintenance and Rehabilitation
Account (RMRA), which is created within the State
Transportation Fund, with the exception of $0.12/gallon
from the diesel excise tax increase, as described below.
The RMRA funds shall be spent on basic road maintenance and
rehabilitation and critical safety projects.
c) Accelerated loan repayment. This bill provides that
outstanding loans made to the General Fund from the State
Highway Account, the Motor Vehicle Fuel Account, the
Highway Users Tax Account, and the Motor Vehicle Account
shall be repaid over three years, one third per year. The
outstanding loan amounts are estimated at about $1 billion.
These funds will also be used to fund the road maintenance
backlog as they are deposited in the RMRA. Funding to
SBX1 1 (Beall) PageD of?
backfill the loss to the General Fund from the loan
repayments will come from the Budget Stabilization Account
(BSA, aka the Rainy Day Fund), which was revised in
Proposition 2 of 2014 to focus on paying down state debts
and unfunded mandates. The BSA balance at the beginning of
FY 2015-16 is estimated to be $1.6 billion.
d) State and local split. These new funds raised by this
bill are formulaically allocated 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. In order to receive these funds,
the city and county must 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. The
California Transportation Commission (CTC) shall annually
evaluate each agency receiving funds to ensure that the
funds are spent appropriately.
e) Trade corridors. Twelve cents of the diesel fuel tax
increase, resulting in about $300 million annually, shall
be deposited in the Trade Corridors Improvement Fund.
These funds are allocated by the CTC for infrastructure
improvements on corridors that have a high volume of
freight movement.
1)Caltrans efficiency. This bill requires Caltrans, by April 1,
2016, to provide the CTC with a plan to increase the
department's efficiency by 30% over the prior three years.
The savings shall increase the funding for the road
maintenance and repair work.
Beginning February 1, 2017, this bill requires the CTC to
allocate all the capital and support costs for the State
Highway Operation and Protection Program, and to approve any
additional allocations for projects which exceed their budget.
This is consistent with a recent recommendation of the
Legislative Analyst's Office to improve oversight and
SBX1 1 (Beall) PageE of?
accountability of transportation funds<2>.
2)Gas tax swap. In 2010, sales tax rates on vehicle fuels were
reduced and replaced with an increase in the fuel excise tax
rate. The swap is intended to be revenue neutral, which
requires annual recalculation of what sales taxes revenues
would have been had the rate not been reduced and then a
resetting of the fuel excise tax rate. This annual adjustment
has led to sudden and steep variations in revenue, making it
hard for state and local governments to plan their
transportation programs. This bill eliminates the true up and
instead imposes a more stable tax.
3)Urgency. This is an urgency statute.
COMMENTS:
1) Purpose of bill. According to the author, this bill solves
a crisis that threatens our deteriorating streets and
highways. California faces a $137 billion combined state and
local backlog of 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. SBX1 1
creates a much-needed 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.
SBX1 1 will provide more resources for the state to repair the
infrastructure under its jurisdiction and it also distributes
billions of dollars at the local level. The author notes that
the state has failed to keep pace with repairs due to several
factors, including the diversion of road maintenance revenues
for other uses and the decline of the gas tax revenue.
2) 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
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<2> 2015-16 Budget: "Capital Outlay Support Program Review".
LAO, May 14, 2014.
SBX1 1 (Beall) PageF of?
direct cost increases of about $130/yr<3>. Individuals who
use more gas or diesel will pay more. By way of comparison,
the slump in gasoline prices from their high of $4.25 in the
middle of 2014 to about $3.25 per gallon today will reduce gas
costs for the average driver by over $500/yr if prices stay at
current levels.
3) Lockbox. Gasoline and diesel excise taxes may only be
spent for transportation purposes, pursuant to Article XIX,
Section 2 of the California Constitution. Fees on vehicles,
other than in lieu property taxes (e.g., VLFs), may only be
spent for transportation purposes pursuant to Article XIX,
Section 3 of the Constitution. Consequently, all of the tax
and fee increases imposed by this bill may only be spent for
transportation purposes and may not be borrowed by the
Legislature.
4) 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 costly.
5) A good start, not a final solution. As vehicle fuel
efficiency rises and fossil fuel alternatives become
increasingly 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.
6) 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
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<3> 12,000 miles @ 24 miles/gallon x $0.12/gallon = $60 in
additional gas taxes plus $35 road access charge plus $35
vehicle registration fee increase for a total of $130.
SBX1 1 (Beall) PageG of?
also considering the issue, though there is little reason to
expect any federal help.
7) 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.
8) Helping themselves. As previously noted, the 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 split 50/50 between the state and
local governments. This provision may need further work on
its mechanisms and definitions.
9) Technical amendment. Page 16, line 3 after "gallon,"
insert the following:
"including an inflation adjustment,"
Related Legislation:
SB 16 (Beall) - this bill raises various transportation fees and
taxes with a five year sunset for the same purposes as SBX1 1.
SB 16 is pending on the Senate floor.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes
Local: No
POSITIONS: (Communicated to the committee before noon on
Thursday,
August 13, 2015.)
SUPPORT:
Alameda Corridor-East Construction Authority
Alta Vista Solutions
American Council of Engineering Companies of California
Arup
Blackburn Consulting
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Blair, Church & Flynn Consulting Engineers
Brelje & Race
California Asphalt Pavement Association
California Association of Council of Governments
California State Association of Counties
California State Council of Laborers
California Transit Association
CDM Smith, Inc.
CEI Engineering Associates, Inc.
City/County Association of Governments of San Mateo County
Covello Group, The
CSW/Stuber-Stroeh Engineering Group, Inc.
Diaz Yourman & Associates
Guida Surveying Inc.
Hatch Mott MacDonald
HMH Engineers
Huitt-Zollars
Humboldt; County of
ILS Associates Civil Engineering And Land Survey
Infrastructure Engineering Corporation
Inland Foundation Engineering
JLB Traffic Engineering
Kimley-Horn
Kleinfelder
KPFF
Lane Engineers
Lawrence Nye Carlson Associates
League of California Cities
Leighton Consulting, Inc
Leptien, Cronin, Cooper, Morris & Poore, Inc
Long Beach; City of
Los Angeles; City of
Michael Baker International
MNS Engineers
Morton & Pitalo, Inc
MTC
Nasland Engineering
Ninyo & Moore
Oakland; City of
Professional Engineers in California Government
Quad Knopf
Rau And Associates
Rick Engineering Company
Rural County Representatives of California
SA Associates
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SACOG
SCAG
Sacramento; City of
Santa Ana; City of
Santa Clara County Board of Supervisors
Santa Cruz; County of
San Francisco; City of
San Jose; City of
Silicon Valley Leadership Group
Southern California Association of Governments
Sukow Engineering
Tri City Engineering
Towill
Transportation Agency for Monterey County
Ventura County Transportation Commission
Wagner Engineering & Survey
Yeh and Associates
OPPOSITION:
AAA of Northern California
Auto Club of Southern California
CalTax
Howard Jarvis Taxpayers Association
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