BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
DEVELOPMENT
Senator Jim Beall, Chair
2015 - 2016 First Extraordinary
Bill No: SBX1 7 Hearing Date: 9/1/2015
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|Author: |Allen |
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|Version: |7/16/2015 Vote: |
| | 2/3 Required |
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|Urgency: |Yes |Fiscal: |Yes |
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|Consultant|Erin Riches |
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SUBJECT: Diesel sales and use tax: State Transit Assistance
(Tax Levy)
DIGEST: This bill increases the sales and use tax on diesel
fuel and dedicates the increase to transit.
ANALYSIS:
Existing law establishes the State Transit Assistance Program
(STA), which provides funding to local transit agencies to help
support operations and capital costs. STA funding comprises
only about 3% of overall transit funding, with the remainder
coming from local sources (passenger fares and local sales
taxes), federal funds, and Local Transportation Fund monies
(derived from a cent of the general sales tax collected
statewide).
In 2010, the "gas tax swap" eliminated the sales tax on
gasoline, 20% of which had been dedicated to transit, and
replaced it with an increase in the gasoline excise tax designed
to generate an equivalent amount of revenue. To partially make
up for the loss in transit funding, the gas tax swap legislation
also provided for a revenue-neutral swap of (increased) sales
tax on diesel and (reduced) diesel excise tax in order to
increase Public Transportation Account (PTA) funds available for
transit operations funding.
SBX1 7 (Allen) Page 2 of ?
Today, STA funding is generated primarily from the sales tax on
diesel fuel, currently set at 9.25%. Of this amount, 4.75% is
dedicated to the PTA, with half of these revenues being directed
to Caltrans for intercity rail and administration and half
flowing to the STA program. In 2011, to bolster transit
funding, the Legislature enacted an incremental increase for the
sales tax on diesel, with the ongoing rate of 1.75% going into
effect in 2014-15. (The remaining 2.75% of the diesel fuel
sales tax is directed to the General Fund for other purposes,
such as debt service and local public safety programs.) Thus,
STA currently receives 4.125% of diesel fuel sales tax revenues:
2.38% (half of the PTA portion) plus 1.75% that goes directly
to STA.
STA funding is allocated to local transit operators based on a
statutory formula, with half the funds allocated based on
population and half allocated based on local revenue support,
including farebox revenue and local sales tax measures.
This bill increases the portion of the diesel fuel sales tax
that is dedicated to STA from 1.75% to 5.25%, effective July 1,
2016. By increasing this portion, this bill increases the
overall diesel fuel sales tax from 9.25% to 12.75%.
COMMENTS:
1)Purpose. The author states that STA funding has not kept pace
with the projections established by the Legislature and
Administration just five years ago, much less the funding
levels necessary for maintenance, rehabilitation, and
expansion of the state's public transit service network. STA
funding is declining due to the price of oil, which is much
lower than when the gas tax swap was enacted by the
Legislature; consumption has not increased sufficiently to
make up the difference.
Further, a 2013 study of California's unmet transit needs by
CH2M HILL found that for both operating and capital funding,
projected need outstrips expected revenue. In fact, over the
next 10 years, the funding gap will exceed $70 billion. The
study predicts that "Under such constrained scenarios the
conditions of existing assets will decline over time as
reinvestment actions fall outside of agency budgets. In
addition, if not met, the service expansion needs will begin
to erode the reliability and performance of existing
SBX1 7 (Allen) Page 3 of ?
services."
This bill would triple the incremental sales tax rate on
diesel fuel in order to direct roughly $298 million in
additional funding to the STA program. The author states that
this funding will help local transit operators meet critical
funding needs which, in turn, will assist the state in meeting
important policy goals such as reducing greenhouse gas
emissions, reducing petroleum consumption, reducing vehicle
miles traveled, and directing benefits to disadvantaged
communities.
2)Running the numbers. Of the current 9.25% sales and use tax
on diesel fuel, nearly half (4.125%) goes to STA. Under this
bill, STA would receive more than half (7.63%) of diesel fuel
sales tax revenues: 2.38% (half of the PTA portion) plus the
5.25% that goes directly to STA. Thus, this bill not only
increases the dollar amount going to transit, but also the
share of diesel fuel sales tax revenues going to transit.
3)Where will the money go? Because the original version of this
bill simply directed revenues from the diesel sales tax
increase to the PTA, the monies could conceivably have funded
nothing but salary increases at transit agencies. Such an
action would seem to violate the intent of the First
Extraordinary Session, which aims to: provide funding for
maintenance and repair of infrastructure; improve the state's
key trade corridors; complement local efforts for repair and
improvements of local transportation infrastructure; establish
clear performance objectives measured by the percentage of
pavement, bridges, and culverts in good condition; and
incorporate project development efficiencies to expedite
project delivery or reduce project costs. To address this
concern, the committee may wish to consider amendments to
ensure that revenues generated pursuant to this bill are spent
on maintenance, repair, or service improvements. The
committee may further wish to consider including reporting and
tracking requirements, to help ensure the money is spent as
directed.
Related Legislation:
SBX1 1 (Beall) - would increase several taxes and fees to raise
roughly $4.3 billion in new transportation revenues annually,
with the funding used to address deferred maintenance on state
SBX1 7 (Allen) Page 4 of ?
highways and local streets and roads and to improve the state's
trade corridors. SBX1 1 passed out of this committee on August
19, 2015, and is pending hearing in the First Extraordinary
Session Senate Appropriations Committee.
ABX1 8 (Chiu and Bloom) - is identical to this bill. ABX1 8 is
pending committee assignment in the Assembly Rules Committee.
FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes
Local: No
POSITIONS: (Communicated to the committee before noon on
Thursday, August 27, 2015.)
SUPPORT:
California Transit Association (sponsor)
Metropolitan Transportation Commission
Monterey Salinas Transit
Peninsula Corridor Joint Powers Board
Sacramento Regional Transit
San Francisco Mayor Edwin M. Lee
San Mateo County Transit District
San Mateo County Transportation Authority
Santa Cruz Metropolitan Transit District
Solano County Transit
OPPOSITION:
None received
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