BILL ANALYSIS Ó
SB 508
Page 1
Date of Hearing: July 13, 2015
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
SB
508 (Beall) - As Amended May 12, 2015
SENATE VOTE: 28-8
SUBJECT: Transportation funds: transit operators: pedestrian
safety.
SUMMARY: Modifies performance metrics related to state funding
for public transit and updates related provisions.
Specifically, this bill:
1)Adds pedestrian safety education programs to the list of
eligible uses of Local Transportation Fund (LTF) moneys.
2)Excludes the principal and interest payments on all capital
projects funded with certificates of participation (COPs) from
the definition of "operating cost" used to calculate a transit
operator's fare box recovery ratio.
3)Simplifies fare box recovery ratio requirements used to
determine a transit operator's eligibility to receive state
transit funds.
SB 508
Page 2
4)Excludes from the calculation of fare box recovery ratios
increased costs that are beyond the change in the Consumer
Price Index (CPI) for all of the following:
a) Fuel;
b) Alternative fuel programs;
c) Power, including electricity;
d) Insurance premiums and settlement payments; and
e) State and federal mandates.
5)Further excludes, for two years, from the fare box recovery
ratio equation startup costs for new services.
6)Provides transit operators greater flexibility in the use of
local funds to satisfy fare box recovery ratio requirements.
7)Authorizes transit operators to use a portion of State Transit
Assistance (STA) funds for operations even if they do not meet
specified performance standards.
EXISTING LAW:
1)The Transportation Development Act (TDA) provides two state
SB 508
Page 3
funding sources for public transit:
a) LTF revenue is derived from a -cent of the general
sales tax collected statewide. These funds are distributed
to each county according to the amount of tax collected in
that county. LTF funds a wide variety of transportation
programs, including planning and program activities,
pedestrian and bicycle facilities, community transit
services, public transportation, and bus and rail projects.
In limited cases, counties may also use LTF moneys for
local streets and roads construction and maintenance.
b) STA revenue is derived from the statewide sales tax on
diesel fuel. STA funds are appropriated by the Legislature
and are allocated by formula to planning agencies and other
selected agencies. Existing law requires that 50% of STA
funds be allocated according to population and 50% be
allocated according to transit operator revenues from the
prior fiscal year.
2)Requires transit operators to maintain a specified ratio of
fare revenues to operating costs in order to be eligible to
receive TDA funds. The required ratio varies. For operators
that began providing service after 1979, their ratio is either
20% or 10%, depending on whether the service area is urban or
non-urban. For operators that provided service prior to 1979,
the required ratio is 20% or 10% (depending on whether the
service area is urban or non-urban) or the ratio they attained
in fiscal year 1978-79, whichever is greater.
3)Authorizes a transit operator to meet the fare box recovery
ratio by combining fare revenues with certain local funds.
4)Defines "operating expenses" for purposes of calculating a
transit operator's fare box recovery ratio; specifically
SB 508
Page 4
excludes from the definition costs associated with
depreciation and amortization, subsidies for commuter rail
services, direct costs for providing charter services, and all
vehicle lease costs.
5)Authorizes transit operators to use STA funds for operating
expenses if their total operating costs per revenue
vehicle-hour increases by no more than the changes in the CPI;
excludes from this calculation costs beyond the CPI related to
fuel, alternative fuel programs, power, insurance premiums and
settlement payments, and federal and state mandates. Startup
costs for new services are also excluded for two years.
6)Provides a one year extension, through the 2015-16 fiscal
year, of an exemption to allow transit operators whose cost
increases have exceeded the CPI to continue using STA funding
for both operating and capital expenditures.
FISCAL EFFECT: The bill is keyed non-fiscal.
COMMENTS: The primary performance measure related to state
transit funding is the fare box recovery ratio. Simply put, the
fare box recovery ratio compares revenue from passenger fares to
operating costs, as defined. Generally, to be eligible for
state transit funding, transit operators in urban areas are
required to recover at least 20% of their operating costs via
fares; for rural transit operators, the required fare box
recovery ratio is 10%. However, different standards apply to
older transit operators, some of which are required to use
whatever their ratio was in the 1978-79 fiscal year.
Furthermore, the basis for calculating operating costs has
morphed over the years in response to, for instance, insurance
premium spikes after 9/11 and gas price spikes last decade.
SB 508
Page 5
The state uses another performance measure for transit operators
that want to use STA funds for operating expenses. To be
eligible for these funds, an operator's total operating costs
per revenue vehicle hour must be maintained at or less than the
previous year's costs, as adjusted by the CPI. Any increase in
costs beyond the previous year, after adjusting for CPI, can
cause an operator to forfeit the use of all STA funds for
operating expenses.
These performance measures served the state well when they were
established decades ago by ensuring that the state's then-new
investment in public transit was appropriately leveraged with
local funds and that state funds went to transit operators that
could establish at least minimum levels of efficiency.
Now, however, these measures complicate operators' ability to
deliver reliable services year to year because, for example:
1)Sudden, unplanned, and unavoidable cost increases jeopardize
transit operators' LTF and STA funding.
2)LTF funding eligibility criteria are outdated and no longer
reflect or allow for, for example, changing local economic
conditions or political preferences, such as a desire to offer
free or reduced transit for students.
SB 508
Page 6
3)Existing STA funding eligibility criteria impose an
unforgiving and unreasonable "pass/fail" standard. A transit
operator that fails to cap operating expenses by even 1% loses
100% of STA funds for operating expenses.
The author has introduced SB 508 to chip away at these problems
that, left unchecked, would continue to threaten transit
operators' receipt of LTF and STA funding. Specifically, SB
508:
1)Makes fare box recovery ratios uniform, regardless of when a
transit operator began providing service. Transit operators
will be required to meet a fare box recovery ratio of 20% if
they serve an urban area and 10% if they serve a non-urban
area.
2)Synchronizes LTF and STA eligibility criteria and operating
cost exclusions, thus making it easier to administer both
programs and to comply with program requirements.
3)Minimizes the impact to operators that fail to comply with the
all-or-nothing STA performance measure for operating funds.
Establishes instead a proportional scale whereby some, but not
all, of an operator's STA funds may be withheld for operating
purposes if the transit operator fails to restrain operating
costs from one year to the next. For example, an operator
that exceeds allowable growth by 5% will lose 5% of its STA
funds for operating expenses.
4)Makes other, non-substantive modifications to update
provisions governing LTF and STA.
Given the evolving role of transit in the context of state
SB 508
Page 7
priorities (e.g., greenhouse gas emission reductions), it may be
that even the simplified fare box recovery ratios proposed by SB
508 are obsolete. Nonetheless, rather than abandon performance
measures all together, the simplified fare box recovery ratio
requirements proposed in SB 508 are an incremental step in the
right direction.
Furthermore, provisions governing the LTF and STA programs are
unnecessarily complicated. Aligning the eligibility criteria
for both programs, including consistent calculations for
operating expenses, is reasonable and should make it easier to
administer the programs and for transit operators to comply with
performance standards. Moreover, updating other provisions that
provide transit operators greater flexibility in the use of
state transit dollars, such as broadening the source of
supplemental local funds, are similarly reasonable.
Undoubtedly, there will be a downside to relaxing fare box
recovery ratio requirements and to authorizing a proportional
use of STA funds for operating expenses in the event a transit
operator fails to cap operating expense growth. The impacts of
these changes should be closely monitored. Relative benefits of
greater uniformity and flexibility should be weighed against any
unintentional consequences that might arise, such as
unreasonable growth in transit operating expenses. In the
meantime, however, the state's transit performance metrics are
broken and
SB 508 proposes a reasonable approach to improving them.
Technical amendment: Recently enacted legislation related to
the budget [AB 95 (Committee on Budget), Chapter 12, Statutes of
2015], extended by one year, through the 2015-16 fiscal year, an
exemption to allow transit operators whose cost increases have
exceeded the CPI to continue using STA funding for both
operating and capital expenditures. SB 508 (specifically
Section 99314.6 of the Public Utilities Code) should be amended
SB 508
Page 8
to delay, until July 1, 2016, the operative date of provisions
that authorize a portion of STA funds to be used for operations
even if a transit operator exceeds last year's operating costs
so that SB 508 does not conflict with
AB 95.
Previous legislation: AB 95 (Committee on Budget), Chapter 12,
Statutes of 2015, extended by one year, through the 2015-16
fiscal year, of an exemption to allow transit operators whose
cost increases have exceeded the CPI to continue using STA
funding for both operating and capital expenditures.
REGISTERED SUPPORT / OPPOSITION:
Support
California Transit Association (Sponsor)
Central Contra Costa Transit Authority
Gold Coast Transit
Mendocino Transit Authority
Monterey-Salinas Transit
Orange County Transportation Authority
SB 508
Page 9
Planning and Conservation League
Sacramento Area Council of Governments
Santa Clara Valley Transportation Authority
Santa Cruz Metropolitan Transit District
TransForm
Transportation Agency for Monterey County
United Transportation Union
Ventura County Transportation Commission
Opposition
None on file
Analysis Prepared by:Janet Dawson / TRANS. / (916)
319-2093
SB 508
Page 10