BILL ANALYSIS Ó
SB 508
Page 1
SENATE THIRD READING
SB
508 (Beall)
As Amended July 15, 2015
Majority vote
SENATE VOTE: 28-8
------------------------------------------------------------------
|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Transportation |16-0 |Frazier, Achadjian, | |
| | |Baker, Bloom, Campos, | |
| | |Chu, Daly, Dodd, | |
| | |Eduardo Garcia, | |
| | |Gomez, Kim, Linder, | |
| | |Medina, Melendez, | |
| | |Nazarian, O'Donnell | |
| | | | |
| | | | |
------------------------------------------------------------------
SUMMARY: Modifies performance metrics related to state funding
for public transit and updates related provisions.
Specifically, this bill:
SB 508
Page 2
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.
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.
SB 508
Page 3
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, beginning July 1, 2016.
EXISTING LAW:
1)The Transportation Development Act (TDA) provides two state
funding sources for public transit:
a) LTF revenue is derived from a one-fourth-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
SB 508
Page 4
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
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: None
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
SB 508
Page 5
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.
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
SB 508
Page 6
conditions or political preferences, such as a desire to offer
free or reduced transit for students.
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 this bill to chip away at these
problems that, left unchecked, would continue to threaten
transit operators' receipt of LTF and STA funding.
Specifically, this bill:
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
SB 508
Page 7
provisions governing LTF and STA.
Given the evolving role of transit in the context of state
priorities (e.g., greenhouse gas emission reductions), it may be
that even the simplified fare box recovery ratios proposed by
this bill are obsolete. Nonetheless, rather than abandon
performance measures all together, the simplified fare box
recovery ratio requirements proposed in this bill 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 this bill proposes a reasonable approach to improving
them.
Analysis Prepared by:
SB 508
Page 8
Janet Dawson / TRANS. / (916) 319-2093 FN:
0001267