BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 508|
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UNFINISHED BUSINESS
Bill No: SB 508
Author: Beall (D)
Amended: 8/20/15
Vote: 21
SENATE TRANS. & HOUSING COMMITTEE: 8-0, 5/5/15
AYES: Beall, Allen, Galgiani, Leyva, McGuire, Mendoza, Roth,
Wieckowski
NO VOTE RECORDED: Cannella, Bates, Gaines
SENATE FLOOR: 28-8, 5/18/15
AYES: Allen, Bates, Beall, Block, Cannella, De León, Galgiani,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Nguyen, Pan, Roth, Vidak, Wieckowski, Wolk
NOES: Anderson, Fuller, Gaines, Moorlach, Morrell, Nielsen,
Runner, Stone
NO VOTE RECORDED: Berryhill, Hall, Pavley
ASSEMBLY FLOOR: 66-14, 8/31/15 - See last page for vote
SUBJECT: Transportation funds: transit operators: pedestrian
safety
SOURCE: California Transit Association
DIGEST: This bill makes changes to performance metrics tied to
state grants for transit operators.
Assembly Amendments make technical changes to improve the
implementation of the bill.
ANALYSIS:
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Existing law:
1)Creates the Transportation Development Act (TDA). The TDA
provides two state funding sources for public transit:
a) Local Transportation Fund (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) State Transit Assistance (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.
1)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.
2)Authorizes a transit operator to meet the fare box recovery
ratio by combining fare revenues with certain local funds.
3)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
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Page 3
vehicle lease costs.
4)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
Consumer Price Index (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.
5)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.
This bill:
1)Adds pedestrian safety education programs to the list of
eligible uses of LTF moneys.
2)Excludes the principal and interest payments on all capital
projects funded with certificates of participation 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 CPI for all
of the following:
a) Fuel;
b) Alternative fuel programs;
c) Power, including electricity;
d) Insurance premiums and settlement payments; and
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e) State and federal mandates.
5)Excludes, for two years, further 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 STA funds for
operations even if they do not meet specified performance
standards, beginning July 1, 2016.
Comments
1)Purpose. According to the author, cost increases over the
years - sudden, unplanned and unavoidable - have threatened
the continued receipt of transit operators' TDA and STA
funding. Local economic conditions, operating environments,
the various built landscapes, and even political preferences
with regard to transit affordability: all these factors change
dynamically year to year. A more predictable, flexible system
of accountability is needed with regard to the eligibility
criteria for transit operators to receive funding. This bill
is intended to amend existing accountability measures to
create that more predictable, flexible system for local
transit systems.
2)What is this bill really about? As described in the existing
law section, the state calculates two relatively ineffective
performance metrics against which transit operators are judged
to determine state funding eligibility. The farebox recovery
ratio is essentially based on the percentage of operating
costs that are borne by the transit riders, while the STA
eligibility criteria is intended to force operators to keep
operating costs from growing more quickly than general
inflation. Over time, these performance metrics have been
diluted due to changes in existing law to allow for exemptions
from what can be included in operating costs. They are,
however, the closest thing the state has to holding transit
operators accountable for effectively spending state dollars.
In many ways, this bill seeks to rationalize these performance
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metrics, for example, by attempting to apply the same
operating cost exemptions to both of them. In addition, this
bill clarifies a few terms that should help ensure
expectations are applied uniformly to transit operators across
the state. These seem like relatively responsible changes to
existing law.
Ultimately, however, the Legislature and the Administration
need to reevaluate how the state should hold transit grant
recipients accountable for managing their costs. Some argue
that it may be irresponsible of the state to provide
ever-increasing subsidies to operators simply to fund higher
pay for transit operators who already earn fair wages.
3)Fixing the STA eligibility criteria. The STA performance
criteria require operators to keep operating costs from
growing more quickly than CPI, a measure of inflation. Of
significance, this bill eliminates the yes/no test of STA
eligibility criteria, allowing transit operators who miss the
criteria by an insignificant margin to continue to use most of
their funds for operations.
4)Certificates of participation (COPs). COPs are defined as
lease financing agreements in the form of tax-exempt
securities, similar to bonds. In COP financing, title to a
leased asset is assigned by the lessor to a trustee
(non-profit corporation) that holds it for the benefit of the
investors, the certificate holders. This financing technique
provides long-term financing through a lease or lease-purchase
agreement that legally does not constitute indebtedness under
the state constitutional debt limitation. It is not subject to
other statutory requirements applicable to bonds, including
the requirement of a vote of citizens. In many ways, COPs
payments are similar to an individual's mortgage payments:
The debt is securitized against the property, but still
requires payment in order to guarantee use of the property.
A key characteristic of using COPs that distinguishes it from
bond indebtedness is a nonappropriation clause. The
nonappropriation or fiscal funding clause means that payments
of the lease are dependent upon an annual appropriation by the
governing body. This differentiates the lease from
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indebtedness such as that created by the sale of bonds
because, with the nonappropriation provision, the present-year
government's action does not bind succeeding ones to pay the
obligation. However, the non-debt classification of
lease-purchase financing does not eliminate the need to fund
lease payment expenditures nor does it eliminate the
responsibility of the government to disclose the obligation in
its financial statements.
This bill excludes principal and interest costs for COPs from
the definition of operating costs when calculating a transit
operator's farebox recovery ratio.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified8/31/15)
California Transit Association (source)
Gold Coast Transit District
Mendocino Transit Authority
Monterey-Salinas Transit
Orange County Transportation Authority
Planning and Conservation League
Sacramento Area Council of Governments
San Bernardino Associated Governments
San Luis Obispo Council of Governments
Santa Clara Valley Transportation Authority
Santa Cruz Metropolitan Transit District
Solano County Transit
Transform
Transportation Agency for Monterey County
United Transportation Union
Ventura County Transportation Commission
OPPOSITION: (Verified8/31/15)
None received
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ASSEMBLY FLOOR: 66-14, 8/31/15
AYES: Achadjian, Alejo, Baker, Bloom, Bonilla, Bonta, Brown,
Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley,
Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Hadley, Roger Hernández, Holden, Irwin,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Perea, Quirk, Rendon,
Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark
Stone, Thurmond, Ting, Waldron, Weber, Williams, Wood, Atkins
NOES: Travis Allen, Bigelow, Brough, Chávez, Dahle, Beth
Gaines, Gallagher, Grove, Harper, Jones, Mathis, Patterson,
Wagner, Wilk
Prepared by:Eric Thronson / T. & H. / (916) 651-4121
8/31/15 20:01:10
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