BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          SB 824            Hearing Date:    4/19/2016
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          |Author:   |Beall                                                 |
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          |Version:  |4/11/2016                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Manny Leon                                            |
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          SUBJECT:  Low Carbon Transit Operations Program


           DIGEST:  This bill modifies the Low Carbon Transit Operations  
          Program (LCTOP).

          ANALYSIS:
          
          AB 32 (Núñez and Pavley, Chapter 488, Statutes of 2006) requires  
          the state Air Resources Board (ARB) to develop a plan to reduce  
          emissions to 1990 levels by 2020.  It also requires ARB to  
          ensure programs that reduce greenhouse gas (GHG) emissions are  
          targeted, to the extent feasible, to the most disadvantaged  
          communities (DACs) in the state.  AB 32 authorizes ARB to  
          deposit any fees paid by GHG emission sources into the  
          Greenhouse Gas Reduction Fund (GGRF).

          SB 535 (De León, Chapter 830, Statutes of 2012) requires 25% of  
          GGRF funds to be allocated to projects that provide benefits to  
          DACs, and at least 10% to projects located within DACs.  DACs  
          have been identified by the California Environmental Protection  
          Agency using census tract data based on geographic,  
          socioeconomic, public health, and environmental hazard criteria.  
           

          SB 862 (Committee on Budget, Chapter 36, Statutes of 2014)  
          established the Transit and Intercity Rail Capital Program  
          (TIRCP), a competitive grant program to fund capital  
          improvements and operational investments that reduce GHG  
          emissions and modernize California's intercity, commuter, and  







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          urban rail and bus systems to achieve specific policy  
          objectives.  Program goals include providing at least 25% of  
          available funding to projects that provide a direct benefit to  
          DACs.  Existing law continuously appropriates 10% of annual GGRF  
          funds to TIRCP beginning in 2015-16.

          SB 862 additionally established the LCTOP, which provides  
          operating and capital assistance for transit agencies to reduce  
          GHG emissions and improve mobility, with a priority on serving  
          DACs.  Eligible projects include new or expanded bus or rail  
          services and expanded intermodal transit facilities, and may  
          include equipment acquisition, fueling, maintenance, and other  
          costs to operate those services or facilities.  All projects  
          must reduce GHG emissions.  Funds are allocated to transit  
          agencies pursuant to the State Transit Assistance statutory  
          formula.  For agencies whose service area includes DACs, at  
          least 50% of the total monies received must be spent on projects  
          that will benefit DACs.  Existing law continuously appropriates  
          5% of annual GGRF funds to LCTOP beginning in 2015-16.

          SB 9 (Beall, Chapter 710, Statutes of 2015) made a number of  
          modifications to the TIRCP, including:

          1)Requiring funding of capital improvements that are  
            "transformative," defined as a rail, bus, or ferry transit  
            project that will significantly reduce vehicle miles traveled,  
            congestion, and GHG emissions by creating a new transit  
            system, increasing the capacity of an existing transit system,  
            or otherwise significantly increasing the ridership of a  
            transit system.  

          2)Eliminating operations funding as an eligible use of TIRCP  
            funds.

          3)Authorizing the California State Transportation Agency  
            (CalSTA) to make multiyear funding commitments.

          4)Requiring CalSTA to maximize the total amount of GHG emission  
            reductions achieved under the program.  

          5)Establishing a process whereby an agency applying for funds  
            for a multiyear project can obtain a letter of no prejudice  
            (LONP) from CalSTA to allow the agency to advance its own fund  
            and be eligible for future reimbursement from the program.  









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          This bill:

            1)  Provides that a recipient transit agency must demonstrate  
              that a project reduces GHG emissions in order to receive  
              LCTOP funds.

            2)  Allows a recipient transit agency to use LCTOP monies for  
              the costs to operate new or expanded service in the fiscal  
              year in which the service is first implemented, and in any  
              subsequent fiscal year if the agency can demonstrate that  
              additional GHG emissions reductions can be realized.

            3)  Allows a recipient transit agency to use LCTOP monies for  
              any other expenditure for which it can demonstrate GHG  
              emissions reductions.
            4)   Requires a recipient transit agency for capital projects,  
              to:

              a)    Specify the phases of work for which it is seeking an  
                LCTOP allocation;

              b)    Identify the sources and timing of all monies required  
                to undertake and complete any phase of a project for which  
                it is seeking an LCTOP allocation; and

              c)    Describe intended sources and timing of funding to  
                complete any subsequent phases of the project, through  
                construction or procurement.

            5)  Allows a recipient transit agency that does not submit a  
              project for funding in a particular fiscal year to retain  
              its funding share for an unlimited number of fiscal years  
              and to utilize the accumulated funding share in a subsequent  
              fiscal year.  Requires the recipient transit agency to  
              specify the number of fiscal years it intends to retain its  
              share and the expenditure for which it is intended.  

            6)  Allows a recipient transit agency, in any fiscal year, to  
              loan or transfer its funding share to another recipient  
              transit agency in the same region for any identified  
              eligible expenditure under LCTOP.

            7)  Allows a group of recipient transit agencies, in any  
              fiscal year, to enter into an agreement to pool their  
              funding shares for any identified eligible expenditure under  








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              LCTOP.

            8)  Allows a recipient transit agency to apply to Caltrans to  
              reassign to another eligible expenditure under LCTOP, any  
              savings or surplus monies allocated from LCTOP, or any  
              previously allocated LCTOP monies for an expenditure that  
              the agency has determined is no longer a priority.

            9)  Expands the audit of public transit operator finances  
              required by existing law to include verification of receipt  
              and appropriate expenditure of LCTOP monies.  Requires each  
              recipient transit agency receiving LCTOP monies in a fiscal  
              year for which an audit is conducted to transmit a copy of  
              the audit to Caltrans, and requires Caltrans to make these  
              audits available to the Legislature and Controller upon  
              request.

            10) Allows a recipient transit agency to apply to Caltrans for  
              an LONP for program expenditures authorized by Caltrans.   
              Allows the recipient transit agency, if the request is  
              approved, to spend its own monies and to be eligible for  
              future reimbursement from LCTOP.  Provides that  
              reimbursement shall be made if:
             a)   The authorized expenditures have commenced and any  
               regional or local expenditures, if applicable, have been  
               incurred;

             b)   The expenditures are eligible under LCTOP;

             c)   The recipient transit agency complies with all legal  
               requirements for the project, including the California  
               Environmental Quality Act, if applicable; and

             d)   Sufficient GGRF monies are available.

            11) Requires the recipient transit agency and Caltrans to  
              enter into an agreement governing LONP reimbursement.

            12) Authorizes Caltrans to develop guidelines to implement the  
              LONP provisions of this bill.
          
          COMMENTS:

          1)Purpose.  The author states that existing law and program  
            guidelines place unnecessary limits on how LCTOP shares are  








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            spent.  These limits undermine recipient agencies' ability to  
            use the funds in ways that could maximize GHG reductions.   
            This bill gives public transit agencies additional tools and  
            greater flexibility for utilizing LCTOP formula shares, as  
            well as including several administrative streamlining  
            provisions.  This bill will help recipient agencies manage  
            program funds more efficiently and effectively, similar to  
            changes made to TIRCP by the author's 2015 legislation.

          2)TIRCP v. LCTOP.  SB 9 of last year eliminated operations as an  
            eligible expenditure under TIRCP.  This resulted in TIRCP  
            exclusively funding transit capital projects.  On the other  
            hand,  while LCTOP was created to provide both operating and  
            capital assistance, LCTOP currently requires a recipient  
            agency to, among other things, demonstrate that the funds will  
            "directly enhance or expand transit service to increase mode  
            share," which is primarily an operating expense.  Both  
            programs were created under SB 862, and both are funded with  
            GGRF monies, but they also differ in that LCTOP funds are  
            allocated to transit agencies on a formula basis, while TIRCP  
            is a competitive grant program.  

          3)Moving funds around.  This bill provides flexibility for  
            recipient transit agencies to loan, transfer, or pool funds  
            among themselves.  The Santa Clara Valley Transportation  
            Authority (VTA), sponsor of this bill, states that this  
            flexibility will help ensure that an agency that is not ready  
            to move forward with a project in a particular year can loan  
            its share to another agency which has insufficient funds to  
            advance an eligible project.  (Currently, LCTOP program  
            guidelines allow transfers but require the agency to  
            demonstrate "mutual benefit.")  It will also help ensure that  
            if an agency has a share so small that it is outweighed by the  
            costs (in staff time) of preparing the application, or an  
            agency does not currently have an eligible use for its share,  
            or did not spend its entire share due to project savings, it  
            can either pool its share with others or transfer it to  
            another agency.  In all cases, shares could only be  
            transferred to another agency within the same region.  

          4)Streamlining project eligibility.  Existing law requires a  
            recipient transit agency to demonstrate that a project  
            receiving LCTOP funds increases mode share, expands service,  
            benefits DACs, and reduces GHG emissions.  However, this bill  
            intends to establish greater flexibility relative to how LCTOP  








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            funds can be used for the above-mentioned eligible projects  
            that aim to reduce GHG emissions.  VTA, sponsor of this bill,  
            states that by maximizing flexibility for eligible project  
            expenditures, this bill ensures that agencies will be able to  
            use their formula shares for the broadest array of projects  
            and services to reduce GHG emissions, including the purchase  
            of zero-emission electric buses to replace diesel buses.    

          5)Funding operating costs beyond the first year.  This bill  
            allows an agency to continue to use its LCTOP share to support  
            new or expanded service beyond the first year in which the  
            service is implemented, provided it can demonstrate that  
            additional GHG reductions will be achieved beyond the first  
            year.  The author states that this provision addresses the  
            fact that it often takes more than one year for new service to  
            "ramp up" to projected ridership - and, by extension, for  
            projected mode share and GHG reductions to be realized.  

          6)Audit streamlining.  Existing law, the Transportation  
            Development Act (TDA), requires all public transit agencies to  
            undergo a financial audit each year.  This bill would include  
            LCTOP in that audit, rather than subjecting agencies to a  
            separate audit just for LCTOP.  

          7)LONPs.  Last year's SB 9 authorized TIRCP grant recipients to  
            receive an LONP from CalSTA, which enables the recipient to  
            spend alternative funds on a project and later be reimbursed  
            from TIRCP.  This bill includes similar LONP provisions for  
            LCTOP, enabling an agency to advance its project using local  
            dollars with the promise of later LCTOP reimbursement, rather  
            than having to wait for the LCTOP allocation.  This bill was  
            amended on April 11 to ensure that the LONP provisions apply  
            to both capital and operating expenditures. 
          8)Opposition concerns.  Opponents state that by eliminating the  
            mode share and service requirements, this bill undermines the  
            basic goals of the program.   The opponents assert, "Many  
            federal and state funding programs already support capital  
            expansion of transit," including TIRCP.  Specifically,  
            TransForm writes: 

              TransForm understands the need to address certain issues  
              with LCTOP, including the amounts of money to smaller,  
              largely rural agencies, and the potential "yo-yo" funding to  
              service to meet the target of ridership increases and new  
              service year over year. However, SB 824 doesn't address  








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              these issues in ways that meet the needs of disadvantaged  
              communities or low-income households, who rely  
              overwhelmingly on bus transit when it's reliable and within  
              reach.

            While opponents have expressed a desire to retain the existing  
            eligibility criteria for LCTOP projects, the author and  
            proponents assert that the intent of this bill is to provide  
            local transit agencies with the flexibility to ultimately  
            achieve reductions in GHG emissions based on their regional  
            needs.  

          Related Legislation:
          
          AB 2090 (Alejo) - authorizes monies appropriated to the LCTOP to  
          support operation of an existing bus or rail service if the  
          governing board of the requesting transit agency declares a  
          fiscal emergency and other criteria are met.  This bill passed  
          the Assembly Transportation Committee 16-0 and was referred to  
          the Assembly Appropriations Committee.  

          SB 9 (Beall, Chapter 710, Statutes of 2015) - modifies the TIRCP  
          to focus on transformative rail and transit system improvements.  
           

          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  Yes     
          Local:  No


            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          April 13, 2016.)
          
            SUPPORT:  

          Santa Clara Valley Transportation Authority (sponsor)
          Associated General Contractors
          California Transit Association
          Central Contra Costa Transit Authority
          Foothill Transit
          Monterey-Salinas Transit
          San Bernardino Associated Governments
          Ventura County Transportation Commission

          OPPOSITION:








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          Asian Pacific Environmental Network
          California Bicycle Coalition 
          Public Advocates
          TransForm



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