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 ----------------------------------------------------------------- |Author: |Beall | |----------+------------------------------------------------------| |Version: |4/11/2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Manny Leon | |: | | ----------------------------------------------------------------- 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 SB 824 (Beall) Page 2 of ? 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. SB 824 (Beall) Page 3 of ? 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 SB 824 (Beall) Page 4 of ? 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 SB 824 (Beall) Page 5 of ? 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 SB 824 (Beall) Page 6 of ? 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 SB 824 (Beall) Page 7 of ? 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: SB 824 (Beall) Page 8 of ? Asian Pacific Environmental Network California Bicycle Coalition Public Advocates TransForm -- END --