BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 824 (Beall) - Low Carbon Transit Operations Program ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 11, 2016 |Policy Vote: T. & H. 10 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 9, 2016 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: SB 824 would revise the Low Carbon Transit Operations Program (LCTOP) to provide enhanced flexibility to recipient transit agencies for program expenditures, as specified. Fiscal Impact: Unknown significant cost pressures, to the extent the bill expands eligible projects to include any transit agency expenditure with demonstrated GHG emission reductions. (Greenhouse Gas Reduction Fund - GGRF) -----See staff comments----- Department of Transportation (Caltrans) administrative costs in the range of $100,000 to $200,000 to adopt revised program guidelines, administer the LNOP process, and manage workload related to expanded audit procedures. (State Highway Account) SB 824 (Beall) Page 1 of ? California Air Resources Board (ARB) costs of approximately $315,000 annually for two positions to coordinate with Caltrans on the adoption of program guidelines, provide guidance on tracking and reporting GHG reductions and disadvantaged communities benefits, and quantify GHG reductions for proposed project expenditures. (GGRF) Background: Existing law establishes the LCTOP to provide operating and capital assistance for transit agencies to reduce greenhouse gas (GHG) emissions and improve mobility, with a priority on serving disadvantaged communities. Funds provided for the program must be expended to provide transit operating or capital assistance that meets all of the following criteria: (1) new or expanded bus, rail, or water transit services, or expanded intermodal facilities, and any other costs to operate those services or facilities, and may include equipment acquisition, fueling, and maintenance; (2) the recipient demonstrates that expenditures directly enhance or expand transit service to increase mode share; and (3) the recipient agency demonstrates that each expenditure reduces GHG emissions. At least 50 percent of the money allocated to transit agencies whose service area includes disadvantaged communities must be spent on projects or services that meet the above requirements and benefit those communities. Caltrans is required to coordinate with ARB to develop guidelines that recipient agencies must use to demonstrate that expenditures meet program criteria. Before authorizing disbursement of funds, Caltrans and ARB coordinate to determine eligibility of recipient agencies' proposed expense types. Existing law continuously appropriates five percent of annual GGRF proceeds to LCTOP, and funding is allocated to transit agencies pursuant to existing State Transit Assistance formulas. LCTOP received $25 million in 2014-15 and $100 million in 2015-16. The Governor's 2016-17 Budget proposes $100 million for the program. Proposed Law: SB 824 would revise the LCTOP to provide enhanced flexibility to recipient transit agencies for program expenditures. Specifically, this bill would authorize transit agencies to: Use funds for the costs to operate new or expanded service in SB 824 (Beall) Page 2 of ? the fiscal year in which the service is first implemented, and in any subsequent year if the agency demonstrates additional GHG emission reductions. Use funds for any expenditure with demonstrated GHG emission reductions. Retain funding allocations in a given year for an unlimited number of fiscal years and use accumulated funds in a future year for a larger expenditure. Loan or transfer funding shares to another recipient transit agency in the same region for any identified eligible expenditure. Enter into an agreement with other transit agencies to pool respective funding shares of each member for any identified eligible program expenditure. Apply to Caltrans to reassign any savings or surplus amounts allocated for an expenditure that has been completed to another eligible expenditure. Apply to Caltrans for a "letter of no prejudice" (LNOP) that allows the agency to expend its own funds for authorized expenditures and be eligible for reimbursement from future allocations, under specified conditions. Caltrans may develop guidelines to implement an LNOP program. The bill also requires recipient agencies to do all of the following for capital projects: (1) specify the phases of work for which the agency is seeking an allocation; (2) identify the sources and timing of all moneys required to undertake and complete any phase of the project; and (3) describe intended sources and timing of funding to complete any subsequent phases of the project, through construction or procurement. SB 824 would also expand existing public transportation operator audits to include verification of receipt and appropriate expenditure of LCTOP funds, and require agencies receiving LCTOP funds to transmit a copy of the audit to Caltrans. Related Legislation: AB 2090 (Alejo), which has been referred to the Assembly Appropriations Committee's Suspense File, would SB 824 (Beall) Page 3 of ? authorize LCTOP funds to be used to support operation of an existing bus or rail service if the transit agency declares a fiscal emergency and other criteria are met. Staff Comments: Under the existing LCTOP eligibility criteria, transit agencies must prove that a proposed expenditure will expand specified services or facilities, directly enhance or expand service to increase mode share, and reduce GHG emissions. SB 824 would amend those eligibility criteria to authorize expenditures that would meet any one of those specified criteria, which essentially broadens eligibility to any expenditure that reduces GHG emissions, rather than ensuring funds are used for expanded services and facilities and expanded mode share. In addition, provisions that allow an agency to retain funds for future expenditures, loan funds to other agencies, and pool resources with other agencies will likely facilitate expenditures for more expensive projects, which may result in more funds being used for capital improvements rather than operating expenses. Expanding the allowable uses and potentially changing the mix of funds used for different types of expenses creates significant cost pressures on LCTOP funds. The bill would also impose new administrative duties on both Caltrans and ARB to coordinate on developing and adopting guidelines, and determining eligibility of proposed transit agency expenses. Caltrans would also be required to develop and administer a program that provides for LNOPs, and would have some additional administrative duties pertaining to the enhanced audit requirements. ARB indicates that analyzing and tracking GHG reductions, co-benefits, and disadvantaged community benefits are complicated by the ability to transfer funding among recipients and fiscal years. In addition, allowing funds to be used for any project that reduces GHG emissions will likely require the development of additional GHG quantification methods for proposed projects. Caltrans costs for 1-2 new positions for additional administrative duties would be in the range of $100,000 to $200,000 annually, while ARB indicates it would need two new positions at a cost of approximately $315,000 annually. SB 824 (Beall) Page 4 of ? -- END --