BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 824 (Beall) - Low Carbon Transit Operations Program
          
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          |Version: April 11, 2016         |Policy Vote: T. & H. 10 - 1     |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 9, 2016       |Consultant: Mark McKenzie       |
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          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)








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           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  








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            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  








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          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.












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