BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: SB 1128 Hearing Date: 4/5/2016 ----------------------------------------------------------------- |Author: |Glazer | |----------+------------------------------------------------------| |Version: |2/17/2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Sarah Carvill | |: | | ----------------------------------------------------------------- SUBJECT: Commute benefit policies DIGEST: This bill removes the sunset from a program requiring certain employers in the San Francisco Bay Area to offer alternative-commute benefits to their employees. ANALYSIS: Existing law: 1)Authorizes the Bay Area Air Quality Management District (BAAQMD) and the Metropolitan Transportation Commission (MTC) to adopt an ordinance requiring employers in the Bay Area with more than 50 employees to offer specified commute benefits to their employees until January 1, 2017. 2)Requires these employers to offer employees one of the following benefits: a) Pre-tax option: Employees may exclude from their taxable wages expenses incurred for transit passes, vanpool charges, or bicycle commuting up to the maximum amount allowed by federal tax law. b) Employer-provided subsidy: The employer subsidizes public transit or vanpool fees paid by employees. The subsidy must be equal to the monthly cost of commuting by public transit or vanpool, or $75, whichever is lower. SB 1128 (Glazer) Page 2 of ? c) Employer-provided transportation: The employer provides free or low-cost commuter transportation service to its employees. d) An alternative program approved by either MTC or BAAQMD that provides at least the same benefit as the above options. 1)Requires MTC and BAAQMD to report on program outcomes to the transportation policy committees of the Senate and the Assembly on or before July 1, 2016. This bill: 1)Authorizes MTC and BAAQMD to continue their commute benefit program on a permanent basis by deleting the sunset date; 2)Deletes the requirement that MTC and BAAQMD issue a report to the legislature; and 3)Changes the requirements relating to bicycles in two of the commute benefit options to conform to federal law. COMMENTS: 1)Purpose. According to the author, the goal of the commute benefit program is to promote the use of transit and other alternative commute modes in order to reduce single-occupant vehicle commute trips, traffic congestion, and emissions of greenhouse gases (GHGs) and other air pollutants from motor vehicles. The program seeks to achieve these objectives by expanding the number of employers who provide commuter benefits to their employees. 2)Background. In 2009, three Bay Area cities adopted ordinances requiring employers to provide employees with incentives to commute by public transit, ridesharing, and bicycle. BAAQMD and MTC recognized this type of policy as an opportunity to promote the use of alternative transportation throughout the Bay Area, and sought authorization from the legislature to SB 1128 (Glazer) Page 3 of ? adopt an ordinance that would apply region-wide. SB 1339 (Yee, Chapter 871, Statutes of 2012), allowed the two entities to develop a pilot ordinance with a January 1, 2017 sunset date. 3)Costs to implement. The current BAAQMD-MTC commute benefit program provides four options from which businesses can choose to achieve compliance, one of which is a pre-tax option whereby an employee may opt to have the employer deduct from his or her gross income the cost incurred to pay for alternative commuting options. This pre-tax program discounts alternative commuting costs by 30% to 40% for employees and reduces the payroll tax that an employer pays on employees' wages by approximately 9%. Supporters argue that the pre-tax option is a win-win-win solution because it saves money for employers and employees while resulting in improved regional outcomes. The other options pose higher costs to employers, but it is strictly the employer's choice to offer one of these benefit types. In the first year of the pilot program, the vast majority (82%) of registered employers offered the pre-tax option. 4)Changes pertaining to bicycles. Under current law, employers that choose the pre-tax option are required to offer this benefit to cyclists. However, federal tax code prohibits excluding expenses related to bicycle commuting from taxable income. In order to achieve consistency with federal law, this bill strikes bicycling as an eligible commute expense for the tax-exclusion program type. The bill instead allows employers who offer a subsidy to extend this benefit to bicycle commuters if they choose. 5)Results. SB 1339 required BAAQMD and MTC to report on the effects of the commute benefit program to the Legislature in order to provide an opportunity to evaluate the success of the program. The bill deletes this requirement because the report has been completed and released to the public. Of the 3,910 employers who completed online registration in the program, 55% were offering commuter benefits for the first time in response to the program. This translates to approximately 472,000 individual employees newly eligible to receive commuter benefits, an estimated 205,000 of whom are actually using the new benefits. The report estimates that 44,400 of these individuals would not have used an alternative commute mode if the benefit were not available. The program has SB 1128 (Glazer) Page 4 of ? resulted in 4.2 million fewer vehicle trips in the region in its first 12 months, and prevented GHG emissions equal to approximately 2.7% of the Bay Area's target under SB 375 (Steinberg, Chapter 728, Statutes of 2008), which set regional goals for GHG emissions reductions from passenger vehicle use. Supporters note that there is great potential to build on these gains if the program is made permanent. 6)Ensuring compliance: an ongoing concern. In 2012, this committee's analysis of SB 1339 raised the question of how MTC and/or BAAQMD would know whether or not an employer was complying with the pilot ordinance. The two entities now estimate that between 10,000 and 11,000 Bay Area employers may be covered by the ordinance - a number far exceeding the 3,910 employers who enrolled in the first year. The report emphasizes that eliminating the sunset will provide additional opportunity to publicize the program and its benefits and, by extension, register additional employers. However, the employer mandate ultimately may not be credible if BAAQMD and MTC are unable to identify which employers are covered and verify their compliance. To date, BAAQMD and MTC have emphasized compliance assistance over enforcement as they implement the program. This may be the most appropriate approach to ensuring broad participation, given that offering commute benefits can result in net savings for both employers and employees. As the program matures, however, it may be necessary to revisit the question of how compliance can be assured. Related Legislation: SB 1339 (Yee, Chapter 871, Statutes of 2012) - authorized a pilot program requiring certain Bay Area employers to offer commute benefits to employees. FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No POSITIONS: (Communicated to the committee before noon on Wednesday, March 30, 2016.) SUPPORT: SB 1128 (Glazer) Page 5 of ? Bay Area Air Quality Management District Coalition for Clean Air Golden Gate Bridge Highway and Transportation District Metropolitan Transportation Commission San Francisco Chamber of Commerce Santa Clara County Board of Supervisors OPPOSITION: None received -- END --