BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 892
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: furutani
VERSION: 6/16/09
Analysis by: Jennifer Gress FISCAL: yes
Hearing date: June 30, 2009
SUBJECT:
Proposition 1B: Goods Movement Emission Reduction Program
(GMERP)
DESCRIPTION:
This bill provides that returned or unspent funds from an
obligated contract received by a local agency under the GMERP
may either be awarded to fund other projects listed in the same
grant agreement with the California Air Resources Board (ARB) or
be returned to ARB for reallocation to other projects in the
same source category in the same trade corridor. This bill also
allows ARB not to allocate funds to a local agency until the
local agency is ready to enter into a contract with an equipment
owner.
BACKGROUND AND ANALYSIS:
Existing law
In November 2006, voters approved the Highway Safety, Traffic
Reduction, Air Quality and Port Security Bond Act of 2006, also
known as Proposition 1B, that among other things, provided one
billion dollars to reduce emissions associated with the movement
of freight along California's trade corridors.
SB 88 (Committee on Budget and Fiscal Review), Chapter 181,
Statutes of 2007, provided guidance to ARB to implement the
program, referred to as the Goods Movement Emission Reduction
Program (GMERP).
SB 88 identified projects that are eligible for funding,
including the replacement, repower, or retrofit of heavy-duty
diesel trucks, locomotives, harbor craft, and cargo handling
equipment, and the provision of on-shore electrical power (i.e.,
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cold-ironing) for cargo ships, portable shore-side power
generation projects, or electrification infrastructure to reduce
engine idling and the use of internal combustion auxiliary power
systems.
SB 88 required ARB to allocate funds on a competitive basis and
enumerated 11 factors that ARB must consider when doing so.
These criteria include:
The magnitude of the emission reduction;
The public health benefits of the emission reduction;
The cost-effectiveness and sustainability of the emissions
reductions;
The severity and magnitude of the emission source's
contributions to emissions;
Regulatory and State Implementation Plan requirements, and the
degree of surplus emissions to be reduced;
The reduction of greenhouse gases, consistent with and
supportive of emission reduction goals;
The extent to which advanced emission reduction technologies
will be used;
The degree to which funds are leveraged from other sources;
The degree to which the project reduces air pollutants or air
contaminants in furtherance of achieving state and federal
ambient air quality standards and reducing toxic air
contaminants;
The total emission reductions a project would achieve over its
lifetime per state dollar invested; and
Whether emission reductions are likely to occur in a location
where emissions sources contribute to cumulative human
exposures to pollution and expose people to adverse health
consequences.
Existing law provides ARB two years to allocate funds. After
that time, any unallocated funds revert to the fund from which
the appropriation was initially made and are subject to
re-appropriation by the Legislature. SB 88 provided that a
grant recipient may have up to two years from the date that ARB
allocates funds to award the contract for implementation of the
equipment project. Under SB 88, the contractor then has four
years to expend the funds. If either the grant recipient or the
contractor does not expend funds within those timeframes, the
funds are reverted to the California Ports Infrastructure,
Security, and Air Quality Improvement Account, subject to
appropriation by the Legislature.
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SB 88 required ARB to develop guidelines to implement the GMERP
by December 31, 2007.
GMERP guidelines
To address each of the 11 criteria, ARB established in its
guidelines funding targets for each source category (trucks,
locomotives, harbor craft, cargo handling equipment, ships) and
for each trade corridor.
In order to consider a region's status for attainment of
national ambient air quality standards and its goods
movement-related health risk, ARB established the following
funding targets for each trade corridor based on population,
goods movement-related emissions, and federal attainment needs:
$550 million for the Los Angeles/Inland Empire corridor
$250 million for the Central Valley corridor
$140 million for the Bay Area corridor
$60 million for the San Diego/border corridor
To ensure that projects in one source category are not competing
for projects in another source category, which vary in the
extent to which they contribute to goods movement-related
emissions statewide, cost-effectiveness, location, health risk,
and other factors, ARB established the following funding targets
for each source category:
$760 million for heavy-duty diesel trucks
$100 million diesel freight locomotives
$100 million for shore-power projects for ships at berth and
cargo handling equipment at seaports and intermodal rail yards
$40 million for commercial harbor craft
Within each source category, ARB has established minimum
requirements that each equipment project must meet in order to
be eligible for funding (e.g., replace a truck with a maximum
state subsidy of $50,000).
Applicants, which are defined as a local public agency involved
in the movement of freight such as an air district, seaport, or
regional transportation agency within a trade corridor, apply to
ARB for funding under a source category for a particular program
(i.e., "local agency project") it plans to implement at the
local level.
ARB ranks the applications from each local agency within each
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source category within each trade corridor on the basis of total
emission reductions and cost-effectiveness. Once ARB selects a
local agency project, it allocates funds and enters into a grant
agreement with the local agency, which authorizes the local
agency to issue a notice of funding availability or similar
solicitation to advertise the program and solicit applications
for equipment projects.
Equipment owners, which could be a private company such as FedEx
or a public agency such as the Port of Los Angeles, apply to the
local agency for funds to do specific equipment projects. The
local agency then ranks the equipment projects using the same
process ARB used to rank local agency projects. Each local
agency submits a final list of equipment projects to ARB for
approval. This list includes backup equipment projects that are
eligible for funding but for which the agency does not have
sufficient funding. Once ARB approves a local agency's list of
equipment projects, the local agency may enter into a contract
with an equipment owner for the equipment project.
This bill :
Allows returned or unspent funds from an obligated contract
received by a local agency either to be awarded to fund other
projects listed in that local agency's same grant agreement
with ARB or to be returned to ARB for reallocation to other
local agency projects in the same source category in the same
trade corridor.
Allows ARB not to allocate funds to a local agency until the
local agency is ready to enter into a contract with an
equipment owner, as opposed to allocating funds at the time
that ARB enters into a grant agreement with the local agency.
COMMENTS:
1.Purpose . According to the author, this bill is needed
because, due to a slowing economy, some equipment owners who
have entered into contracts to receive GMERP funding are
backing out of their contracts and returning the funds to the
district. This may occur because a company cannot fund its
share of the project or the company is simply going out of
business. Although the local air districts have dozens of
qualified projects waiting to receive GMERP funding, current
law does not allow the air district to apply the returned
funds to otherwise qualified projects. Funds must be returned
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to the main Proposition 1B account, re-appropriated by the
Legislature, and then again awarded by ARB. There is no
guarantee that the air district or other local agency will
receive those funds back. Many air districts in the state
have air quality improvement projects that are ready to be
implemented and have already demonstrated that they are
consistent with ARB's GMERP guidelines and Proposition 1B.
2.When ARB must allocate funds . This bill also allows ARB not
to allocate funds to a local agency until the local agency is
ready to enter into a contract with an equipment owner,
notwithstanding existing law requiring ARB to liquidate
appropriated funds within two years of obligating them.
Existing law contains conflicting timelines for the obligation
and liquidation of funds, but it is unclear how this language
addresses the problem. Furthermore, similar budget control
language has been included with each of the past three budget
appropriations rendering this change unnecessary. For this
reason, the author or committee may wish to consider an
amendment to delete this provision of the bill.
3.Suggested amendments .
a. In the event of a cancelled contract, the circumstances
under which funds could be applied to the next project on a
local agency's list or returned to ARB for re-allocation
are unclear. The author's intent is that funds only be
returned to ARB for re-allocation when there is no other
project on a local agency's approved list. For this
reason, the author or committee may wish to consider the
following amendment to clarify this situation: Page 3,
line 2 after "or" insert ", in the event there are no other
eligible projects listed in the grant agreement."
b. The bill is presented as though it allows a local agency
to fund the next equipment project listed in the same grant
agreement. Because ranked equipment projects are not
included in the grant agreement, it is unclear that the
bill actually accomplishes that objective. The author or
committee may wish to consider an amendment clarifying the
projects that local agencies may fund in the following
manner: Page 3, delete "projects listed in the same grant
agreement approved by the state board" and insert
"equipment projects included on the same competitively
ranked list approved by the state board pursuant to its
grant agreement."
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4.Double-referral . This bill is double-referred to this
committee and the Committee on Environmental Quality. If this
bill passes this committee, it will be re-referred to the
Environmental Quality Committee.
Assembly Votes:
Floor: 78-0
Appr: 17-0
Trans: 14-0
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 24, 2009)
SUPPORT: Automobile Club of Southern California
Bay Area Air Quality Management District
California Air Pollution Control Officers
Association
Harbor Association of Industry and Commerce
San Joaquin Valley Air Pollution Control District
OPPOSED: None received.