BILL ANALYSIS �
SB 1257
Page 1
SENATE THIRD READING
SB 1257 (Ed Hernandez)
As Amended June 11, 2012
Majority vote
SENATE VOTE :38-0
LOCAL GOVERNMENT 9-0 REVENUE & TAXATION
9-0
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|Ayes:|Smyth, Gordon, Williams, |Ayes:|Perea, Harkey, Beall, |
| |Bradford, Beall, Davis, | |Charles Calderon, Cedillo, |
| |Hueso, Knight, Norby | |Fletcher, Fuentes, Gordon, |
| | | |Nestande |
| | | | |
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SUMMARY : Exempts from utility user taxes (UUTs) the consumption
of compressed natural gas (CNG) and electricity as a motor
vehicle fuel for public transit vehicles by local agencies or
public transit operators. Specifically, this bill :
1)States that it is the Legislature's intent to recognize that
public transit operators are moving towards the use of
electricity as a primary fuel source to meet air quality
objectives at the state and regional levels, as well as to
provide vital public transportation services to
transit-dependent citizens in California.
2)Notes that the Mills-Hayes Act �Revenue and Taxation Code
(R&TC) Section 8655] provides that a tax shall not be imposed
upon the use of fuel by public transit operations.
3)States that this legislation will clarify that, pursuant to
the Mills-Hayes Act, the consumption of electricity as a motor
vehicle fuel by an electric public transit bus shall be exempt
from any taxes imposed upon the consumption of electricity.
4)Exempts from any UUT, imposed by a local jurisdiction, a local
agency's or public transit operator's consumption of:
a) CNG dispensed by a gas compressor, within a local
jurisdiction, that is separately metered and is dedicated
to providing CNG as a motor vehicle fuel for use by the
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local agency or public transit operator; and,
b) Electricity used to charge electric bus propulsion
batteries, within a local jurisdiction, that is separately
metered and is dedicated to providing electricity as a
motor vehicle fuel for use by an electric public transit
bus.
5)Defines a "local jurisdiction" to mean "any city, county, city
and county, including any chartered city, county, or city and
county, district, or public or municipal corporation."
6)Defines a "public transit operator" to mean a local or
regional transit agency or a joint powers agency operating bus
transportation service as described pursuant to Public
Utilities Code Section 99200 et seq.
7)Finds and declares that this UUT exemption will ensure
statewide uniformity and fairness in the overall cost of
providing vital public transportation services to transit
dependent citizens in California. Therefore, the exemption is
a matter of statewide concern, and not a municipal affair, as
that term is used in California Constitution Article XI,
Section 5.
EXISTING LAW :
1)Allows charter cities to levy taxes that are not preempted by
the state or federal governments.
2)Authorizes any county to levy a UUT on the consumption of
electricity, gas, water, sewer, telephone, telegraph, and
cable television services in the county's unincorporated area.
�R&TC Section 7284.2(a)]. For purposes of this
authorization, "gas" does not refer to the consumption of CNG
dispensed by a gas compressor, within a local jurisdiction,
that is separately metered and is dedicated to providing CNG
as a motor vehicle fuel for use by the local agency or public
transit operator. �R&TC Section 7284.2(b)].
3)Prohibits the imposition of use fuel tax upon fuel used by any
transit district, transit authority, or city owning and
operating a local transit system itself or through a wholly
owned nonprofit corporation. �R&TC Section 8655(b)(1)].
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FISCAL EFFECT : Unknown. The Assembly Revenue and Taxation
Committee staff estimates that this bill will not impact General
Fund revenues.
COMMENTS : The author has provided the following statement in
support of this bill:
SB 1257 will clarify that electricity is a fuel used by
public transit agencies, and therefore is exempt from any
tax as per the Mills-Hayes Act. Foothill Transit
operates not only in SD 24 �Senate District 24], but
throughout the San Gabriel and Pomona Valleys. It
recently acquired a specific type of electric bus, and is
currently being charged a UUT on this particular type of
bus. SB 1257 is a district bill, and specifically
applies only to the fast-charging electric buses used by
Foothill Transit. They are the only transit agency in
the state that uses it. Thus, this bill has very limited
applicability and impact. It has no general fund impact,
because the UUT is strictly a local tax.
This bill is sponsored by the Board of Directors for Foothill
Transit (Foothill Transit). By way of background, Foothill
Transit notes:
In 2008, Foothill Transit sponsored AB 2009 that was
carried by then Assemblyman Ed Hernandez which was
enacted exempting a public transit agency's use of
compressed natural gas (CNG) to power its buses from
local utility users' taxes (UUT). SB 1257 by Senator
Hernandez would exempt a public transit agency's use of
in-route battery charged electricity to power its buses
from local UUT's. The introduction of the Ecoliner and
Foothill Transit's goal of continuing to convert a
portion of our fleet to zero emission all electric
battery charged buses has prompted us to seek legislation
that would exempt a public transit agency's use of
electricity to power its buses from being charged local
electric UUT's.
Foothill Transit's operation is centered in the San
Gabriel Valley, in eastern Los Angeles County. We
provide regional transit services encompassing the
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Valley, Downtown Los Angeles and parts of Orange and San
Bernardino Counties. With the introduction last year of
our Ecoliner, Foothill Transit became the first public
transit operator to use fast-charging electric buses as
part of its fleet. Unfortunately, under current law, we
could be charged a utility users tax for the consumption
of electricity as a fuel in the operation of our Ecoliner
buses. SB 1257 would clarify (as currently exists for
CNG fueled buses) that we would be exempt from the UUT
under the Mills-Hayes Act.
Assembly Revenue and Taxation Committee staff comments:
UUTs : Cities may impose a UUT on the consumption of utility
services, including electricity, gas, water, sewer, telephone,
sanitation, and cable services. The rate of the tax and the use
of its revenues are determined by the local agency. A UUT may
be imposed as a special tax, earmarked for specific purposes, or
as a general tax.
Existing law also authorizes counties to levy a UUT on the
consumption of specified services in the county's unincorporated
area. As of 2008, it was estimated that city and county UUTs
generate about $2 billion in revenues each year.
AB 2009 : AB 2009 (Hernandez), Chapter 221, Statutes of 2008,
provided that,
for purposes of the statute permitting counties to impose a UUT
on the consumption of gas, the term "gas" shall not be construed
to refer to CNG used as a motor vehicle fuel by a local agency
or public transit operator. Like the present bill, AB 2009 was
sponsored by Foothill Transit, which noted at the time:
�A]gencies that use diesel would not be subject to a
utility user tax. This presents an uneven financial
playing field between agencies who have determined
using natural gas better suits their needs than those
using diesel fuels. Also, if we are required to pay a
UUT, operating expenses will increase leading to likely
service reductions and fewer travel options for the
transit customer.
What would this bill do ? As noted by the Assembly Local
Government Committee, this bill takes the exemption provided by
AB 2009 a few steps further. First, this bill expands the
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current exemption for CNG. Currently, the exemption applies
only to county-imposed UUTs. This bill would bar any local
jurisdiction (i.e., both counties and cities) from imposing a
UUT on the consumption of CNG used as a motor vehicle fuel by a
local agency or public transit operator. Second, this bill
would bar local jurisdictions from imposing a UUT on electricity
used to charge electric bus propulsion batteries, as specified.
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098
FN: 0004370