BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 1122
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: pavley
VERSION: 4/8/14
Analysis by: Mark Stivers FISCAL: yes
Hearing date: April 29, 2014
SUBJECT:
Cap-and-Trade Program funds for Sustainable Communities Strategy
implementation
DESCRIPTION:
This bill requires the Strategic Growth Council to award
Cap-and-Trade Program funds on a per capita basis to a council
of governments, metropolitan planning organization, regional
transportation planning agency, city, county, or joint powers
authority to develop or implement regional plans that improve
air and water quality, improve natural resource protection,
increase the availability of affordable housing, improve
transportation, meet the goals of AB 32, encourage sustainable
land use, and meet the requirements for regional transportation
plans.
ANALYSIS:
SB 375
SB 375 (Steinberg), Chapter 728, Statutes of 2008, requires the
Air Resources Board (ARB) to provide each region that has a
metropolitan planning organization (MPO) with a greenhouse gas
(GHG) emission-reduction target for the automobile and
light-truck sector for 2020 and 2035, respectively. Each MPO,
in turn, is required to include within its regional
transportation plan (RTP) a sustainable communities strategy
(SCS) or alternative planning scenario (APS) designed to achieve
the ARB targets for GHG emission reduction. Each MPO must
submit its SCS or APS to ARB for review. ARB must accept or
reject the MPO's determination that the SCS of APS submitted
would, if implemented, achieve the GHG emission-reduction
targets.
Cap-and-Trade Program
SB 1122 (PAVLEY) Page 2
In 2006, the Legislature enacted AB 32 (Nu�ez), Chapter 488, the
Global Warming Act of 2006, which requires the ARB to establish
a statewide GHG emissions limit such that by 2020 California
reduces its GHG emissions to the level they were in 1990.
Thereafter, ARB must adopt the maximum feasible and
cost-effective reductions in GHG emissions for sources subject
to the Act.
As one of its key AB 32 implementation programs, ARB has adopted
the Cap-and-Trade Program. Under this program, ARB establishes
an overall limit or cap on GHG emissions from specified
industries. Facilities subject to the cap may reduce their own
emissions or purchase allowances from others to emit GHGs,
including from facilities that have reduced emissions more than
required. In essence, the Cap-and-Trade Program uses market
forces in an attempt to reduce GHG emissions in the most
economically efficient manner.
As part of the Cap-and-Trade program, ARB auctions off GHG
emission allowances. To date, ARB has completed six auctions,
taking in a total of $663 million in proceeds. These funds may
only be used to facilitate the achievement of GHG emission
reductions in California consistent with AB 32. The Department
of Finance, in consultation with ARB and other relevant state
agencies, must develop a three-year investment plan for these
funds, but ultimately the Legislature and governor appropriate
the funds through the annual budget process.
Strategic Growth Council
The Strategic Growth Council (SGC) is a cabinet-level committee
comprised of the secretaries of Health and Human Services;
Natural Resources; Transportation; Business, Consumer Services,
and Housing; and Environmental Protection, as well as the
directors of the Office of Planning and Research and the
Department of Food and Agriculture. The council's mission is to
coordinate activities that support sustainable communities
emphasizing strong economies, social equity, and environmental
stewardship.
This bill requires the SGC, with Cap-and-Trade Program funds
appropriated for this purpose, to award financial assistance to
a council of governments, metropolitan planning organization,
regional transportation planning agency, city, county, or joint
powers authority to develop or implement a regional plan that
improves air and water quality, improves natural resource
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protection, increases the availability of affordable housing,
improves transportation, meets the goals of AB 32, encourages
sustainable land use, and meets the requirements for regional
transportation plans. The bill requires that SGC awards grants
to regional entities on a per capita basis.
Eligible uses of the funds are:
Transportation network and demand management, including, but
not limited to, trip reduction programs, congestion pricing,
safe routes to schools, and roadway modifications.
Public transportation, including operations, maintenance, and
capital costs.
Road and bridge maintenance; operations and retrofits for
complete street, bike, and pedestrian safety enhancements; and
urban greening.
Clean transportation fueling infrastructure and support.
Multimodal network connectivity to reduce travel distances and
improve access to parks, schools, jobs, housing, and markets
for rural and urban communities, including neighborhood scale
planning.
Development and adoption of local plans and land use policies
that help to implement an SCS.
Community infrastructure, including public works and municipal
improvements, necessary to support transit-oriented
development, affordable housing, infill in existing urbanized
areas, and small walkable communities in rural neighborhoods.
Multiuse facilities and accommodations for bicyclists,
pedestrians, and neighborhood electric vehicles.
Administrative costs and the development and use of
evaluation, monitoring, and verification systems.
The bill requires SGC to adopt criteria and requirements for
regional awards that do all of the following and to review and
revise these criteria annually:
Require that regional or local agencies select projects
through a competitive public process based on reduction in the
emissions of greenhouse gases.
Provide for the development and implementation of projects
that integrate infrastructure investment with land use or
local code changes to achieve the maximum reduction in the
emissions of greenhouse gases.
Provide for public participation in the review of proposed
projects.
Provide for consultation and coordination with air pollution
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control districts and air quality management districts.
Establish the methods for evaluating, monitoring, and
verifying project effectiveness, including those related to
travel-demand reduction, system efficiency, safety
improvements, demographic characteristics, and integrated land
use and transportation strategies.
Establish standards for integrated modeling systems and
measurement methods to ensure consistency in evaluating the
potential effectiveness of projects and verifying the actual
benefits of projects after completion.
Ensure compliance with current statute requiring that 25% of
Cap-and-Trade Program funds provide benefits to disadvantaged
communities and that an additional 10% of funds go to projects
located within disadvantaged communities.
The bill also allows SGC to award funds directly to a city,
county, city and county, or regional agency for the development
and implementation of agricultural, natural resources, and
open-space land protection that reduce the emissions of
greenhouse gases and that are consistent with and support the
implementation of sustainable communities strategies,
alternative planning strategies, or other regional GHG emissions
reduction plans.
COMMENTS:
1.Purpose of the bill . According to the author, the SGC's main
purpose is to help coordinate the various land use,
transportation, and housing strategies that will achieve the
GHG reduction target for those sectors that the ARB adopted
pursuant to SB 375. To that end, the SGC received $90 million
from Prop 84 to award grants that supported the planning
objectives of SB 375. The SGC will finish awarding those
funds in its next cycle of grants. To continue the work of
the SGC and to help achieve the transportation, land use, and
housing objectives of SB 375, this bill authorizes the SGC to
make grants to regional entities with funds it receives from
Cap-and-Trade Program auction revenues.
2.Empowering the regions . For the most part, this bill requires
the SGC to pass through Cap-and-Trade Program funds to the
regions on a per capita basis. While the SGC would set
overall program guidelines for the regions, the regions
themselves would evaluate and select individual projects for
funding.
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This approach differs from the governor's proposed trailer
bill, which envisions the SGC selecting projects for funding
under guidelines it will develop. The proposed trailer bill
only requires that the SGC coordinate with the regions to
identify and recommend projects.
Given the limited staff at the SGC, the deep experience of the
regions in administering transportation programs, and the fact
that SB 375 puts the focus on regions to develop and implement
GHG emission-reduction strategies, the bill's approach to
empower the regions seems to make sense for transportation
investments. The bill, however, also allows the SGC to grant
funds directly to cities and counties, which undermines the
competitive regional approach and is incompatible with the
bill's provisions to grant funds on a per capita basis to
regional authorities. Moreover, the bill refers vaguely to
implementing regional plans that meet the criteria for
regional transportation plans. It would be clearer to refer
directly to the regional SCS or APS where required and to a
"regional plan that includes policies and programs to reduce
GHG" where an SCS or APS is not required. The committee may
wish to consider limiting grants to regional entities to
implement an SCS or APS where required or to implement an
equivalent regional plan in other areas.
3.Including housing . ARB's Cap-and-Trade Investment Plan
states, "The State must look to invest new funding in ?
programs that encourage a change in land-use patterns and mode
shift by contributing to transit-oriented development,
sustainable communities, and active transportation programs."
There is broad agreement that developing housing, particularly
affordable housing whose residents are more likely to use
transit, near transit infrastructure reduces GHG emissions by
promoting transit ridership. While the bill makes eligible
for funding land use planning changes and related
infrastructure to promote transit-oriented development, it
does not actually allow funding for transit-oriented
development itself.
To the extent that the committee does wish to include
affordable housing in the bill, this is one activity that may
be more appropriate for the state to administer. While most
of the large MPOs have made some awards for
transportation-related infrastructure that supports
transit-oriented affordable housing, and the Bay Area's
Metropolitan Transportation Commission has invested $10
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million with a third-party fund for transit-oriented
affordable housing, no MPO has directly underwritten,
administered, and monitored loans to affordable housing
developments. Like the bill's provision for the SGC to
administer grants for agricultural, natural resources, and
open-space land protection, the committee may wish to consider
making the Department of Housing and Community Development's
Transit-Oriented Development Implementation Program eligible
for direct funding.
4.Maximizing GHG reductions . The bill's list of eligible
projects includes a number of items that do not clearly result
in reducing GHG emissions. For example, transit operations
and maintenance and general road and bridge maintenance are
eligible expenditures, yet these do not necessarily improve
transit service or highway efficiency. The committee may wish
to consider replacing these eligibility categories with
projects that increase public transportation service or
frequency of service or that enhance active transportation
options.
In addition, the bill requires regional agencies to award
funds competitively based on reduction in the emissions of
GHG. While this will help maximize GHG reductions and ensure
compliance with legal rules for expenditure of Cap-and-Trade
Program funds, this criterion cannot be the sole scoring
factor. It is also necessary, for example, that projects be
financially feasible and that the applicants have the capacity
to carry them out. Otherwise, the awarded projects may never
come to fruition. The committee may wish to consider
requiring regional agencies to award funds to projects meeting
minimum threshold criteria based on GHG reductions.
Lastly, the bill allows for regions to use some of their grant
funds for administration of the program and for the evaluation
and monitoring of awarded projects. The committee may wish to
cap regional administrative expenditures at 5%.
5.The ability to measure GHG impacts will be key . This bill
requires that regions select projects for funding through a
competitive process based on reduction in the emissions of
GHG. This is necessary to ensure that Cap-and-Trade Program
auction proceeds are spent to reduce GHG emissions or their
impacts as the law requires. It is also good policy in order
to facilitate uniform comparison of different types of
projects and to achieve maximum cost effectiveness. That
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said, it will be very difficult for the SGC and regions to
develop methodologies for measuring the GHG impacts of such a
wide variety of potential projects. It is not clear that
current models are sensitive enough to do this and that the
SGC and regions will have access to relevant data to improve
the models sufficiently. Ultimately, the success of the bill
may depend on the ability to accurately estimate the GHG
impacts of individual projects.
6.Arguments in opposition . Opponents believe that ARB does not
have the authority to sell cap-and-trade emission allowances
through auction and that it is therefore premature to expend
auction proceeds.
PREVIOUS VOTES:
Senate Environmental Quality: 6-0
RELATED LEGISLATION:
Governor's Proposed Budget Trailer Bill requires the SGC to
develop and administer a Sustainable Communities Implementation
Program to reduce GHG by funding projects that implement
housing, transportation, land use, and agricultural land
preservation practices to support infill and compact development
and related and coordinated public policy objectives. The
Senate and Assembly Budget Committees are considering this
proposal.
Senator Steinberg's Proposal allocates 40% of Cap-and-Trade
Program revenues for affordable housing and sustainable
communities (with at least half of this for affordable housing)
and an additional 30% of revenues for public transit. Not
currently in legislation.
AB 1970 (Gordon) requires the SGC to establish the Community
Investment and Innovation Program to provide grants and other
financial assistance to eligible local government recipients for
the purposes of developing and implementing GHG emission
reduction projects. In the Assembly Local Government Committee.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 23,
2014.)
SUPPORT: American Planning Association, California Chapter
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California Alliance for Jobs
California Association of Councils of Government
Transportation Coalition for Livable Communities
OPPOSED: California Chamber of Commerce
California League of Food Processors
California Manufacturers and Technology
Association
California Taxpayers Association