The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. The act authorizes the state board to include the use of market-based compliance mechanisms. Existing law requires all moneys, except for fines and penalties, moneys collected by the state board as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund and to be available upon appropriation. Existing law continuously appropriates specified portions of the annual proceeds in the fund to various programs, including 5% for the Low Carbon Transit Operations Program, which provides operating and capital assistance for transit agencies to reduce greenhouse gas emissions and improve mobility, with a priority on serving disadvantaged communities.

This bill would additionally authorize moneys appropriated to the program to be expended to support the operation of existing bus or rail service if the governing board of the requesting transit agency declares a fiscal emergency and other criteria are met, thereby expanding the scope of an existing continuous appropriation.

The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. The act authorizes the state board to include the use of market-based compliance mechanisms. Existing law requires all moneys, except for fines and penalties, collected by the state board as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund and to be available upon appropriation. Existing law continuously appropriates specified portions of the annual proceeds in the fund to various programs, including 5% for the Low Carbon Transit Operations Program, which provides operating and capital assistance for transit agencies to reduce greenhouse gas emissions and improve mobility, with a priority on serving disadvantaged communities.

This bill would additionally authorize moneys appropriated to the program to be expended to support the operation of existing bus or rail service if the governing board of the requesting transit agency declares a fiscal emergency and other criteria are met, thereby expanding the scope of an existing continuous appropriation.

The California Global Warming Solutions Act of 2006 designates the State Air Resources Board as the state agency charged with monitoring and regulating sources of emissions of greenhouse gases. The act authorizes the state board to include the use of market-based compliance mechanisms. Existing law requires all moneys, except for fines and penalties, collected by the state board as part of a market-based compliance mechanism to be deposited in the Greenhouse Gas Reduction Fund and to be available upon appropriation. Existing law continuously appropriates specified portions of the annual proceeds in the fund to various programs, including 5% for the Low Carbon Transit Operations Program, which provides operating and capital assistance for transit agencies to reduce greenhouse gas emissions and improve mobility, with a priority on serving disadvantaged communities.

This bill would additionally authorize moneys appropriated to the program to be expended to support the operation of existing bus or rail service if the governing board of the requesting transit agency declares a fiscal emergency and other criteria are met, thereby expanding the scope of an existing continuous appropriation.

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

AB 2090 (Alejo) - Low Carbon Transit Operations Program

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

AB 2090 would expand the uses for funds allocated to transit agencies pursuant to the Low Carbon Transit Operations Program (LCTOP) to include expenditures for the support the operation of existing bus or rail service under specified circumstances.

Fiscal Impact:

• Unknown, significant cost pressures on LCTOP funds to the extent expenditures that support existing bus or rail operations displace funding for projects that provide new or expanded service. (Greenhouse Gas Reduction Fund – GGRF)
  
• Likely minor administrative costs for the Department of Transportation (Caltrans) to revise program guidelines and review additional funding requests. (State Highway Account)
  
• Potential increased staff costs at the California Air Resources Board (CARB) to determine whether projects that support existing transit operations would result in greenhouse gas reductions and other co-benefits, develop quantification methods, and establish criteria. (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 CARB to develop guidelines that recipient agencies must use to demonstrate that expenditures meet program criteria. Before authorizing disbursement of funds, Caltrans and CARB coordinate to determine eligibility of recipient agencies’ proposed expense types.

Existing law continuously appropriates five percent of annual GGRF proceeds to LCTOP. Funding is allocated to transit agencies pursuant to existing State Transit Assistance formulas but an agency’s proposed project expenditures must be reviewed and approved by Caltrans to ensure they meet program requirements. LCTOP received $25 million in 2014-15 and $100 million in 2015-16. The Governor’s 2016-17 Budget proposed $100 million for the program in the budget year.

Existing law, the California Environmental Quality Act (CEQA), authorizes a transit agency to declare a “fiscal emergency” if it is projected to have negative funding within one year, and it considers the proposed declaration at a public hearing. When a transit agency declares a fiscal emergency caused by the failure of revenues to adequately fund agency programs, facilities, and operations, existing law exempts the agency from conducting a CEQA review of impacts related to a proposed reduction or elimination of transit services and proposed fare, fee, fine, or rate increases that those services.

Proposed Law:

In addition to existing authorizes LCTOP expenditures, AB 2090 would authorize transit agencies to use LCTOP funds to support the operation of existing bus or rail service if all of the following occur:

• The transit agency’s governing board declares a fiscal emergency, as specified, within 90 days prior to requesting funds.
• Expenditure of the requested funds is necessary to sustain the agency’s transit service in the fiscal year in which funds are proposed to be spent.
• The agency’s governing board would be required to reduce or eliminate transit service if the funds are not provided.
• The agency makes a finding that reduction or elimination of transit service would result in an increase in greenhouse gas (GHG) emissions, as specified.
• The agency does not request funds over consecutive years unless the governing board declares a fiscal emergency in each year, and does not request funds for more than three consecutive years.

Transit operating assistance provided pursuant to the bill must support bus or rail service operating costs, including labor, fueling, maintenance, and other costs. The recipient agency must also demonstrate that each expenditure would directly sustain service that would otherwise be reduced or eliminated if the funds were not received.

Related Legislation:

SB 824 (Beall), which is currently pending in the Assembly Appropriations Committee, would make various changes to LCTOP that provide enhanced flexibility to recipient transit agencies for program expenditures, but also require that at least 50 percent of all LCTOP funds are used for projects that benefit disadvantaged communities.

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. AB 2090 would instead authorize revenues to be used to sustain existing bus or rail operations if a transit agency declares a fiscal emergency and determines that existing service would be reduced or eliminated without the operating subsidy. Rather than reducing GHG emissions and expanding transit services, as the program was originally designed, this bill would provide funding to maintain existing operations and provide a mechanism that avoids potential increases in GHG emissions that may result if consumers of transit services instead chooses a less efficient modes of transportation. By expanding the uses of LCTOP funds, this bill would create significant cost pressures on the program.

Under current law, CARB must develop quantification methods for determining GHG emission reductions related to GGRF expenditures. CARB indicates that it would be involved in determining what justifies a fiscal emergency and likelihood of losses of transit services, and will likely be required to develop new quantification methods for determining that expenditures supporting continued operations (as opposed to investments in transit expansion) result in GHG emission reductions. CARB estimates that it may require an additional position, at a cost of $162,000, to perform these functions.

Staff notes that both this bill and SB 824 make changes to the LCTOP. Both measures will need to be amended eventually to avoid chaptering conflicts.

-- END --

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Wieckowski, Chair

2015 - 2016 Regular

Bill No: AB 2090

SUBJECT: Low Carbon Transit Operations Program.

ANALYSIS:

Existing law:

1. Under the California Global Warming Solutions Act of 2006 (also known as AB 32), requires the California Air Resources Board (ARB) to determine the 1990 statewide greenhouse gas (GHG) emissions level and approve a statewide GHG emissions limit that is equivalent to that level, to be achieved by 2020, and to adopt GHG emissions reductions measures by regulation. ARB is authorized to include the use of market-based mechanisms to comply with these regulations. (Health and Safety Code §38500 et seq.)
2. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury, requires all moneys, except for fines and penalties, collected pursuant to a market-based mechanism be deposited in the fund. (Government Code §16428.8)
3. Prohibits the state from approving allocations for a measure or program using GGRF moneys except after determining that the use of those moneys furthers the regulatory purposes of AB 32, and requires moneys from the GGRF be used to facilitate the achievement of reductions of GHG emissions in California. (HSC §39712)
4. Establishes Low Carbon Transit Operations Program (LCTOP), administered by the California Department of Transportation (Caltrans), and continuously appropriates 5% of GGRF fund proceeds for transit operations to expand service and reduce emissions of GHGs, with a priority on serving disadvantaged communities.

This bill:

1. Allows funds from LCTOP to be expended to support the operation of existing bus or rail service if the following criteria are met:
   1. The governing board of the transit agency declares a fiscal emergency, as defined by the California Environmental Quality Act (CEQA), within 90 days of the agency requesting LCTOP funds.
   2. The expenditure of the LCTOP funds is necessary to sustain the transit agency’s transit service in the year in which the funds would be expended.
   3. The governing board of the transit agency would be forced to reduce or eliminate transit service if the requested LCTOP funds are not received.
   4. The governing board of the transit agency makes a finding that a reduction in or elimination of existing transit service would increase GHG emissions because customers would choose other less-efficient modes of transportation.
2. Defines the criteria for which funds from LCTOP can be expended by the transit agency after it declares a fiscal emergency under CEQA, as specified.

Background

1. Cap-and-trade auction revenue. Since November 2012, ARB has conducted 15 cap-and-trade auctions, generating over $4 billion in proceeds to the state.

State law specifies that the auction revenues must be used to facilitate the achievement of GHG emissions reductions and outlines various categories of allowable expenditures.

Budget allocations. SB 862 (Committee on Budget and Fiscal Review, Chapter 36, Statutes of 2014), a budget trailer bill, established a long-term cap-and-trade expenditure plan by continuously appropriating portions of the funds for designated programs or purposes. The legislation appropriates 25% for the state’s high-speed rail project, 20% for affordable housing and sustainable communities grants, 10% to the Transit and Intercity Rail Capital Program, and 5% for the Low-Carbon Transit Operations Program (LCTOP). The remaining 40% is available for annual appropriation by the Legislature.

The Governor’s 2016-17 proposed budget appropriates over $3 billion to a variety of programs and projects in the transportation, energy, natural resources, and waste diversion sectors.

1. Low Carbon Transit Operations Program. LCTOP was established to provide operating and capital assistance for transit agencies to reduce GHG emissions and improve mobility, with a priority on serving disadvantaged communities. LCTOP is administered by Caltrans and is continuously appropriated 5% of GGRF funds. In 2014-15, LCTOP received $25 million, and in 2015-16 it was funded at $100 million. LCTOP expenditures are required to support new or expanded transit service, directly enhance or expand transit service to increase mode share, and reduce GHG emissions.

Prior to receiving an allocation, which is distributed by the State Controller through the State Transit Assistance formula, eligible transit agencies must submit a description of their proposed expenditures and demonstrate how each expenditure will reduce GHG emissions. Approved projects in LCTOP may include equipment acquisition, fueling, maintenance, and other costs to operate new or expanded services and/or facilities. For transit agencies whose service area includes disadvantaged communities, at least 50% of the total moneys received are required to be expended on projects that will benefit disadvantaged communities.

Comments

1. Purpose of Bill. According to the author, “This bill would provide transit agencies with an additional tool for maintaining current transit service levels during fiscal emergencies, with the acknowledgement that severe funding challenges hurt transit ridership and jeopardize the state’s long-term greenhouse gas emission reduction goals. An important part of meeting the state’s greenhouse emission reduction goals is not only to expand existing transit services, but also to maintain existing services to prevent people from having to take on less environmentally safe modes of transportation.”
2. Counter to goals of LCTOP program. LCTOP is funded through a 5% continuous appropriation of GGRF. Projects funded through GGRF are required to demonstrate GHG emissions reductions. Because of the statutory and legal requirements with regard to use of GGRF, LCTOP was designed to require new or expanded service to increase ridership in order to provide additional GHG emissions reductions above and beyond base levels of service. The requirements of the program are intended to prevent GGRF moneys be used to subsidize current levels of service, or backfill operating budgets.

Because of budget deficits, proponents wish to use LCTOP funds to maintain current levels of transit service. Does that objective run counter to the original policy goals of LCTOP and the statutory mandates for the use of GGRF, intended to fund projects that result in new, additional GHG emissions reductions?

1. After three years time. Under the bill, a governing board may use LCTOP moneys to maintain current levels of service for three years, provided they declare a fiscal emergency each of those years. In a situation where a transit agency has no choice but to declare a fiscal emergency and use LCTOP to subsidize current operations, the funds are being used not to increase sustainability or decrease the structural deficit, but simply to barely maintain the status quo. Will the moneys simply delay the inevitable? How will a three year operating subsidy fix a transit agency’s structural funding problems?
2. Fiscal emergency. Under AB 2090, transit agencies may use LCTOP moneys to support the operation of existing bus or rail service if the governing board of the transit agency declares a fiscal emergency, and finds that LCTOP funds are necessary to sustain the transit agency’s level of service.

However, once LCTOP funds are available when a fiscal emergency is declared, will transit agencies, frequently strapped for funds, be more likely to declare fiscal emergencies instead of implementing alternative options, such as fare increases, changes in transit service, renegotiations of agreements with universities and cities, and other measures that may improve fiscal sustainability down the road?

DOUBLE REFERRAL:

This measure was heard in the Senate Transportation and Housing Committee on June 21, 2016, and passed out of committee with a vote of 9-0.

Related/Prior Legislation

SB 824 (Beall) makes various changes related to LCTOP, including requiring expenditures under the LCTOP to fund new or expanded service, increase mode share, or purchase zero-emission buses. SB 824 is set for hearing in the Assembly Transportation Committee on June 27, 2016.

SOURCE:

Santa Cruz Metropolitan Transit District

SUPPORT:

Association of Monterey Bay Area Governments

California Transit Association

City of Santa Cruz

Monterey-Salinas Transit

Orange County Transportation Authority

Riverside Transit Agency

Santa Cruz County Regional Transportation Commission

Transportation Agency for Monterey County

Ventura County Transportation Commission

OPPOSITION:

None received

-- END --

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2015 - 2016 Regular

Bill No: AB 2090 Hearing Date: 6/21/2016

SUBJECT: Low Carbon Transit Operations Program

DIGEST: This bill allows funding from the Low Carbon Transit Operations Program (LCTOP) be expended to support the operation of existing bus or rail service if the specified criteria is met.

ANALYSIS:

Existing law:

1. Requires the California Air Resources Board (CARB), pursuant to AB 32 (Núñez, Chapter 488, Statutes of 2006) to develop a plan of how to reduce statewide greenhouse gas (GHG) emissions to 1990 levels by 2020. Under AB 32, CARB is authorized to include the use of market-based mechanisms to comply with these regulations (i.e., cap and trade).
2. Requires regions, pursuant to t SB 375 (Steinberg, Chapter 728, Statutes of 2008) to prepare a regional transportation plan that includes a sustainable communities strategy (SCS) designed to achieve the regional targets for GHG emission reduction.
3. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury and requires all money collected pursuant to cap- and- trade, with limited exceptions, be deposited into the fund, and makes the GGRF funds available for appropriation by the Legislature.
4. Establishes LCTOP, administered by the California Department of Transportation (Caltrans), and continuously appropriates 5% of GGRF fund proceeds for transit operations to expand service, with a priority on serving disadvantaged communities.
5. Requires that a minimum of 25% of the moneys available in GGRF be used to benefit disadvantaged communities.
6. Provides funding for public transportation through the Transportation Development Act (TDA), including State Transit Assistance (STA) which is derived from the statewide sales tax on diesel fuel. STA funds are appropriated by the Legislature and are allocated by a formula, with 50% being allocated according to population and 50% being allocated according to transit operator revenues from the prior fiscal year.
7. Requires transit operators to maintain a specified ratio of fare revenues to operating costs in order to be eligible to receive TDA funds.

This bill:

1. Allows funds from LCTOP to be expended to support the operation of existing bus or rail service if the following criteria are met:
   1. The governing board of the transit agency declares a fiscal emergency, as defined by the California Environmental Quality Act (CEQA), within 90 days of the agency requesting LCTOP funds
   2. The expenditure of the LCTOP funds is necessary to sustain the transit agency’s transit service in the year in which the funds would be expended
   3. The governing board of the transit agency would be forced to reduce or eliminate transit service if the requested LCTOP funds are not received
   4. The governing board of the transit agency makes a finding that a reduction in or elimination of existing transit service would increase GHG emissions because customers would choose other less-efficient modes of transportation
2. Defines the criteria for which funds from LCTOP can be expended by the transit agency after it declares a fiscal emergency under CEQA, as specified

COMMENTS:

1. Purpose. The author asserts, “AB 2090 will provide transit agencies with an additional tool for maintaining current transit service levels during fiscal emergencies, with the acknowledgement that severe funding challenges hurt transit ridership and jeopardize the state’s long-term greenhouse gas (GHG) emission reduction goals. An important part of meeting the state’s GHG emission reduction goals is not only to expand existing transit services, but also to maintain existing services to prevent people from having to take to the road in their own vehicles.”
2. LCTOP. LCTOP was created by SB 862 (Committee on Budget and Fiscal Review, Chapter 862, Statutes of 2014), as part of a comprehensive package of programs to target GHG reductions in California using funds generated by the state’s cap –and- trade program. These programs include affordable housing and sustainable communities, transit and intercity rail capital projects, and high-speed rail.

Specifically, LCTOP was created to provide operating and capital assistance for transit agencies to reduce GHG emissions and improve mobility, with a priority on serving disadvantaged communities. LCTOP is administered by Caltrans and is continuously appropriated 5% of GGRF of funds. In 2014-15, LCTOP received $25 million, and in 2015-16 it was funded at $100 million.

Prior to receiving an allocation, which is distributed by the State Controller through the STA formula, eligible transit agencies must submit a description of their proposed expenditures and demonstrate how each expenditure will reduce GHG emissions. Approved projects in LCTOP may include equipment acquisition, fueling, maintenance, and other costs to operate new or expanded services and/or facilities. For transit agencies whose service area includes disadvantaged communities, at least 50% of the total moneys received shall be expended on projects that will benefit disadvantaged communities.

1. Greater flexibility. AB 2090 will allow transit agencies to use LCTOP funds to support existing service if a transit agency declares a fiscal emergency under CEQA. This increased flexibility will allow transit agencies struggling to maintain services with a vital funding option. For example, writing in support of the bill, the Santa Cruz Metropolitan Transit District notes, “the Santa Cruz Metropolitan Transit District is experiencing a significant and growing structural deficit caused by rising operations costs and flat ridership amidst diminishing local, state, and federal support. The flexibility provided by AB 2090 will allow the agency to avoid making a counterproductive 25% reduction in service that would impact 46% of the agency’s core ridership.”
2. Double-referral. This bill is also referred to the Senate Committee on Environmental Quality.

Related Legislation:

SB 862 (Committee on Budget and Fiscal Review) — Chapter 36, Statues of 2014, created and funded the Affordable Housing and Sustainable Communities,

the Low Carbon Transportation, and the Low Carbon Transit Operations programs.

SB 535 (de León), Chapter 830, Statutes of 2012) — required, among other things, that a minimum of 25% of the moneys available in GGRF be used to benefits disadvantaged communities.

AB 32 (Núñez), Chapter 488, Statutes of 2006) — created the California Global Warming Solutions Act of 2006 and required ARB to adopt GHG reduction measures to ensure that statewide emissions are reduced to 1990 levels by 2020.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

Assembly Votes:

Floor: 77-1

Approps: 20-0

Trans: 16-0

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 15, 2016.)

SUPPORT:

Santa Cruz Metropolitan Transit District (Sponsor)

Association of Monterey Bay Area Governments

California Transit Association

Honorable Cynthia Mathews, Mayor, city of Santa Cruz

Monterey-Salinas Transit

Orange County Transportation Authority

Riverside Transit Agency

San Francisco Bay Area Transit District

Santa Cruz County Regional Transportation Commission

Transportation Agency for Monterey County

Ventura County Transportation Commission

OPPOSITION:

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 2090

Author:(Alejo)

As Amended Ver:May 27, 2016

Majority vote

SUMMARY: Allows funding from the Low Carbon Transit Operations Program (LCTOP) to be expended to support the operation of existing transit service if the agency declares a fiscal emergency under the California Environmental Quality Act (CEQA). Specifically, this bill:

1. Allows funds from the LCTOP be expended to support the operation of existing bus or rail service if the following criteria are met:
   1. The governing board of the transit agency declares a fiscal emergency, as defined by CEQA, within 90 days of the agency requesting LCTOP funds;
   2. The expenditure of the LCTOP funds is necessary to sustain the transit agency's transit service in the year in which the funds would be expended;
   3. The governing board of the transit agency would be forced to reduce or eliminate transit service if the requested LCTOP funds are not received; and,
   4. The governing board of the transit agency makes a finding that a reduction in or elimination of existing transit service would increase greenhouse gas (GHG) emissions because customers would choose other less-efficient modes of transportation.
2. Defines the criteria for which funds from LCTOP can be expended by the transit agency after they declare a fiscal emergency under CEQA, including:
   1. The expenditures support current bus or rail service operating costs, including labor, fueling, maintenance, and other costs to operate;
   2. The transit agency demonstrates that each expenditure directly sustains transit service that would otherwise be reduced or eliminate in the upcoming year without the LCTOP funds; and,
   3. Transit agencies may not request LCTOP to support existing transit service unless the agency declares a fiscal emergency in each year under CEQA and for not more than three consecutive years.

FISCAL EFFECT: According to the Assembly Appropriations Committee, potential significant cost pressure on the LCTOP by expanding criteria for use of funds set aside for this program and thus likely increasing the number of transit agencies that would be eligible to apply for funding. Caltrans may incur additional administrative costs to revise program guidelines and to review additional funding applications, but these costs should be absorbable.

COMMENTS: LCTOP was created by SB 862 (Budget and Fiscal Review Committee), Chapter 862, Statutes of 2014, as part of a comprehensive package of programs to target GHG reductions in California using funds generated by the state's cap and trade program. LCTOP is administered by Caltrans and is continuously appropriated 5% of GGRF of funds. In 2014-15, LCTOP received $25 million, and in 2015-16 it was funded at $100 million.

Specifically, LCTOP was created to provide operating and capital assistance for transit agencies to reduce GHG emission and improve mobility, with a priority on serving disadvantaged communities. Approved projects in LCTOP support new or expanded bus or rail services and expand intermodal transit facilities and may include equipment acquisition, fueling, maintenance, and other costs to operate those services or facilities, with each project reducing GHG emissions. For transit agencies whose service area includes disadvantaged communities, at least 50% of the total moneys received shall be expended on projects that will benefit disadvantaged communities. Prior to receiving an allocation, which is distributed by the State Controller following the STA formula, eligible transit agencies must submit a description of their proposed expenditures and demonstrate how each expenditure will reduce GHG emissions.

As noted by the author, some transit agencies in the state are facing fiscal challenges that prevent them from putting more new bus or rail service out on the street, and they are currently prohibited from using these vital state funds to supplement their transit service. He adds that not only are these agencies unable to provide new transit services, they are struggling to maintain the level of service out on the street today. And without sources of revenue, transit agencies may have to cut back service, thus forcing some transit riders onto less efficient, dirtier modes of transportation, which could in turn actually increase GHG emissions.

Under this bill, to be able to use LCTOP funds to support existing service, a transit agency would have to declare a fiscal emergency under CEQA. Current law allows transit agencies to be exempted from CEQA review of the reduction or elimination of transit services and increases to fares, fees, fines, rates and charges that support transit service when such actions are undertaken as a result of a declared fiscal emergency caused by the failure of revenues to adequately fund agency programs, facilities, and operations. Under CEQA, a "fiscal emergency" means that the agency is projected to have negative funding within one year from the date of declaration. The transit agency must conduct a public hearing to consider the action prior to declaring the fiscal emergency.

If a transit agency declares a fiscal emergency, the use of LCTOP funds may not fully offset all of the reductions or changes needed to regain balance, but will help mitigate the situation. This bill also includes a three-year limit on the time one agency can use LCTOP for this purpose, which will help ensure the funds serve only as temporary assistance.

Please see the policy committee analysis for full discussion of this bill.

Analysis Prepared by: Melissa White / TRANS. / (916) 319-2093 FN: 0003179

Date of Hearing: April 27, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2090

Author:(Alejo) – As Amended Ver:April 7, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill allows funding from the Low Carbon Transit Operations Program (LCTOP) to sustain a transit agency's existing service if the agency declares a fiscal emergency under existing provisions of the California Environmental Quality Act (CEQA). An agency could not request such funds for more than three consecutive years and would have to declare a fiscal emergency in each year to receive funds for that year.

FISCAL EFFECT:

Potential significant cost pressure on the LCTOP by expanding criteria for use of funds set aside for this program and thus likely increasing the number of transit agencies that would be eligible to apply for funding.

Caltrans may incur additional administrative costs to revise program guidelines and to review additional funding applications, but these costs should be absorbable.

COMMENTS:

1. Background. LCTOP was created 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. Approved projects in LCTOP support new or expanded bus or rail services and expand intermodal transit facilities and may include equipment acquisition, fueling, maintenance, and other costs to operate those services or facilities. For transit agencies whose service area includes disadvantaged communities, at least 50% of the total moneys received shall be expended on projects that will benefit disadvantaged communities.

LCTOP is administered by Caltrans and is funded by a continuous appropriation of 5% of Greenhouse Gas Fund (GGRF) revenues. 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.

1. Purpose. According to the author, due to current fiscal challenges, some transit agencies are unable to expand service, thus are prohibited them from seeking LCTOP funds. Moreover, some agencies are struggling to maintain existing service levels, which could force service cutbacks, thus forcing some transit riders onto less efficient, dirtier modes of transportation, resulting in increased GHG emissions.

This bill is sponsored by Santa Cruz Metropolitan Transit District, which asserts it is experiencing a growing structural deficit caused by rising operations costs and flat ridership amidst diminished local, state, and federal support. It contends that the funding flexibility offered by this bill will allow it to avoid making a 25% reduction in service that would impact 46% of core ridership.

Under CEQA, a “fiscal emergency” means that the agency is projected to have negative funding within one year from the date of declaration. The transit agency must conduct a public hearing to consider the action prior to declaring the fiscal emergency. This bill also includes a three-year limit on the time one agency can use LCTOP to offset a fiscal emergency.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: April 11, 2016

ASSEMBLY COMMITTEE ON TRANSPORTATION

Jim Frazier, Chair

ABPCA Bill Id:AB 2090 (

Author:Alejo) – As Amended Ver:April 7, 2016

SUBJECT: Low Carbon Transit Operations Program

SUMMARY: Allows funding from the Low Carbon Transit Operations Program (LCTOP) to be expended to support the operation of existing transit service if the agency declares a fiscal emergency under the California Environmental Quality Act (CEQA). Specifically, this bill:

1. Allows funds from the LCTOP be expended to support the operation of existing bus or rail service if the following criteria are met:
   1. The governing board of the transit agency declares a fiscal emergency, as defined by CEQA, within 90 days of the agency requesting LCTOP funds;
   2. The expenditure of the LCTOP funds is necessary to sustain the transit agency’s transit service in the year in which the funds would be expended;
   3. The governing board of the transit agency would be forced to reduce or eliminate transit service if the requested LCTOP funds are not received; and,
   4. The governing board of the transit agency makes a finding that a reduction in or elimination of existing transit service would increase greenhouse gas (GHG) emissions because customers would choose other less-efficient modes of transportation.
2. Defines the criteria for which funds from LCTOP can be expended by the transit agency after they declare a fiscal emergency under CEQA, including:
   1. The expenditures support current bus or rail service operating costs, including labor, fueling, maintenance, and other costs to operate;
   2. The transit agency demonstrates that each expenditure directly sustains transit service that would otherwise be reduced or eliminate in the upcoming year without the LCTOP funds; and,
   3. Transit agencies may not request LCTOP to support existing transit service unless the agency declares a fiscal emergency in each year under CEQA and for not more than three consecutive years.

EXISTING LAW:

1. Requires the California Air Resources Board (ARB), pursuant to AB 32 (Núñez),
   Chapter 488, Statutes of 2006, to develop a plan of how to reduce statewide GHG emissions to 1990 levels by 2020. Under AB 32, ARB is authorized to include the use of market-based mechanisms to comply with these regulations (cap and trade).
2. Requires, pursuant to the SB 375 (Steinberg), Chapter 728, Statutes of 2008, regions must prepare a regional transportation plan that includes a sustainable communities strategy (SCS) designed to achieve the regional targets for GHG emission reduction.
3. Establishes the Greenhouse Gas Reduction Fund (GGRF) in the State Treasury and requires all money collected pursuant to cap and trade, with limited exceptions, be deposited into the fund and makes the GGRF funds available for appropriation by the Legislature.
4. Establishes the LCTOP, administered by the California Department of Transportation (Caltrans), and continuously appropriates 5% of GGRF fund proceeds for transit operations to expand service, with a priority on serving disadvantaged communities.
5. Requires, pursuant to SB 535 (de León), Chapter 830, Statutes of 2012, that a minimum of 25% of the moneys available in GGRF be used to benefits disadvantaged communities.
6. Provides funding for public transportation through the Transportation Development Act (TDA), including State Transit Assistance (STA) which is derived from the statewide sales tax on diesel fuel. STA funds are appropriated by the Legislature and are allocated by a formula with 50% being allocated according to population and 50% being allocated according to transit operator revenues from the prior fiscal year.
7. Requires transit operators to maintain a specified ratio of fare revenues to operating costs in order to be eligible to receive TDA funds.

FISCAL EFFECT: Unknown

COMMENTS: LCTOP was created by SB 862 (Committee on Budget and Fiscal Review), Chapter 862, Statutes of 2014, as part of a comprehensive package of programs to target GHG reductions in California using funds generated by the state’s cap and trade program. These programs include affordable housing and sustainable communities, transit and intercity rail capital projects, and high-speed rail. LCTOP is administered by Caltrans and is continuously appropriated 5% of GGRF of funds. In 2014-15, LCTOP received $25 million, and in 2015-16 it was funded at $100 million. The Governor’s January 2016-17 Budget proposes $100 million for the program.

Specifically, LCTOP was created to provide operating and capital assistance for transit agencies to reduce GHG emission and improve mobility, with a priority on serving disadvantaged communities. Approved projects in LCTOP support new or expanded bus or rail services and expand intermodal transit facilities and may include equipment acquisition, fueling, maintenance, and other costs to operate those services or facilities, with each project reducing GHG emissions. For transit agencies whose service area includes disadvantaged communities, at least 50% of the total moneys received shall be expended on projects that will benefit disadvantaged communities.

LCTOP’s purpose is to support new and expanded transit service that increase mode share – shift new riders out of their cars – to reduce GHG emissions. Prior to receiving an allocation, which is distributed by the State Controller following the STA formula, eligible transit agencies must submit a description of their proposed expenditures and demonstrate how each expenditure will reduce GHG emissions.

As noted by the author, some transit agencies in the state are facing fiscal challenges that prevent them from putting more new bus or rail service out on the street, and they are currently prohibited from using these vital state funds to supplement their transit service. He adds that not only are these agencies unable to provide new transit services, they are struggling to maintain the level of service out on the street today. And without sources of revenue, transit agencies may have to cut back service, thus forcing some transit riders onto less efficient, dirtier modes of transportation, which could in turn actually increase GHG emissions.

This bill is sponsored by Santa Cruz Metropolitan Transit District (METRO). The district asserts it is experiencing a significant and growing structural deficit caused by rising operations costs and flat ridership amidst diminishing local, state, and federal support. It further contends that the flexibility provided by this bill will allow it to avoid making a counterproductive 25% reduction in service that would impact 46% of their core ridership.

Under this bill, to be able to use LCTOP funds to support existing service, a transit agency would have to declare a fiscal emergency under CEQA. Current law allows transit agencies to be exempted from CEQA review of the reduction or elimination of transit services and increases to fares, fees, fines, rates and charges that support transit service when such actions are undertaken as a result of a declared fiscal emergency caused by the failure of revenues to adequately fund agency programs, facilities, and operations. Under CEQA, a “fiscal emergency” means that the agency is projected to have negative funding within one year from the date of declaration. The transit agency must conduct a public hearing to consider the action prior to declaring the fiscal emergency.

In writing support of this bill, the California Transit Association states that it supports AB 2090 because it would provide a recipient transit agency with a targeted new tool for maintaining current transit service levels in a fiscal emergency. At the same time, the stringent requirements ensure that the core function of LCTOP remains i.e., advancing transit services and initiatives that reduce GHG emissions.

As the state and regions continue to work toward the goal reducing GHG emissions, as well as cutting other forms of air pollution, as set forth in AB 32 and SB 375, increasing the mode shift from single occupant car trips to public transportation is critical for success in reaching this goal. LCTOP is an important funding source to support new and expanding transit services throughout the state. However, if a transit agency is forced to increase fares and reduce or eliminate services due to budget problems, not allowing the agency to access and utilize this funding source seems counterproductive. Eliminating service will eliminate transportation options for the affected communities and will likely shift people back to their cars for commuting and other uses, which will serve to increase GHG emissions. If a transit agency declares a fiscal emergency, the use of LCTOP funds may not fully offset all of the reductions or changes needed to regain balance, but will help mitigate the situation. This bill also includes a three-year limit on the time one agency can use LCTOP for this purpose, which will help ensure the funds serve only as temporary assistance.

Related legislation: SB 824 (Beall), would authorize a transit agency that does not submit a project for funding under LCTOP in a particular fiscal year to retain its funding share for expenditure in a subsequent fiscal year or loan or transfer it to another eligible agency in the same region. SB 824 is scheduled to be heard by the Senate Transportation and Housing Committee on April 19, 2016.

Previous legislation: SB 862 (Committee on Budget and Fiscal Review), Chapter 36, Statues of 2014, created and funded the Affordable Housing and Sustainable Communities, the Low Carbon Transportation, and the Low Carbon Transit Operations programs.

SB 535 (de León), Chapter 830, Statutes of 2012, required, among other things, that a minimum of 25% of the moneys available in GGRF be used to benefits disadvantaged communities.

AB 32 (Núñez), Chapter 488, Statutes of 2006, created the California Global Warming Solutions Act of 2006 and required ARB to adopt GHG reduction measures to ensure that statewide emissions are reduced to 1990 levels by 2020.

REGISTERED SUPPORT / OPPOSITION:

Support

Santa Cruz Metropolitan Transit District (Sponsor)

Association of Monterey Bay Area Governments

California Transit Association

Honorable Cynthia Mathews, Mayor, city of Santa Cruz

Monterey-Salinas Transit

Orange County Transportation Authority

Riverside Transit Agency

Opposition

None on file

Analysis Prepared by: Melissa White / TRANS. / (916) 319-2093