VETO  

Bill No: SB 1351

Author: Beall (D)

Amended: 8/25/20

Vote: 27

SENATE TRANSPORTATION COMMITTEE: 13-0, 5/29/20

AYES: Beall, Allen, Dahle, Dodd, Galgiani, Lena Gonzalez, Grove, McGuire, Melendez, Morrell, Roth, Rubio, Wieckowski

NO VOTE RECORDED: Skinner, Umberg

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 39-0, 6/11/20 (Consent)

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Jackson, Jones, Leyva, McGuire, Melendez, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

NO VOTE RECORDED: Hurtado

SENATE FLOOR: 28-10, 8/31/20

AYES: Allen, Archuleta, Atkins, Beall, Bradford, Caballero, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Hertzberg, Hill, Hueso, Hurtado, Jackson, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener

NOES: Bates, Borgeas, Chang, Dahle, Grove, Melendez, Moorlach, Morrell, Nielsen, Wilk

NO VOTE RECORDED: Jones, Roth

ASSEMBLY FLOOR: 58-17, 8/31/20 - See last page for vote

SUBJECT: Transportation improvement fee: revenue bonds

SOURCE: Author

DIGEST:

This bill authorizes the state to issue revenue bonds to fund and accelerate transportation rehabilitation projects, as specified.

ANALYSIS:

Existing law:

1. Establishes the TIF, starting January 1, 2018, based on the market value of the vehicle with the fee range described below:
   1. $25 per year for vehicles with a market value of $0 - $4,999;
   2. $50 per year for vehicles with a market value of $5,000 - $24,999;
   3. $100 per year for vehicles with a market value of $25,000 - $34,999;
   4. $150 per year for vehicles with a market value of $35,000 - $59,999; and,
   5. $175 per year for vehicles with a market value of $60,000 and higher.
2. Creates the Road Maintenance and Rehabilitation Account (RMRA). RMRA includes funds generated by the gasoline excise tax, a portion of the diesel excise tax increase ($0.10), TIF, and Zero Emission Vehicle (ZEV) fees. RMRA is created within the State Transportation Fund.
3. Specifies that RMRA funds are to be prioritized to be spent on basic road maintenance and rehabilitation, critical safety projects, and several other transportation programs.
4. Requires certain programs to be funded annually from the RMRA. Specifically, $200 million is continuously appropriated for the Local Partnership Program (LPP); $100 million for the active transportation program for bicycle and pedestrian projects (ATP); $400 million for bridge and culvert repair; $25 million for freeway service patrols, $25 million for local and regional SB 375 planning; and $7 million for university transportation research. Additionally, $5 million per year for five years ($25 million total), is set aside for the California Workforce Development Board to assist local agencies to implement policies to promote pre-apprenticeship training programs.
5. Requires the remainder of funds in the RMRA to be split 50/50 between state and local governments. The state share will be allocated for road maintenance and projects identified in the State Highway Operation and Protection Program (SHOPP). Local funding is apportioned pursuant to existing statutory formulas, where 50% of the apportionment goes to cities based on population and 50% goes to counties based on a combination of the number of registered vehicles and the miles of county roads.
6. Provides approximately $700 million annually for public transportation capital projects and operating expenses. These funds are derived from a portion of the diesel sales tax increase (3.5%) and an annual appropriation of approximately $350 million from the TIF. The increase in the diesel sales tax will fund local transit operators through the existing State Transit Assistance Program (STA), with funding allocated by existing formulas, and also provides funding for commuter and intercity passenger rail service. Allocates $350 million from the TIF to the Transit Intercity Rail Capital Program (TIRCP) for transit capital projects prior to TIF revenue being distributed into the RMRA.

This bill:

1. Permits the Director of Caltrans to designate projects to be funded by the revenue generated by the bonds issued by the TIF Committee, as specified.
2. Requires Caltrans to provide TIF committee with a list of projects that are eligible to be accelerated for construction within 90 days of the enactment of this bill.
3. Limits the projects Caltrans can designate for acceleration to projects in the California Transportation Commission (CTC) approved 2020 SHOPP that have also completed environmental clearance and project design.
4. Creates the Transportation Improvement Fee Subaccount (TIF Subaccount) within the RMRA and allocates all TIF revenue deposited into the RMRA into the TIF Subaccount.
5. Creates the State Highway and SHOPP TIF Account (SHOPP TIF Account) within the State Transportation Fund and specifies that revenue generated by the TIF allocated to RMRA that would be allocated to the SHOPP be placed in the SHOPP TIF Account, and authorizes the TIF Committee to bond against the revenues placed in the SHOPP TIF Account.
6. Permits the TIF Committee to authorize the State Treasurer (STO) to sell up to $5 billion in revenue bonds.
7. Specifies that TIF revenue shall be used to pay for the remaining $5 million allocation to the California Workforce Development Board, which is set to expire in fiscal year 2021-2022.
8. Specifies that bonding capacity shall not reduce the amount of TIF revenue that would be allocated to the 50% apportionment to cities and counties and prohibits TIF Committee from pledging those revenues for a bond.
9. Adds a number of technical provisions that allow the STO and TIF Committee to carry out the abovementioned financing provisions.

Comments

1. Author’s statement. According to the author, “SB 1351 is an economic stimulus proposal to get people back to work and also expedite the accomplishment of the performance goals set forth in SB 1. Research has indicated that revenues generated from the TIF will continue to increase over the next several years. Therefore, by accelerating shovel-ready SHOPP projects, we can combat the State’s economic downturn by putting people to work in well-paying skilled jobs and also expedite the completion of the performance goals identified in SB 1.”
2. SB 1. In April of 2017, the Legislature passed and Governor Brown signed SB 1 (Beall, Chapter 5, Statutes of 2017). Upon passage, California had not increased the gas tax in 23 years, despite the fact that California’s population had grown by 8 million people, adding millions of cars to California’s roads without transit and road investments to keep pace with that growth.

At the time that SB 1 passed, California was facing a $59 billion deferred maintenance backlog for road maintenance and repairs. The poor condition of California roads resulted in the state’s drivers spending approximately $700 per year in extra vehicle repairs caused by rough roads. In addition, at the time, transit operators were similarly experiencing projected budget shortfalls of $72 billion over the next ten years. To address these concerns, SB 1 increased the excise tax on gasoline by $0.12 per gallon, increased the excise tax on diesel fuel by $0.20 per gallon, increased the sales tax on diesel fuels by an additional 4% increment, and created TIF, which started on January 1, 2018 and imposed a fee based on the market value of an individual’s vehicle. As mentioned above, SB 1 provided funding for a number of transportation and transit related programs with transit receiving separate set asides from TIF and the sales tax on diesel and the remainder of TIF (minus the congested corridors program), gas tax, ZEV fee, and a portion of the diesel gas tax to fund programs in the RMRA (i.e. LPP, bridge and culverts, etc.) that are to prioritize basic road rehabilitation and maintenance and critical safety projects.

After those five programs are funded, the balance of RMRA funds are to be evenly split fifty percent to Caltrans and fifty percent to locals for road rehabilitation and maintenance projects. Specifically, Caltrans is to use its allocation to fund its SHOPP and road maintenance programs.

1. SHOPP. SHOPP is a four-year document of road rehabilitation and maintenance projects that is adopted by CTC after holding at least two public hearings and a finding of consistency with the Transportation Asset Management Plan (TAMP). The adopted SHOPP is submitted to the Legislature and the Governor not later than April 1 of each even-numbered year. SHOPP projects are identified through periodic condition assessments and field reviews, through the biennial State Highway System Management Plan, are guided by the developing Transportation Asset Management Plan, and constrained to the funding in the adopted Fund Estimate. Funding for SHOPP projects is a mixture of Federal and State funds, including the Road Maintenance and Rehabilitation Account created by SB 1. Projects included in the program shall be limited to capital improvements relative to the maintenance, safety, operation, and rehabilitation of the state highway system that do not add new capacity to the system.

The 2020 SHOPP was approved by CTC on May 13, 2020 and includes 986 projects at the cost of $18 billion with funds to be allocated over the next four years and projects to be completed over the next five years. Construction has begun on 19 of those projects, costing a total of $88.5 million. Another $5.8 million worth of projects have cleared the environmental process and are in the final engineering stage. $13.8 billion worth of projects are still in the environmental process.

1. Accelerated Projects. The author asserts now is the appropriate time to accelerate SHOPP projects. As the State and country are experiencing significant economic decline and job losses, this measure would create an infusion of funds to accelerate rehabilitation projects that have cleared environmental review and design and, as a result, spur job creation. According to the Federal Highway Administration, for every $1 billion in infrastructure funding spent, approximately 13,000 jobs are created/supported. The provisions specified in this bill authorizes the STO to issue up to $5 billion in bonds from the Caltrans’ share of SB 1 revenues to fund projects that are included in the 2020 SHOPP program which, at the time this analysis was written, has been reviewed and approved by CTC. Additionally, setting a “cap” on the amount of bonds that may be authorized further ensures that the amount of TIF revenues obligated to debt service remains a fraction of the total amount of Caltrans’ TIF revenues; thus providing adequate funding for future SHOPP programs. For example, for the 2019-20 Budget Year, a total of $1,112,070,000 of TIF revenue went into RMRA. Under SB 1351, if the gas and diesel excise tax are used to pay off the entirety of the programs in RMRA, the SHOPP would have received a little more than $556 million in TIF revenue on top of other revenues that support SHOPP (i.e. federal dollars, other state funds). If STO was to issue the total authorized $5 billion in bonds, annual debt service would be approximately $320 million over 20 years. The author notes that with interest rates at an all-time low, the state’s requirement to meet SB 1 performance goals, and the need to restore the State’s economy, now is the best time to enact this measure.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee:

1. One-time costs of an unknown amount, but likely in the low-to-mid hundreds of thousands of dollars, for Caltrans to develop and submit a list of eligible projects to the committee, and to designate projects for bonding, should it choose to do so, and report annually on outstanding debt and planned bond amount requests (special fund).
2. The bill’s more-significant fiscal effect is dependent upon Caltrans requesting the committee to issue revenue bonds, and the committee choosing to do so. The revenue this bill authorizes to back bonds comes from a per-vehicle fee—the TIF—ranging from $25 to $175, the amount determined by a vehicles’ value. In budget year 2019-20, TIF revenue generated $1.1 billion, half of which would be eligible for bonding capacity. Therefore, it is reasonable to estimate bondable TIF revenue will total $550 million annually, with future annual revenue increasing as the value of vehicles increases.
3. Under current law, Caltrans would spend this portion of the TIF revenue on eligible transportation projects annually. Conversely, were the committee to issue revenue bonds as this bill proposes, the state would receive bond proceeds up front to spend on eligible transportation projects, immediately, but expend future TIF revenues servicing the bond debt. The amount of the debt service would depend on the dollar amount of any bonds, their maturity period and the rate of interest of the bonds. As an illustration, the Treasurer’s Office projected $6.3 billion in bond proceeds would result in annual debt service of $401 million, based on interest rates the Treasurer’s Office found to be available as of July 1, 2020, and a 20-year bond amortization schedule.

SUPPORT: (Verified 8/30/20)

Associated General Contractors of California

California Alliance for Jobs

California Trucking Association

Professional Engineers in California Government

OPPOSITION: (Verified 8/30/20)

Alameda-Contra Costa Transit District

GOVERNOR'S VETO MESSAGE:

This bill would allow the issuance of up to $5 billion of revenue bonds, backed by revenue from Senate Bill 1 (Beall), Chapter 5, Statutes of 2017, to accelerate transportation projects in the State Highway Operation and Protection Program.

While I appreciate the Legislature's intent, the California Department of Transportation (Caltrans) has already significantly increased the number of projects going to construction through project savings and other administrative actions and does not need this tool to accelerate transportation maintenance projects.

Bonding against these future revenues runs counter to the pay-as-you-go principle established by Senate Bill 1 and risks locking California into long-term debt obligations to finance maintenance repairs. Caltrans will need these revenues in the future to keep our roads and bridges safe.

ASSEMBLY FLOOR: 58-17, 8/31/20

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bloom, Boerner Horvath, Bonta, Burke, Calderon, Carrillo, Chau, Chiu, Chu, Cooley, Cooper, Daly, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager, Levine, Limón, Low, Maienschein, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Weber, Wicks, Wood, Rendon

NOES: Bigelow, Brough, Chen, Choi, Cunningham, Megan Dahle, Diep, Flora, Fong, Gallagher, Kiley, Lackey, Mathis, Mayes, Obernolte, Patterson, Waldron

NO VOTE RECORDED: Cervantes, Eggman, Frazier, Voepel

Prepared by: Manny Leon / TRANS. / (916) 651-4121

10/14/20 11:24:18

**** END ****

 UNFINISHED BUSINESS  

Bill No: SB 1351

Author: Beall (D), et al.

Amended: 8/25/20

Vote: 21

SENATE TRANSPORTATION COMMITTEE: 13-0, 5/29/20

AYES: Beall, Allen, Dahle, Dodd, Galgiani, Lena Gonzalez, Grove, McGuire, Melendez, Morrell, Roth, Rubio, Wieckowski

NO VOTE RECORDED: Skinner, Umberg

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE FLOOR: 39-0, 6/11/20 (Consent)

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Jackson, Jones, Leyva, McGuire, Melendez, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

NO VOTE RECORDED: Hurtado

ASSEMBLY FLOOR: Not available

SUBJECT: Transportation improvement fee: revenue bonds

SOURCE: Author

DIGEST:

This bill authorizes the state to issue revenue bonds to fund and accelerate transportation rehabilitation projects, as specified.

Assembly Amendments

create the Transportation Improvement Fee Finance Committee (TIF Committee) to authorize up to $5 billion in revenue bonds to be allocated to Department of Transportation (Caltrans) to expedite certain transportation rehabilitation projects, as specified. The amendments further require revenue bonds to be paid back from Caltrans’ portion of Transportation Improvement Fee (TIF) revenues.

ANALYSIS:

Existing law:

1. Establishes the TIF, starting January 1, 2018, based on the market value of the vehicle with the fee range described below:
   1. $25 per year for vehicles with a market value of $0 - $4,999;
   2. $50 per year for vehicles with a market value of $5,000 - $24,999;
   3. $100 per year for vehicles with a market value of $25,000 - $34,999;
   4. $150 per year for vehicles with a market value of $35,000 - $59,999; and,
   5. $175 per year for vehicles with a market value of $60,000 and higher.
2. Creates the Road Maintenance and Rehabilitation Account (RMRA). RMRA includes funds generated by the gasoline excise tax, a portion of the diesel excise tax increase ($0.10), TIF, and Zero Emission Vehicle (ZEV) fees. RMRA is created within the State Transportation Fund.
3. Specifies that RMRA funds are to be prioritized to be spent on basic road maintenance and rehabilitation, critical safety projects, and several other transportation programs.
4. Requires certain programs to be funded annually from the RMRA. Specifically, $200 million is continuously appropriated for the Local Partnership Program (LPP); $100 million for the active transportation program for bicycle and pedestrian projects (ATP); $400 million for bridge and culvert repair; $25 million for freeway service patrols, $25 million for local and regional SB 375 planning; and $7 million for university transportation research. Additionally, $5 million per year for five years ($25 million total), is set aside for the California Workforce Development Board to assist local agencies to implement policies to promote pre-apprenticeship training programs.
5. Requires the remainder of funds in the RMRA to be split 50/50 between state and local governments. The state share will be allocated for road maintenance and projects identified in the State Highway Operation and Protection Program (SHOPP). Local funding is apportioned pursuant to existing statutory formulas, where 50% of the apportionment goes to cities based on population and 50% goes to counties based on a combination of the number of registered vehicles and the miles of county roads.
6. Provides approximately $700 million annually for public transportation capital projects and operating expenses. These funds are derived from a portion of the diesel sales tax increase (3.5%) and an annual appropriation of approximately $350 million from the TIF. The increase in the diesel sales tax will fund local transit operators through the existing State Transit Assistance Program (STA), with funding allocated by existing formulas, and also provides funding for commuter and intercity passenger rail service. Allocates $350 million from the TIF to the Transit Intercity Rail Capital Program (TIRCP) for transit capital projects prior to TIF revenue being distributed into the RMRA.

This bill:

1. Permits the Director of Caltrans to designate projects to be funded by the revenue generated by the bonds issued by the TIF Committee, as specified.
2. Requires Caltrans to provide TIF committee with a list of projects that are eligible to be accelerated for construction within 90 days of the enactment of this bill.
3. Limits the projects Caltrans can designate for acceleration to projects in the California Transportation Commission (CTC) approved 2020 SHOPP that have also completed environmental clearance and project design.
4. Creates the Transportation Improvement Fee Subaccount (TIF Subaccount) within the RMRA and allocates all TIF revenue deposited into the RMRA into the TIF Subaccount.
5. Creates the State Highway and SHOPP TIF Account (SHOPP TIF Account) within the State Transportation Fund and specifies that revenue generated by the TIF allocated to RMRA that would be allocated to the SHOPP be placed in the SHOPP TIF Account, and authorizes the TIF Committee to bond against the revenues placed in the SHOPP TIF Account.
6. Permits the TIF Committee to authorize the State Treasurer (STO) to sell up to $5 billion in revenue bonds.
7. Specifies that TIF revenue shall be used to pay for the remaining $5 million allocation to the California Workforce Development Board, which is set to expire in fiscal year 2021-2022.
8. Specifies that bonding capacity shall not reduce the amount of TIF revenue that would be allocated to the 50% apportionment to cities and counties and prohibits TIF Committee from pledging those revenues for a bond.
9. Adds a number of technical provisions that allow the STO and TIF Committee to carry out the abovementioned financing provisions.

Comments

1. Author’s statement. According to the author, “SB 1351 is an economic stimulus proposal to get people back to work and also expedite the accomplishment of the performance goals set forth in SB 1. Research has indicated that revenues generated from the TIF will continue to increase over the next several years. Therefore, by accelerating shovel-ready SHOPP projects, we can combat the State’s economic downturn by putting people to work in well-paying skilled jobs and also expedite the completion of the performance goals identified in SB 1.”
2. SB 1. In April of 2017, the Legislature passed and Governor Brown signed SB 1 (Beall, Chapter 5, Statutes of 2017). Upon passage, California had not increased the gas tax in 23 years, despite the fact that California’s population had grown by 8 million people, adding millions of cars to California’s roads without transit and road investments to keep pace with that growth.

At the time that SB 1 passed, California was facing a $59 billion deferred maintenance backlog for road maintenance and repairs. The poor condition of California roads resulted in the state’s drivers spending approximately $700 per year in extra vehicle repairs caused by rough roads. In addition, at the time, transit operators were similarly experiencing projected budget shortfalls of $72 billion over the next ten years. To address these concerns, SB 1 increased the excise tax on gasoline by $0.12 per gallon, increased the excise tax on diesel fuel by $0.20 per gallon, increased the sales tax on diesel fuels by an additional 4% increment, and created TIF, which started on January 1, 2018 and imposed a fee based on the market value of an individual’s vehicle. As mentioned above, SB 1 provided funding for a number of transportation and transit related programs with transit receiving separate set asides from TIF and the sales tax on diesel and the remainder of TIF (minus the congested corridors program), gas tax, ZEV fee, and a portion of the diesel gas tax to fund programs in the RMRA (i.e. LPP, bridge and culverts, etc.) that are to prioritize basic road rehabilitation and maintenance and critical safety projects.

After those five programs are funded, the balance of RMRA funds are to be evenly split fifty percent to Caltrans and fifty percent to locals for road rehabilitation and maintenance projects. Specifically, Caltrans is to use its allocation to fund its SHOPP and road maintenance programs.

1. SHOPP. SHOPP is a four-year document of road rehabilitation and maintenance projects that is adopted by CTC after holding at least two public hearings and a finding of consistency with the Transportation Asset Management Plan (TAMP). The adopted SHOPP is submitted to the Legislature and the Governor not later than April 1 of each even-numbered year. SHOPP projects are identified through periodic condition assessments and field reviews, through the biennial State Highway System Management Plan, are guided by the developing Transportation Asset Management Plan, and constrained to the funding in the adopted Fund Estimate. Funding for SHOPP projects is a mixture of Federal and State funds, including the Road Maintenance and Rehabilitation Account created by SB 1. Projects included in the program shall be limited to capital improvements relative to the maintenance, safety, operation, and rehabilitation of the state highway system that do not add new capacity to the system.

The 2020 SHOPP was approved by CTC on May 13, 2020 and includes 986 projects at the cost of $18 billion with funds to be allocated over the next four years and projects to be completed over the next five years. Construction has begun on 19 of those projects, costing a total of $88.5 million. Another $5.8 million worth of projects have cleared the environmental process and are in the final engineering stage. $13.8 billion worth of projects are still in the environmental process.

1. Accelerated Projects. The author asserts now is the appropriate time to accelerate SHOPP projects. As the State and country are experiencing significant economic decline and job losses, this measure would create an infusion of funds to accelerate rehabilitation projects that have cleared environmental review and design and, as a result, spur job creation. According to the Federal Highway Administration, for every $1 billion in infrastructure funding spent, approximately 13,000 jobs are created/supported. The provisions specified in this bill authorizes the STO to issue up to $5 billion in bonds from the Caltrans’ share of SB 1 revenues to fund projects that are included in the 2020 SHOPP program which, at the time this analysis was written, has been reviewed and approved by CTC. Additionally, setting a “cap” on the amount of bonds that may be authorized further ensures that the amount of TIF revenues obligated to debt service remains a fraction of the total amount of Caltrans’ TIF revenues; thus providing adequate funding for future SHOPP programs. For example, for the 2019-20 Budget Year, a total of $1,112,070,000 of TIF revenue went into RMRA. Under SB 1351, if the gas and diesel excise tax are used to pay off the entirety of the programs in RMRA, the SHOPP would have received a little more than $556 million in TIF revenue on top of other revenues that support SHOPP (i.e. federal dollars, other state funds). If STO was to issue the total authorized $5 billion in bonds, annual debt service would be approximately $320 million over 20 years. The author notes that with interest rates at an all-time low, the state’s requirement to meet SB 1 performance goals, and the need to restore the State’s economy, now is the best time to enact this measure.

FISCAL EFFECT: Appropriation: Yes Fiscal Com.: Yes Local: No

According to the Assembly Appropriations Committee:

1. One-time costs of an unknown amount, but likely in the low-to-mid hundreds of thousands of dollars, for Caltrans to develop and submit a list of eligible projects to the committee, and to designate projects for bonding, should it choose to do so, and report annually on outstanding debt and planned bond amount requests (special fund).
2. The bill’s more-significant fiscal effect is dependent upon Caltrans requesting the committee to issue revenue bonds, and the committee choosing to do so. The revenue this bill authorizes to back bonds comes from a per-vehicle fee—the TIF—ranging from $25 to $175, the amount determined by a vehicles’ value. In budget year 2019-20, TIF revenue generated $1.1 billion, half of which would be eligible for bonding capacity. Therefore, it is reasonable to estimate bondable TIF revenue will total $550 million annually, with future annual revenue increasing as the value of vehicles increases.
3. Under current law, Caltrans would spend this portion of the TIF revenue on eligible transportation projects annually. Conversely, were the committee to issue revenue bonds as this bill proposes, the state would receive bond proceeds up front to spend on eligible transportation projects, immediately, but expend future TIF revenues servicing the bond debt. The amount of the debt service would depend on the dollar amount of any bonds, their maturity period and the rate of interest of the bonds. As an illustration, the Treasurer’s Office projected $6.3 billion in bond proceeds would result in annual debt service of $401 million, based on interest rates the Treasurer’s Office found to be available as of July 1, 2020, and a 20-year bond amortization schedule.

SUPPORT: (Verified 8/30/20)

Associated General Contractors of California

California Alliance for Jobs

California Trucking Association

Professional Engineers in California Government

OPPOSITION: (Verified 8/30/20)

Alameda-Contra Costa Transit District

Prepared by: Manny Leon / TRANS. / (916) 651-4121

8/31/20 21:37:29

**** END ****

SENATE THIRD READING

STR Bill Id:SB 1351

Author:(Beall)

As Amended Ver:August 25, 2020

Majority vote

SUMMARY:

Creates the Transportation Improvement Fee Finance Committee (TIF Committee) to authorize up to $5 billion in revenue bonds to be issued to Department of Transportation (Caltrans) to expedite transportation projects.

Major Provisions

1. Permits the Director of Caltrans to designate projects to be funded by the revenue generated by the bonds issued by the TIF Committee.
2. Limits the projects Caltrans can select for acceleration to projects approved by the California Transportation Commission (CTC) for the 2020 State Highway Operation and Protection Program (SHOPP) that have completed environmental clearance and project design.
3. Creates the Transportation Improvement Fee Subaccount (TIF Subaccount) within the Road Maintenance and Rehabilitation Account (RMRA) and allocates all TIF revenue specified for RMRA into the TIF Subaccount.
4. Creates the State Highway and SHOPP TIF Account (SHOPP TIF Account) within the State Transportation Fund and specifies that revenue generated by the TIF allocated to RMRA that would be allocated to the SHOPP be placed in the SHOPP TIF Account, and authorizes the TIF Committee to bond against the revenues placed in the SHOPP TIF Account.
5. Specifies that bonding capacity shall not reduce the amount of TIF revenue that would be allocated to the 50% apportionment to cities and counties and prohibits TIF Committee from pledging those revenues for a bond.

COMMENTS:

In 2017 the Legislature passed and Governor Brown signed SB 1 (Beall), Chapter 5. At that time California had not increased the gas tax in 23 years, despite the fact that California's population had grown by 8 million people, adding millions of cars to California's roads without transit and road investments to keep pace with that growth. At the time that SB 1 passed, California was facing a $59 billion deferred maintenance backlog for road maintenance and repairs. The poor condition of California roads resulted in the state's drivers spending approximately $700 per year in extra vehicle repairs caused by rough roads. In addition, at the time, transit operators were similarly experiencing projected budget shortfalls of $72 billion over the next ten years.

To address these concerns, SB 1 increased the excise tax on gasoline by $0.12 per gallon, increased the excise tax on diesel fuel by $0.20 per gallon, increased the sales tax on diesel fuels by an additional 4% increment, and created TIF, which started on January 1, 2018 and imposed a fee based on the market value of an individual's vehicle. In total, Legislative Analyst's Office (LAO) estimated that SB 1 revenue would generate $5.2 billion annually, with $1.7 generated by TIF.

On March 19, 2020, Governor Newsom issued a statewide order to shelter at home as a result of the COVID-19 pandemic. All nonessential workers were asked to stay home to help stop the spread of COVID-19. As of August 18, 2020 COVID 19 has killed over 11,300 Californians and 171,000 Americans.

The economy is also doing poorly. The United States Commerce Department estimates that the real gross domestic product decreased at an annual rate of 32.9%, a single year loss nearly equivalent to that of the economic losses of the United States during the Great Depression between 1929 and 1933. California went from having an unemployment rate of 4% in June of 2019 to having an unemployment rate of 16.4% in May of 2020. While the construction industry gained nearly 27,000 jobs between May and June of this year, there are still 37,300 fewer people on payroll in the construction industry in June of 2020 compared to June of 2019.

The Mineta Transportation Institute, which receives $2 million in SB 1 funding annually, conducted a study entitled "The Impact of COVID-19 on California Transportation Revenue" at the request of CTC. The study concluded that California could lose up to $20 billion in transportation revenue over the next 10 years because of the COVID-19 pandemic.

Bonding against transportation revenues has the potential to create jobs in the middle of a recession that has resulted in 37,300 fewer construction jobs compared to last year, while also accelerating much needed transportation projects. The White House Council for Economic Advisors found that every $1 billion invested in transportation infrastructure supports 13,000 jobs a year. It's possible the costs of the bonds may even be offset by the cost of labor inflation.

According to the Author:

According to the author, "SB 1351 is an economic stimulus proposal to get people back to work and also expedite the accomplishment of the performance goals set forth in SB 1. Research has indicated that revenues generated from the TIF will continue to increase over the next several years. Therefore, by accelerating shovel-ready SHOPP projects, we can combat the State's economic downturn by putting people to work in well-paying skilled jobs and also expedite the completion of the performance goals identified in SB 1."

Arguments in Support:

According to the Professional Engineers in California Government, "SB 1351 will expedite that work at a significant savings to taxpayers by allowing the State to issue lease revenue bonds against the existing road maintenance fee. California has a significant backlog of highway maintenance due to many years of underfunding."

Arguments in Opposition:

None on file

FISCAL COMMENTS:

According to the Assembly Appropriations Committee:

One-time costs of an unknown amount, but likely in the low-to-mid hundreds of thousands of dollars, for Caltrans to develop and submit a list of eligible projects to the committee, and to designate projects for bonding, should it choose to do so, and report annually on outstanding debt and planned bond amount requests (special fund).

The bill's more-significant fiscal effect is dependent upon Caltrans requesting the committee to issue revenue bonds, and the committee choosing to do so. The revenue this bill authorizes to back bonds comes from a per-vehicle fee – the TIF – ranging from $25 to $175, the amount determined by a vehicles' value. In budget year 2019-20, TIF revenue generated $1.1 billion, half of which would be eligible for bonding capacity. Therefore, it is reasonable to estimate bondable TIF revenue will total $550 million annually, with future annual revenue increasing as the value of vehicles increases.

Under current law, Caltrans would spend this portion of the TIF revenue on eligible transportation projects annually. Conversely, were the committee to issue revenue bonds as this bill proposes, the state would receive bond proceeds up front to spend on eligible transportation projects, immediately, but expend future TIF revenues servicing the bond debt. The amount of the debt service would depend on the dollar amount of any bonds, their maturity period and the rate of interest of the bonds. As an illustration, the Treasurer's Office projected $6.3 billion in bond proceeds would result in annual debt service of $401 million, based on interest rates the Treasurer's Office found to be available as of July 1, 2020, and a 20-year bond amortization schedule.

VOTES:

SENATE FLOOR: 39-0-1

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Jackson, Jones, Leyva, McGuire, Melendez, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Umberg, Wieckowski, Wiener, Wilk

ABS, ABST OR NV: Hurtado

ASM TRANSPORTATION: 11-3-1

YES: Berman, Chu, Daly, Arambula, Friedman, Gipson, Grayson, Medina, Nazarian, Robert Rivas, Bauer-Kahan

NO: Fong, Cunningham, Kiley

ABS, ABST OR NV: Diep

ASM APPROPRIATIONS: 13-5-0

YES: Gonzalez, Bauer-Kahan, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Petrie-Norris, Quirk, Robert Rivas

NO: Bigelow, Megan Dahle, Diep, Fong, Voepel

UPDATED:

VERSION: August 25, 2020

CONSULTANT: David Sforza / TRANS. / (916) 319-2093 FN: 0003404

Date of Hearing: August 20, 2020

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 1351

Author:(Beall) – As Amended Ver:August 6, 2020

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

SUMMARY:

This bill authorizes the state to issue revenue bonds to fund capital improvements needed to preserve and protect the state highway system. Specifically, this bill:

1. Creates the Transportation Improvement Fee ITIF) Finance Committee, made up of the Treasurer, the Controller and the Director of Finance.
2. Directs the Department of Transportation (Caltrans), within 90 days following the effective date of this bill, to submit a list of projects to the Treasurer and the committee that are eligible for revenue-bond financing.
3. Authorizes the committee to issue revenue bonds, with a maturity date of no more than 40 years, to finance transportation projects designated by Caltrans.
4. Limits the projects Caltrans may designate as eligible for revenue-bond financing to those projects included in the “SHOPP” (State Highway Operation and Protection Program) as adopted on May 13, 2020, and that have completed environmental clearance and project design.
5. Creates the TIF Subaccount within the Road Maintenance and Rehabilitation Account (RMRA) and allocates all TIF revenue that comes into the RMRA into the TIF Subaccount.
6. Creates the State Highway and SHOPP TIF Account (SHOPP TIF Account) within the State Transportation Fund and specifies that TIF revenue in the RMRA that, under current law, would have been allocated to the SHOPP be placed in the SHOPP TIF Account
7. Authorizes the committee to secure repayment of the revenue bonds with monies in the SHOPP TIF Account.
8. Appropriates continuously monies in the SHOPP TIF Account and prohibits them from being borrowed by, or available for transfer to, the General Fund or for similar uses.

Declares any revenue bonds issued by the committee do not constitute a debt or liability of the state or a pledge of the full faith and credit of the state.

Protects city and county TIF revenues.

Specifies TIF revenue shall be used to pay for the $5 million allocated, under current law, to the California Workforce Development Board.

1. Authorizes payment from bond proceeds for certain professional services that support bond issuance.

FISCAL EFFECT:

One-time costs of an unknown amount, but likely in the low-to-mid hundreds of thousands of dollars, for Caltrans to develop and submit a list of eligible projects to the committee, and to designate projects for bonding, should it choose to do so, and report annually on outstanding debt and planned bond amount requests (special fund).

The bill’s more-significant fiscal effect is dependent upon Caltrans requesting the committee to issue revenue bonds, and the committee choosing to do so. The revenue this bill authorizes to back bonds comes from a per-vehicle fee—the TIF—ranging from $25 to $175, the amount determined by a vehicles’ value. In budget year 2019-20, TIF revenue generated $1.1 billion, half of which would be eligible for bonding capacity. Therefore, it is reasonable to estimate bondable TIF revenue will total $550 million annually, with future annual revenue increasing as the value of vehicles increases.

Under current law, Caltrans would spend this portion of the TIF revenue on eligible transportation projects annually. Conversely, were the committee to issue revenue bonds as this bill proposes, the state would receive bond proceeds up front to spend on eligible transportation projects, immediately, but expend future TIF revenues servicing the bond debt. The amount of the debt service would depend on the dollar amount of any bonds, their maturity period and the rate of interest of the bonds. As an illustration, the Treasurer’s Office projected $6.3 billion in bond proceeds would result in annual debt service of $401 million, based on interest rates the Treasurer’s Office found to be available as of July 1, 2020, and a 20-year bond amortization schedule.

COMMENTS:

1. Purpose. According to the author:

SB 1351 is an economic stimulus proposal to get people back to work and also expedite the accomplishment of the performance goals set forth in SB 1. Research has indicated that revenues generated from the TIF will continue to increase over the next several years. Therefore, by accelerating shovel-ready SHOPP projects, we can combat the State’s economic downturn by putting people to work in well-paying skilled jobs and also expedite the completion of the performance goals identified in SB 1.

1. Background. In 2017, the Legislature passed the Road Repair and Accountability Act of 2017 (SB 1 (Bealle), Chapter 5, Statutes of 2017) to fund the state’s severe backlog of road repairs and maintenance. To provide an estimated $5.2 billion in annual funding, the act increased a number of fuel and sales taxes and instituted fees, including the TIF. According to the Legislative Analyst’s Office (LAO), in 2019, SB 1 revenues doubled state revenues for transportation spending, when compared to the prior year.

More recently, however, SB 1 revenues are down significantly. This can be attributed, mainly, to a decrease in miles traveled and, therefore, fuel consumed, as Californians reduced travel in response to the COVID-19 pandemic.

State transportation planners use SHOPP to identify and coordinate needed transportation capital projects. The SHOPP is adopted by the California Transportation Commission (CTC), following public input, and is submitted to the Legislature and the Governor each even-numbered year. SHOPP projects are funded by a variety of sources, including SB 1’s TIF and other charges.

The 2020 SHOPP was approved by CTC on May 13, 2020, and includes 986 projects at the cost of $18 billion with funds to be allocated over the next four years and projects to be completed over the next five years. Construction has begun on 19 of those projects, costing a total of $88.5 million. Another $5.8 million worth of projects have cleared the environmental review process and are in the final engineering stage.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: August 10, 2020

ASSEMBLY COMMITTEE ON TRANSPORTATION

Jim Frazier, Chair

SBPCA Bill Id:SB 1351

Author:(Beall) – As Amended Ver:August 6, 2020

SENATE VOTE: Not relevant

SUBJECT: Transportation improvement fee: revenue bonds

SUMMARY: Creates the Transportation Improvement Fee Finance Committee (TIF Committee) to authorize revenue bonds to be issued to Department of Transportation (Caltrans) to expedite transportation projects. Specifically, this bill:

1. Creates a TIF Committee made up of the following members or their designees to authorize revenue bonds to be issued to Caltrans to expedite transportation projects:
2. The Treasurer as chair of the committee,
3. The Controller, and
4. Director of Finance.
5. Permits the Director of Caltrans to designate projects to be funded by the revenue generated by the bonds issued by the TIF Committee.
6. Limits the projects Caltrans can select for acceleration to projects approved by the California Transportation Commission (CTC) for the 2020 State Highway Operation and Protection Program (SHOPP) that have completed environmental clearance and project design.
7. Requires Caltrans to provide TIF committee with a list of projects that are eligible to be accelerated for construction within 90 days of the enactment of this bill.
8. Creates the Transportation Improvement Fee Subaccount (TIF Subaccount) within the Road Maintenance and Rehabilitation Account (RMRA) and allocates all TIF revenue specified for RMRA into the TIF Subaccount.
9. Creates the State Highway and SHOPP TIF Account (SHOPP TIF Account) within the State Transportation Fund and specifies that revenue generated by the TIF allocated to RMRA that would be allocated to the SHOPP be placed in the SHOPP TIF Account, and authorizes the TIF Committee to bond against the revenues placed in the SHOPP TIF Account.
10. Specifies that TIF revenue in RMRA shall first be used to satisfy the 50% allocation to SHOPP, and if any money remains, to satisfy the 50% allocation for apportionment to cities and counties as allocated by the Controller.
11. Specifies that TIF revenue shall be used to pay for the $5 million allocated to the California Workforce Development Board.
12. Specifies that bonding capacity shall not reduce the amount of TIF revenue that would be allocated to the 50% apportionment to cities and counties and prohibits TIF Committee from pledging those revenues for a bond.
13. Requires Caltrans to prepare and submit an annual report to the Governor and the Legislature compiling the total amount of outstanding debt issued pursuant to this chapter and the projects funded by that outstanding debt.
14. Requires Caltrans to report to the Governor, the Department of Finance, the Legislative Analyst’s Office (LAO), and the Chairs of the Senate and Assembly Transportation Committees the amount of revenue bonds that Caltrans intends to request that TIF Committee issue for the subsequent fiscal year.
15. Specifies that TIF Committee is created solely for the purpose of authorizing the issuance and sale of the bonds and the execution and delivery of ancillary obligations and designates the Attorney General (AG) as legal counsel for the Committee unless TIF Committee received approval from AG to employ legal counsel.
16. Provides that a member, officer or agent of TIF Committee is not subject to personal liability on any revenue bonds or ancillary obligations issued or entered into.
17. Specifies that the members of the committee shall serve without compensation.
18. Authorizes revenue bonds to be issued on a tax-exempt basis to finance or refinance eligible projects and to fund necessary reserves for principal and interest, capitalized interest, credit enhancements on liquidity costs, costs of issuance, and administrative expenses associated with the revenue bonds.
19. Authorizes TIF Committee to provide security for repayment of the revenue bonds and ancillary obligations through issuing instrument provisions pledging all or a portion of the interests of the SHOPP TIF Account and any TIF revenues for as long as the revenue bonds or ancillary obligations remain outstanding.
20. Establishes that the revenue bonds shall be authorized by resolutions of the TIF Committee and provides that no revenue bond may mature more than 40 years from the date of its issue.
21. Specifies that amounts deposited into SHOPP TIF Account are continuously appropriated, without regard to fiscal years, to the Treasurer to fulfill the bond requirements.
22. Specifies that monies in the SHOPP TIF Account cannot be borrowed by, or made available for transfer to, the General Fund.
23. Authorizes the Treasurer to employ financial, engineering, or transportation consultants as necessary by the Treasurer’s judgment in connection with the issuance and sale of any revenue bonds and specifies that payment for these services may be made out of the proceeds of the sale of the revenue bonds.
24. Specifies that revenue bonds issued are not to be deemed to constitute a debt or liability to the state, or of any political subdivision of the state, and are not and shall not be deemed to be a pledge of the full faith and credit of the state, and shall be payable solely from the funds and revenues pledged under the issuing instrument.
25. Specifies that the bonds issued shall be free from taxation by the state and by all political subdivisions of the state.
26. Specifies that all challenges to the validity of any revenue bond shall be brought in the Superior Court of the County of Sacramento.

EXISTING LAW:

• 1. Etabishes TIF, starting January 1, 2018, based on the market value of the vehicle with the fee range described below:
     1. $25 per year for vehicles with a market value of $0 - $4,999;
     2. $50 per year for vehicles with a market value of $5,000 - $24,999;
     3. $100 per year for vehicles with a market value of $25,000 - $34,999;
     4. $150 per year for vehicles with a market value of $35,000 - $59,999; and,
     5. $175 per year for vehicles with a market value of $60,000 and higher

1. Creates the Road Maintenance and Rehabilitation Program. Funds raised by the gasoline excise tax, a portion of the diesel excise tax increase ($0.10), and TIF, and Zero Emission Vehicle (ZEV) fees are deposited into RMRA, which is created within the State Transportation Fund. The RMRA funds shall be spent on basic road maintenance and rehabilitation, critical safety projects, and several other transportation programs.
2. Allocates an estimated $750 million annually for public transportation capital projects and operating expenses. These funds are derived from a portion of the diesel sales tax increase (3.5%) and an annual appropriation of $350 million from the TIF. The increase in the diesel sales tax will fund local transit operators through the exisitng State Transit Assistance Program (STA), with funding allocated by existing formulas, and also provide funding for commuter and intercity passenger rail service. Allocates $350 million from the TIF to the Transit Intercity Rail Capital Program (TIRCP) for transit capital projects.
3. Requires the outstanding loans made to the General Fund from various transportation special funds, a total of $706 million, be repaid over three years. The funds will be allocated as follows: $236 million for the TIRCP, up to $20 million for planning, $225 million for SHOPP, and $225 million for local agencies.
4. Requires certain programs to be funded annually from the newly created RMRA. Specifically, $200 million is set aside for local entities that have passed local sales and use taxes and/or developer fees for transportation purposes; $100 million for the active transportation program for bicycle and pedestrian projects; $400 million for bridge and culvert repair; $25 million for freeway service patrols, $25 million for local and regional SB 375 planning; and $7 million for university transportation research. Additionally, $5 million per year for five years ($25 million total), is set aside for the California Workforce Development Board to assist local agencies to implement policies to promote preapprenticeship training programs.
5. Requires the remainder of funds in the RMRA to be split 50/50 between state and local governments. The state share will be allocated for road maintenance and SHOPP projects. Local funding is allocated pursuant to existing statutory formulas, where 50% of the allocation goes to cities based on population and 50% goes to counties based on a combination of the number of registered vehicles and the miles of county roads. In order to receive these funds, a city and county must maintain its historic commitment to funding street and highway purposes by annually expending not less than the average of its expenditures over a specified three-year period (i.e. maintenance of effort requirement). The California Transportation Commission (CTC) shall annually evaluate each agency receiving funds to ensure that the funds are spent appropriately.
6. Creates the Congested Corridors Program, to be implemented by the CTC, and allocates $250 million annually from the TIF for projects that provide congestion relief within the state's most heavily used transportation corridors. Eligible projects can be nominated by both the state and regional transportation agencies, however, only up to half of the annual appropriation may be allocated for state-only nominated projects.
7. Directs Caltrans to generate up to $100 million in department efficiencies. The revenue generated through the efficiencies will be allocated to RMRA.
8. Requires Caltrans to develop an asset management plan for SHOPP, with approval by the CTC, to prioritize the state highway assets for funding purposes.

FISCAL EFFECT: Unknown

COMMENTS: After two years, four months, and six days of negotiations, the Legislature passed and Governor Brown signed SB 1 (Beall) Chapter 5, Statutes of 2017. At that time California had not increased the gas tax in 23 years, despite the fact that California’s population had grown by 8 million people, adding millions of cars to California’s roads without transit and road investments to keep pace with that growth.

At the time that SB 1 passed, California was facing a $59 billion deferred maintenance backlog for road maintenance and repairs. The poor condition of California roads resulted in the state’s drivers spending approximately $700 per year in extra vehicle repairs caused by rough roads. In addition, at the time, transit operators were similarly experiencing projected budget shortfalls of $72 billion over the next ten years.

To address these concerns, SB 1 increased the excise tax on gasoline by $0.12 per gallon, increased the excise tax on diesel fuel by $0.20 per gallon, increased the sales tax on diesel fuels by an additional 4% increment, and created TIF, which started on January 1, 2018 and imposed a fee based on the market value of an individual’s vehicle.

In total, LAO estimated that SB 1 revenue would generate $5.2 billion annually, with $1.7 generated by TIF. $350 million of TIF revenue, adjusted for inflation, is used for TIRCP for transit capital projects. Another $250 million is used for the new Congested Corridors Program to provide relief for the states most congested corridors. The remaining TIF revenues go to the newly created RMRA.

RMRA consists of several programs with statutory set asides, including monies for self help counties, active transportation programs, university research and other programs.

In total, SB 1 has helped fund over 3,000 transportation projects across the state since its implementation.

SB 1 revenue is divided up into several different transportation programs, as illustrated by this chart created by LAO:

On March 19, 2020, Governor Newsom issued a statewide order to shelter at home as a result of the COVID-19 pandemic. All nonessential workers were asked to stay home to help stop the spread of COVID-19. As of July 19, 2020, the first draft of this analysis, COVID-19 had claimed the lives of nearly 7,700 Californians and 142,000 Americans. By August 3, 9,399 Californians have died as a result of COVID 19, and 157,000 have died nationwide.

The economy is also doing poorly. The United States Commerce Department estimates that the real gross domestic product decreased at an annual rate of 32.9%, a single year loss nearly equivalent to that of the economic losses of the United States during the Great Depression between 1929 and 1933. California went from having an unemployment rate of 4% in June of 2019 to having an unemployment rate of 16.4% in May of 2020. While the construction industry gained nearly 27,000 jobs between May and June of this year, there are still 37,300 fewer people on payroll in the construction industry in June of 2020 compared to June of 2019.

As a result of the stay at home order, Californians have been driving significantly less. The Mineta Transportation Institute, which receives $2 million in SB 1 funding annually, conducted a study entitled “The Impact of COVID-19 on California Transportation Revenue” at the request of CTC. The study concluded that California could lose up to $20 billion in transportation revenue over the next 10 years because of the COVID-19 pandemic.

This loss of revenue was projected by the Mineta Institute in part due to the fact that vehicle miles traveled (VMT) have been estimated to have dropped 40%, 50%, and even 60% in some areas. The report, written in May, assumed that recovery would begin on June 1, and gasoline consumption would return to pre-COVID-19 levels. Since the report has been written the spread of COVID-19 has gotten worse, and the Governor has ordered many indoor industries to close.

The Road Ecology Center at UC Davis has found that VMT has declined 61% to 90% following various stay-at-home orders. They estimate that the reduced VMT has resulted in a $46 million per week loss of SB 1 fuel tax funds and a $161 million per week loss in total fuel tax revenues. The Road Ecology Center estimates that an eight-week-stay-at-home order would result in a total fuel sales tax loss of $1.3 billion.

The Governor’s May Budget Revision, on the other hand, projects a total loss of $1.5 billion in gas tax revenue between the 2019-2020 Budget Year and the 2020-2021 Budget Year.

In order to reduce the economic loss of gas tax revenue and in order to stimulate the economy during a recession, this bill seeks to allow the California Treasurer to issue revenue bonds backed by TIF revenues that are allocated to SHOPP programs in order to accelerate SHOPP projects.

According to the author, “SB 1351 is an economic stimulus proposal to get people back to work and also expedite the accomplishment of the performance goals set forth in SB 1. Research has indicated that revenues generated from the TIF will continue to increase over the next several years. Therefore, by accelerating shovel-ready SHOPP projects, we can combat the State’s economic downturn by putting people to work in well-paying skilled jobs and also expedite the completion of the performance goals identified in SB 1.” 

According to the Professional Engineers in California Government, who are supporting this bill, “SB 1351 will expedite that work at a significant savings to taxpayers by allowing the State to issue lease revenue bonds against the existing road maintenance fee. California has a significant backlog of highway maintenance due to many years of underfunding. PECG agrees it makes sense to accelerate these projects which will put more people back to work while improving the State Highway system.”

California has traditionally sold two main types of bonds: General Fund-supported bonds [the majority of which are general obligation (GO) bonds] and traditional revenue bonds. General obligation bonds require a two-thirds vote by the California Legislature and a majority vote of the electorate and their repayment is guaranteed by the state’s general taxing power. Revenue bonds, on the other hand, are paid for by a designated revenue stream. Revenue bonds only require a majority vote by the Legislature and normally do not require voter approval.

According to LAO, “Bond financing is a type of long-term borrowing that state and local governments frequently use to raise money, primarily for long-lived infrastructure assets. They obtain this money by selling bonds to investors. In exchange, they promise to repay this money, with interest, according to specified schedules. The interest the state has to pay investors on the bonds it issues for public infrastructure is exempt from their federal and state income taxes, which makes the state’s interest cost on the bonds less than it otherwise would be.”

Bonds can wind up costing the state more money, as bonds generally come with an interest rate and are paid off over the course of 30 years. This bill allows for a 40-year bond. A $100 million bond costs the state $180 million over the course of 30 years. However, LAO notes that “because the repayment is spread over the entire 30-year period, the cost after adjusting for inflation is considerably less-about $1.2 million for each $1 million borrowed.”

Interest rate projections currently have revenue bonds at 4% (compared to 3.8% for GO bonds) with the rates steadily increasing to 4.6% in the fall of 2021 (4.4% for GO bonds). The Federal Highway Administration Project Cost Index suggests that construction costs for transportation projects have increased 4 percent per year since 2003. As a result, the interest costs of the bonds may be offset by inflation.

The Treasurer’s office provided the following estimates to this committee on the bond revenue that could be generated using TIF revenue and the annual debt service to pay off the bonds for a 20 year bond:

For the 2019-20 Budget Year, a total of $1,112,070,000 of TIF revenue went into RMRA. If the gas and diesel excise tax are used to pay off the entirety of the set asides in RMRA, the SHOPP would have received a little more than $556 million in TIF revenue. For example, however unlikely, an $8 billion bond would essentially result in all RMRA revenue dedicated to SHOPP being used for debt service for the next 20 years, while at the same time advancing 15 years’ worth of TIF funding in a single year.

Both the League of Cities (The League) and the California State Association of Counties (CSAC) have not taken a position on this bill but have been working closely with this Committee and the author’s staff to address concerns they have raised. CSAC and the League have been concerned that the debt service on the bonds may potentially reduce the amount of funding local governments receive under RMRA. To address those concerns, the author recently amended the bill to place the SHOPP’s share of RMRA dollars in a separate account and only allow funding in that account to be used to securitize the bonds. In addition, language was added to the bill to specify that it is not the intent for money that would have otherwise been allocated to local governments to be reduced as a result of the debt service on the bonds.

Local governments in California have successfully bonded against sales-tax revenue for transportation projects for years. Contra Costa Transportation Authority, for example, has used revenue bonds to fast track 25 years’ worth of projects in 10 years, primarily using bond funds backed by sales tax revenue to pay for projects that have a long useful life (i.e. ones that use concrete, like building new overpass bridges that have a useful life of 75 years).

While local governments have been using revenue bonds for transportation projects for years, the State of California has generally not used revenue bonds based off of California tax revenue to fund projects, more often opting to use GO bonds instead. The last two major GO bond propositions passed by the voters were Proposition 1A (High Speed Rail) and Proposition 1B in 2006, which authorized $19.9 billion in general obligation bonds for various transportation programs.

However, the state has used Federal Grant Anticipation Revenue Vehicle (GARVEE) bond financing for large transportation projects that would otherwise be unaffordable with available State Highway Account (SHA) funding. California must repay the bonds using federal funds expected to be received in the future, and are restricted to being used to cover only the federally funded portion of a project’s cost.

GARVEE bonds have been approved by CTC twice, once for a suite of State Transportation Improvement Program (STIP) projects and once for SHOPP projects. In March of 2004, the state issued $614.8 million of GARVEE bonds for eight STIP projects. All 8 projects have been completed and paid for. In October of 2008 the state issued a second set of GARVEE bonds totaling $97.6 million for two SHOPP projects. Those bonds matured from 2009 to 2020, and both have been completed.

Bonding against transportation revenues has the potential to create jobs in the middle of a recession that has resulted in 37,300 fewer construction jobs compared to last year, while also accelerating much needed transportation projects. The White House Council for Economic Advisors found that every $1 billion invested in transportation infrastructure supports 13,000 jobs a year. It’s possible the costs of the bonds may even be offset by the cost of labor inflation.

In addition, infrastructure spending has other ancillary benefits to the economy. According to an analysis by TRIP, a national transportation research group, the average return on every $1 spent on highway, street, and bridge investment is $5.20. Other studies put out by the U.S. Treasury Department in 2016 found that for every dollar spent on select infrastructure projects, the net economic benefit ranged between $3.50 and $7.

Injecting $5 billion in transportation spending through the bond process into the economy could result in $25 billion in gains, easily negating the $1.4 billion interest costs that would be made for a $5 billion bond over the course of 20 years.

The 2020 SHOPP was approved by the CTC on May 13, 2020 and includes 986 projects at the cost of $18 billion with funds to be allocated over the next four years and projects to be completed over the next five years. Construction has begun on 19 of those projects, costing a total of $88.5 million. Another $5.8 million worth of projects have cleared the environmental process and are in the final engineering stage. $13.8 billion worth of projects are still in the environmental process.

Using revenue bonds may permit Caltrans to accelerate projects in the 2020 SHOPP to be completed in 2 or 3 years instead of 5, allowing Caltrans to designate billions of dollars’ worth of projects for the 2022 SHOPP.

REGISTERED SUPPORT / OPPOSITION:

Support

Professional Engineers in California Government

Opposition

None on file

Analysis Prepared by: David Sforza / TRANS. / (916) 319-2093

 CONSENT 

Bill No: SB 1351

Author: Beall (D)

Amended: 3/25/20

Vote: 21

SENATE TRANSPORTATION COMMITTEE: 13-0, 5/29/20

AYES: Beall, Allen, Dahle, Dodd, Galgiani, Lena Gonzalez, Grove, McGuire, Melendez, Morrell, Roth, Rubio, Wieckowski

NO VOTE RECORDED: Skinner, Umberg

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Transportation planning

SOURCE: Author

DIGEST:

This bill makes several technical changes relative to transportation planning.

ANALYSIS:

Existing law:

1. Requires transportation planning agencies to conduct certain transportation planning and programming activities, including preparing and adopting regional transportation plans (RTP).
2. Authorizes certain regional transportation planning agencies (RTPA) to allocate up to three percent of their annual revenues from the Transportation Development Act (TDA) for transportation planning and programming processes, and alternatively authorizes the allocation of a greater amount upon approval by the State Director of Transportation (Caltrans), as specified.
3. Requires each transportation planning agency and county transportation commission that has two or more transit operators within its jurisdiction, and the San Diego Metropolitan Transit Development Board, to adopt rules and regulations to provide for transfers between the operators’ transit services so that the services are coordinated.

This bill:

1. Caps the amount of annual revenues the Caltrans Director may approve for allocation to RTPA’s for transportation planning and programming purposes at five percent.
2. Requires RTPAs and County Transportation Commissions to update their rules and regulations pertaining to the transfer policies of transit agencies within their jurisdiction every four years.

Comments

1. Author’s Statement. According to the author, “SB 1351 is a common sense measure that places accountability provisions on RTPAs, transit agencies and the Caltrans Director. Currently, existing law does not place a cap on the amount of TDA revenue the Caltrans director may approve to be used for transportation planning purposes by RTPA’s. This bill places an allocation cap on the approval process to hold the Caltrans director and RTPAs accountable. Additionally, this bill ensures RTPAs and county transportation commissions are updating their regulations and procedures every four years for local transit agencies relative to transfer policies to again ensure our public agencies are accounting for the latest technology and cost effective methods.”
2. Transportation Planning. According to the Federal Transit Administration, transportation planning “plays a fundamental role in a state, region, or community’s vision for its future. It includes a comprehensive consideration of possible strategies; an evaluation process that encompasses diverse viewpoints; the collaborative participation of relevant transportation-related agencies and organizations; and open, timely, and meaningful public involvement. Transportation planning is a cooperative process designed to foster involvement by all users of the system, such as businesses, community groups, environmental organizations, the traveling public, freight operators, and the general public, through a proactive public participation process.”
3. TDA. The Mills-Alquist-Deddeh Act of 1971, known as the TDA, provides funding to be allocated to transit and non-transit related purposes that comply with regional transportation plans.

TDA established two funding sources: the Local Transportation Fund (LTF), and the State Transit Assistance (STA) fund. Provided certain conditions are met, counties with a population under 500,000 (according to the 1970 federal census) may also use the LTF for local streets and roads, construction and maintenance. The STA funding can only be used for transportation planning and mass transportation purposes. Existing law generally allows for RTPAs to use up to three percent of their annual revenue for transportation planning and programming purposes. Existing law also allows for the Caltrans Director to increase this amount upon request by the RTPA and at the Director’s discretion. However, existing law does not impose a limit on the amount the Caltrans director may grant. The provisions specified in the bill placed a five percent cap on the amount that may be increased.

1. Transit Transfer Policies. Typically, transit agencies allow a rider to transfer from one operator/service to another for a discounted fare. As transit agencies, services, and frequencies greatly vary throughout the state, transfer policies between operators also vary in detail. For example, a rider on a Foothill Transit (San Gabriel and Pomona Valley) bus may transfer onto a LA METRO rail line using an electronic TAP card for fifty cents and must use the transfer within a certain timeframe. Whereas a rider using a Clipper card on AC Transit (Alameda and Contra Costa) offers a variety of transfer discounts and, at times, free transfers depending on the transit operator. Currently, statute requires RTPA’s to establish transfer policies for two or more transit operators that are within its jurisdiction. However, existing law does not require RTPAs to update transfer policies once established. This bill simply requires RTPAs to update their transfer policies for transit operators every four years to consider and incorporate the most up-to-date technology and practices relative to rider transfers.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT: (Verified 6/9/20)

None received

OPPOSITION: (Verified 6/9/20)

None received

Prepared by: Manny Leon / TRANS. / (916) 651-4121

6/10/20 13:25:15

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SENATE COMMITTEE ON TRANSPORTATION

Senator Jim Beall, Chair

2019 - 2020 Regular

Bill No: Hearing Date: 5/29/2020

SUBJECT:

DIGEST: This bill makes several technical changes relative to transportation planning.

ANALYSIS:

Existing law:

1. Requires transportation planning agencies to conduct certain transportation planning and programming activities, including to prepare and adopt regional transportation plans (RTP).
2. Authorizes certain regional transportation planning agencies (RTPA) to allocate up to three percent of their annual revenues from the Transportation Development Act (TDA) for transportation planning and programming processes, and alternatively authorizes the allocation of a greater amount upon approval by the State Director of Transportation (Caltrans), as specified.
3. Requires each transportation planning agency and county transportation commission that has two or more transit operators within its jurisdiction, and the San Diego Metropolitan Transit Development Board, to adopt rules and regulations to provide for transfers between the operators’ transit services so that the services are coordinated.

This bill:

1. Caps the amount of annual revenues the Caltrans Director may approve for allocation to RTPA’s for transportation planning and programming purposes at five percent.
2. Requires RTPAs and County Transportation Commissions to update their rules and regulations pertaining to the transfer policies of transit agencies within their jurisdiction every four years.

COMMENTS:

1. Author’s Statement. According to the author, “SB 1351 is a common sense measure that places accountability provisions on RTPAs, transit agencies and the Caltrans Director. Currently, existing law does not place a cap on the amount of TDA revenue the Caltrans director may approve to be used for transportation planning purposes by RTPA’s. This bill places an allocation cap on the approval process to hold the Caltrans director and RTPAs accountable. Additionally, this bill ensures RTPAs and county transportation commissions are updating their regulations and procedures every four years for local transit agencies relative to transfer policies to again ensure our public agencies are accounting for the latest technology and cost effective methods.”
2. Transportation Planning. According to the Federal Transit Administration, transportation planning “plays a fundamental role in a state, region, or community’s vision for its future. It includes a comprehensive consideration of possible strategies; an evaluation process that encompasses diverse viewpoints; the collaborative participation of relevant transportation-related agencies and organizations; and open, timely, and meaningful public involvement. Transportation planning is a cooperative process designed to foster involvement by all users of the system, such as businesses, community groups, environmental organizations, the traveling public, freight operators, and the general public, through a proactive public participation process.”
3. TDA. The Mills-Alquist-Deddeh Act of 1971, known as the TDA, provides funding to be allocated to transit and non-transit related purposes that comply with regional transportation plans.

TDA established two funding sources: the Local Transportation Fund (LTF), and the State Transit Assistance (STA) fund. Provided certain conditions are met, counties with a population under 500,000 (according to the 1970 federal census) may also use the LTF for local streets and roads, construction and maintenance. The STA funding can only be used for transportation planning and mass transportation purposes. Existing law generally allows for RTPAs to use up to three percent of their annual revenue for transportation planning and programming purposes. Existing law also allows for the Caltrans Director to increase this amount upon request by the RTPA and at the Director’s discretion. However, existing law does not impose a limit on the amount the Caltrans director may grant. The provisions specified in the bill placed a five percent cap on the amount that may be increased.

1. Transit Transfer Policies. Typically, transit agencies allow a rider to transfer from one operator/service to another for a discounted fare. As transit agencies, services, and frequencies greatly vary throughout the state, transfer policies between operators also vary in detail. For example, a rider on a Foothill Transit (San Gabriel and Pomona Valley) bus may transfer onto a LA METRO rail line using an electronic TAP card for fifty cents and must use the transfer within a certain timeframe. Whereas a rider using a Clipper card on AC Transit (Alameda and Contra Costa) offers a variety of transfer discounts and, at times, free transfers depending on the transit operator. Currently, statute requires RTPA’s to establish transfer policies for two or more transit operators that are within its jurisdiction. However, existing law does not require RTPAs to update transfer policies once established. This bill simply requires RTPAs to update their transfer policies for transit operators every four years to consider and incorporate the most up-to-date technology and practices relative to rider transfers.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

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

May 21, 2020.)

SUPPORT:

None received.

OPPOSITION:

None received.

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