Administration and Projects Committee STAFF REPORT July 3, 2014 Page 2 of 2 Mark Watts of Smith, Watts & Martinez LLC will be in attendance to discuss

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1 Administration and Projects Committee STAFF REPORT Meeting Date: July 3, 2014 Subject Summary of Issues Legislative Update This is an update on relevant developments in policy, legislation and finance that are of interest to the Authority. Mark Watts of Smith, Watts & Martinez LLC will discuss current State legislation. Recommendations Discussion and action to be determined on proposed legislation on an individual basis. Financial Implications N/A Options Attachments A. Federal Legislative Update A1. Highway Trust Fund Primer B. State Legislative Update C Budget Actions affecting transportation programs D. California State Senate Transportation and Housing Committee policy on Measures Naming Highways and Structures E. California State Assembly Transportation Committee policy on Resolutions Naming Highways and Structures Changes from Committee Background This report contains updates on relevant developments in policy, legislation and finance that are of interest to the Authority both at the State and Federal levels of government. On the Federal side, our lobbyist has suggested some bills that the Authority should watch and potentially take a position on. Because the Highway Trust Fund is so precarious at this time, Keystone Public Affairs has provided a primer on the Highway Trust Fund as information for Authority staff and Commissioners. 14-1

2 Administration and Projects Committee STAFF REPORT July 3, 2014 Page 2 of 2 Mark Watts of Smith, Watts & Martinez LLC will be in attendance to discuss current legislative activities that may affect the Authority. This discussion will consist of an overview of current bills, and may also include recommendations for positions/actions by the Authority pertaining to specific bills. Per a request at the May Authority Board meeting, Attachments C and D outline the current State Senate and Assembly policies on naming Highways and Structures. These attachments are meant to serve as information only. 14-2

3 Federal Legislation House Measure Author Topic Status Summary CCTA Position TBD Shuster Transportation Reauthorization Not yet introduced (NYI) Reauthorization of surface transportation first hearings held. Met with T&I staff to discuss CCTA priorities. Still expect draft bill before August recess pending funding mechanism solution found. Support w/ provisions H4745 Latham THUD Appropriations Bill NYI FY15 Appropriations passed by House on June 12. Seek funding HR2288 Grimm Transportation Fringe Benefits Intro 6/6/13 House Ways and Means Provides parity at $220/month for the exclusion of parking and transit benefits from income tax and employer payroll taxes. Reforms the bicycle provisions to allow a person to exclude bicycling along with transit, vanpooling or parking expenses. No further movement expect language in Reauthorization TBD Camp Tax Reform Discussion Draft $127 billion raised from transition tax is earmarked for the highway trust fund. Corporate tax reform will not move other funding mechanisms are being explored. Senate Measure Author Topic Status Summary CCTA Position TBD Boxer Transportation Reauthorization Intro 5/13/14 Passed EPW 5/15/14 S2438B Murray THUD Appropriations Bill Introduced and reported out of committee S1116 Schumer Transportation Fringe Benefits Intro 6/7/13 Senate Finance Reauthorization of surface transportation. Met with EPW staff to discuss CCTA priorities. Passed EPW Committee with amendments on May 15. Awaiting additional committee actions before bringing to floor FY15 Appropriations committee passed by on June 5. Awaiting floor action. Provides parity at $245/month for the exclusion of parking and transit benefits from income tax and employer payroll taxes. Expect language in Reauthorization Support w/ provisions Seek funding Support 14-3

4 States Contribute To, Benefit From Highway Trust Fund Fuel Retailers Source: Financing Federal-aid Highways, Federal Highway Administration, March Collection and Distribution of Highway Trust Funds Motorists State Depts. of Transportation Drive on roads constructed with Highway Trust Fund money Purchase gas from state retailers and pay federal fuel tax Receive federal funds from Highway Trust Fund Use funding to pay for road construction U.S. Department of Transportation Collect federal fuel taxes paid by motorists Send tax revenue to Highway Trust Fund 14-4 Stores fuel taxes and other revenue in Highway Trust Fund* Sets policy for distributing funds to state Depts. of Transportation *Approximately 15% of Highway Trust Fund revenue goes into a separate account funding mass transit Summary The Highway Trust Fund helps states pay for road construction and improvements with gas tax revenue collected by state retailers

5 2 Fuel Taxes Power Fund Analysis 90% of the Highway Trust Fund s revenue comes from fuel taxes (imposed at the federal level but collected by state retailers), and gas taxes comprise 75% of fuel tax income The fund s relative dependence on a small number of sources makes it vulnerable to revenue and consumption fluctuations 14-5 Joseph Kile, The Highway Trust Fund and Paying for Highways, Congressional Budget Office, May 17, 2011.

6 Fund is On the Brink of Insolvency 3 Analysis The Highway Trust Fund is projected to be in deficit by September 2014 Because the fund lacks the authority to run at a negative balance, and the fund cannot raise revenue on its own, consequences of a deficit could include project slowdowns or federal defunding of state projects 14-6 Source: Federal Highway Administration.

7 Increased Outlays and Lagging Revenues Drive Shortfall 4 Year-by-Year Status of Highway Accounts (Billions) Analysis Since 2000, the highway account of the Highway Trust Fund has regularly spent more than it has received in income In 2014, the fund s income is projected to fall to 71% of yearly expenditures, a ratio not seen for the past twenty years 14-7 Source: Office of Highway Policy Information, Status of the Highway Trust Fund

8 Deficit Means That Fund s Reserves Are Close To Exhaustion 5 Injection of stimulus funds 14-8 Analysis While the fund s balance sheet was boosted by a 2009 injection of funds from the stimulus program, the fund s combination of lagging revenue and increasing costs have brought reserves down to near zero-level today Source: Office of Highway Policy Information, Status of the Highway Trust Fund

9 Below-Average Gas Tax May Decrease Revenue Long term average: $.22 /gallon Current: $.18 /gallon Source: James Bickley, The Federal Excise Tax on Gasoline and the Highway Trust Fund: A Short History, Congressional Research Service, September 7, Analysis Some cite changes in the gas tax as the cause of the apparent stagnation in the Fund s revenue Advocates for increasing the federal gas tax from its current level of $.18 cents/gallon reason that the nominal gas tax has not been increased since 1993; however, the inflation-adjusted value of the gas tax has only been below the historical average since 2005 These results suggest that lower amounts of gasoline purchased may be the primary cause of the Fund s revenue slowdown 14-9

10 But Slowdown in Consumption May Matter More From 1971 to 2006, the amount of gas consumed by American drivers grew at approximately 4% a year Since 2008, gas consumption has decreased by about 1% a year Summary Because the Highway Trust Fund is largely funded by gas sales, the slowdown in gas consumption is the major cause of the Fund s crisis Sources: Energy Information Administration, St. Louis FRED. 7

11 Find Alternate Funding Source E.g.:, apply new tariffs on vehicle-miles driven, implement congestion charges or other taxes Would allow trust fund to diversify revenue base The House opposes tax increases; levies on vehicle-miles could raise privacy concerns Sources: Jake Sherman, Washington s Next Cliff, Politico, April 30, 2014; Alternative Approaches to Funding Highways, Congressional Budget Office, March Congress Faces Tough Choices Possibilities for Handling Highway Trust Fund Cliff Transfer Funds From Treasury Slow Down Project Spending Raise the Gas Tax Description Top up the Highway Trust Fund, allowing it to operate at a loss for a continuing period Reduce reimbursements to states for highway construction, either temporarily or permanently Increase the federal tax on gasoline Why Congress Could Do This Would allow time to find a more permanent solution Would decrease trust fund spending, adjusting for revenue drop Would bring in greater revenue Why Congress May Not Do This The idea of bailing out a federal fund remains controversial among conservatives; fails to solve underlying problem State Departments of Transportation would be irate; Members of Congress would see their districts directly impacted Gas tax increases hit every driver in the pocketbook; would be politically radioactive Analysis Although Congress recognizes that the Highway Trust fund is in trouble, finding a solution may be difficult, as Members of Congress will have to choose which form of pain their voters dislike the least

12 Senate s Transportation Proposal Maintains Current Funding Levels Current and Proposed Funding for Surface Transportation Bill (in billions) Funding from federal gas Funding from other tax revenue sources Current Transportation Bill Total: $108B Senate s Proposed Transportation Bill Total: $319B Analysis The current surface transportation bill expires in September 2014 On May 12, 2014, the Senate Environment and Public Works Committee released a bill to set highway spending at the CBO s baseline scenario levels, but the bill does not include a funding mechanism or a solution for the expected insolvency of the Highway Trust Fun The Senate bill has been commended for covering funding over six years enough time to support major transportation project planning but the bill has been criticized for relying too heavily on federal gas tax revenue Source: Eric Beech, Senate panel backs transport bill to maintain funding, Reuters, May 15, 2014.

13 Current Transportation Bill Total: $108B Administration s Proposed Transportation Bill Total: $302B* Administration s Transportation Proposal Boosts Funding with Tax Reform Current and Proposed Funding for Surface Transportation Bill (in billions) Funding from federal gas tax revenue Funding from other sources Funding from corporate tax reform Analysis President Obama has also proposed to reauthorize the surface transportation bill, but for four years instead of six, and at $302B, an increase of approximately 39% per year over the current surface transportation bill Obama s proposal has been praised for relying less on the federal gas tax for funding, but criticized for depending instead on revenue from corporate tax reform, a measure Congress has largely ignored in the past *Under the administration s proposal, funding from federal gas tax and corporate tax reform revenue are distributed evenly across , but funding from other sources may not be distributed evenly as represented in this graphic Source: Keith Laing, CBO: Six-year transit bill would cost $100B more, The Hill, February 7, 2014; Kathryn A. Wolfe, President Obama to urge $302 billion transportation bill, Politico, February 26, 214; Projection of Highway Trust Fund Accounts Under CBO s Reestimate of the President s FY2015 Proposals, April 17, 2014.

14 State Legislation May 29, 2014 Assembly Measure Author Topic Status Summary Recommended CCTA Position AB 1179 Bocanegra (D) Strategic Growth Council Senate Nat Resources: June 10 AB 1193 Ting (D) Bikeways Standards Senate T&H: June 24 AB 1447 Waldron (R) Cap and Trade revenues, traffic synchronization Senate Env Quality: June 25 This bill would add the Superintendent of Public Instruction or his or her designee to the Strategic Growth Council. This bill would additionally provide for a classification of Class IV bikeways, as specified. This bill contains other related provisions and other current laws. The bill adds traffic signal synchronization to the list of eligible expenditures for appropriation from Cap and Trade revenues. Support AB 1724 Frazier CM/GC Authority Senate Trans June 24 AB 1811 Buchanan (D) High-occupancy vehicle lanes. AB 1857 Frazier (D) Department of AB 2013 Muratsuchi (D) Transportation: vehicle and equipment procurement. Vehicles: highoccupancy vehicle lanes Senate Trans; June 17 Senate Trans: June 24 Senate Appropriations: AB 2250 Daly (D) Toll facility revenues Senate Trans: June 24 Will provide CM/GC authority to CMAs and other regional entities. Amended per Assembly Trans direction. Addresses Sunol Grade HOT lanes and amended to authorize that HOV must have a transponder. Modernizes Caltrans heavy duty fleet procurement by requiring life-cycle cost assessment. Goal is to reduce costs. Will expand the number of authorized decals for plugin hybrids to access HOV lanes from 40,000 to 85,000; amended to new limit of 70,000. Amended to ensure that any of the toll revenues generated from managed lanes on the state highway system that are administered by local agencies remain Support 14-14

15 AB 2471 Frazier (D) Public contract change orders Senate Gov Organization: June 24 AB 2728 Perea Vehicle Weight Fees Retained on Assembly Suspense, Senate available for expenditure by those local agencies in the respective corridor. Would require a public entity, when authorized to order changes or additions in the work in a public works contract awarded to the lowest bidder, to issue a change order promptly, and in no event later than 30 days after the changes or additions are required. Would prohibit weight fee revenue from being transferred from the State Highway Account to the Transportation Debt Service Fund or to the Transportation Bond Direct Payment Account, and from being used to pay the debt service on transportation general obligation bonds. Support in concept, work with Author on payment date to ensure realistic Bill will not progress this year. Measure Author Topic Status Summary CCTA Position SB 731 Steinberg (D) SB 792 DeSaulnier (D) SB 969 DeSaulnier (D) Environment: California Environmental Quality Act. Assembly Local Government: JPC Plan Assembly Local Gov: June 18 Megaproject Peer Review SB 1077 DeSaulnier Vehicle Miles Travel Charges Assembly Accountability: June 18 Assembly Transportation: June 23 Provides for modernization of CEQA; key elements were placed in another measure, SB 743, so it is unclear how the author will proceed in This is the author's renewed attempt to consolidate certain functions between Bay Area planning entities. Amended in January to delete a requirement in the prior version that SFBCDC locate at new MTC HQ. Expands last years Peer Review Act beyond Caltrans projects to include projects that cost more than $1 billion developed by any transportation agency. Latest amendments raise the threshold to $2.5 billion. Would require the Transportation Agency to undertake a pilot program designed to assess specified issues related to implementing a vehiclemiles-traveled fee in California. Oppose Support 14-15

16 SB 1122 Pavley (D) Cap and Trade Retained on Senate Approps. Suspense SB 1151 Canella Vehicle fines in school; zones Assembly Trans: June 16 SB 1156 Steinberg (D) Carbon Tax Senate Gov and Finance, SB 1183 DeSaulnier Bicycle Tax Assembly Local Gov: June 18 SB 1298 Hernandez HOT Lanes Assembly Trans: June 23 SB 1418 DeSaulnier Weight Fees Retained on Senate Approps. suspense Establishes Cap and Trade funds as a source of funding for planning grants for SCS work. This bill imposes an additional $35 fine for specified violations occurring in school zones and directs revenue from the fine to the state's Active Transportation Program (ATP). Establishes a new carbon tax on fuels to fund earned income tax credits for wage earners under $75,000; an increment is dedicated to transit capital. Allows a city, county or regional park district to impose a special tax at the point of sale on bicycles, except for those with a wheel diameter of less than 20 inches Re-authorizes HOT Lanes, indefinitely, and addresses 2 projects in LA. New HOT Lanes will require CTC approval. Would prohibit weight fee revenue from being transferred from the State Highway Account to the Transportation Debt Service Fund or to the Transportation Bond Direct Payment Account, and from being used to pay the debt service on transportation general obligation bonds. Also, changes relative allocation of funds recaptured. (see below) Bill will not progress this year Bill will not progress this year 14-16

17 MEMORANDUM June 16, 2014 TO: FROM: SUBJECT: Contra Costa Transportation Authority MARK WATTS BUDGET ACTIONS AFFECTING TRANSPORTATION PROGRAMS Late yesterday, the Legislature completed it work on the State Budget Act and relevant trailer bills needed to conform state law with the budgetary actions. The main budget bill is contained in SB 852 (Leno) and the key budget trailer bills are SB 853 (Transportation Trailer bill) and SB 862 (Cap and Trade Compromise). State Budget Overview The final budget sent to the Governor contains an estimated $105 billion in new General Fund revenues, for a total of new resources, when combined with higher present year estimates, of an estimated $109 billion. Key fiscal features: Includes Reserves of $2.1 billion. The Budget Act of 2014 contains a combined reserve of $2.1 billion. This includes $1.6 billion in the Rainy Day Fund, plus $450 million in the regular reserve. Structurally balanced, with Growing Reserves to $5 billion. The Budget Act of 2014 long term spending plan is balanced throughout the forecast period, with reserves growing to over $5 billion by Pays down Wall of Debt by up to $12.4 billion. The Budget Act of 2014 pays down as much as $12.4 billion of the Wall of Debt. This includes $10.6 billion in payments directly from the budget, as well as an additional $1.8billion in payments to local governments and school districts should revenues grow beyond the forecast by next spring Transportation Programs Key Actions The final budget provides $479 million for Transportation infrastructure maintenance and repair projects, expanding upon the Governor's $337 million Early Pay Back proposal to return 14-17

18 funds loaned to the General Fund earlier than scheduled. The final budget adds $142 million from the State Highway Account to supplement the amounts the Governor intended to spend on local roads. Another major infusion of funds was the acceptance by the legislature of the Governor s proposal in the budget to include $1.2 billion in appropriation authroity in remaining Proposition 1B funds. Other actions: Approved a May Revision proposal to reduce Capital Outlay Support staff by 195 position and $21.8 million to reflect the expected workload for the program in the budget year. Adopted a Spring Fiscal Letter for $243 million of additional appropriation authority of Proposition 1B to reflect updated administrative and project savings which would then be redirected into additional transportation projects. Provided full funding to reflect the State's share of operating costs for the Amtrak system. Extended 4 positions that administer the Intercity Rail federal grant, for an annual cost of $421,000. This federal grant funding is used for improvements such as double tracks, layover facilities, crossovers, station improvements, and procurement of rail cars for the existing passenger rail systems. Provided an increase of $778,000 and 10 positions to operate the 20 mile Intestate 15 Express Lane. Provided a $4 million one-time transfer of funding from the Local Airport Loan Account to Aeronautics program $1 million for 55 Airport Improvement Grants and $3 million for 18 Acquisition and Development grants for general aviation airports. High Speed Rail Program A key develop related to the High Speed Rail program was the dedication of $250 million of Cap and Trade funds for High Speed Rail Construction and a continuous appropriation of 25 percent of the ongoing Cap and Trade revenue for construction, beginning in In addition, when the $400 million General Fund Loan from the Cap and Trade fund is repaid, these funds are dedicated to High Speed Rail. Other budget actions: Approved a $29.3 million loan of Public Transportation Account Funding to High Speed Rail for State Operations. The intent of this funding is to cover the Authority's operations while Proposition 1A Bond Funds are frozen by the courts. According to the Administration, this loan will not impact the state or local transit agencies and the Public 14-18

19 Transportation Account will have a projected remaining balance of $305.2 million after the loan to the Authority Provided $32 million of American Recovery and Reinvestment Act funds for Southern California passenger rail investments that would provide connectivity to high-speed rail service. The proposed funding would generate a local match of an additional $48 million. This proposal is consistent with the Bookend investment contained in the April 2012 Revised High Speed Rail Business Plan. Cap and Trade Agreement The final budget allocates Cap and Trade auction revenues in the budget act and contains statutory language to continuously appropriate 60 percent of ongoing Cap and Trade funding, beginning in to several major transportation-related or sustainable community programs. The 40% remaining balance will be subject to annual budgetary proposals. I have summarized the budget year expenditures as well as the ongoing expenditure plan set forth in SB 862 on the tables that follow: Budget Year Plan Comments Amount HSR $250 Transit Operations or Capital (Local) State Transit Assistance formula, subject to ARB $25 guidelines and Caltrans oversight Transit Ops and I/C Rail (State) Includes bus transit, and commuter and intercity and urban light rail $25 SCS/Affordable Housing Competitive at California Transportation Commission, California State Transportation Agency review ( Sustainable Communities projects and services, such as Transit/Active Transportation Program/Transit Oriented Development, are eligible $130 Competitive at Strategic Growth Council (with ARB guidelines and consultation with regional agencies) Low Carbon Transportation $200 Other Weatherization, energy, Water, $242 Waste Diversion Long Term, , Ongoing (SB 862) 14-19

20 Program Comments Amount HSR 25% Transit Operations or Capital (Local) State Transit Assistance formula, subject to ARB guidelines and Caltrans approval similar to Prop. 1B PTMISEA program 5% Transit Capital or Operations (State) Sustainable Communities Includes bus transit, and commuter and intercity and urban light rail Competitive process through California Transportation Commission, California State Transportation Agency review Sustainable Communities projects and services, such as Transit/Active Transportation Program/Transit Oriented Development, are eligible 10% 10% Competitive at Strategic Growth Council (with ARB guidelines and consultation with regional agencies) Affordable Housing 10% Energy, Low-Carbon Trans, Subject to annual appropriation by the Legislature 40% Water, Waste Diversion, Weatherization Total 100% 14-20

21 SENATE TRANSPORTATION AND HOUSING COMMITTEE SENATOR MARK DESAULNIER, CHAIRMAN Session Committee Policy on: MEASURES NAMING HIGHWAYS OR STRUCTURES Policy: The committee will not consider any measure proposing to name or designate a state highway or highway structure unless the measure meets the following conditions: a) The person being honored must have provided extraordinary public service or some exemplary contribution to the public good and have a connection to the community where the highway is located. b) The person being honored must be deceased. c) The naming must be done without cost to the state. Costs for signs and plaques must be paid by local or private sources. d) The author or co-author of the measure must represent the district in which the facility is located, and the measure must identify the specific highway segment or structure being named. e) A segment of highway being named for a specific individual or individuals must not exceed five miles in length f) The proposed designation must reflect a community consensus and be without local opposition. g) The proposed designation may not supersede an existing designation unless the sponsor can document that a good faith effort has uncovered no opposition to rescinding the prior designation. Discussion: Each legislative session members of the Senate and Assembly introduce measures proposing to name a state highway segment or structure in honor of some individual, group or historical event. Over the years, an informal policy developed relative to the criteria for approval of such designations and memorials. No firm guidelines existed, however, which in some instances resulted in inconsistency or controversy over a proposed designation. For the last several sessions, the committee has adopted and successfully employed a policy establishing general criteria and guidelines for naming transportation facilities. The establishment of basic guidelines for naming highways and structures serves to mitigate questions or controversy in advance of legislative consideration of naming measures. It also serves the committee s efficient consideration of such proposals and promotes fairness in determining whether a particular facility or segment is to be specially designated. Adopted by the Senate Committee on Housing and Transportation on April 2,

22 ASSEMBLY TRANSPORTATION COMMITTEE BONNIE LOWENTHAL, CHAIR SESSION Committee Policy on: RESOLUTIONS NAMING HIGHWAY OR STRUCTURES Recommended Policy: Resolutions proposing to name or designate state highways or highway structures should meet the following specific minimum criteria: a) Any person being honored must have provided extraordinary public service or some exemplary contribution to the public good and have a connection to the community where the highway is located; b) The author or a co-author of the resolution must represent the district in which the facility is located and the resolution must identify the specific highway segment or structure being named; c) The proposed designation must reflect a community consensus; d) The proposed designation may not supersede an existing designation unless the sponsor can document that a good faith effort has uncovered no opposition to rescinding the prior designation; and, e) When a resolution names a highway or structure in honor of an individual, the designee must have been deceased, except in the instance of elected officials, in which case they must be out of office. Discussion: Each legislative session produces a number of Senate and Assembly resolutions proposing to name state highway segments or structures in honor of some individual, group or historical event. Over the years, an informal or ad hoc policy developed relative to the criteria for approval of such designations and memorials. No firm legislative guidelines existed, however, which in some instances resulted in inconsistency or controversy over a proposed designation. The establishment of basic guidelines for naming highways and structures serves to mitigate questions or controversy in advance of legislative consideration of naming resolutions. It also serves the Committee s efficient consideration of such proposals and promotes fairness in determining whether a particular facility or segment is to be specially designated

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