Gas tax, Cap and Trade, and consequences for Caltrain

Last week Thursday, the state legislature passed SB1, a major transportation funding bill raising gas taxes and vehicle fees, raising $52 billion over ten years for transportation, including $8Billion for transit and $1Billion for active transportation.

That same day, the California Court of appeals upheld the state’s Cap and Trade program which has been a valuable but irregular source of funding for transportation in the state.  

Both of these decisions could be important for the funding of Caltrain modernization, including potential backup funding to complete the first phase of electrification, whose federal funding is currently hung up in Washington DC.

SB1 and the Peninsula Corridor

If we are reading right, there are two sections of SB1 potentially relating to Caltrain and the Peninsula Corridor:

  • an increase in the state’s State Transit Assistance Program coming from the increase in diesel taxes
  • a Congested Corridors program which specifically identifies “Emerging solutions for the Route 101 and Caltrain corridor connecting Silicon Valley with San Francisco.”

The Congested Corridors program would logically pertain to Caltrain modernization, and also to the proposed 101 Managed Lanes program which could create an express lane for high occupancy vehicles and possibly toll-paying solo drivers.

So in the unwelcome event that backup funding is needed for Caltrain electrification, the Congested Corridors section of the bill seems to be directly pertinent and hopefully would be prioritized by the State.

Governor Brown travelled to Washington DC to lobby to free the funding for Caltrain electrification. Carl Guardino, whose Silicon Valley Leadership Group made a lobbying pilgrimage to DC and worked diligently to pass a Santa Clara County transportation ballot measure with funding for the next phase of Caltrain modernization, is the Chair of the California Transportation Commission charged with allocating funds for the Congested Corridors Program.  Caltrain electrification would seems like a logical high priority for funding if needed.

The Congested Corridor program would generate $250M per year with up to 50% for Caltrans projects. So even if the state prioritized Caltrain electrification as a use of that program’s funds, there could still be cash flow issues. The amount of funding hung up in Washington DC is $647Million, which would not be needed all at once.

Funding from the major state transportation bill is, of course, relevant and welcome for many other transit projects in the Bay Area and around the state, including projects that would also be impacted by the drastic proposed cuts to federal transit funding expressed in the President’s draft federal budget.

Thanks to organizations including TransForm, and legislators especially Senator Scott Wiener, who fought hard and successfully to increase the amount of funding in the bill for transit and active transportation.

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An unwelcome piece of the bill is a last-minute loophole to exempt large trucks from pollution regulation. The “dirty trucks” provision was added late, could not be removed in time for a vote before the holiday recess, because of a ballot measure passed last November requiring bill language to be posted for 72 hours before a vote.  The ballot measure didn’t keep side deals from being passed, like $400 Million to extend ACE to Merced on behalf of Republican Senator Anthony Canella, but it did prevent environmental advocates from rallying to remove the dirty trucks provision.

Cap and Trade and the Peninsula Corridor

The same day that the transportation funding bill passed, a state appeals court panel upheld the Cap and Trade program.  The a core element of the state’s strategy to fight climate change, the cap-and-trade law limits carbon emissions and auctions off permits that allow companies to release excess greenhouse gases into the atmosphere.

The  Appeals Court ruled that Cap and Trade program is an allowable fee, and is not considered a tax which would require a two thirds vote of the legislature.  And the Court ruled that the program to auction sales of pollution permits was legitimately authorized by California’s 2006 law, AB32, which set goals to fight climate change and directed the Air Resources Board to set regulations to reduce carbon emissions. The California Chamber of Commerce had argued that the law did not allow the administrative branch to create an auction program.  

Following last week’s ruling, the Chamber and businesses that filed suit could choose to appeal to the California Supreme Court. A majority of the Supreme Court’s members had been appointed by Governor Brown, who considers the state’s climate initiatives including this program as key elements of his legacy.

Since 2013, the Cap and Trade Program has raised $6 billion for a wide range of projects intended to reduce greenhouse gas emissions, including $800 Million for the High Speed Rail project, over $500 Million for transit capital and operations, and $570 Million for Affordable Housing and Sustainable Communities, for infill and compact development that reduces miles driven.

However, Cap and Trade revenues have been very uneven in recent auctions over the last year or so.  Reasons include the state generating less climate pollution than expected and polluters having less need to buy permits; the legal uncertainty that has just been reduced with the current ruling; and uncertainty about the legislative future of the program, which was originally authorized only until 2020.  Last year, the legislature passed a critical bill that extends timeline for carbon reduction til 2030 and strengthened the goals for carbon reduction.  

The last remaining step  would be to extend the Cap and Trade provisions themselves beyond 2020; this is likely to be easier now that the court has confirmed the interpretation that it is not a tax and therefore does not need a supermajority vote of the legislature.

If the Cap and Trade program is extended, this could provide another helpful funding stream for transit in the state, if settling all the legal questions improves auction results. 

Cleaner air with electric Caltrain

Overall, last week was a very good week for the funding of sustainable transportation on the Peninsula Corridor, the Bay Area, and the state.