To: Environment Committee & Transportation Committee

Date: June 12, 2013

To: Environment Committee & Transportation Committee

From: Mike Mielke, VP, Environmental Programs and Policy; Shaila Narang, Environment Coordinator

Re: AB 32 Implementation: Funding Source Matrix

The matrix below summarizes potential funding sources to implement California’s landmark Global Warming Solutions Act, Assembly Bill 32 (AB 32). As we consider tactics and funding to move the State towards greater sustainability, we must think holistically about how these pots of money and supporting regulation/legislation work together.

Prop 39 / AB 32 C&T / EPIC / AB 118/Carl Moyer / OBAG
Overview / Prop 39 closes a tax loophole by requiring out-of-state businesses to calculate their California income tax liability based solely on the percentage of their sales in California and repealing an existing law previously gave out-of-state businesses an option to choose favorable tax treatment due to their property and payroll outside California. / AB 32 C&T regulation is a market-based compliance mechanism to impose a cap on the aggregate GHG emissions allowed from “capped sectors.” Each year the cap declines by 3%, thus resulting in a reduction in GHG emissions over time. Entities can either purchase “allowances” to emit GHGs, or use “offsets” resulting from an emissions reduction achieved in an uncapped sector. / EPIC is a clean energy research, development and demonstration (RD&D) program overseen by the California Public Utilities Commission (CPUC). The program is budget neutral because investments are included in electricity rates. / AB 118 established the following three funding programs for modernizing transportation infrastructure to meet climate and clean air goals:
1) Alternative and Renewable Fuels and Vehicle Technology Program (ARFVTP) overseen by CEC;
2) Air Quality Improvement Program (AQIP) by ARB; and
3) Enhanced
Fleet Modernization Program (EFMP) by Bureau of Automotive Repair (BAR). / One Bay Area Grant (OBAG) program from MTC is a new funding approach that better integrates the region’s federal transportation program with California’s climate law (Senate Bill 375) and the Sustainable Communities Strategy.
Amount of revenue expected / $1 billion annually and overall $5 billion over five years. Half of that - roughly $2.5 billion over five years would go to Energy efficiency and clean energy projects at California’s schools & community colleges. The other half will go to the state's general fund. / The three auctions conducted so far, covering Utilities and large industrial polluters, raised over $260 million in state revenue. The future auctions are expected to produce over $1 billion annually as the program expands in 2015 to cover the distributors of transportation fuels. / A $162 million/year program. Of that, $55 million allocated to research, $75 million on demonstration, $15 million on marketing, and $17 million on administration. 80% funds administered by CEC and rest by Utilities. / 1)  The CEC has an annual program budget of approximately $100 million funded by various fee surcharges to support projects under ARFVTP.
2)  AQIP receives between $30-36 million per year from various fees.
3)  EFMP receives roughly $30 million per year.
SB 11 has proposed continuation of above annual revenues of $180 million from fee surcharges for various AB 118 programs until 2024. / OBAG establishes commitments for investing roughly $800 million over the four-year Cycle 2 period, funded through continuations of the Federal surface transportation legislation (currently MAP-21).
Timeline / Five years (2013-14 through 2017-18) / All sectors will be covered through 2020 / Eight years (Jan 2013 through Dec 2020) / SB 11 & AB 8 would extend until January 1, 2024, extra charges on vehicle registrations and others in order to fund the AB 118 programs. / Four-year Cycle 2 period (2012-13 through 2015-16).
Types of activities meant to address / Much of the Prop 39 money would go to improving heating and cooling systems, as well as upgrading lights in public schools. / Several – Energy Efficiency, Clean energy, Natural Resources conservation, Low-Carbon Transportation etc. / EPIC funds energy efficiency, renewable energy, and RD&D programs in California. Applicable sectors - Commercial, Industrial, Residential, General Public/Consumer, Utility, and Institutional. / AB 118 programs fund development and deployment of emerging clean transportation technologies and infrastructure needed to meet clean air and climate goals. / Funding targeted toward achieving local land-use and housing policies by:
• Rewarding jurisdictions that accept Regional Housing Need Allocation (RHNA) process.
• Supporting the Sustainable Communities Strategy.
• Flexibility to invest in Transportation for Livable Communities, etc
Major companion / enabling legislation / ·  SB 39 (De Leon) – School Facilities: Energy Efficiency – Calls for Office of Public School Construction to distribute grants to only K-12 school districts and County education offices through a priority ranking system.
·  AB 39 (Skinner) – Prop 39 implementation – requires the CEC to distribute grants & loans to K-12, community college, university or other public buildings. Recommended allocation– 75% to be awarded as grants to K-14 projects; 25% in the form of low/no-interest loans to all public agencies. / ·  AB 1051 (Bocanegra) – This directs a portion of C&T revenue to fund implementation of SB 375 and regional Sustainable Communities Strategy goals including transit-oriented residential development and energy efficiency improvements for affordable homes. Funds will be administered beginning January 2015.
·  AB 574 (Lowenthal) – Requires ARB, California Transportation Commission and the Strategic Growth Council, to establish standards for use of C&T funds for sustainable communities projects.
·  AB 1375 (Chau) - Intends to establish a dedicated Clean Technology Investment Account within the Greenhouse Gas Reduction Fund and utilize a portion of C&T revenues to fund development and deployment of innovative technologies.
·  AB 26 (Bonilla) - Ensures that C&T investment plan considers regional reinvestment and workforce skills transition as important priorities. / ·  AB 270 (Bradford) – Public Utilities: Ratepayer funded energy efficiency - monitoring of expenditures of ratepayer funds.
·  AB 340 (Bradford) – Public Utilities: Electric Program Investment Charge - encourage the use of women, minority, and disabled veteran-owned businesses as prime contractors for funds administered by EPIC.
·  The CEC’s development work on the EPIC investment plan is being conducted in accordance with recent legislation, Senate Bill 1018 (Statutes of 2012) / ·  SB 11 (Pavley and Rubio) and AB 8 (Perea and Skinner) – These will help reduce GHG emissions and improve clean air by extending sunset dates for critical funding programs under AB 118 until January 1, 2024.
-  These bills would also dedicate funding to establish hydrogen fueling infrastructure necessary to support commercial fuel cell vehicle deployment in California beginning in 2015. The bills provide $20 million from the Alternative and Renewable Fuels and Vehicle Technology Fund for three years, from July 1, 2013 to June 30, 2016, and then up to $20 million annually thereafter until at least 100 hydrogen fueling stations are in place.
These programs are paid for by dedicated vehicle, tire, vessel, and smog abatement fees and do not require general fund revenues. / ·  SB 375 – Requires metropolitan areas to adopt Sustainable Communities Strategies and better integrate transportation and land use patterns; OBAG is one tactic towards that goal.

Established SVLG positions

1.  Prop 39 – Public K-12 Schools, Community Colleges, and Public Colleges and Universities Should All Be Eligible for Prop 39 funding.

2.  EPIC – There should not be a set 80/20 split of the funds between the California Energy Commission (CEC) and the utilities, but rather should be allocated based on the qualifying projects or programs presented for consideration.

3.  EPIC – The Leadership Group supports a technology neutral investment strategy for the EPIC program (instead of 20% earmarked for Bioenergy) to ensure a level playing field for each technology to compete in the marketplace.

4.  C&T – See brief on AB 32 Cap and Trade Investment Opportunities

Key questions to guide discussion:

1.  What other funding sources should be considered in this mix, if any?

2.  For Transportation and Housing and Land-use Committees – Whether Cap-and-Trade revenue should be spent to develop transit-oriented development, improve energy efficiency for affordable multi-family homes and secure open space (SB 375).

3.  Should cap-and-trade funds should be distributed at a statewide or regional level?

______

General Notes

·  Automakers are poised to introduce hydrogen fuel cell vehicles in California and several have announced plans to launch beginning in 2015, but the lack of sufficient fueling infrastructure remains a significant obstacle. Hence SB 11 and AB 8 are very important enablers in this regard.

·  California has about 10,000 public schools in nearly 60,000 school buildings to educate its roughly 6 million students. State Superintendent of Public Instruction Tom Torlakson, a Democrat said 70 percent of those school buildings are more than 25 years old, and a large portion of those are more than 50 years old.

·  Under the governor’s plan for Prop 39 implementation, exceptionally small districts – those with ADA of 200 or less – would receive the minimum grant of $15,000. All other districts would receive a minimum grant of $50,000 or a per-ADA allocation of $65.46, whichever is larger. Therefore, districts with an ADA up to 764 would get $50,000 each while all others would receive $65.46 per ADA.