State Senate Unveils Cap-and-Trade Funding Plan
Last week the California State Senate joined Los Angeles Mayor Eric Garcetti to announce their proposal to use the more than $1 billion in annual cap-and-trade revenues. It’s a great plan that would finally deliver serious, stable revenues to transit and high speed rail in California.
Here’s the detailed plan:
• 25% for transit operations
• 20% for affordable housing centered in transit-oriented developments
• 15% for “low carbon transportation” – reducing CO2 emissions from autos and trucks
• 15% for high speed rail
• 13% for energy efficiency and renewables
• 7% for urban parks, urban forests, and wetland restoration
• 5% for other intercity rail
Cap-and-trade permit auctions raised about $1.3 billion in 2013. At that amount, HSR would get $195 million a year. Senator Darrell Steinberg’s office now projects the permit auctions will soon raise more – between $3 billion and $5 billion a year. At that rate, HSR’s share would be between $450 million and $750 million a year. That is probably enough to use as the backing for a revenue bond, or a federal RRIF loan, to bring in enough money to build the Initial Operating Segment from Merced to Los Angeles.
One issue is whether HSR is subject to the competitive ranking process. It would be extremely stupid to do that, given that HSR is a major piece of infrastructure whose funding cannot be uncertain from year to year. Stable and reliable funding is required if the state is to borrow against those revenues, as Governor Jerry Brown’s office has pointed out.
As Streetsblog LA points out, the Assembly version does require HSR to compete annually, which seems to be a non-starter. It does not specifically allocate revenue to HSR or intercity rail, whereas the Senate plan does. Notably, the Senate plan offers less than half the funding to HSR that Governor Brown’s plan did, as the chart below put together by Streetsblog LA shows:
The Senate’s plan is getting better reviews among transit advocates than is the Assembly plan. I would not be surprised if the Governor’s office felt the same way – and Governor Brown is not shy about vetoing the budget if he doesn’t like it, as he’s done so in the recent past.
The Assembly and Senate will spend the next week reconciling their budget plans, including the use of cap-and-trade funds. The state constitution requires the budget to be adopted by June 15, which is just over a week away. So this issue will be resolved quickly.
And if cap-and-trade funds are allocated to HSR, that in turn will go a very long way toward resolving Judge Michael Kenny’s ruling blocking further sale of Prop 1A bonds, as it answers the questions about where future funding comes from.