March 22, 2005

SUBJECT: Adoption of Legislative Action Position Regarding SB 680: Santa Clara County Vehicle Registration Fee for Congestion Relief and Litter Control Projects

REPORT IN BRIEF

Senator Joe Simitian is carrying legislation for the Silicon Valley Leadership Group (SVLG) to enact a $ 5 fee on vehicle registrations in Santa Clara County. This fee would be a limited term (eight year) fee to fund congestion relief and litter control projects that would be designated by the Board of Directors of the Santa Clara Valley Transportation Authority (VTA). A proposed expenditure plan has been developed by a technical advisory group of City, County and VTA staff that could be used as a guide for the VTA Board should the legislation pass. This plan would expend funds on Caltrain, County Expressways, city and county street improvement projects, and litter control projects. Under the preliminary plan, Sunnyvale could stand to receive about $ 150,000 per year for roadway capacity projects, and the County would stand to receive almost $ 16 million, a portion of which could be spent on expressway improvements in the Sunnyvale area. An additional $ 15.8 million would be set aside for competitive distribution to local jurisdictions, including Sunnyvale.

The SVLG, on behalf of Senator Simitian, is requesting that local jurisdictions in Santa Clara County consider a position on this bill. Although SB 680 is consistent with existing City policy, the City does not have policy which specifically addresses vehicle registration fees. If Council decides to take a position on SB 680, staff recommends that Council adopt a Legislative Action Position on this issue. City staff recommends a Legislative Action Position in support of SB 680.

BACKGROUND

The impetus for this bill was the passage of a similar bill in San Mateo County in the 2004 legislative session. The SVLG perceived an opportunity for Santa Clara County to generate a modest amount of new transportation revenue at a time when transportation funding from State and Federal sources is constrained and local General and other funds are stressed. As proposed in the Bill, these funds would be locally controlled by the VTA Board of Directors and would be tabbed for congestion relief and litter control projects. The Bill does not contain a specific expenditure plan, but rather tasks the VTA Board of Directors to approve an expenditure plan.

As part of its process for developing the legislation, the SVLG convened a technical advisory group of agency staff from all Santa Clara County cities and the County to draft a recommended expenditure plan. This plan is as follows:

$560,000 to DMV (approx. 1% of total revenues)
$4 million for Caltrain capacity improvements. These funds could be used for Santa Clara County’s share of the cost of purchasing additional Baby Bullet train cars, or making station or parking improvements. All improvements must meet the nexus test and serve Santa Clara County.
$4 million for litter removal and landscape restoration ($500,000 per year). This money can be used on highways or county expressways. Any unused funds would revert to the competitive pool (#2) described below.

The remaining $47.4 million would be divided into thirds:

1. $15.8 million for Tier 1A county expressway improvements. (projects in Sunnyvale include Central Expressway auxiliary lanes and Lawrence Expressway intersection modifications and grade separations).

2. $15.8 million for street & road operational and Intelligent Transportation System (ITS) technological improvements --competitive pool. These funds would be available to cities/towns and the county for use on priority operational projects including small scale congestion relief projects, matching grants for larger projects, and signal timing/coordination projects.

3. $15.8 million—Direct subvention. These funds would be distributed to cities/towns/county on a pro rata basis based on vehicle registrations and be available for the same uses outlined in the above two categories (Approximately $ 150,000/year would be allocated to Sunnyvale).

The expenditure plan would serve as a recommendation to the VTA Board of Directors. There is nothing in the legislation that formally binds the VTA Board to this expenditure plan. It is believed that this is not necessary if all of the VTA member agencies endorse the legislation and expenditure plan as conceived. The VTA Board of Directors will consider a position on the legislation as well as the expenditure plan prior to the bill’s consideration by the State Legislature.

EXISTING POLICY

There is no specific City policy related to vehicle registration fees. The following policies deal generally with the topic:

Legislative Action Position 1.i.2 Support state funding for regional transportation projects; oppose eliminating or reducing state or federal funds due to local contributions. Support local input in determining project priorities. Oppose transfers of local and statewide transportation funds to balance the State General Fund budget.

Legislative Action Position 1.i.5 Support upgrading Caltrain service to provide faster and more frequent service to Sunnyvale; support transportation policies and funding that would provide and improve connections between Light Rail, Caltrain and industrial neighborhoods.

Land Use and Transportation Element R1.3.1, Land Use and Transportation Element R1.2.1, Participate in intergovernmental activities related to regional and sub-regional land use and transportation planning in order to advance the City’s interests.

Land Use and Transportation Element C3.7, Pursue local, state and federal transportation funding sources to finance City transportation capital improvement projects consistent with City priorities.

Land Use and Transportation Element C3.7.1, Develop alternatives and recommendations for funding mechanisms to finance the planned transportation system.

Fiscal Sub-Element 7.1B.6, Use all available funding sources to finance capital improvement projects consistent with City priorities.

Fiscal Sub-element, 7.1B.4d, Pursue and use intergovernmental assistance for projects in the Ten-Year Capital Improvement Plan.

DISCUSSION

Staff is providing this report for Council to consider adopting a new Legislative Action Position regarding vehicle registration fees. Staff recommends that Council support SB 680 and adopt the following Legislative Action Position:

Support vehicle registration fees for regional and local transportation projects that are consistent with the City's existing policies.

Funding for transportation capital improvements is in short supply throughout California, and Santa Clara County is not an exception. The proposed funding source would assist the City in meeting its identified transportation needs, as well as potentially provide funding for regional improvements of benefit to Sunnyvale. Staff is somewhat concerned with the lack of a binding expenditure plan, but is recommending support based on the proposal’s consistency with existing City policy. However, there are a number of issues to consider with regard to this proposal.

· Overall Status of Transportation Funding in Santa Clara County: The VTA is undergoing a high profile fiscal crisis. The agency has a structural fiscal deficit in its transit planning and operations. Transit sales tax measures were approved without an identified source of operations funding, and the original revenue projections are falling short of the ability to fund the promised transit projects, notably BART to San Jose, Caltrain electrification and light rail expansion. The VTA is strategizing to fill the deficit with a new sales tax measure, to be brought forth to the electorate in 2006. While the SB 680 Vehicle Registration Surcharge does not directly conflict with the VTA’s pending sales tax proposal, it can create perceptions in the minds of the electorate that transportation funding is already approved, or that there are “too many” transportation “taxes,” or otherwise that the public burden for transportation is too great. This is an important factor in that SB 680 will generate a very small relative amount of funding compared to a sales tax, but it may endanger support for a subsequent sales tax. The expenditure plan for SB 680 also may politically limit the applicability of the future sales tax by pre-empting use of future sales tax revenues for City and County Expressway improvements or maintenance, i.e. creating a perception that these needs are already funded. The current sales tax plan assumes that 25% of the revenue would go to cities and the County for roadways.

· Vehicle License Fee Conflict – A Vehicle Registration Fee is different than the Vehicle License Fee (VLF). However, the distinction may be too slight for some citizens to recognize. This is important because Vehicle License Fees were the topic of much high profile political wrangling between cities, counties, the Governor’s office, and the electorate in the past few years regarding the level of the VLF. Governor Schwarzenegger’s first formal action in office was to cut the VLF. Imposing a Vehicle Registration Fee via legislation may be perceived by citizens as a “back door” means for local governments to restore VLF funds, regardless of the facts.

· Legislation as the Process for Imposing a Broad Based Fee – A Vehicle Registration Fee will apply to many citizens of Santa Clara County (1.7 million population, 1.4 million registered vehicles). There will be some citizens who resent a legislated fee versus some other process for considering a fee, such as a vote.

There is some degree of political risk associated with the format, content and timing of this proposal. However, there is a precedent in San Mateo County, and there have been discussions of legislation enabling a region-wide Vehicle Registration Fee with a County option buy-in.

Staff believes that this proposal is highly consistent with City legislative and General Plan policies regarding transportation revenue generation, and therefore should be supported. If Council decides to support SB 680 and adopts the proposed Legislative Action Position, staff will draft a letter of support to Senator Simitian.

FISCAL IMPACT

There is no fiscal impact with the adoption of the proposed Legislative Action Position in support of SB 680. Should SB 680 be approved by the State Legislature and Governor, and the proposed expenditure plan be approved by the VTA Board, Sunnyvale would stand to gain a minimum of approximately $ 150,000 a year for transportation capital projects beginning in 2006 and ending in 2013. The City would have the opportunity to apply for additional discretionary competitive funding for transportation improvement projects, and could realize the operational benefit of new funding for County Expressway improvements and litter control within the City of Sunnyvale. Funding for additional Caltrain cars would also provide benefit to Sunnyvale Caltrain commuters.

CONCLUSION

Senator Joe Simitian is carrying legislation to enact a $ 5 vehicle registration fee for transportation capacity and litter control projects. Revenue from this fee would be shared by Santa Clara County cities and the County. The Senator is requesting indications of support from all Santa Clara County cities and the County. City staff have participated in the development of a concept expenditure plan. The expenditure plan, if approved by the VTA Board subsequent to approval of the legislation, would have a positive financial impact to Sunnyvale. There are a number of issues associated with the format, content, and timing of the proposal, including coordination with other transportation funding issues within the County, and citizen perception of the proposed fee and the mechanism for enacting it. Staff believes that this proposal is highly consistent with City legislative and General Plan policies regarding transportation revenue generation, and therefore should be supported with the adoption of a new Legislative Action Position.

PUBLIC CONTACT

Public contact was made through posting of the Council agenda on the City's official notice bulletin board, posting of the agenda and report on the City's web page, and the availability of the report in the Library and the City Clerk's Office.

ALTERNATIVES

1. Support SB 680 and adopt the proposed Legislative Action Position: Support vehicle registration fees for regional and local transportation projects that are consistent with the City's existing policies.

2. Support SB 680 and adopt an alternative Legislative Action Position.

3. Oppose SB 680 and/or adopt an alternative Legislative Action Position.

4. Other action as identified by Council.

RECOMMENDATION

Staff recommends Alternative 1: Support SB 680 and adopt the proposed Legislative Action Position: Support vehicle registration fees for regional and local transportation projects that are consistent with the City's existing policies.

Reviewed by:

Marvin A. Rose, Director of Public Works

Prepared by Jack Witthaus, Transportation and Traffic Manager

Approved by:

Amy Chan

City Manager

Attachments:

Attachment A: Vehicle Registration Fee Bill Summary (MS Word .doc)

Attachment B: Proposed Expenditure Plan (MS Word .doc)

Attachment C: SB 680 FAQ Sheet (MS Word .doc)