SENATE RULES COMMITTEE
Office of Senate Floor Analyses
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SB 63
THIRD READING
Bill No: SB 63
Author: Wiener (D) and Arreguín (D), et al.
Amended: 5/23/25
Vote: 21
SENATE TRANSPORTATION COMMITTEE: 11-3, 4/22/25
AYES: Cortese, Archuleta, Arreguín, Blakespear, Cervantes, Gonzalez, Grayson, Limón, Menjivar, Richardson, Umberg
NOES: Strickland, Dahle, Valladares
NO VOTE RECORDED: Seyarto
SENATE REVENUE AND TAXATION COMMITTEE: 4-1, 4/23/25
AYES: McNerney, Ashby, Grayson, Umberg
NOES: Valladares
SENATE APPROPRIATIONS COMMITTEE: 4-1, 5/23/25
AYES: Caballero, Cabaldon, Grayson, Richardson
NOES: Seyarto
NO VOTE RECORDED: Dahle, Wahab
SUBJECT: San Francisco Bay area: local revenue measure: transportation funding
SOURCE: Author
DIGEST: This bill (1) creates the Transportation Revenue Measure District (District) to include Alameda, Contra Costa, and San Francisco counties, and expresses the intent of the Legislature that San Mateo and Santa Clara counties may opt into the District. (2) Authorizes the District to propose a new retail transaction and use tax, to be administered by the Metropolitan Transportation Commission (MTC), for a duration of 10-15 years, and to be placed on the November 2026 ballot to fund transit operations for specified Bay Area transit operators. (3) Requires transit operators receiving funds from the regional revenue SB 63
measure to comply with regional network policies and programs, and a financial efficiency review, as specified.
ANALYSIS:
Existing law:
1) Establishes MTC as the transportation planning, coordinating, and financing agency for the nine-county San Francisco Bay Area, and specifies its governance, structure duties, and powers.
2) Establishes various transit districts located in the San Francisco Bay area, with specified powers and duties relating to providing public transit services.
3) Authorizes MTC to adopt rules and regulations to promote the coordination of fares and schedules for all public transit systems within its jurisdiction.
Authorizes MTC to withhold transit funding from a transit agency if a transit agency has not complied with the standards.
4) Authorizes MTC to identify the functions performed by individual transit systems that could be consolidated to improve the efficiency of regional transit service, and recommend that those functions be consolidated and performed through inter-operator agreements or as services contracted to a single entity.
5) Authorizes the formation of county transportation authorities in each of the 9 Bay Area counties, and provides for the imposition of a retail transaction and use tax of either 1/2 of 1% or 1%, subject to voter approval, with revenues to be used for various transportation purposes.
This bill:
1) Defines terms, as follows:
a) “AC Transit” means the Alameda-Contra Costa Transit District. b) “BART” means the San Francisco Bay Area Rapid Transit District. c) “Board” means the governing board of the Transportation Revenue Measure District.
d) “Caltrain” means the Peninsula Rail Transit District. e) “Commission” means the Metropolitan Transportation Commission. f) “District” means the Transportation Revenue Measure District.
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g) “Muni” means the San Francisco Municipal Transportation Agency.
2) Creates the District and Governing Board (Board) to include the jurisdictions of the Counties of Alameda and Contra-Costa and the City and County of San Francisco. Requires the District to be staffed MTC.
3) Expresses the intent of the Legislature that the Counties of Santa Clara and San Mateo have the opportunity to opt into the District by August 11, 2025.
4) Expresses the preference of the Legislature for the County of San Mateo to opt into the District.
5) Stipulates that the provisions of the revenue measure will only apply to the counties and city and county who are part of the Transportation Revenue Measure District.
6) Authorizes the Board to impose a retail transaction and use tax, either directly or through a qualified voter initiative. Defines parameters for the revenue measure, including:
a) Requires the tax rate to be ½ of 1% for Alameda and Contra Costa Counties and between ½ of 1% and 1% for San Francisco County in 1/8% increments.
b) Requires the revenue measure be on the November 2026 ballot and be for 10-15 years in duration.
c) Specify the purposes for which the revenues will be used.
7) Stipulates that the tax rate authorized will not be subject to the combined rate limit.
8) Expresses the intent of the Legislature that the tax rate and duration of the tax will be determined by August 11, 2025.
9) Sets election procedures for the District, as specified.
10) Requires a qualified voter initiative to comply with all of the requirements applicable to a tax imposed by the Board, including how the proceeds of the tax are to be spent.
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11) Requires MTC to reimburse each county that comprises the District for the incremental costs incurred related to submitting the measure to voters, as specified.
12) If the measure is successful, requires the District to establish an independent oversight committee, as defined, to ensure that any revenues generated pursuant to this section are expended consistent with the statute.
13) Requires the Board to allocate to MTC to then allocate revenues to AC Transit, BART, Caltrain, and Muni exclusively for transit operations expenses.
14) Authorizes MTC to utilize up to 10% of revenues for initiatives included in the 2021 Bay Area Transit Transformation Action Plan or any successor plan.
15) Requires the Board, after the amounts are allocated to AC Transit, BART, Caltrain, and Muni, to allocate any remaining funds directly to the counties for support of public transit expenses, as specified.
16) Expresses the intent of the Legislature that MTC not supplant any funding that would have otherwise been allocated to projects and programs in the counties, as specified.
17) Requires the Board to pay administrative costs of the California Department of Tax and Fee Administration for collection of revenues. Authorizes the Board, to retain up to 1% of revenues for its administrative costs.
18) Expresses the intent of the Legislature to establish specific levels of funding for allocation by August 11, 2025.
19) Requires, upon approval of the regional revenue measure, MTC contract with an independent third party to develop a comprehensive financial efficiency review of AC Transit, BART, Caltrain, and Muni.
20) Requires MTC to consult a select committee on the review, that consists of:
a) Members of MTC;
b) A state representative;
c) Transit operator representatives from the operators subject to the review; and
d) Representatives from transit labor, advocacy, and business communities.
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21) Requires the review to identify a menu of cost-saving efficiencies that, if implemented, would reduce one-time and ongoing fixed and variable costs for the transit operators.
22) Requires the scope of the review to include:
a) Administrative, operating, and capital costs and to clearly distinguish between cost-saving options that would not impact service and cost-saving options that would require service realignments or reductions. b) Initiatives included in the 2021 Bay Area Transit Transformation Action Plan or any successor plan and associated supporting programs administered by MTC, such as the Clipper program.
23) Requires the independent third party to transmit a final report to the select committee, the Legislature, and the transit operators, as specified.
24) Requires a transit operator to finalize an implementation plan, after receipt of the review report, that describes efficiency measures that the transit operator has already taken since January 1, 2020, associated cost savings, and all subsequent efficiency measures the transit operator plans to take. Requires transit operators, as a condition of receiving funds from the regional revenue measure, to submit the plan to MTC. Requires MTC to transmit it to the Legislature, the California State Transportation Agency (CalSTA), and the counties that have a funding relationship with at least one of the transit operators subject to the review.
25) Requires transit operators subject to the review to verify to MTC that it will maintain its expected level of funding for operations and not supplant any sources of revenue that were used for transit operations for the preceding three years, as specified, in order to be eligible for funding from the measure, except in proportion to any reduction in operating costs or reduction in operating revenue based on factors outside of its control, as specified. Authorizes a transit operator to request an exception for the purposes of transferring operating funds to state of good repair needs or compliance with a state or federal law or regulation.
26) Requires transit operators that receive funding from the regional revenue measure to comply with the policies and programs adopted by MTC through its Regional Network Management framework in order to fulfill initiatives included in the 2021 Bay Area Transit Transformation Action Plan or successor plan.
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27) Stipulates that nothing in this bill authorizes MTC to do any of the following:
a) Restrict a transit operator’s access to funds not allocated by MTC. b) Require a transit operator to implement policies or programs that would impede or interfere with its ability to comply with any legal obligations in transit labor contracts.
c) Restrict the use of a transit operator’s logo outside the scope of MTC’s regional mapping and wayfinding standards.
d) Require that a transit operator modify the schedule or route of a specific local route that the transit agency and MTC do not identify as primarily serving regional transit service.
28) Stipulates that MTC cannot require a transit operator to be subject to a one- time or ongoing policy, or to make a one-time or ongoing expenditure, if the transit operator adopts a finding that the policy or expenditure would require the agency to take an action that the agency determines to be unacceptable with respect to its impact on transit service, staffing, maintenance, or other specified operational or state of good repair considerations.
29) Requires the transit operator, before adopting a finding regarding the policy to conduct an assessment that takes into consideration all funding anticipated to be available to the transit operator in the next fiscal year, as specified. Requires the assessment be developed in consultation with MTC staff and be presented at a public meeting before adopting a finding.
30) Stipulates that in implementing the provisions, transit operators are required to fulfill all applicable requirements under Title VI of the federal Civil Rights Act of 1964 (Public Law 88-352) regarding service and fare changes.
31) Requires MTC to submit a report to the Legislature and post on its internet website on or before January 1, 2028, and each year thereafter, on the status of the outcomes and the status of transit ridership in the entire region, as specified.
32) Authorizes a county transportation authority or MTC to impose a retail transactions and use tax for up to 1%, in any combination of 1/8% increments in San Mateo and San Francisco counties, as specified.
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33) Requires MTC to submit a report to the Legislature on or before March 31, 2026, on its forecast of the impacts to ridership on AC Transit, Caltrain, MUNI, and BART from planned transportation projects and strategies included in its adopted regional transportation plan, with an emphasis on rail connectivity projects that may increase ridership, reduce operating costs, or help with enhanced mobility.
34) Declares that the provisions of this bill are severable, as specified. Declares the provisions of this bill could constitute a reimbursable mandate.
Comments
1) Purpose of this bill. According to the author, “Public transportation is an essential service. Every day, transit systems like BART, Muni, Caltrain, and AC Transit help Bay Area residents and visitors travel throughout the region.
These systems were structurally underfunded and overly fare-reliant prior to the coronavirus pandemic. Shifting post-pandemic travel patterns have made this funding model even more untenable, despite cost-saving measures that transit agencies have taken to be more financially efficient and improve service.
Without new funding and as emergency federal and state aid runs out, Bay Area transit systems will be forced to make devastating service cuts that would push public transit into a death spiral. The loss of transit service would disproportionately impact lower income people of color, greatly increase traffic congestion and pollution, and destroy the region’s economic recovery.
“SB 63 gives the voters an opportunity on the November 2026 General Election ballot to decide whether to provide public transportation services like BART, Caltrain, Muni, and AC Transit a sustainable funding source while requiring increased accountability and improvements. To receive funding from the potential measure, transit agencies will be required to be in compliance with regional network management policies and participate in a financial efficiency review that identifies cost-saving efficiencies and other service improvement opportunities.
“SB 63 provides a pathway for longer-term, sustainable funding that helps preserve critical public transportation services, subject to meeting accountability measures, while making Bay Area public transportation safer, cleaner, more reliable, and a more seamlessly integrated system.”
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2) MTC. MTC is the transportation planning, financing and coordinating agency for the nine-county San Francisco Bay Area. As the Bay Area’s federally designated metropolitan planning organization and state-designated regional transportation planning agency, MTC is responsible for developing the Bay Area’s federally mandated long-range transportation plan and state-mandated sustainable communities strategy, a 25-year roadmap to achieving state- mandated goals to reduce greenhouse gas emissions (GHG) from cars and light truck travel, including planning for adequate housing near jobs and transit to accommodate expected population growth. MTC distributes roughly $850 million in federal transportation funds each year for transportation investments across the Bay Area’s 101 cities, 9 counties and 27 transit operators, including $650 million in transit capital funds. Additionally, MTC is responsible for apportioning nearly $1.1 billion in state and locally generated transit operating revenues each year, including roughly $750 million in discretionary operating funds.
3) COVID-19 and the transit fiscal cliff. The Bay Area transit network includes 27 transit operators. The agencies range from large agencies such as BART and Caltrain to much smaller ones such as Petaluma Transit and the Rio Vista Delta Breeze. Public transit ridership has been declining for decades, nationally and in California, far before the COVID-19 pandemic. With the onset of the COVID- 19 pandemic during the first half of 2020, transit ridership plunged from 50% to as much as 94% in California. Specifically, Caltrain saw a 98% decline in ridership; BART saw an 88% decline in transit ridership. Bus lines in the Bay Area fared slightly better, as MUNI saw a 70% decline in ridership and AC Transit saw a 72% decline.
In an effort to stave off financial losses from declining transit ridership, the federal government provided relief for transit operators across the country.
Specifically, the Bay Area received $4.5 billion in transit aid through three successive COVID relief packages. Additionally, the 2023-24 State Budget provided $5.1 billion for transit agencies to use for both capital and operating expenditures. Of these funds, the Bay Area is expected to receive roughly $800 million in funds that were previously committed to two major capital projects – BART’s Core Capacity Project and Santa Clara Valley Transportation Authority’s BART to Silicon Valley Phase 2 project. Additionally, the Bay Area would receive roughly $400 million in funding which can be used flexibly for operations or zero emissions transition investments.
As detailed in MTC’s required short-term financial plan submitted to CalSTA, Bay Area transit operators faced a $169 million standardized operating shortfall SB 63
in budget year 2024-2025, which grows to $600 million in 2025-2026 and $800 million in 2026-2027. A combination of these state relief funds and $300 million from MTC regional funds closes the standardized operating deficits through 2025-2026. Bay Area transit operators anticipate they will hit “fiscal cliffs” in 2026-27, and without additional funding, operators will have to face possible cuts to transit service, as detailed in MTC’s Transportation Revenue Measure Select Committee Final Report.
4) Regional Network Manager Coordination. In May of 2020, MTC created the Blue Ribbon Transit Recovery Task Force to “guide the future of the Bay Area’s public transportation network as the region adjusts to the new conditions created by the COVID-19 pandemic.” The Task Force released their final report, “Bay Area Transit Transformation Action Plan,” in June of 2021, which outlined a variety of immediate and mid-term steps MTC and area transit operators committed to take in the effort to reform and improve the transit network. Specifically, the Action Plan recommended the following actions:
fare-payment coordination and integration; customer information; transit priority on roadways to increase bus speeds and reliability; bus and rail network management reform; connected network planning; data collection and coordination; accessibility; and funding.
5) SB 63 is a streamlined measure, but leaves a lot open for further discussion.
Building on the lessons learned from the broad regional revenue measure, SB 1031 (Wiener, Wahab) of 2024, proposed last year and the MTC Transportation Revenue Measure Select Committee’s consensus principles developed last fall, SB 63 represents a more streamlined approach. Specially, SB 63:
Revenue – This bill creates a District that includes Alameda, Contra Costa, and San Francisco counties and would be staffed by MTC. This bill expresses the intent of the Legislature that San Mateo and Santa Clara counties may opt into the District by August 11, 2025. The District is authorized to propose, either directly or through a qualified voter initiative, a new retail transaction and use tax for a duration of 10 - 15 years to be placed on the November 2026 ballot to fund transit operations for specified Bay Area transit operators.
This bill allows for a tax rate of ½ of 1% in all the participating counties, expect for San Francisco which is set at between ½ of 1% and 1% in 1/8 increments. According to early estimates by MTC, with Alameda, Contra Costa, and San Francisco counties participating, the regional revenue measure could generate between roughly $440 million and $550 million SB 63
annually, depending on the tax rate. This bill expresses intent to determine final tax rate by August 11, 2025.
Expenditures – SB 63 provides the outline of an expenditure plan for the revenues raised. Specifically, the funds would be allocated to AC Transit, BART, Caltrain, and Muni, exclusively for transit operating expenses. Up to 10% of the revenue can be allocated to MTC exclusively for initiatives for regional coordination activities. After the required amounts are allocated, MTC will provide any additional revenues to the participating counties for other public transit expenses. Once again, this bill expresses intent to determine the specific levels of funding for allocation to each eligible entity by August 11, 2025.
Regional Network Manager – In an effort to continue to implement regional transit transformation policies, this bill requires all transit operators who receive funding from the regional revenue measure to comply with policies and programs adopted by MTC through its regional network manager framework. This bill limits MTC’s regional policies and programs to not interfere with other transit funding sources, existing transit labor contracts, or modification of local routes.
Financial Efficiency Review – This bill requires MTC to conduct a comprehensive independent third party financial efficiency review of the four transit operators. The scope of the review will include administrative, operating, and capital costs.
Numerous aspects of the regional revenue measure are still undetermined. SB 63 includes language throughout expressing the intent of the Legislature for certain tasks to be accomplished and deadlines for critical details to be added.
Specifically, by August 11, 2025, the intent would be to have finalized, through continued discussions with stakeholders, the participating counties, the tax rate, the duration of the measure, and the expenditure allocation amounts.
6) Concerns over who’s in and who’s out. One of the major issues still to be resolved is which counties will participate in the regional revenue measure. As drafted, SB 63 only includes Alameda, Contra Costa, and San Francisco counties. It allows for Santa Clara and San Mateo to opt-into the measure, but those counties would have to be included in this bill at some point to be authorized as part of the new District. This bill also express the preference of the Legislature that San Mateo County opt into the District and stipulates that the provisions of the revenue measure will only apply to the counties and city and county who are part of the District.
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The central question is will the regional revenue measure raise enough funding to cover the operating shortfalls to stave off service cuts and continue regional coordination in the Bay Area? With so many factors still in flux, it is unclear.
In addition to discussions of the regional revenue measure, there are ongoing conversations over county funding contributions toward multi-county regional operators. For example, Santa Clara County may not opt into the regional revenue measure but they contribute funding directly to the operations of Caltrain and a portion of BART. San Mateo also has direct funding commitments to Caltrain and BART through agreements developed at the local level.
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee:
Unknown significant local costs related to the substantial workload imposed on MTC as a result of this bill in advance of placing a transactions and use tax ordinance before voters in specified counties in the Bay Area, including preparing the report to the Legislature on forecast impacts to ridership, acting as the governing board of the District, staffing the District, preparing an impartial analysis of the tax measure, and paying for the counties’ costs associated with the election. Should the measure pass, any ongoing MTC costs would be covered from the 1% set-aside of any new revenues collected from the transactions and use tax authorized by the bill, as specified. Staff is unaware of any prior instances in which MTC has been deemed an eligible claimant for state reimbursement for mandated costs. Ultimately, whether costs associated with the bill’s requirements are reimbursable from the General Fund would be subject to a determination by the Commission on State Mandates, should MTC file a reimbursement claim. (General Fund)
The California Department of Tax and Fee Administration (CDTFA) indicates that it will only incur costs if voters were to approve the authorizing tax ordinance, and that all preparatory costs and all ongoing administrative costs would be reimbursed by TRMD from the proceeds of the transactions and use tax. (local funds)
Unknown major local tax revenue gains, likely in the hundreds of millions annually for 10 to 15 years, contingent upon voter approval, to fund transit operations and other transportation-related projects in specified Bay Area counties. Actual revenues would depend upon the tax rates imposed in various SB 63
counties within the district, and whether the optional counties participate. (local funds)
SUPPORT: (Verified 5/23/25)
City of El Cerrito
Climate Action California
Livermore Amador Valley Transit Authority (Support If Amended) Metropolitan Transportation Commission
San Francisco Bay Area Planning & Urban Research Association (SPUR) San Francisco Bay Area Rapid Transit District (BART)
San Francisco Bay Area Water Emergency Transportation Authority (Support If Amended)
San Francisco County Transportation Authority
Transbay Joint Powers Authority
OPPOSITION: (Verified 5/23/25)
California Association of Realtors
California Building Industry Association
California Business Properties Association
California Taxpayers Association
New Livable California Dba Livable California (Oppose Unless Amended) ARGUMENTS IN SUPPORT: Writing in support, SPUR states, “SB 63 provides a solution. It seeks to give voters in Alameda, Contra Costa and San Francisco counties the opportunity to temporarily invest in sustaining and improving these critical transit systems, while providing the option for San Mateo and Santa Clara counties to participate as well. The bill is not a panacea for all of transit’s challenges- instead it provides a practical and politically realistic approach to a pressing regional problem and will keep our core transit systems running over the coming decade. Critically, in addition to financially supporting transit operations SB 63 also includes key policy provisions that aim to improve the customer experience on transit while holding operators accountable to continued financial efficiency improvements and reforms, ensuring public funds are used responsibly.”
ARGUMENTS IN OPPOSITION: Writing in opposition, the California Taxpayers Association, state they oppose SB 63 for numerous reasons, including (1) duplicates existing taxing authority by creating a special district; (2) continuing to authorize waivers makes California less affordable as “the sales and use tax is a regressive tax that has the greatest impact on low-income residents because it SB 63
makes purchases of everyday necessities more expensive;” (3) increases costs of manufacturing and R&D; (4) increases government costs; and (5) runs counter to the purpose of the local sales tax rate limit.
Prepared by: Melissa White / TRANS. / (916) 651-4121
5/27/25 11:29:54
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