California lawmakers will decide whether to securitize vehicle registration fee revenues for a $1 billion bond program to pay for electric vehicle charging stations.
The revenues to support the bonds would come from a $2 slice of car registration fees that support the Clean Transportation Program, currently set to expire on Jan. 1, 2024.
In addition to approving a securitization structure, lawmakers would have to approve extending the fee, which generates $60 million a year, until 2046, said H.D. Palmer, a spokesman in the state’s Department of Finance. The additional years would provide the revenue stream that will be used to pay debt service on the bonds, Palmer said.
If lawmakers approve the proposal as part of the fiscal 2022 state budget, Palmer said, the state would issue $500 million in lease revenue bonds in the fall to support the program.
The California Energy Resources Conservation and Development Commission
Though the program would securitize future revenues similar to tobacco bonds, this proposal would not carry the same risk, said Marc Joffe, a senior policy analyst with the Reason Foundation.
The issue for tobacco bonds is that there is a lot of uncertainty around how many packs of cigarettes states will be able to sell in the future, because fewer people are smoking, Joffe said.
“This is based on personal vehicle fees and it’s hard to imagine personal vehicle use dropping,” Joffe said.
He does, however, view it as another workaround to avoid going to voters to get general obligation bonds approved.
“I think when the state takes on $1 billion in debt, it should be seeking voter approval,” Joffe said.
The securitization will probably have a higher all-in true interest cost than a GO, Joffe said. “That is great for banks, but maybe not so good for state finances.”
The Newsom administration chose to go with revenue bonds "because we already had existing revenues that are used for the types of projects these bond proceeds would fund,” Palmer said. “Unlike general obligation bonds, this securitization proposal does not create a General Fund obligation, since the bonds are supported entirely by program fee revenue.”
The bond program would support a
It also comes as President Biden unveils an infrastructure plan that includes a significant electric vehicle component.
"When it was offered, they didn't know what Congress would do," Joffe said. "With Biden's infrastructure plan providing a lot of funding for EV infrastructure, this seems to be redundant. I think the state should wait and see what happens with the federal government, befoe putting a program like this in place."
Environmental goals California has established since 2006 to reduce greenhouse gases include putting at least 1.5 million zero emission vehicles on the road by 2025 and 5 million by 2030, according to the commission’s report. They also involve installing 200 hydrogen-fueling stations and 250,000 battery electric vehicle chargers, including 10,000 direct-current fast chargers by 2025.
“This accelerated funding will provide the needed near-term investments to spark the market and develop and deploy zero-emission vehicle infrastructure to meet California’s aggressive climate change goals,” according to the CDC report.
While private sector investments are increasing, public investments are still required to fill gaps and ensure all Californians can participate in the state’s transition to zero emission transportation, according to the commission. In the most recent grant solicitation for hydrogen stations, the available funding was oversubscribed by 60%, its report states.
