AMENDED IN ASSEMBLY MAY 18, 2026

AMENDED IN ASSEMBLY MARCH 24, 2026

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

97

Introduced by Assembly Member Alvarez

(Coauthors: Assembly Members Ward and Bennett)

February 20, 2026

An act to amend Sections 120480, 120481, 120485, and 120486 of, and to repeal Section 120482 of, the Public Utilities Code, relating to transportation.

Vote: majority   Appropriation: no   Fiscal committee: yes   Local program: yes

LEGISLATIVE COUNSEL’S DIGEST

The Mills-Deddeh Transit Development Act establishes the San Diego Metropolitan Transit Development Board, also known as the San Diego Metropolitan Transit System (MTS), governed by a 15-member board with specified powers and duties related to the operation of public transit services in the southern portion of the County of San Diego. The act authorizes MTS to impose a transactions and use tax of up to 0.5% for public transit purposes within its jurisdiction, or a portion of its jurisdiction, pursuant to the Transactions and Use Tax Law and subject to voter approval and various other requirements.

This bill would also authorize those taxes to be imposed by a qualified voter initiative. To the extent that the bill would impose additional duties on a county elections official, the bill would impose a state-mandated local program.

The Transactions and Use Tax Law limits the combined rate of all taxes that may be imposed in accordance with that law in any county to 2%.

This bill would prohibit the tax rate of 0.5% described above that may be imposed by MTS or a qualified voter initiative from being considered for purposes of the combined rate limit under the Transactions and Use Tax Law.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to the statutory provisions noted above.

The people of the State of California do enact as follows:

SECTION 1.

The Legislature finds and declares all of the following:

(a) The San Diego Metropolitan Transit System, also referred to as MTS, provides public transit services to the urbanized areas of the County of San Diego, including 10 cities and a portion of the unincorporated areas of the county, serving approximately 3,000,000 people in the County of San Diego.

(b) MTS connects to other local and regional transportation systems in southern California.

(c) The MTS transit network is a critical component of the overall transportation network in the County of San Diego, and as such MTS has aggressively taken steps to improve and optimize public transportation for the benefit of all communities in the County of San Diego.

(d) Through these improvements, MTS has realized a strong transit ridership recovery, having recovered more than 95 percent of its ridership compared to pre-COVID-19 levels and recording 81.1 million trips in the 2025–26 fiscal year.

(e) MTS has prioritized ridership recovery lost from the COVID-19 pandemic, rising eight spots nationwide to the 13th ranked system on ridership as of the 2025–26 fiscal year.

(f) While MTS has seen success and ridership growth since the COVID-19 pandemic, it is still experiencing a structural deficit and approaching what is commonly known as the transit fiscal cliff in 2030.

(g) Since the COVID-19 pandemic, MTS has seen the onset of a fiscal cliff due to reasons such as regaining lost ridership from the pandemic, rising workforce costs, higher operating expenses, flat sales tax revenues, and limited local funding.

(h) MTS has developed a comprehensive financial sustainability strategy to delay its fiscal cliff to the 2030–31 fiscal year. This includes delaying noncritical infrastructure improvements, finding more sources of nonfare revenue, such as advertising and property leases, extending timelines for pension bond payments, exploring fare increase opportunities, and more.

(i) Also, as part of the financial sustainability strategy, MTS is pursuing a Comprehensive Operational Analysis to analyze MTS services and to provide strategic data necessary for making decisions on major network changes, while also exploring viability of a local revenue measure in 2028.

(j) The County of San Diego is at the forefront of housing expansion and leads the state in housing production per capita. MTS has contributed to regional housing goals in the County of San Diego with its own Transit-Oriented Development Program with a focus on affordable housing. MTS has built 476 homes since 2019, is under construction on 79 homes, has 147 homes at the permitting and financing stage, and has 929 homes in the negotiation stage.

(k) Continuing this housing growth requires robust transit service to match and ultimately grow with the region to sustain the needs of its residents, particularly those who are transit dependent, of which 78 percent of MTS ridership is classified.

(l) Public transit is of regional and local benefit, serving both regional and local trips for residents of all income levels. As of the most recent customer survey, more than two-thirds of current MTS riders are using bus and trolley services primarily to access jobs or education.

(m) MTS plays a vital role in transportation access to major events, conventions, and sports and entertainment venues in the San Diego region, including Comic-Con, Snapdragon Stadium, and Petco Park, enabling residents, workers, and visitors to attend sporting events and other large-scale gatherings while reducing traffic congestion, parking demand, and greenhouse gas emissions. In the 2025–26 fiscal year, MTS provided roughly over 1,000,000 trips to special events in the San Diego region.

(n) The County of San Diego needs a world-class, reliable, affordable, and connected transportation network that meets the needs of San Diego residents, businesses, and visitors while also helping combat the climate crisis. Furthermore, MTS serves as a critical binational economic connector between the United States and Mexico at the busiest land port of entry in the Western Hemisphere. MTS carries more than one-half of the pedestrians crossing every day at the Otay Mesa and San Ysidro ports of entry.

(o) The County of San Diego needs a public transit network that offers safe, clean, frequent, accessible, easy-to-navigate, and reliable service that gets transit riders where they want and need to go safely, affordably, quickly, and seamlessly.

(p) Preserving, improving, and expanding public transit to ensure a world-class transit network is critical to enhance access to opportunity, lower emissions of greenhouse gases, strengthen the region’s economy, support increased housing production, and improve quality of life.

(q) To achieve these goals, local funding is critical to sustaining and improving public transit service in the County of San Diego for future generations to come.

(r) This act is critical to ensure ample time for planning and preparation in advance of a local funding initiative effort.

SEC. 2.

Section 120480 of the Public Utilities Code is amended to read:

120480.

(a) (1) A retail transactions and use tax ordinance applicable to the entirety of, or a portion of, the incorporated and unincorporated territory within the area of the board pursuant to Section 120054 shall be imposed by the board in accordance with Section 120485, the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code), and Section 2 of Article XIIIC of the California Constitution. The county shall conduct an election called by the board pursuant to this paragraph in the same manner as provided by law for the conduct of elections by a county.

(2) Notwithstanding Section 9300 of the Elections Code or any other law, the retail transactions and use tax ordinance described in paragraph (1) may also be imposed by a qualified voter initiative pursuant to Chapter 4 (commencing with Section 9300) of Division 9 of the Elections Code and in accordance with Section 120485 and the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code).

(b) The tax ordinance shall take effect at the close of the polls on the day of the election at which the proposition is adopted. The initial collection of the transactions and use tax shall take place in accordance with Section 120483.

(c) If, at any time, the voters do not approve the imposition of the transactions and use tax, this chapter remains in full force and effect. At any time thereafter, the same, or a different, measure may be submitted to the voters by the board or a qualified voter initiative in accordance with this chapter.

(d) The portion of the area of the board to which the tax would apply shall be determined by the board or the qualified voter initiative, as applicable, before the electors vote on the measure.

(e) If the tax only applies to a portion of an area of the board, both of the following shall apply:

(1) (A) The incorporated area of each city and of contiguous cities within the area of the board shall be either wholly included within that portion or wholly excluded from that portion. For purposes of this subparagraph, “contiguous cities” means two or more cities with shared borders.

(B) The entire unincorporated area of the board shall either be wholly included within that portion or wholly excluded from that portion.

(2) (A) The board shall not enter into a construction contract over one million dollars ($1,000,000) that would be in part or wholly financed through the tax with any entity unless the entity provides to the board an enforceable commitment that the entity and its subcontractors at every tier will use a skilled and trained workforce to perform all work on the project or a contract that falls within an apprenticeship occupation in the building and construction trades in accordance with Chapter 2.9 (commencing with Section 2600) of Part 1 of Division 2 of the Public Contract Code.

(B) This paragraph shall not apply if any of the following requirements are met:

(i) The board has entered into a project labor agreement that will bind all contractors and subcontractors performing work on the project.

(ii) The board has contracted to use a skilled and trained workforce and the entity has agreed to be bound by that project labor agreement.

(iii) The project or contract is being performed under the extension or renewal of a project labor agreement that was entered into by the board before January 1, 2019.

(iv) The entity has entered into a project labor agreement that will bind the entity and all its subcontractors at every tier performing the project or the entity has contracted to use a skilled and trained workforce.

(C) For purposes of this paragraph, “project labor agreement” has the same meaning as defined in paragraph (1) of subdivision (b) of Section 2500 of the Public Contract Code.

(f) The revenues derived from the tax shall be spent within, or for the benefit of, the portion of the area of the board to which the tax applies, and shall be spent only on transportation and transit infrastructure and services.

(g) Any revenues derived from the tax shall supplement, and not supplant, other transportation revenues available to the portion of the area of the board to which the tax applies.

SEC. 3.

Section 120481 of the Public Utilities Code is amended to read:

120481.

(a) The ordinance shall state the nature of the tax to be imposed, the tax rate or the maximum tax rate, the purposes for which the revenue derived from the tax will be used, the portion of the area of the board to which the tax would apply, and may set a term during which the tax will be imposed. The purposes for which the tax revenues may be used shall be limited to public transit purposes serving the area of jurisdiction of the board, including the administration of this division and legal actions related thereto. These purposes include expenditures for planning, environmental reviews, engineering and design costs, and related right-of-way acquisition. The ordinance shall contain an expenditure plan that shall include the allocation of revenues for the purposes authorized by this section.

(b) As used in this section, “public transit purposes” includes the public transit responsibilities under the jurisdiction of the board and any repair, redesign, or ongoing maintenance of a right-of-way upon which transit is intended to travel, or any bikeway, bicycle path, sidewalk, trail, pedestrian access, or pedestrian accessway.

SEC. 4.

Section 120482 of the Public Utilities Code is repealed.

SEC. 5.

Section 120485 of the Public Utilities Code is amended to read:

120485.

(a) Subject to the approval of the voters within the portion of the county to which the tax would apply, a maximum tax rate of one-half of 1 percent may be imposed under this article and the Transactions and Use Tax Law (Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code). The tax at a rate other than one-half or one-fourth of 1 percent shall not be levied unless specifically authorized by the Legislature.

(b) A retail transactions and use tax may be imposed pursuant to subdivision (a) that, in combination with all taxes imposed in accordance with Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code, exceeds the limit established in Section 7251.1 of the Revenue and Taxation Code.

(c) Notwithstanding Section 7251.1 of the Revenue and Taxation Code, the tax rate authorized pursuant to this section shall not be considered for purposes of the combined rate limit established by Section 7251.1 of the Revenue and Taxation Code.

SEC. 6.

Section 120486 of the Public Utilities Code is amended to read:

120486.

The board or a qualified voter initiative, as part of the ballot proposition to approve the imposition of a retail transactions and use tax, may seek authorization to issue bonds payable from the proceeds of the tax.

SEC. 7.

If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.