A breakdown of Colorado’s giant transportation funding bill

Senate Bill 260 is a big win for electric vehicles, a mixed bag for climate

June 15, 2021 | Matt Frommer

This week, Colorado Governor Jared Polis signed Senate Bill 260 (SB260) into law, marking the passage of the most comprehensive transportation funding package in decades. The legislation will raise $5.4 billion over the next 10 years through a combination of general fund transfers and new fees on gasoline, diesel, electric vehicles (EVs), residential deliveries, and rideshare trips to repair and expand our decaying transportation system and clean up its air pollution. 

While not perfect, the legislation is a decisive win for EVs, dedicates much-needed funding to multimodal transportation projects, creates protections for communities disproportionately impacted by transportation pollution, and requires more climate-focused transportation planning, setting the stage for an important greenhouse gas (GHG) rulemaking at the Air Quality Control Commission (AQCC) later this summer. 

Before we dive into the specifics of SB260, let’s revisit Colorado’s HB19-1261 climate targets and the recently-released GHG Pollution Reduction Roadmap. Transportation is now the largest source of GHG pollution in Colorado and one of the two largest sources of local air pollutants that create ground-level ozone, threatening the health of communities along the Front Range and particularly those living near highways and other major pollution sources. 

According to the Roadmap, Colorado needs to cut transportation GHG pollution 25% by 2025 and 40% by 2030 to hit our HB-1261 targets and limit global warming to 1.5 degrees. To decarbonize transportation we must:

  1. Electrify all cars, trucks, and buses on the road (and fuel them with clean energy),
  2. Build a connected multimodal transportation system with safe and reliable transit, biking, and walking infrastructure to give people low-carbon alternatives to driving, and
  3. Develop smart land use policies that put housing closer to jobs and other services to reduce driving trips and distances.

The 40% reduction target translates to 12.8 million metric tons of transportation GHG pollution by 2030. The graph below shows our progress to date with a breakdown of the expected GHG reductions from current and future transportation policies. 

We can expect about 75% of 2030 reductions to come from more energy-efficient and EVs with the remaining 25% from reducing vehicle-miles-traveled, or VMT, by shortening single-occupancy vehicle (SOV) trips and replacing them with transit, biking, walking, and telework. SB260 makes clear progress toward vehicle electrification while setting the stage for future policies to lower VMT.

SB260 is a decisive win for EVs

Over the last decade, we’ve gradually increased the number of EVs in Colorado from zero to 35,000 and Colorado’s EV market share is now the fifth highest in the nation. Encouraging progress, but all the Teslas, Bolts, Leafs, and other EVs on the road still represent only 0.7% of all light-duty vehicles. To get to the Governor’s goal of nearly one million EVs by 2030, we need to increase EV market share from four in 100 new cars to almost one in two in the next nine years. This may sound daunting, but it’s absolutely possible if we implement the right policies to lower the upfront cost of EVs, increase model availability, and expand our EV charging infrastructure.

The state’s GHG Pollution Reduction Roadmap shows we must dramatically accelerate the electrification of cars, trucks, and buses over the next 10 years to hit our HB 1261 climate targets.

Enter SB260, which will raise $734 million for EVs, the largest investment in EVs of any state outside California. The legislation builds off the successful EV programs funded by the Volkswagen Settlement and creates 3 new enterprises to elevate these programs beyond the pilot phase toward full scale implementation:

1. Community Access Enterprise ($310 million) to support the installation of EV charging stations and create rebates for low-income households to replace older, high-polluting gasoline cars with EVs and electric bikes (eBikes).

  • EV charging infrastructure: A recent ICCT study found that Colorado needs to install 11 times more EV charging stations to support the goal of one million EVs by 2030. The Community Access Enterprise builds on the success of the Charge Ahead Colorado and EV Fast-Charging Corridors programs, which have leveraged Volkswagen Settlement funds to support over 1000 new EV charging stations in Colorado. In particular, the new Enterprise will focus on expanding EV charging infrastructure in low-income and pollution-burdened communities.
  • EV incentives: If combined, the federal and state EV tax credits can save consumers up to $10,000 on the cost of a new EV. However, the federal tax credit is non-refundable and doesn’t include used EVs, which excludes many low-income consumers from taking advantage of the incentive. The Community Access Enterprise will create income-qualified point-of-sale rebates for both new and used EVs to improve equity and access to EVs. 
  • Electric bike incentives: Recognizing that not everyone wants or needs a new car, the Enterprise creates new incentives for eBikes and provides much-needed financial support for the state’s new Low-income eBike Incentive Program.

2. Clean Fleet Enterprise ($289 million) to support the replacement of high-polluting delivery trucks, school buses, Uber and Lyft vehicles, and other private and government fleets with EVs, particularly those operating in disproportionately-impacted communities.

  • Zero-emission trucks: Freight and delivery vans and trucks are responsible for about 20% of statewide transportation GHG pollution and the diesel exhaust along our urban freight corridors threatens the health of adjacent communities. The Clean Fleet Enterprise will support the replacement of dirty diesel trucks with zero-emission vehicles, setting the stage for future policies like the Advanced Clean Truck rule, which requires 40% zero-emission truck sales by 2030. 
  • Electric school buses: Today, 4000 diesel school buses carry 42% of kids to school in Colorado and the diesel exhaust is linked to high rates of asthma and other long-term respiratory issues. The Clean Fleet Enterprise will replenish funding for the Alt Fuels Colorado program, which has awarded funding to seven school districts to replace old diesel buses with new electric ones. Without new funding to support these popular incentive programs, persuading a fiscally-constrained school district to purchase a $350,000 electric school bus instead of a $100,000 diesel bus is all but impossible. 
  • Electric rideshare vehicles: Transportation Network Companies (TNCs) like Uber and Lyft are growing their market share, but they’re also contributing more air pollution and congestion. The average Uber ride generates 70% more pollution than the trips they displace, partially because of miles spent driving around without a passenger in the vehicle. TNC vehicles also travel about three times more miles than privately-owned vehicles, meaning an electric TNC vehicle delivers three times the climate benefits as a privately owned EV. SB260 creates new fees for TNCs – $0.30 per ride, lowered to $0.15 for electric or shared rides – and uses the revenue to support fleet electrification. 

3. Clean Transit Enterprise ($134 million) to support the electrification of public transit buses.

  • Electric transit buses: The Colorado Department of Transportation’s (CDOT) Transit Grant Program leveraged the Volkswagen Settlement to purchase 30 new electric transit buses for transit agencies around Colorado – from the Regional Transportation District (RTD) in Denver to TransFort in Fort Collins to Mountain Metro in Colorado Springs. New investment from the Clean Transit Enterprise will allow these programs to scale up to support the state’s goal of 1000 zero-emission transit vehicles by 2030.

Unlike many of the existing state and federal EV policies and incentives, these programs aren’t about helping wealthy people drive expensive EVs, but rather expanding access to the benefits of electric transportation by improving equity in low-income communities disproportionately impacted by poor air quality. The programs will largely be designed by Governor-appointed Enterprise Boards, but the Polis Administration anticipates spending 30-40% of the funds on low to moderate income or disproportionately-impacted communities (DICs). 

To help implement equity-focused climate policies, CDPHE created a Climate Equity Data Viewer, which combines environmental and socioeconomic data to identify census tracts with the most inequities and therefore, the greatest need for investment in clean, safe, and affordable transportation. The new electrification enterprises should be designed from the ground up, incorporating feedback from local communities to create flexibility and give residents better access to the clean mobility options that work for them.

Earlier this year, Denver used federal CARES Act dollars to expand their electric carshare program for residents in affordable housing.

On top of the climate and air quality benefits, transportation electrification presents a big economic opportunity for Colorado. Electrifying most passenger vehicles in Colorado would deliver $43 billion* in benefits through mid-century in the form of reduced fuel and maintenance costs for drivers, lower electricity bills for everyone, and the avoided cost of climate change (*net present value). Economists use the social cost of carbon to estimate the cost of total damages from droughts, wildfires, food insecurity, and storm intensity caused by climate change. Currently, the GHG pollution created by Colorado’s transportation system adds up to about $1.4 billion per year in damages and that number will grow as the planet gets warmer and the frequency and intensity of natural disasters increases. If we compare the cost of climate change to the $75 million per year investment in EVs from SB260, the benefits far outweigh the costs.

The new fee on EVs phases in over time.

EVs do not buy gasoline and, therefore, do not contribute to state gas tax revenue. To address this, Colorado created a $50 annual EV registration fee in 2015 – $30 of which goes to the Highway Users Tax Fund (HUTF) to pay for transportation infrastructure and $20 of which goes to the EV Charging Grant program to build more charging stations. For comparison, the average gasoline vehicle in Colorado pays about $102 per year in gasoline taxes.

SB260 layers a new EV equalization fee on top of the existing $50. New fees ramp up over time, staying  low over the next four to five years as the EV market gains more traction. By 2028, electric and gasoline vehicle owners will pay around the same amount, but by 2032, EV owners will be paying $40 more per year than owners of gasoline cars. SB260 schedules a review of the EV fees in 2026 to make sure they’re on track to achieve price parity with gas cars, giving policymakers and advocates an opportunity to course-correct. While the new EV fees are too high toward the end of the decade, the near-term fees compare favorably to much higher fees in other states.

BEV = Battery EV powered by electricity 100% of the time.
PHEV = Plug-in Hybrid EV with a limited electric range and a gasoline engine.

EVs are essential, but insufficient to accomplish our transportation and climate goals on their own – we must also cut down on driving

Okay, now for the more complicated part. Achieving a 40% reduction in transportation GHG emissions by 2030 requires a two-pronged approach: Electrification and VMT Reduction. This is partially because fleet turnover takes a long time. We only replace about 6% of our 5.2 million cars every year and even in an optimistic EV scenario – one million EVs by 2030 – over 80% of cars on the road will still run on gasoline or diesel. As a result, the GHG Roadmap says we need both a rapid transition to EVs and a 10% reduction in VMT by 2030 compared to forecasted levels. 

Cutting down on driving is hard, not because we don’t have the tools, but because it confronts decades of car-centric transportation planning and land use policy, and disproportionate investment in infrastructure for single-occupancy vehicles. While some may argue that people prefer driving over other ways of getting around, such arguments imply we have a choice between equally safe, convenient, and affordable transportation options. Our state’s failure to invest in multimodal transportation options like transit, biking, and walking makes it exceedingly difficult for people who rely on other modes to get around in a timely, affordable, and safe manner. 

What would it take to cut VMT 10% by 2030? According to the National Center for Sustainable Transportation, the most effective strategies for reducing vehicle travel include:

  1. Reprioritize transportation investments: Increase funding for multimodal transportation like transit, biking, and walking, while limiting spending on highway capacity projects;
  2. Promote infill development: Encourage more efficient land use patterns that place new housing closer to jobs and transit;
  3. Expand transportation demand management programs: Develop requirements for large employers to provide alternative commuting options for their employees. (There’s a current rulemaking at the AQCC to create a Employer Traffic Reduction Program); and
  4. Increase road pricing: Raise the price of driving through higher fuel and parking fees while lowering the price of transit and other multimodal transportation options.  

These VMT reduction strategies offer important co-benefits beyond climate and clean air. They also improve safety for cyclists and pedestrians, protect our health, stimulate economic development in local communities, relieve congestion on our roadways, reduce household transportation costs, and advance equity for underserved communities. Such goals and performance measures have been adopted by CDOT and Denver Regional Council of Governments (DRCOG) to guide the transportation planning process. 

But our true policy is not defined by aspirational goals in long-term transportation planning documents, but by how we spend our money. So how does the spending in SB260 line up against the GHG Roadmap’s VMT reduction target?

SB260 raises significant new funding for multimodal transportation and pollution mitigation, but is it enough?

The legislation allocates $453 million over 10 years for the Multimodal and Mitigation Options Fund (MMOF) to improve access to transit, biking, and walking. Importantly, the MMOF is available for transit operating costs to help struggling agencies like RTD restore pre-pandemic ridership and improve service frequency and reliability on their network. The MMOF requires at least a 1:1 match from local governments, most of which contribute more than their equal share. If past matching trends continue, total investment from the MMOF could exceed $1.1 billion over 10 years. 

SB260 also includes $115 million for the Revitalizing Main Street program, an excellent new initiative launched by CDOT in 2020 to improve pedestrian and bicycle infrastructure with new bike lanes, sidewalks and crosswalks, road diets, traffic calming elements, green infrastructure, and better connections to transit in downtown areas. CDOT and DRCOG created a Story Map with fact sheets for each project funded by the Safer Main Streets programs. These small-scale community projects provide some of the largest safety, mobility, economic, and equity benefits per dollar invested.

As part of the Safer Main Streets program (recently combined with the Revitalizing Main Streets program), CDOT recently awarded $10 million to improve pedestrian and bicycle infrastructure in West Denver and Lakewood.

Another $234 million will be set aside for the new Nonattainment Area Air Pollution Mitigation Enterprise to address the public health impacts of highway projects on low-income and disproportionately-impacted communities. These neighborhoods suffer from a long history of racist and inequitable transportation and housing policies that have polluted, bulldozed, and gentrified their communities. (The pollution impacts of Central-70 construction on neighboring communities is well documented.) This new Enterprise, coupled with other SB260 provisions to create a new Environmental Justice Department at CDOT and new air quality monitoring requirements for big highway projects, are designed to give these communities a voice and protect them from the adverse effects of highway expansion projects. 

Is this enough? According to DRCOG’s 2050 Scenario Planning, the cost to build a safe, connected, and high-frequency multimodal system would require a transformative investment: $6 billion for transit infrastructure (plus $1 billion in annual operating expenses), and $3 billion for bicycle, pedestrian, and telecommuting infrastructure. The SB260 funding is a start, but completing the multimodal network will likely require a repurposing of other state transportation dollars, significant new investment from the federal government, and/or new funding from RTD.

All told, over 40% of the new funding in SB260 is for clean transportation projects to support the Roadmap’s GHG reduction targets and mitigate local air pollution. The other 60% is for the Highway Users Tax Fund (HUTF), the primary funding source for CDOT’s 10 Year Strategic Project Pipeline, including 75% for highway projects, 16% to repave rural roads, and 9% for transit projects. One question is whether the pollution impacts from this half – the $2.5 billion for traditional road, bridge, and tunnel projects – will cancel out the climate and air quality benefits created by the clean transportation projects. 

Continued investment in highway expansion is incompatible with our climate goals

Over the last 30 years, metro-area highway expansions have outpaced population growth, yet traffic delays have only gotten worse because people are driving more – a phenomenon known as “induced demand.” According to multiple studies, new highway lanes attract a proportional amount of new vehicle travel as wider roads encourage people to drive further and enable sprawling land use patterns. Not only do highway expansions increase VMT and GHG emissions, but they also don’t fix traffic. In 2006, CDOT widened I-25 in Denver only to watch traffic delays return to pre-construction levels within five years. (Imagine if we’d spent the $1.2 billion on multimodal transportation options instead!)

Earlier this year, RMI adapted the California Department of Transportation’s Induced Travel Calculator to estimate the induced demand from Colorado’s current and planned highway widening projects. The results: A 2% increase in statewide VMT and 600,000 metric tons of new GHG pollution by 2030. That’s the equivalent of putting 70,000 more cars on our roads every year – about twice as many EVs as we currently have. We’re spending over $3 billion on big highway projects that move us further away from our climate goals while inflicting more damage on communities already suffering from toxic air pollution. For comparison, the capital costs to build 10 new Bus-Rapid-Transit lines for RTD is $1.2 billion, but based on DRCOG’s current funding allocation, just two of these will be finished by 2030. 

Construction progress photo for the Central I-70 expansion project shows the new width of the highway once it’s completed in 2022. According to the RMI Calculator, the 19 new lane miles will add 160 million new VMT to the metro-area, the equivalent of 12,000 new cars.

To address transportation pollution, we first need to “stop the bleeding” of induced demand by limiting highway expansion. To its credit, under the leadership of Director Shoshana Lew, CDOT has removed some of the most harmful highway expansion projects from their long-term plan, expanded its statewide Bustang transit service, and taken a lead role in EV planning, particularly for trucks and buses. But based on the modeling, such progress will be overwhelmed by much larger investments in highway widening, particularly along I-270, I-70 West, and I-25. Instead, we should focus our transportation dollars on maintaining the system we have (aka “fix it first”) while optimizing its use by investing in modes that move people more efficiently than single-occupancy vehicles. 

SB260 sets the stage for transportation planning reform at the AQCC

The 10-year project list funded by SB260 is not set in stone and the true climate impact of SB260 hinges on what will happen later this year with a Transportation GHG Pollution Standard (GPS) rulemaking at the AQCC, which kicks off in July. The concept is simple enough – create GHG pollution budgets for state and regional transportation plans so that we prioritize funding for climate-friendly projects. A weak AQCC rule would continue to focus our transportation spending – including the new SB260 HUTF dollars – on more highway capacity projects, while a strong rule would direct more of those dollars toward projects that align with our climate, air quality, and equity goals.  

SB260 lays the groundwork for the AQCC rulemaking by requiring CDOT and the MPOs to undertake an “enhanced level of planning” to measure the induced demand and GHG pollution impacts of their highway capacity projects. It also expedites rule implementation, forcing CDOT and the MPOs in the ozone nonattainment area to review their long-term plans by October, 2022 to make sure they comply with the forthcoming GHG budgets. The specific GHG budgets, enforcement mechanisms, and mitigation strategies will be established during the AQCC rulemaking this fall.

Importantly, the bill requires CDOT and the MPOs “to consider the role of land use in the transportation planning process and develop strategies to encourage land use decisions that reduce VMT and GHG emissions.” According to multiple studies from other states that have set VMT targets like Minnesota and California, it’s very difficult, if not impossible, to significantly reduce VMT without addressing land use and housing policy, an especially important policy area in a growing state like Colorado. 

For too long, CDOT has been picking up the tab for expensive, inefficient, and environmentally-destructive land use decisions by local governments that limit infill development, promote sprawl, and put more stress on our road system. Last week, the Colorado legislature passed HB1271 encouraging local governments to develop smart growth policies that promote the development of affordable housing in existing communities. An effective AQCC rule would better integrate transportation and land use planning and reward local governments for updating their zoning, housing, and parking policies to increase transit and multimodal access while reducing vehicle travel.

Transportation for America’s Driving Down Emissions report compares the daily driving needs for residents of clustered versus sprawling developments.

We’re at a crossroads and the big influx of SB260 transportation dollars – plus the billions of dollars in federal investment from the COVID relief packages as well as the Biden’s forthcoming American Job Plan and the Surface Transportation Reauthorization bill –  presents a real opportunity to create a clean, efficient, and equitable transportation system in Colorado. SB260 is a home run on electrification and a big step forward for multimodal transportation, though it falls short of the kind of transformative investment we need to build a safe and connected multimodal transportation system and accomplish the VMT reduction targets in the GHG Roadmap.