The people of the Santa Cruz Metropolitan Transit District do ordain as follows:

Section 1. Title.

This Act shall be known as “The Modern and Efficient Transit Ridership and Operations” Initiative (“The METRO Initiative”). 

Section 2. Findings and Declarations.

The people of the Santa Cruz Metropolitan Transit District hereby find and declare the following: 

(a) Santa Cruz Metropolitan Transit (METRO) provides a safe, reliable, and congestion-reducing transportation option for Santa Cruz County, thereby improving mobility, economic opportunity, and quality of life for residents, workers, students, seniors, and visitors. METRO’s financial viability is critical to the region’s economic health, environmental sustainability, and overall quality of life.

(b) Reliable and accessible public transit reduces greenhouse gas emissions, traffic congestion, and dependence on fossil fuels by providing a viable alternative to driving. Public transportation is an essential component of Santa Cruz County’s efforts to meet local, regional, and state climate goals, improve air quality, and reduce vehicle miles traveled.

(c) The cost of providing safe, frequent, clean, and accessible bus and paratransit service to more than 15,000 daily riders continues to increase due to rising fuel, insurance, maintenance, labor, and regulatory costs, while state and federal operating support has declined or failed to keep pace with inflation and service demands. Without a stable, local funding source, METRO faces significant service reductions that would negatively impact transit-dependent populations and the broader community.

(d) Funding raised by this initiative will remain local and be dedicated solely to public transit purposes within Santa Cruz County. Keeping revenues local ensures that residents, businesses, and visitors directly benefit from the funds they generate through improved transit service, reliability, safety, and accessibility.

(e) Enhanced and expanded public transit service supports students traveling to and from school, seniors aging in place, workers commuting to jobs, people with disabilities accessing essential services, and visitors supporting the local economy. A strong transit system strengthens the regional economy, reduces transportation costs for households, improves access to employment and education, and enhances overall mobility throughout Santa Cruz County.

(f) The people of the Santa Cruz Metropolitan Transit District have a strong interest in ensuring that public funds are used efficiently, transparently, and for their intended purposes. Revenues raised by this measure will be subject to independent financial audits and citizen oversight to ensure accountability, fiscal responsibility, and the delivery of promised transit improvements consistent with the will of the voters.

Section 3. Purpose and Intent.

In enacting the METRO Initiative, it is the intent of the people of the Santa Cruz Metropolitan Transit District to do all of the following:

(a) To impose a one-half of one percent (0.5%) retail transactions and use tax to provide a stable, locally controlled source of funding for public transit services, projects, and facilities within Santa Cruz County.

(b) To require that all proceeds of the tax be used solely for the improvement, construction, maintenance, and operation of public transit projects, services, and facilities, and to authorize the issuance of limited tax bonds to finance transportation improvements that accomplish the following goals:

(1) Protecting and expanding the frequency, reliability, and coverage of core bus routes in order to preserve essential service levels and meet current and future transit demand.

(2) Maintaining and improving bus, paratransit, and other mobility services that better serve seniors, students and youth, people with disabilities, low-income residents, and other transit-dependent populations throughout Santa Cruz County.

(3) Increasing transit ridership, improve operational efficiency, and reduce traffic congestion within the County by maintaining and expanding service that incentivizes residents and visitors to choose public transit over driving.

(4) Continuing and expanding free and reduced-fare programs and maintaining clean, safe, and accessible bus stops, transit centers, and passenger facilities, while supporting technology-based solutions that enhance efficiency, convenience, safety, and access to transit information.

(5) Implementing services, programs, and policies that better connect neighborhoods and communities with major destinations within the County and to improve transit connections both within Santa Cruz County and between the County and the broader region.

(c) To ensure fiscally responsible transit operations through balanced budgets, long-term financial sustainability, and cost-effective service delivery, and to protect taxpayers by requiring strict accountability measures, including an Independent Taxpayers’ Oversight Committee and independent audits, to ensure funds are spent solely as intended by the voters.

Section 4. Definitions.

For purposes of this chapter, the following definitions shall apply: 

(a) “Act” or “Ordinance” means “The Modern and Efficient Transit Ridership and Operations Initiative”.

(b) “Board” or “Board of Directors” means the Santa Cruz Metropolitan Transit District Board of Directors.

(c) “Independent Taxpayers’ Oversight Committee” means the Independent Taxpayers’ Oversight Committee appointed by the Board pursuant to Section 20 of this Act. 

(d) “District” or “METRO” means the Santa Cruz Metropolitan Transit District.  

(e) “Fund” means The Modern and Efficient Transit Ridership and Operations Initiative Fund.

(f) “Operative Date” means April 1, 2027. 

Section 5. Application and Interpretation of the Act.  

This Act shall be applicable in the incorporated and unincorporated territory of the County of Santa Cruz and shall be applied and interpreted to accomplish the following:

(a) To impose a retail transactions and use tax in accordance with the provisions of Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and Taxation Code, and Section 98290 of the Public Utilities Code, which shall be operative if a majority of the electors voting on the measure vote to approve the imposition of the tax at an election called for that purpose.

(b) To adopt a retail transactions and use tax ordinance that incorporates provisions identical to those of the Sales and Use Tax Law of the State of California insofar as those provisions are not inconsistent with the requirements and limitations contained in Part 1.6 of Division 2 of the Revenue and Taxation Code.

(c) To adopt a retail transactions and use tax ordinance that imposes a tax and provides a measure therefor that can be administered and collected by the California Department of Tax and Fee Administration in a manner that adapts itself as fully as practicable to, and requires the least possible deviation from, the existing statutory and administrative procedures followed by the California Department of Tax and Fee Administration in administering and collecting the California State Sales and Use Taxes.

(d) To adopt a retail transactions and use tax ordinance that can be administered in a manner that will be, to the greatest degree possible, consistent with the provisions of Part 1.6 of Division 2 of the Revenue and Taxation Code, minimize the cost of collecting the transactions and use taxes, and at the same time, minimize the burden of record keeping upon persons subject to taxation under the provisions of this ordinance.

(e) To require that proceeds of the tax imposed by this Act be used in accordance with applicable law and solely for the purposes set forth in Section 19.

(f) To authorize the issuance, from time to time, of limited tax bonds to finance transportation improvements consistent with this Act, the Transit District Act and other applicable law.

(g) To establish an independent taxpayers' oversight committee to review the utilization of tax revenues to ensure compliance with this Act and its stated purposes.

Section 6. Contract With State.  

Prior to the operative date, the District shall contract with the California Department of Tax and Fee Administration to perform all functions incident to the administration and operation of this transactions and use tax ordinance; provided, that if the District shall not have contracted with the California Department of Tax and Fee Administration prior to the operative date, it shall nevertheless so contract and in such a case the operative date shall be the first day of the first calendar quarter following the execution of such a contract.

Section 7. Transactions Tax Rate.  

For the privilege of selling tangible personal property at retail, a tax is hereby imposed upon all retailers in the incorporated and unincorporated territory of the District at the rate of one half of one percent (0.5%) of the gross receipts of any retailer from the sale of all tangible personal property sold at retail in said territory on and after the operative date of this ordinance.

Section 8. Place Of Sale.  

For the purposes of this ordinance, all retail sales are consummated at the place of business of the retailer unless the tangible personal property sold is delivered by the retailer or his agent to an out-of-state destination or to a common carrier for delivery to an out-of-state destination.  The gross receipts from such sales shall include delivery charges, when such charges are subject to the state sales and use tax, regardless of the place to which delivery is made.  In the event a retailer has no permanent place of business in the State or has more than one place of business, the place or places at which the retail sales are consummated shall be determined under rules and regulations to be prescribed and adopted by the California Department of Tax and Fee Administration.

Section 9. Use Tax Rate.  

An excise tax is hereby imposed on the storage, use or other consumption in the District of tangible personal property purchased from any retailer on and after the operative date of this ordinance for storage, use or other consumption in said territory at the rate of one half of one percent (0.5%) of the sales price of the property.  The sales price shall include delivery charges when such charges are subject to state sales or use tax regardless of the place to which delivery is made.

Section 10. Adoption Of Provisions Of State Law.  

Except as otherwise provided in this ordinance and except insofar as they are inconsistent with the provisions of Part 1.6 of Division 2 of the Revenue and Taxation Code, all of the provisions of Part 1 (commencing with Section 6001) of Division 2 of the Revenue and Taxation Code are hereby adopted and made a part of this ordinance as though fully set forth herein.

Section 11. Limitations On Adoption Of State Law And Collection Of Use Taxes. 

In adopting the provisions of Part 1 of Division 2 of the Revenue and Taxation Code:

(a) Wherever the State of California is named or referred to as the taxing agency, the name of this District shall be substituted therefor.  However, the substitution shall not be made:

(1)  When the word “State” is used as a part of the title of the State Controller, State Treasurer, State Treasury, or the Constitution of the State of California;

(2)  When the result of that substitution would require action to be taken by or against this District or any agency, officer, or employee thereof rather than by or against the California Department of Tax and Fee Administration, in performing the functions incident to the administration or operation of this Ordinance.

(3)  In those sections, including, but not necessarily limited to sections referring to the exterior boundaries of the State of California, where the result of the substitution would be to:

(A) Provide an exemption from this tax with respect to certain sales, storage, use or other consumption of tangible personal property which would not otherwise be exempt from this tax while such sales, storage, use or other consumption remain subject to tax by the State under the provisions of Part 1 of Division 2 of the Revenue and Taxation Code, or;

(B) Impose this tax with respect to certain sales, storage, use or other consumption of tangible personal property which would not be subject to tax by the state under the said provision of that code.

(4) In Sections 6701, 6702 (except in the last sentence thereof), 6711, 6715, 6737, 6797 or 6828 of the Revenue and Taxation Code.

(b) The word “District” shall be substituted for the word “State” in the phrase “retailer engaged in business in this State” in Section 6203 of the Revenue and Taxation Code and in the definition of that phrase in Section 6203 of the Revenue and Taxation Code.

(c) “A retailer engaged in business in the District” shall also include any retailer that, in the preceding calendar year or the current calendar year, has total combined sales of tangible personal property in this state or for delivery in the State by the retailer and all persons related to the retailer that exceeds five hundred thousand dollars ($500,000). For purposes of this section, a person is related to another person if both persons are related to each other pursuant to Section 267(b) of Title 26 of the United States Code and the regulations thereunder.

Section 12. Permit Not Required.  

If a seller's permit has been issued to a retailer under Section 6067 of the Revenue and Taxation Code, an additional transactor's permit shall not be required by this ordinance.

Section 13. Exemptions And Exclusions.  

(a) There shall be excluded from the measure of the transactions tax and the use tax the amount of any sales tax or use tax imposed by the State of California or by any city, city and county, or county pursuant to the Bradley-Burns Uniform Local Sales and Use Tax Law or the amount of any state-administered transactions or use tax.

(b) There are exempted from the computation of the amount of transactions tax the gross receipts from:

(1) Sales of tangible personal property, other than fuel or petroleum products, to operators of aircraft to be used or consumed principally outside the District in which the sale is made and directly and exclusively in the use of such aircraft as common carriers of persons or property under the authority of the laws of this State, the United States, or any foreign government.

(2) Sales of property to be used outside the District which is shipped to a point outside the District, pursuant to the contract of sale, by delivery to such point by the retailer or his agent, or by delivery by the retailer to a carrier for shipment to a consignee at such point.  For the purposes of this paragraph, delivery to a point outside the District shall be satisfied:

(A) With respect to vehicles (other than commercial vehicles) subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, and undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code by registration to an out-of-District address and by a declaration under penalty of perjury, signed by the buyer, stating that such address is, in fact, his or her principal place of residence; and

(B) With respect to commercial vehicles, by registration to a place of business out-of-District and declaration under penalty of perjury, signed by the buyer, that the vehicle will be operated from that address.

(3) The sale of tangible personal property if the seller is obligated to furnish the property for a fixed price pursuant to a contract entered into prior to the operative date of this ordinance.

(4) A lease of tangible personal property which is a continuing sale of such property, for any period of time for which the lessor is obligated to lease the property for an amount fixed by the lease prior to the operative date of this ordinance.

(5) For the purposes of subparagraphs (3) and (4) of paragraph (b) of this section, the sale or lease of tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised.

(c) There are exempted from the use tax imposed by this ordinance, the storage, use or other consumption in this District of tangible personal property:

(1) The gross receipts from the sale of which have been subject to a transactions tax under any state-administered transactions and use tax ordinance.

(2) Other than fuel or petroleum products purchased by operators of aircraft and used or consumed by such operators directly and exclusively in the use of such aircraft as common carriers of persons or property for hire or compensation under a certificate of public convenience and necessity issued pursuant to the laws of this State, the United States, or any foreign government.  This exemption is in addition to the exemptions provided in Sections 6366 and 6366.1 of the Revenue and Taxation Code of the State of California.

(3) If the purchaser is obligated to purchase the property for a fixed price pursuant to a contract entered into prior to the operative date of this ordinance.

(4) If the possession of, or the exercise of any right or power over, the tangible personal property arises under a lease which is a continuing purchase of such property for any period of time for which the lessee is obligated to lease the property for an amount fixed by a lease prior to the operative date of this ordinance.

(5) For the purposes of subparagraphs (3) and (4) of paragraph (c) of this section, storage, use, or other consumption, or possession of, or exercise of any right or power over, tangible personal property shall be deemed not to be obligated pursuant to a contract or lease for any period of time for which any party to the contract or lease has the unconditional right to terminate the contract or lease upon notice, whether or not such right is exercised.

(6) Except as provided in subparagraph (7), a retailer engaged in business in the District shall not be required to collect use tax from the purchaser of tangible personal property, unless the retailer ships or delivers the property into the District or participates within the District in making the sale of the property, including, but not limited to, soliciting or receiving the order, either directly or indirectly, at a place of business of the retailer in the district or through any representative, agent, canvasser, solicitor, subsidiary, or person in the District under the authority of the retailer.

(7) “A retailer engaged in business in the District” shall also include any retailer of any of the following:  vehicles subject to registration pursuant to Chapter 1 (commencing with Section 4000) of Division 3 of the Vehicle Code, aircraft licensed in compliance with Section 21411 of the Public Utilities Code, or undocumented vessels registered under Division 3.5 (commencing with Section 9840) of the Vehicle Code.  That retailer shall be required to collect use tax from any purchaser who registers or licenses the vehicle, vessel, or aircraft at an address in the District.

(d)  Any person subject to use tax under this ordinance may credit against that tax any transactions tax or reimbursement for transactions tax paid to a district imposing, or retailer liable for a transactions tax pursuant to Part 1.6 of Division 2 of the Revenue and Taxation Code with respect to the sale to the person of the property the storage, use or other consumption of which is subject to the use tax.

Section 14. Amendments to State Law.

All amendments subsequent to the effective date of this ordinance to Part 1 of Division 2 of the Revenue and Taxation Code relating to sales and use taxes and which are not inconsistent with Part 1.6 and Part 1.7 of Division 2 of the Revenue and Taxation Code, and all amendments to Part 1.6 and Part 1.7 of Division 2 of the Revenue and Taxation Code, shall automatically become a part of this ordinance, provided however, that no such amendment shall operate so as to affect the rate of tax imposed by this ordinance.

Section 15. Enjoining Collection Forbidden.

No injunction or writ of mandate or other legal or equitable process shall issue in any suit, action or proceeding in any court against the State or the District, or against any officer of the State or the District, to prevent or enjoin the collection under this ordinance, or Part 1.6 of Division 2 of the Revenue and Taxation Code, of any tax or any amount of tax required to be collected.

Section 16. The Modern and Efficient Transit Ridership and Operations Initiative Fund. 

There is hereby established in the treasury of the District a special fund called The Modern and Efficient Transit Ridership and Operations Initiative Fund, which shall be maintained by the District.  

Section 17. Receipt of Proceeds.

(a) All revenue generated by this Act shall be deposited into the Fund.

(b) The uses and expenditures of money allocated to the Fund shall be governed by and subject to the requirements set forth in Sections 18 and 19. 

Section 18. Use of Proceeds.

(a) Moneys in the Fund shall be used to reimburse the District for the costs imposed by the California Department of Tax and Fee Administration to administer and operate this tax pursuant to Section 6.

(b) The remaining moneys in the Fund shall be appropriated pursuant to Section 19.

Section 19. Expenditure Plan.

(a) The proceeds in the Fund shall be expended on operating and capital needs of the County’s primary public transit services, generally comprised of the METRO bus and ParaCruz paratransit services, consistent with the purpose of providing a bus transit system under the jurisdiction of the District.

(b) The District Board shall prioritize the following funding objectives when making expenditures from the Fund; these funding objectives are not listed in order of priority or importance and may be expanded over time:

(1) Maintaining and improving bus, paratransit, and other mobility services to better serve seniors, students and youth, disabled, low-income, and transit-dependent populations throughout the County.

(2) Protecting and expanding the frequency of service on METRO’s core bus routes.

(3) Increasing ridership, improving efficiency, and reducing traffic within the County by maintaining expanded service to incentivize more riders to choose public transit over driving.

(4) Continuing the Youth Cruz Free program allowing K-12 students to ride fixed route service for free. 

(5) Creating a program that allows seniors and people with disabilities to ride fixed route service for free. 

(6) Creating a program that maximizes fixed route ridership among low-income riders and commuters by offering free or reduced fares and/or targeted service.

(7) Maintaining clean, safe, and accessible bus stops, transit centers, and passenger facilities, including investments in lighting, security, sanitation, and amenities that enhance rider and bus driver comfort and safety. 

(8) Facilitating technology-based solutions that improve METRO’s efficiency, convenience and overall rider experience and access to transit information.

(9) Implementing services, programs and policies that better connect neighborhoods and communities with popular destinations to make transit the travel option of choice for more County residents and visitors.

(10) Improving transit connections both within the County and between the County and the broader region.

(11) Supporting fiscally responsible operations by maintaining balanced budgets, ensuring long-term financial sustainability, and prioritizing cost-effective service delivery.

(12) Maximizing the District’s access to additional federal, state, and regional revenues.

(c) The Board may allocate proceeds deposited into the Fund for projects and programs, including but not limited to, the following:

(1) Continuing and expanding free and reduced fare programs for youth and students, seniors and disabled riders. 

(2) Improving METRO bus service routes, frequency and hours, and continuing implementation of the Reimagine METRO Plan.

(3) Improving ParaCruz paratransit service hours to serve seniors and disabled riders.

(4) Offering new on-demand, point-to-point ParaCruz paratransit service options.

(5) Launching shared ride and technology-enabled models to enhance service to all riders. 

(6) Launching tap-to-pay fare collection technology, to connect with systems in Monterey, Santa Clara and San Benito Counties

(7) Developing METRO’s express bus network.

(8) Creating, utilizing and improving bus-only lanes on Highway 1 for North-South cross-county express service between Watsonville and Santa Cruz. 

(9) Improving safety, accessibility, cleanliness and real-time bus arrival information at upgraded bus stops and transit stations. 

(10) Reducing air pollution by converting the METRO fleet to zero emission buses.

(11) Improving safety and reliability of METRO’s facilities and equipment.

(12) Implementing the Rapid Corridors Plan for faster bus service on high-traffic roads.

(13) Improving service over Highway 17 to connect commuters and other riders to Diridon Station and San Jose.

(14) Expanding real-time info for bus arrivals and service alerts.

(15) Supporting emergency responders and protecting the community during evacuations due to fire, extreme weather and other disasters.

(c) The District shall have the right, power and authority to pledge revenues generated by this Act to the payment of bonds of the District or another public agency (including, but not limited to, a joint powers authority created pursuant to Article 1 of the Joint Exercise of Powers Act (Government Code Section 6500 et seq.)) consistent with the Santa Cruz Metropolitan Transit District Act of 1967 and other applicable law, and use of revenues generated by this Act to pay debt service on such bonds and the costs of issuance related thereto.

Section 20. Independent Taxpayers’ Oversight Committee.

(a) Administration of the proceeds of the tax will be subject to annual review by an Independent Taxpayers’ Oversight Committee which is established to ensure such proceeds are utilized in a way that is consistent with the stated purpose of the tax. The Board shall appoint members to the Committee no later than 45 days after the effective date of this Act.  

(b) The Committee shall be composed of seven at-large, voting members with the characteristics described below.  Members of the committee shall not simultaneously hold any elected office.  The intent is to have one member representing each of the specified areas of expertise. If, however, after a good faith effort, qualified individuals have not been identified for one or more of the areas of expertise, then no more than two members from one or more of the remaining areas of expertise may be selected.

(1) Seniors and people with disabilities.

(2) Youth transit riders and transit riders at local community colleges.

(3) Transit riders at the University of California, Santa Cruz.

(4) Environmental or sustainability-related organizations. 

(5) Bike riders. 

(6) Organized labor. 

(7) Private-sector employers.

(c) Term limits

(1) Committee members shall serve a term of four years, except that for the initial appointments to this Committee, three members shall serve a two-year term and four members shall serve a three-year term in order to ensure the terms of the Committee members are staggered.

(2) Committee members shall serve no more than eight years unless the member’s first term was less than four years, in which case the member may serve an additional two terms after the partial term. In no case, however, shall any member serve more than ten years on the Committee.

(3) If and when vacancies in membership of the Committee occur, the same selection process as outlined above shall be followed to select a replacement to fill the remainder of the term. At the completion of a term, eligible incumbent members must apply for reappointment for another term.

(4) Term limits for Committee members should be staggered to prevent turnover of more than two members at any one time. In the event more than two members must be replaced during the same recruitment period, the Board shall determine the length of their replacement first term in order to limit concurrent future turnover.

(d) The Independent Taxpayers’ Oversight Committee shall receive the annual audit, hold a public hearing and issue a report annually to provide the public with information regarding how tax proceeds are being spent.  The hearing will be held at a public meeting subject to the Ralph M. Brown Act.

Section 21. Annual Report.

The Chief Financial Officer of the District shall annually prepare a report setting forth the amount of funds collected and expended; and the status of operations and projects funded by this Act. 

Section 22. Annual Appropriations Limit.

The appropriations limit for the District shall be adjusted periodically by the aggregate sum collected by levy of this Act.

Section 23. Effective Date.

This ordinance shall be considered adopted upon the date the vote is declared by the District board and shall go into effect 10 days after that date.  Although this ordinance shall be deemed to be effective once adopted a simple majority vote of the electors voting, the new term and related tax and fiscal provisions of this Act shall not operative until April 1, 2027.

Section 24. Severability.

If any provision of this ordinance or the application thereof to any person or circumstance is held invalid, the remainder of the ordinance and the application of such provision to other persons or circumstances shall not be affected thereby.

Section 25. Amendment.

The District Board of Directors may amend this Act with a two-thirds vote provided that any amendment is consistent with and furthers the purposes of this Act as enacted by the voters, including to maximize the District’s access to additional federal, state, and regional revenues or to take into consideration unforeseen circumstances.  The District Board of Directors may only amend the Act after adopting findings of necessity at a public meeting, Publishing notice of a hearing to consider the amendments and holding a hearing and considering public input.  Any amendment to increase the rate of the tax imposed by this Act or to extend the term of the tax shall be subject to approval by the voters of the District. 

Section 26. Liberal Construction.

This Act is an exercise of the initiative power of the People of the Santa Cruz Metropolitan Transit District to implement a special tax to fund the purposes set forth in the Act, and it shall be liberally construed to effectuate these purposes.