(a) Except as provided in subdivision (e) and Section 99314.7, the following eligibility standards apply:

1. (1) Except as provided in paragraph (3), funds shall be allocated for operating or capital purposes pursuant to Sections 99313 and 99314 to an operator if the operator meets either of the following efficiency standards:

   1. (A) The operator shall receive its entire allocation, and any or all of this allocation may be used for operating purposes, if the operator’s total operating cost per revenue vehicle hour in the latest year for which audited data are available does not exceed the sum of the preceding year’s total operating cost per revenue vehicle hour and an amount equal to the product of the percentage change in the Consumer Price Index for the same period multiplied by the preceding year’s total operating cost per revenue vehicle hour.
   2. (B) The operator shall receive its entire allocation, and any or all of this allocation may be used for operating purposes, if the operator’s average total operating cost per revenue vehicle hour in the latest three years for which audited data are available does not exceed the sum of the average of the total operating cost per revenue vehicle hour in the three years preceding the latest year for which audited data are available and an amount equal to the product of the average percentage change in the Consumer Price Index for the same period multiplied by the average total operating cost per revenue vehicle hour in the same three years.
2. (2) If an operator does not meet either efficiency standard under paragraph (1), the operator shall receive its entire allocation and the funds shall be allocated pursuant to this paragraph. The portion of the allocation that the operator may use for operations shall be the total allocation to the operator reduced by the lowest percentage by which the operator’s total operating cost per revenue vehicle hour for the applicable year or three-year period calculated pursuant to subparagraph (A) or (B) of paragraph (1) exceeded the target amount necessary to meet the applicable efficiency standard. The remaining portion of the operator’s allocation shall be used only for capital purposes.

3. (3) The transportation planning agency or county transportation commission, or the San Diego Metropolitan Transit Development Board, as the case may be, shall adjust the calculation of operating costs and revenue vehicle hours pursuant to paragraph (1) to account for either or both of the following factors:

   1. (A) Exclusion of cost increases beyond the change in the Consumer Price Index for fuel; alternative fuel programs; power, including electricity; insurance premiums and payments in settlement of claims arising out of the operator’s liability; or state or federal mandates.
   2. (B) Exclusion of the costs and revenue vehicle hours required to provide comparable complementary paratransit service as required by Section 37.121 of Title 49 of the Code of Federal Regulations, pursuant to the federal Americans with Disabilities Act of 1990 (42 U.S.C. Sec 12101 et seq.), as identified in the operator’s paratransit plan pursuant to Section 37.139 of Title 49 of the Code of Federal Regulations, costs and revenue vehicle hours required to operate demand response and microtransit services that expand access to transit service beyond fixed route corridors, costs of funding or improving payment and ticketing systems and services, costs of security services and public safety contracts, any expense greater than the actuarially determined contribution associated with pensions and other post-employment benefits as required by Government Accounting Standards Board Statement Numbers 68 and 75, costs of planning for improvements in transit operations, integration with other operators and agencies, transitioning to zero-emission operations, and for compliance with state and federal mandates, and startup costs for new services for a period of not more than two years.

(b) As used in this section, the following terms have the following meanings:

1. (1) “Consumer Price Index,” as applied to an operator, is the regional Consumer Price Index for that operator’s region, as published by the United States Bureau of Labor Statistics. If a regional index is not published, the index for the State of California applies.
2. (2) “Microtransit” means IT-enabled multipassenger transportation services that serve passengers using dynamically generated routes, and may expect passengers to make their way to and from common pick-up or drop-off points. Microtransit vehicles include, but are not limited to, large sport utility vehicles, vans, and shuttle buses.
3. (3) “New service” has the same meaning as “extension of public transportation services” as defined in Section 99268.8.
4. (4) “Operating cost” means the total operating cost as reported by the operator under the uniform system of accounts and records, pursuant to Section 99243 and subdivision (a) of Section 99247.
5. (5) “Revenue vehicle hours” has the same meaning as “vehicle service hours,” as defined in subdivision (h) of Section 99247.

(d) The exclusion of cost increases described in paragraph (3) of subdivision (a) applies solely for the purpose of calculating an operator’s eligibility to claim funds pursuant to this section and does not authorize an operator to report an operating cost per revenue vehicle hour, other than as described in this section and in Section 99247, to any of the following entities:

1. (1) The Controller pursuant to Section 99243.
2. (2) The entity conducting the fiscal audit pursuant to Section 99245.
3. (3) The entity conducting the performance audit pursuant to Section 99246.