BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Tom Torlakson, Chairman
118 (Nunez)
Hearing Date: 9/10/07 Amended: 9/7/07
Consultant: Miriam Barcellona IngenitoPolicy Vote: T&H 6-3; EQ
5-2; T&H 6-3
-1-
AB 118 (Nunez)
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BILL SUMMARY: AB 118, as re-written on the Senate Floor, would
establish the Fleet Modernization Program, the Alternative and
Renewable Fuel and Vehicle Technology Program, and the Air
Quality Improvement Program. Additionally, AB 118 would
increase various existing fees for use by the new programs.
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Fiscal Impact (in thousands)
Major Provisions 2007-08 2008-09 2009-10 Fund
Enhanced Fleet Modernization $130 $260
$130SF<1>
Program (admin. CARB)
Enhanced Fleet Modernization $0 $0 $650SF
Program (admin. BAR)
Enhanced Fleet Modernization
$16,500SF
Program (grants)
Advisory body unknown, potentially significant GF/SF<2>
DMV: adjust fees $200 SF<3>
Alt/Renew Fuel program $360 $720 $720 SF<4>
(admin. CEC)
Alt./Renewable Fuel (grants) >$100,000
>$100,000 SF
Air Quality Improvementunknown, potentially significant SF<5>
Program (admin. CARB)
Air Quality Improvement (grants) >$50,000 >$50,000 SF
Cost pressure to fund grants unknown, potentially
significant SF<6>
Revenue generation (>$75,000) (>$150,000) (>$150,000)SF
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<1> Enhanced Fleet Modernization Subaccount in the High Polluter
Removal and Repair Account, created in the bill.
<2> Alternative and Renewable Fuel and Vehicle Technology Fund,
created in the bill.
<3> DMV costs are paid with the fees it would collect in the
bill, upon appropriation by the Legislature.
<4> Alternative and Renewable Fuel and Vehicle Technology Fund.
<5> Air Quality Improvement Fund, created in this bill.
<6> Alternative and Renewable Fuel and Vehicle Technology Fund
and the Air Quality Improvement Fund.
AB 118 (Nunez)
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense file.
Enhanced Fleet Modernization Program
AB 118 would authorize the State Air Resources Board (CARB), in
consultation with the Bureau of Automotive Repair (BAR), to
adopt a program that would be effective starting January 1,
2010, that would allow for the voluntary retirement of passenger
vehicles and light-duty and medium-duty trucks that are high
polluters. The program would be administered by BAR pursuant to
guidelines adopted by CARB. Staff was not able to contact CARB
or BAR to obtain estimates on how much it would be to develop
the guidelines or administer this program. Staff estimates
that, based on other guidelines developed by CARB, costs could
be about two positions for two years, or about $260,000 per
year. If BAR were to administer programs as efficiently as CARB,
its administrative costs would be about $1.3 million annually.
Funding: Enhanced Fleet Modernization Subaccount
AB 118 would create the Enhanced Fleet Modernization Subaccount
in the High Polluter Removal and Repair Account (funded from a
smog impact fee and a portion of DMV registration fees); monies
in the subaccount would be available upon appropriation by the
Legislature. The monies to be deposited into the account would
come from a $1 increase in the vehicle registration fee and
would generate about $33 million annually.
California Alternative and Renewable Fuel, Vehicle Technology,
Clean Air, and Carbon Reduction Act of 2007
AB 118 would establish the California Alternative and Renewable
Fuel, Vehicle Technology, Clean Air, and Carbon Reduction
Program, administered by the State Energy Resources Conservation
and Development Commission (CEC), to provide grants, revolving
loans, loan guarantees, or loans, or "other appropriate
measures." Staff notes that given the amount of monies that
would be available for this program, the Committee may wish to
amend the bill to be more specific about the distribution of
monies made available between grants or loans and loan
guarantees.
AB 118 would give CEC and CARB the authority to determine
AB 118 (Nunez)
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definitions of terms used in the provisions of this chapter,
establish goals of the two programs (both this program and the
Air Quality Improvement Program discussed below), "identify
revenue streams" for the programs, and undertake numerous other
activities that are normally spelled out in statute. This is a
significant delegation of legislative authority to the executive
branch limits the Legislative authority on the expenditure of
more than $100 million annually.
AB 118 would require CEC to create an advisory body to help in
the development of an investment plan to determine priorities
and opportunities for the Alternative and Renewable Fuel and
Vehicle Technology Program. Staff notes that the size of the
committee, how often it is to meet, where it is to meet, and if
the members are to be compensated or receive per diem or
reimbursement for travel or other expenses are not specified in
the measure. Without knowing this information, costs associated
with the advisory committee are unknown, but could be
significant. Staff recommends amending the bill to make the
advisory committee provisions consistent with Government Code
Section 1337.3.
AB 118 would give the CEC the authority to issue "sole-source"
grants, which could include for-profit companies, without usual
public oversight process. Sole-source contracts are contracts
let without the usual competitive bid and public review process
under law. Sole source contracts have been authorized in a very
limited way for public interest energy research due to the
limited number of public parties doing research and possessing
the requisite expertise. The commission would be required to
provide notice, at least 60 days prior to taking an action as
specified, to the Joint Legislative Budget Committee and the
relevant policy committees in both houses of the Legislature, in
writing, of its intent to take the proposed action. If the
Joint Legislative Budget Committee either approves or does not
disapprove the proposed action within 60 days from the date of
notification, the CEC may enter into the sole-source or single
source contract. Staff notes that should the Legislature be
given this notice during the interim recess, the Legislature may
not have sufficient time to review the request. Staff
recommends deleting the provisions that would authorize sole
source grants for this program.
AB 118 (Nunez)
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CEC estimates its costs to implement and administer this program
would be about $720,000 annually and would require four
additional technical staff, one attorney, and one administrative
staff.
Funding: Alternative and Renewable Fuel and Vehicle Technology
Fund
AB 118 would establish this fund in the Treasury with funds to
be available, upon appropriation by the Legislature, to
implement the Alternative and Renewable Fuel and Vehicle
Technology Program, as specified, and the fund would be
administered by CEC. As drafted, this measure states that
alternative renewable fuel funds shall be spent to develop and
deploy fuels "without adopting any one preferred fuel or
technology." The bill neither includes a definition of
"renewable fuel" nor prohibits subsidization of carbon-based
fuels. As such, it is unclear if these funds could be used to
subsidize upgrading of oil refineries (which currently use small
amounts of "renewable fuel" or other petroleum related
infrastructure).
The funding made available from this program would be for public
agencies, vehicle and technology consortia, California-based
businesses and projects, public-private partnerships, workforce
training partnerships, fleet owners, consumers, recreational
boaters, and academic institutions to develop innovative
technologies that transform California's fuel and vehicle types
to help attain the state's climate change policies. AB 118
specifies 10 different types of projects that could be funded
through this program, with preference being given to those
projects that maximize the "goals" of the program. Staff notes
that there are no goals explicitly outlined in the bill.
Additionally, preference would be given to projects that are
consistent with existing and "future" state climate change
policy and low-carbon fuel standards. Staff notes that (1)
state monies are generally not used for to bring projects up to
compliance with existing regulations or requirements in law, but
rather exceed it; and (2) it is unclear how a proposed project
would be consistent with "future state climate change policy and
low-carbon fuel standards."
AB 118 would transfer $10 million annually from the Public
Interest Research, Development, and Demonstration Fund. Monies
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in this fund are derived from surcharges paid on utilities by
ratepayers. AB 118 would require CEC to make a determination
that the proposed projects will provide benefits to electric or
natural gas ratepayers, as specified. Staff notes, however,
that many of the grants are likely have direct benefits to
industry and may not have sufficient nexus to the Public
Interest Research, Development, and Demonstration Fund's rate
payers.
Until January 1, 2016, AB 118 would also receive annual revenues
from the smog abatement fee, vehicle registration fees (about
$66 million), and license plate fees. (See discussion below
under "General funding provisions.")
Air Quality Improvement Program
AB 118 would create this program to be administered by CARB, in
consultation with the districts. The program would provide
competitive grants for air quality improvement projects relating
to fuel and vehicle technologies. The primary purpose of the
program is to fund projects that reduce criteria air pollutants,
improve air quality, and provide funding for research, as
specified. AB 118 specifies how projects are to be evaluated and
what types of projects can be funded.
CARB estimates its administration costs would be about four
percent of the total amount to be awarded in grants.
Funding: Air Quality Improvement Fund
AB 118 would establish this fund in the State Treasury and
monies in the fund would be available, upon appropriation by the
Legislature, to CARB to implement the Air Quality Improvement
Program or to be transferred to the Carl Moyer Memorial Air
Quality Standards Attainment Trust Fund. Until January 1,
2016, the fund would receive annual revenues from the smog
abatement fee, boat registration fee, and a trailer plate fee.
(See discussion below under "General funding provisions.")
General funding provisions
Until January 1, 2016, AB 118 would increase the smog abatement
fee by $8 (up to $20). Under existing law, the entire $12 fee
is distributed as follows: (1) $6 is deposited in the Air
Pollution Control Fund for expenditure, upon appropriation by
the Legislature, to fund the Carl Moyer Memorial Air Quality
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Standards Attainment Program (Carl Moyer Program), as specified;
and (2) the remaining $6 is deposited in the High Polluter
Repair or Removal Account for vehicles that are registering for
the first time, as specified, otherwise $4 of the $6 goes to the
High Polluter Repair or Removal Account and $2 is deposited in
the Vehicle Inspection and Repair Account.
AB 118 would augment the smog abatement fee from July 1, 2008 to
January 1, 2016, by $8 and distribute $4 of it to the Air
Quality Improvement Fund and $4 to the Alternative and Renewable
Fuel and Vehicle Technology Fund.
Additionally, from July 1, 2008 to January 1, 2016, AB 118 would
increase the vehicle registration fee by $3. Two dollars of
that increase would be deposited into the Alternative and
Renewable Fuel and Vehicle Technology Fund and $1 would be
deposited into the Enhanced Fleet Modernization Subaccount. DMV
estimates this would generate about $100 million annually.
Last, from July 1, 2008 to January 1, 2016, AB 118 would
increase fees for trailer license plates by $5 and the increased
revenues would be divided equally between the Alternative and
Renewable Fuel and Vehicle Technology Fund and the Air Quality
Improvement Fund.
From July 1, 2008 to January 1, 2016, AB 118 would increase boat
registration fees by $10 and the increased revenues would be
divided equally between the Alternative and Renewable Fuel and
Vehicle Technology Fund and the Air Quality Improvement fund.
DMV estimates this increase would generate about $3.5 million
annually.
The Department of Motor Vehicles (DMV) estimates it would
require about $200,000 for programming costs to adjust the
various fee increases in 2008 and another $200,000 (adjusted for
inflation) to reset the rates again to be effective January 1,
2016. AB 118 states it is the intent of the Legislature to
appropriate monies from the Alternative and Renewable Fuel and
vehicle Technology Fund and the Air Quality Improvement Fund to
the DMV to cover any administrative costs of implementing the
fee increases created by this act. Staff recommends amending
the bill to give DMV the authority to take the monies required
to collect and distribute this fee from the fee itself before it
AB 118 (Nunez)
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is deposited into the fund; this would be consistent with how
other fees are collected by both DMV and other entities such as
the Board of Equalization.
Staff notes that the bill imposes new consumer fees in excess of
$150 million to subsidize industries that may be mandated by
regulation to produce clean fuels and already are very
profitable. As recently amended, this measure imposes a set of
fee increases on consumers who drive motor vehicles and uses the
money to subsidize industry costs of research, construction, and
implementation of various clean air and alternative renewable
fuels activities. Rather than subsidizing public interest
research and development that would benefit the entire state,
the bill appears to authorize these funds to be used to
subsidize project construction and investment normally paid for
by the industries that profit from those activities. There are
no provisions for fees paid by industry, for public/state
royalty sharing for profits from such investments-simply a grant
program to private sector fuels and energy companies paid for by
the public. Additionally, staff notes that using motor vehicle,
boat, and operator fees for programs that do not directly
benefit them could raise a question as to whether these
additional fees are in fact taxes.
Other issues
Staff notes that the programs established in AB 118 may be
duplicative with each other and with other programs already
authorized in statute and established by CARB, including the
Carl Moyer Program, the Accelerated Light-Duty Vehicle
Retirement Program, the Public Interest Energy Research,
Demonstration, and Development Program, the California
Alternative Energy and Advanced Transportation Financing
Authority Act, and the Strategic Clean Technology and Climate
Research, Development, among others. The committee may wish to
consider amending one or more of these existing programs instead
of creating new programs. This would reduce administrative
costs.
Staff notes that while the operative language in the bill
sunsets on January 1, 2016, the bill includes Legislative
findings and declarations that state "this act will provide
ongoing funding for alternative fuel and vehicle technology
research, development, demonstration, and deployment ?." As a
AB 118 (Nunez)
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result, AB 118 would result in significant cost pressures,
potentially in excess of $150 million annually, continuing past
2016.