BILL ANALYSIS
AB 2142
Page 1
Date of Hearing: April 1, 2008
ASSEMBLY COMMITTEE ON JUDICIARY
Dave Jones, Chair
AB 2142 (Swanson) - As Introduced: February 20, 2008
PROPOSED CONSENT (As Proposed to Be Amended)
SUBJECT : VEHICLE RENTAL AGREEMENTS: OAKLAND AIRPORT
KEY ISSUE : SHOULD THE OAKLAND INTERNATIONAL AIRPORT HAVE THE
SAME AUTHORITY, AS OTHERWISE LIMITED BY LAW, TO REQUIRE THE
COLLECTION OF CUSTOMER FACILITY CHARGES BY CAR RENTAL COMPANIES
FOR AIRPORT CAR RENTAL FACILITIES AND OTHER EXISTING STATUTORY
PURPOSES WITHOUT THE NECESSITY OF INCURRING THE ADDITIONAL COSTS
OF INDEBTEDNESS?
SYNOPSIS
Existing law authorizes rental car companies to collect a
customer facility charge when required by an airport to finance,
design, and construct consolidated airport car rental facilities
and related passenger transportation systems. However, this
authority is expressly limited to bond financing, and expires
when the indebtedness is repaid. It is therefore unclear
whether a customer facility charge may be collected when an
airport, such as Oakland International, wishes to engage in
construction of such facilities without going into debt, with
all of the increased costs associated with debt financing, to
say nothing of the difficulty of municipal bond sales in the
currently tight financial markets. As proposed to be amended,
this bill would allow the Oakland Airport to impose the charge
under the same terms and conditions as under current law without
the necessity of incurring debt. There is no known opposition
to this district bill.
SUMMARY : Authorizes the temporary collection of a customer
facility charge at Oakland International Airport without debt
financing. Specifically, this bill provides that
notwithstanding references to bond financing in current law, if
bonds or other indebtedness are not used for financing the
Oakland International Airport may require the collection of a
customer facility charge for a period of up to 10 years from the
imposition of the charge for the purposes allowed by, and
subject to the conditions otherwise imposed by existing law.
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EXISTING LAW governs contracts between vehicle rental companies
and their customers and specifically authorizes a company that
rents passenger vehicles to the public to collect a customer
facility charge, which is required by an airport to be
collected, under specified circumstances, to finance, design,
and construct consolidated airport car rental facilities and to
finance, design, construct, and provide common use
transportation systems to move passengers between airport
terminals and those consolidated airport car rental facilities.
This law provides that the aggregate amount to be collected may
not exceed the reasonable costs, as determined by an independent
audit paid for by the airport, to finance, design, and construct
those facilities, and requires copies of the audit to be
provided to the Legislature, and provides that the authorization
for an airport to impose a customer facility charge shall become
inoperative when the bonds used for financing are paid. (Civil
Code section 1936.)
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
COMMENTS : In support of the bill the author states, "Building,
renovating or upgrading car rental facilities at airports must
be accomplished by the airport's incurring debt. They are
unable to make such changes with the collection of fees that
aren't tied to some sort of bond financing arrangement. Today's
bleak economic climate for governmental entities, such as
airports, demands a new way of financing capital improvements
for car rental facilities. It is fiscally prudent for airports
to limit debt and decrease liability to secure stable financing
for improvements and maintenance of car rental facilities that
are not within the main terminals. Aging car rental facilities
subject counties and airport authorities to unreasonable legal
liability and personal injury risks. Airports have many options
on how to finance infrastructure improvements, such as
consolidated rental car facilities, including pay-as-you-go
projects undertaken on a yearly basis. The requirement that
airports incur debt related to such infrastructure improvements
adds an unnecessary and significant cost to finance the bond
issuance and amortize the debt. The customer also does not
receive a benefit from the use of a portion of their CFC
payments for debt retirement."
The sponsor, Port of Oakland (operator of the Oakland
International Airport) adds:
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Civil Code Section 1936 permits the imposition of Customer
Facility Charges (CFCs) on rental car contracts at
California airports. Unfortunately, the original
authorizing statute included language that permitted CFCs
to be collected only for as long as "the bonds used for
financing [projects] are paid." In other words, airports
must use debt financing to fund modest improvements for our
rental car facilities, even when such improvements do not
require large initial outlays that would normally require
airports to finance these projects over many years.
For example, Oakland International Airport and our rental
car company tenants that collect the CFCs on the airport's
behalf are exploring the replacement of existing
diesel-powered shuttle buses that run between the rental
car facility and the passenger terminals with new,
cleaner-burning Compressed Natural Gas (CNG) vehicles.
While the Port's current CFC collection is chiefly being
spent on the operation of the existing common use rental
car buses, (approximately $7 out of every $10 CFC
collection goes to provide the consolidated busing system)
sufficient CFC flow exists to fund the purchase of new CNG
shuttle buses. The airport also intends to use the CFCs
for the improvement of a shuttle bus yard, which will be
equipped with time-flow CNG fueling positions. This will
enable the buses to be fueled with CNG while they are
parked.
In order to accomplish these projects, the airport would
prefer to pay for them through a financial instrument of
its own choosing (most likely existing Port cash), and then
reimburse itself using CFCs following an independent audit,
as required by state law. Under current law, an airport is
required to finance the debt for this project and then
remain in debt in order to keep collecting CFCs. This
requirement diverts funds and resources (to manage the
third-party debt issuance) that would be better spent
directly benefiting the rental car companies and their
customers.
Author's clarifying amendment . In order to better capture the
intent of the bill, the author appropriately proposes to amend
the bill by substituting the following amendment in place of the
bill as introduced, adding a new subdivision (a)(4)(D) to Civil
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Code section 1936 to read as follows:
Notwithstanding subdivision (C), if bonds or other indebtedness
are not used for financing the Oakland International Airport may
require the collection of a customer facility charge for a
period of up to 10 years from the imposition of the charge for
the purposes allowed by, and subject to the conditions otherwise
imposed by, this section.
REGISTERED SUPPORT / OPPOSITION :
Support
Port of Oakland (sponsor)
Opposition (as proposed to be amended)
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334