BILL ANALYSIS AB 2522 Page 1 Date of Hearing: May 7, 2008 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mark Leno, Chair AB 2522 (Arambula) - As Introduced: February 21, 2008 Policy Committee: Transportation Vote: 8-2 Local Government 5-2 Urgency: No State Mandated Local Program: Yes Reimbursable: No SUMMARY This bill allows the San Joaquin Valley Unified Air Pollution Control District (district) to increase, from $6 to $36, the annual fee imposed on a motor vehicle registered within the district's jurisdiction to support programs designed to reduce motor vehicle emissions and to achieve and maintain state and federal air quality standards in the district. FISCAL EFFECT 1)Substantial revenue, up to $58 million in 2008-09 and $78 million in 2009-10 and annually thereafter for up to 14 years, to the extent the district adopts a $30 increase in the annual air pollution fee imposed on motor vehicles registered within the district and the fee is collected starting October 2009. Annual revenue generated by the increased fee would increase as the number of motor vehicles registered within the district increases. 2)Moderate one-time costs, in the range of $220,000 as early as 2008-09, to the DMV to modify its vehicle registration fee programming to accommodate the increased annual fee imposed in the San Joaquin Valley. These costs are reimbursed by a portion of the revenue generated by the increased fee. (Motor Vehicle Account) 3)Minor one-time GF costs, likely less than $50,000 in 2008-09, to the Air Resources Board (ARB) to determine whether or not the district has satisfied the prerequisites for imposing the increased fee, and minor ongoing GF costs, in the range of AB 2522 Page 2 $50,000 annually starting as early as 2011-12, to the ARB to biennially assess the district's use of these revenues. 4)Moderate ongoing GF costs, in the range of $75,000 every two years as early as 2011-12, to the Bureau of State Audits (BSA) to conduct the biennial audit of the district's expenditure of these revenues. SUMMARY CONTINUED Specifically, this bill: 1)Specifies that revenue generated by the fee increase, authorized for the period 2009-10 through 2023-24, is to be used to establish and implement incentive-based programs to achieve surplus emissions reductions needed to remediate air pollution harm created by motor vehicles. 2)Allows the district to adopt rules and regulations to reduce vehicle trips as a means of reducing vehicular air pollution. 3)Allows the increased fee to be imposed after 2012-13 only if the U.S. EPA approves the district's proposed reclassification of its nonattainment status for ozone from severe to extreme. 4)Earmarks $10 million of the revenue generated by the increased fee to mitigate the impacts of air pollution in disproportionately impacted environmental justice (EJ) communities in the San Joaquin Valley. 5)Makes the imposition of the fee increase contingent upon the ARB determining the district has undertaken all feasible measures to reduce nonattainment air pollutants and provided the ARB with an estimate of the total funds to be annually generated by the increased fee. 6)Requires the Bureau of State Audits to conduct a biennial audit of the district's assessment and expenditure of the increased fee, and to submit these audits to the Legislature within two weeks of their completion. 7)Requires the ARB to biennially assess the district's use of this revenue to achieve air quality standards, and to submit these assessments to the Legislature within two weeks of completion. AB 2522 Page 3 8)Requires the district, by January 1, 2010, to submit an assessment to the Legislature on ways in which fees could be imposed on vehicles that are not registered in the district but that travel through the district. 9)Is contingent upon SB 240 (Florez) being enacted this year. (SB 240, a measure virtually identical to this bill, was held on this committee's Suspense File in August 2007.) COMMENTS 1)Rationale . The author believes the financial contribution for funding air quality programs made by motor vehicle owners in the San Joaquin Valley should be dramatically increased to enhance the district's share of the total costs needed to ultimately attain state and federal air quality standards. The author notes that the San Joaquin Valley is one of the worst air quality regions in the United States and that a substantial portion of air pollutants emitted in the valley, including oxides of nitrogen (NOX) as a precursor to ozone, emanates from gas and diesel-powered motor vehicles. (The author also notes that a significant portion of the air pollution generated by motor vehicles in the valley come from vehicles registered elsewhere that are just passing through, primarily on Interstate 5 or Highway 99.) 2)Background . There are currently 2.6 million cars, trucks and motorcycles registered in the eight county area that comprises the San Joaquin Valley Unified Air Pollution Control District. Each owner of a motor vehicle registered in the Counties of Fresno, Kings, Madera, Merced, San Joaquin, Stanislaus, and Tulare, and the valley portion of Kern County pays an annual $6 fee, the revenue from which is earmarked for district air quality programs related to vehicle use. In addition, the district is required to impose a $1 fee on annual motor vehicle registration to reduce emissions through activities such as clean fuels programs and adoption of motor vehicle use reduction measures. These two fees combine to generate $18 million annually, with a small percentage retained by the DMV to pay the department's imposition and collection costs. If the district fully exercises the authority provided by this bill, annual revenue generated by the $36 air pollution fee would initially amount to $94 million, an increase of $76 AB 2522 Page 4 million over current revenue generated by the combined $7 in fees. Because population growth in the San Joaquin Valley is currently among the highest in California and is projected to continue to outpace the rest of the state, this revenue would increase substantially over the years. 3)Current Annual Fees Imposed on Valley Vehicles . There are several annual fees imposed by the state, the air district, or individual counties on vehicles registered in the San Joaquin Valley. For example, the owner of a car registered in Fresno and valued at $30,000 would pay the following annual fees to the DMV: Registration $36 CHP 10* Vehicle License Fee 196 County Service Authority for Freeway Emergencies 1 Fingerprint ID 1 Smog High Polluter Repair 6 Smog Abatement 6 Auto Theft and/or DUI Crime Deterrence 1 Abandoned Vehicle 1 Air Quality Management District 6 SJV Air Pollution Control District 1 Reflectorized License Plate 1 *The governor's 2008-09 budget proposes to increase the CHP surcharge to $21. Analysis Prepared by : Steve Archibald / APPR. / (916) 319-2081