BILL ANALYSIS                                                                                                                                                                                                    

          SENATOR ALAN LOWENTHAL, CHAIRMAN               AUTHOR:  hill
                                                         VERSION: 6/15/10
          Analysis by:  Jennifer Gress                   FISCAL:  yes
          Hearing date:  June 29, 2010


          Smog check:  vehicle repair assistance and retirement program


          This bill increases the amount of money from $1,500 to $2,000  
          that the Bureau of Automotive Repair (BAR) may pay to a person  
          who retires his or her vehicle under the smog check program,  
          deletes the provision of law that provides for repair assistance  
          to vehicle owners whose vehicles have been directed to a  
          test-only smog check station, and directs the resulting savings  
          to the vehicle retirement program.


          To meet federal air quality standards, existing law requires  
          California-registered, gasoline-powered vehicles and certain  
          diesel-powered vehicles to undergo biennial smog inspections to  
          measure motor vehicle-related pollutants.  New vehicles six  
          model years old and newer, vehicles with a pre-1976 model year,  
          electric vehicles, motorcycles, and large commercial vehicles  
          are exempt from the smog check program. 

          Upon initial registration and upon a change of ownership and  
          registration of a vehicle, the vehicle owner must submit to the  
          Department of Motor Vehicles (DMV) a valid certificate of  
          compliance indicating that the vehicle has passed its smog  
          inspection. If a vehicle fails any component of a smog  
          inspection, the vehicle owner must, with some exceptions, repair  
          the vehicle and pass a subsequent smog inspection before being  
          able to register or renew the registration of the vehicle.  


          AB 787 (HILL)                                            Page 2


          Each year, BAR directs a certain percentage of vehicles that it  
          deems to be "high emitters" (currently about 42 percent of  
          vehicles subject to the program) to specified "test-only"  
          stations.  Test-only stations are those that test, but do not  
          repair, vehicles.  

          Under existing law, BAR administers a Consumer Assistance  
          Program that provides financial support to assist vehicle owners  
          who have failed their smog inspection.  Vehicle owners have the  
          following options:

          1.Repair cost waiver:  A waiver allows a vehicle owner to  
            register his or her vehicle, even if it does not pass a smog  
            inspection.  A vehicle owner qualifies for a repair cost  
            waiver after he or she spends at least $450 for repairs,  
            including parts and labor.  For low-income vehicle owners,  
            defined as persons whose income does not exceed 185 percent of  
            the federal poverty level, the vehicle owner qualifies for the  
            repair cost waiver (known in this case as an "economic  
            hardship extension") if an estimate for repairs exceeds $250.   
            A vehicle owner may apply for only one repair cost waiver for  
            the life of a vehicle.  Failures resulting from emissions  
            control equipment that is missing or that has been tampered  
            with are not eligible for a repair cost waiver.  

          2.Repair assistance:   Two categories of vehicle owners are  
            currently eligible for repair assistance under this program.   
            The first consists of low-income vehicle owners, defined as  
            persons whose income does not exceed 185 percent of the  
            federal poverty level, which BAR has authority to increase to  
            225 percent, whose vehicles fail their smog inspection.  The  
            second category of eligible vehicle owners consists of persons  
            who were directed to a test-only facility and whose vehicles  
            fail the smog inspection.  Under the repair assistance  
            program, BAR will pay up to $500 for repair costs, subject to  
            a co-payment of $20 for low-income persons and $100 for all  
            other persons.   

          3.Vehicle retirement:  The vehicle retirement program provides  
            vehicle owners compensation to voluntarily retire (or scrap)  
            their vehicles that have failed a smog inspection.  Under this  
            option, a vehicle owner applies to BAR and receives an  
            approval letter by mail. The owner then takes the approval  
            letter to a vehicle dismantler under contract with BAR for  
            retirement and payment.  The vehicle is removed from operation  
            and dismantled.  Existing law allows BAR to pay an owner who  


          AB 787 (HILL)                                            Page 3


            elects to retire his or her vehicle up to $1,500 and to opt to  
            pay more than $1,500 if it determines that doing so will be  
            cost-effective.  Currently, BAR provides $1,000 to a vehicle  
            owner who retires his or her vehicle and is working in  
            cooperation with ARB to amend BAR's regulations to provide  
            $1,500 owners who are low-income.  

          To be eligible for any of these consumer assistance options, the  
          vehicle must have failed its smog inspection and have been  
          continuously registered for at least 24 months, with some  
          exceptions, in an area where vehicles are subject to biennial  
          smog inspection.  

           This bill  :   

           Deletes the provision that vehicle owners directed to  
            test-only smog facilities are eligible for repair assistance  
            and makes conforming changes.

           Directs the savings resulting from the elimination of repair  
            assistance for directed vehicles to the vehicle retirement  

           Increases the maximum payment that BAR may offer for vehicle  
            retirement from $1,500 to $2,000.

           Establishes that a "low-income motor vehicle owner" is a  
            person whose income does not exceed 300 percent of the federal  
            poverty level.


          1.Purpose  .  The author argues that 75 percent of vehicular  
            pollution is caused by just 25 percent of the vehicle fleet.   
            Unfortunately, BAR's vehicle retirement program is continually  
            raided for General Fund expenditures instead of being used to  
            retire high polluting vehicles.  In addition, the author  
            asserts that not enough Californians are utilizing the vehicle  
            retirement program.  There are over three million vehicles 15  
            years old or older in California yet only about 22,000  
            vehicles are retired through the program annually.  Because  
            vehicle retirement programs are one of the most productive  
            ways to reduce air pollution, this bill authorizes BAR to  
            increase the incentive so that more people may participate in  
            the program and prevent funds intended for vehicle retirement  


          AB 787 (HILL)                                            Page 4


            from being used for other purposes.  
             This bill also eliminates repair assistance for vehicle owners  
            who are directed to test-only facilities and whose vehicle  
            fails its smog inspection.  This form of repair assistance  
            does not have an eligibility criterion based on income; any  
            owner who is directed to a test-only facility and fails is  
            eligible.  In fiscal year 2007-08, approximately 46 percent of  
            total expenditures for the repair assistance program were for  
            vehicle owners who were directed to test-only facilities.   
            (BAR notes that some of these may have been eligible under the  
            income provision but chose not to specify their income.)  The  
            author argues that this is an unnecessary subsidy for those  
            who are otherwise likely able to afford vehicle repairs.  This  
            bill closes that loophole and limits participation in the  
            repair assistance program to vehicle owners whose income level  
            does not exceed 300 percent of the federal poverty level.
          2.Recent legislation  .  This bill is very similar to AB 823  
            (Hill), which this committee passed last year 7 to 3.  That  
            bill was vetoed by the Governor.  In his veto message, the  
            Governor encouraged the author to direct any savings achieved  
            by the bill to the vehicle retirement program, which this bill  
            does.  Comparing this bill to AB 823, this bill also clarifies  
            that vehicle retirement is an option for any person whose  
            vehicle fails its smog inspection and increases the income,  
            from 225 to 300 percent of the federal poverty level, that  
            qualifies a person as "low income" for purposes of  
            participating in BAR's Consumer Assistance Program.

           3.Questionable likelihood BAR will increase payment from $1,500  
            to $2,000  .  AB 1870 (Lieber), Chapter 761, Statutes of 2006,  
            increased, from $1,000 to $1,500, the maximum amount that BAR  
            may pay a vehicle owner to retire his or her vehicle and  
            authorized BAR to increase the amount if it deems doing so is  
            cost-effective.  Since passage, BAR continues to pay $1,000  
            for vehicle retirement, unless the person is low-income in  
            which case BAR will pay $1,500.  Based on this experience, it  
            may be unlikely to expect BAR to increase funding to $2,000.  

           4.Benefits of vehicle retirement  .  By incentivizing the early  
            retirement of fully functional vehicles, vehicle retirement  
            programs accelerate emission benefits that would have  
            otherwise occurred by the natural turnover of the fleet.   
            Accelerating emission reductions will help to improve air  
            quality and public health, and further the state's ability to  


          AB 787 (HILL)                                            Page 5


            attain federal air quality standards.  In addition to these  
            environmental and public health benefits, vehicle retirement  
            programs have economic benefits by incentivizing the purchase  
            of new or newer vehicles.  Automobile manufacturers and  
            dealers are likely to benefit by accelerated vehicle  
            purchases, which may be particularly valuable in the state's  
            current economic climate. 
          The Assembly votes are not relevant.


          AB 2289 (Eng) authorizes BAR to assess vehicle emissions by  
          using a vehicle's on-board diagnostic system rather than  
          conventional equipment and requires BAR to rank the performance  
          of smog check stations and refer the vehicle most likely to need  
          repairs to the highest performing stations. Set for hearing in  
          the Senate Business, Professions and Economic Development  
          Committee on June 28th.
           POSITIONS:  (Communicated to the Committee before noon on  
                      June 23, 2010)

               SUPPORT:  None received.
               OPPOSED:  Department of Consumer Affairs (unless amended)