BILL ANALYSIS                                                                                                                                                                                                    

                   Senate Appropriations Committee Fiscal Summary
                           Senator Christine Kehoe, Chair

                                           787 (Hill)
          Hearing Date:  8/2/2010         Amended: 7/15/2010
          Consultant:  Bob Franzoia       Policy Vote: T&H 8-0 
          BILL SUMMARY: AB 787 would increase from $1,500, or more, if  
          cost effective, to $2,000, the amount to be paid by the Bureau  
          of Automotive Repair (BAR) within the Department of Consumer  
          Affairs to the owner of a vehicle that has failed its most  
          recent smog check inspection.  This bill would require the  
          department to permit vehicle retirement for any motor vehicle  
          that has been continuously registered in the state for at least  
          two years prior to vehicle retirement, and that fails any type  
          of legally required smog check inspection.  This bill would make  
          the test only station repair assistance program available only  
          to low income participants whose income does not exceed 300  
          percent of the federal poverty level.
                            Fiscal Impact (in thousands)

           Major Provisions         2010-11      2011-12       2012-13     Fund
           Expanded vehicle retirement       Up to $11,000 to $22,000  
          annually*              Special**

          BAR program administration    $1,674 to $3,350*** annually   
          Reduction in eligibility               Estimated savings of  
          ($4,066) annually           Special**        
          for vehicle repair assistance   

          * Assumes 22,000 vehicle retirements at $500.00 to $1,000.00  
          over current payment.
          ** High Polluter Repair and Removal Account (all costs beginning  
          July 1, 2011).  For 2009-10, this account will end the year with  
          a projected fund balance of $2,240,000.  This account made a $20  
          million loan to the General Fund in 2008-09 and is proposed by  
          the Governor's Budget to be repaid in 2010-11. 
          *** Based on 25 to 50 percent increase in participation



          STAFF COMMENTS: This bill meets the criteria for referral to the  
          Suspense File.

          According to the Air Resources Board (ARB) there are currently  
          over one million vehicles retired in the state every year as  
          part of normal fleet turnover with the state's low-emission new  
          car standards dependent on this turnover for emission  
          reductions. However, extra emission reductions benefits can be  
          achieved through the early retirement of fully functional but  
          high emitting vehicles.  The BAR vehicle retirement program  
          retires roughly 22,000 older vehicles annually and local air  
          districts scrap an additional 5,000 vehicles, primarily for air  
          quality benefits.  By 2010, vehicles 15 years and older will  
          account for about 20 percent of the fleet (and about 14 percent  
          of the 
          miles traveled), but still be responsible for over 62 percent of  
          the smog-forming emissions from cars.

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          AB 787 (Hill)

          The CAP provides financial assistance for qualified consumers  
          whose vehicles fail the biennial Smog Check.  The statutory  
          authority for CAP is implemented through 
          regulations adopted by BAR.  Participation in CAP is limited to  
          available funds and under the following options:

          Repair Assistance
          Qualified consumers can receive financial assistance toward  
          emissions-related repairs to help their vehicles pass their Smog  
          Check inspection. Approved applicants must take their vehicles  
          to a Gold Shield repair station for repairs.  Gold Shield  
          stations are licensed Smog Check facilities that are  
          independently owned and under contract with BAR. There are two  
          ways to qualify for repair assistance. 

               (1) Income Eligible - Qualified consumers whose household  
          incomes meet the income guidelines (derived from the federal  
          poverty guidelines) can receive financial assistance toward  
          emissions-related repairs.  A copayment is required and is  
          applied toward diagnosis and emission-related repairs.   

               (2) Directed Vehicle Eligible - Certain vehicles are  
          directed to Test-Only or Gold Shield stations for their initial  


          smog tests. If a Department of Motor Vehicles registration  
          notice requires a test at a Test-Only or Gold Shield station,  
          and the vehicle fails, the owner may qualify for financial  
          assistance toward emissions-related repairs at a Gold Shield  
          repair station.  Test-Only stations cannot perform repairs. A  
          copayment is required and will be applied toward diagnosis and  
          emissions-related repairs. 

          Vehicle Retirement
          Eligible consumers can receive payment to retire their  
          high-polluting vehicle.  There are no income or Directed Vehicle  
          eligibility requirements.  Approved applicants must take their  
          vehicle to an authorized dismantler. The vehicle must pass a  
          visual and operational inspection before it is retired. 

          Chapter 761/2006 (AB 1870, Lieber) increased the maximum amount  
          BAR may pay a vehicle owner to retire his or her vehicle and  
          authorized BAR to increase the amount up to $1,500 if it deems  
          doing so is cost-effective.  (BAR's administrative costs for  
          this bill would be $0 if it determines the increase is not  
          cost-effective to $2,574,900 to $5,149,800 annually if it  
          determines otherwise.)  BAR prepared a regulation package to  
          increase the VIR incentive to $1,500 for low-income consumers.   
          This proposed regulation was rejected by the Department of  
          Finance (DOF).  

          Staff notes participation in the Air Resource Board's (ARB)  
          Enhanced Fleet Modernization Program (EFMP) would be affected by  
          this bill.  As noted, the CAP program addresses the retirement  
          of vehicles failing a biennial Smog Check.  The EFMP handles the  
          retirement of off-cycle vehicles (the vehicle does not need to  
          fail a smog check).  Both programs use the same application and  
          not raising both retirement incentives to the same level would  
          draw vehicles away from the program that offers the 
          lesser incentive.  (ARB was planning to raise the EFMP threshold  
          from $1,000 to $1,500 but delayed action when DOF rejected the  
          BAR proposed regulation.)  Staff recommends this bill be amended  
          to set the incentive threshold for both programs at 
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          AB 787 (Hill)

          the same amount.

          A total of 88,000 vehicles have been retired since the program's  
          inception. In 2005-06, 2006-07, 2007-08, and 2008-09, 15,536,  
          16,906, 21,909, and 22,331 vehicles respectively, were retired.   


          BAR projects the retirement of 20,025 vehicles in 2009-10.
          In addition, 352,121 vehicles have received repair assistance  
          since 2000-01, which includes a projected 59,084 for 2009-10.