BILL ANALYSIS ----------------------------------------------------------------------- |Hearing Date:June 21, 2010 |Bill No:AB | | |2289 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Gloria Negrete McLeod, Chair Bill No: AB 2289Author:Eng As Amended:May 28, 2010 Fiscal: Yes SUBJECT: Smog check program: testing: penalties. SUMMARY: Revises and recasts elements of the current biennial inspections of vehicle emission control equipment and systems (smog check) program, and establishes new industry operating performance standards and technology upgrades. Existing law: 1)Requires, generally, gasoline and diesel-fueled vehicles that are registered in nonattainment areas for ozone or carbon monoxide pollutant emissions to undergo smog check. Authorizes Department of Consumer Affairs, Bureau of Automotive Repair (BAR) to enforce and administer the smog check program to ensure the reduction of gaseous emissions of hydrocarbons, carbon monoxide, and oxides of nitrogen. 2)Requires the smog tests to include, at minimum, loaded mode dynamometer testing in enhanced areas, and 2-speed testing in all other program areas, and a visual or functional check of emission control devices specified by smog technicians. 3)Requires the periodic evaluation of the smog check program by BAR and California Air Resources Board (ARB). Establishes, until January 1, 2013, the Inspection and Maintenance Review Committee Inspection and Maintenance Review Committee (IMRC) to review the BAR and ARB joint evaluation plan and to submit a report on the proposed plan to the Legislature. 4)Establishes procedures for the issuance of citations for operating violations by underperforming stations and establishes a schedule of AB 2289 Page 2 civil penalties for the violations. 5)Requires BAR to submit recommendations to the Governor and the Legislature for any appropriate mitigation measures, if existing smog check stations are required to make additional investments of more than $10,000 in order to participate in the enhanced program,. 6)Establishes a citation structure by which BAR may establish penalties for a licensed smog check station, a test-only station contractor, or a fleet owner who has violated the laws. The citation shall specify the nature of the violation and may assess a civil penalty. 7)Authorizes BAR to issue a citation to a smog check technician who has violated specified laws or regulations. The citation shall specify the nature of the violation and provides for progressive penalties as follows: a) First citation : The smog check technician shall successfully complete one or more retraining courses prescribed by BAR. b) Second citation : The smog check technician shall successfully complete one or more retraining courses prescribed by BAR, and the technician shall perform inspections or repairs under the direction of a technician in good standing. c) Third citation : The smog check technician shall successfully complete an advanced retraining course prescribed by BAR and shall perform no inspection or repair until completion. d) Fourth citation : The smog check technician's qualification may be permanently revoked. 8)Establishes a fine structure of various amounts for specified violations of the law, up to a maximum of $2,500. 9)Provides that any person who obtains or attempts to obtain a repair cost waiver, or economic hardship extension by falsifying information shall be subject to a civil penalty of not less than $150 and not more than $1,000, This bill: 1)States legislative intent that the BAR work with the California Community Colleges and other training institutions to identify funding mechanisms that encourage the development of innovative programs that respond to industry demands for automotive AB 2289 Page 3 technicians. 2)Establishes January 1, 2013, as the date for which new testing procedures are authorized for the test-only smog facilities. Authorizes BAR, in consultation with the ARB, to also select other vehicles for testing in order to meet federal emission reduction performance standards. 3)Authorizes an alternative smog check test method and corresponding test equipment for the year 2000, and newer motor vehicles equipped with second generation on-board diagnostic systems (OBD II). 4)Authorizes BAR to establish inspection-based performance standards and requires vehicles that cause most of the pollution or directed vehicles, as specified, to have smog checks performed by stations that meet high performance standards. 5)For test-only stations, requires BAR to automatically suspend operations when the test-only station fails the inspection-based performance standards. Establishes the following suspension and appeal procedures: a) Requires BAR to provide the test-only station with notice, written or electronic, of any suspension within 24 hours of the suspension. b) A test-only station whose certification has been suspended may apply in writing to BAR within 30 days after the date of suspension for a hearing to contest the evidence supporting the suspension. c) BAR shall set the matter for a hearing within 30 days of receipt of the written request. 6)Provides that a test-only station not meeting the performance standards may continue to issue certificates of compliance and noncompliance for other vehicles that are not directed or high polluting vehicles. 7)Establishes that the criteria for the inspection-based performance standards is the same for all smog check facilities. If deemed feasible by BAR, establishes that performance standards also apply to smog check technicians. Requires BAR, if the performance standards are established, to provide to smog check stations and technicians, no later than January 1, 2012, a preliminary report on their performance. AB 2289 Page 4 8)Prohibits a test-only facility from referring a vehicle owner to a specific vehicle repair facility in which the owner of the test-only facility has also a financial interest in the vehicle repair facility. 9)Revises the existing procedures for the provision of referees by BAR. Requires referees to make inspections of specially constructed vehicles, as defined. Authorizes referees to promote automotive training through community colleges and other training institutions certified by BAR. Authorizes referees to charge a fee sufficient to cover the costs of providing referee services, as specified. 10)Requires an annual evaluation of the performance of the smog check program by BAR, in cooperation with the ARB, using data collected from a roadside audit program. The required annual report, beginning July 1, 2011, is to include, at a minimum, the following: a) An independent analysis done on the report's evaluation methods, findings, and conclusions. b) The percentage of vehicles that initially passed a smog check inspection and then failed a subsequent inspection. c) The percentage of vehicles that initially failed a smog check inspection and then failed a subsequent inspection. d) An estimate of excessive emissions resulting from vehicles identified in (b) and (c), above. e) A best-efforts explanation regarding the reasons vehicles inappropriately failed or passed an inspection. f) Recommended changes to the smog check program. Requires authorization by the Legislature, through enactment of statute, prior to implementing any recommendations on contracting out the management of smog check stations. g) A comparison to the findings of the report "Evaluation of the California Smog Check Program Using Random Roadside Data" dated March 12, 2009. 11)Authorizes BAR to enter into a contract for the supply or service of certified equipment with the manufacturers and service providers. Requires BAR to provide to smog check stations the option to purchase the equipment or service directly from the contractor or AB 2289 Page 5 any other provider of certified equipment or service. 12)Prohibits BAR from requiring smog check stations to use the new certified equipment earlier than January 1, 2013. 13)Clarifies, should existing smog check station equipment upgrades cost more than $10,000, that BAR would be required to submit recommendations to the Governor and the Legislature for any appropriate mitigation measures, including and not limited to subsidies, equipment leases, grants, or loans. Extends the provisions also to certified training institutions. 14)Repeals the existing fine and penalty structure and adopts a more stringent fine and penalty structure to respond to stations and technicians that perform improper inspections. Establishes a minimum fine penalty of $100, but not more than $5,000, based upon various factors of consideration by BAR. Increases the minimum daily civil penalty to not more than $5,000 per day. Requires, in assessing civil penalties, that due consideration be provided to certain factors as specified. 15)Increases the penalties to customers who obtain or attempt to obtain a repair cost waiver, or economic hardship extension, by falsifying information to not more than $5,000. 16) Establishes a new civil penalty for any person who obtains or attempts to obtain a smog certificate by falsifying information at not more than $5,000. FISCAL EFFECT: The Assembly Appropriations Committee analysis, dated May 21, 2010, indicates: (1) Annual costs to DCA, ranging from $350,000 to $450,000, to develop new Smog Check standards, certify test stations that meet higher standards, enforce compliance, and collect, analyze and publish data (VIRF); (2) Minor, absorbable costs to ARB to consult with DCA. COMMENTS: 1.Purpose. This bill is sponsored by the Department of Consumer Affairs' Bureau of Automotive Repair (BAR) and the Air Resources Board (ARB) who believes the bill will achieve cleaner, healthier air by using better technology to diagnose and address vehicle emissions problems; through monitoring of station performance, directing vehicles to higher performing stations for proper repair, and encouraging better and innovative training for technicians. The AB 2289 Page 6 Sponsors state that cleaner air saves lives, reduces adverse effects on children and the elderly as well as particular populations, and reduces time lost and money spent on associated medical treatment and medication. The Sponsors believe the bill will save consumers money, save time, and provide greater air quality from the state's smog check program, which is administered by BAR. The Author contends that this bill is designed to improve smog check in reducing pollution through the use of new technologies (OBD II) that provide considerable time and cost savings to consumers, while at the same time improving consumer protections by adopting more stringent fine structures to respond to stations and technicians that perform improper and incomplete inspections. While making the transition to new equipment and reducing the need for the old equipment, the Author's office wants to provide clear direction to BAR/ARB and especially to the regulated smog stations regarding the new scope of the law as envisioned. With program implementation changes clearly delineated by this bill, smog stations will be better able to make informed business decisions along with the ability of BAR personnel to better manage, investigate, and enforce the program. 2.Background. a) Statewide Smog Check Program . In 1982, California became the 20th state in the nation to adopt a vehicle inspection and maintenance (smog check) program. Unlike the other states, BAR administers a "decentralized" program, which means that smog check stations are privately owned and operated. In 2008/2009, BAR licensed approximately 8,400 smog check stations (although only 7,300 are considered active stations in the 1st quarter of 2009). During this time, BAR also licensed almost 14,000 smog check technicians. b) On-Board Diagnostics (OBD II) . OBD II is the second generation of on-board self-diagnostic equipment requirements for California vehicles. OBD II does not test exhaust; but instead, this system monitors multiple systems in the vehicle and checks a vehicle's computer-controlled emissions systems and components to ensure that no malfunction exists that would cause an increase in emissions. OBD II is installed on most 1996 and newer passenger cars and light duty trucks. The electronic component allows smog technicians to plug into the vehicle's computer and diagnose in-use driving vehicle emission performance. According to IMRC, with the exception of California and Colorado, AB 2289 Page 7 all states with federally- mandated smog check programs have discontinued tailpipe, visual, and functional testing for newer model-year vehicles, because they were not cost effective. The U.S. Environmental Protection Agency (USEPA) has supported OBD-only testing and testified before the IMRC last year that it would agree with this approach in California. The primary advantages of OBD II-only testing are a lower cost to the consumer and a more effective testing procedure. The California Automotive Business Coalition , writing in opposition to this bill, indicates that "the vast majority of vehicles in the State of California would instead only be required to be tested using only the on-board diagnostic (OBD) equipment of the vehicle. The shift of vehicles away from tailpipe testing requirements will erode the ability of existing businesses to generate future income on their investments; and could also deteriorate our state's air quality. At a minimum, there is significant dispute about the accuracy of OBD systems to properly detect excess emissions." Additionally, the Automotive Service Councils of California (ASCCA), also in opposition to this bill, contends that "it may be possible for 'gross polluting' vehicles to pass smog check under AB 2289, since the tailpipe emissions testing would not be required for vehicles 1996 or newer. Although OBD II systems have steadily improved over the years, concerns still remain with faulty OBD systems in late 1990's and early 2000 vehicles passing the OBD II portion of the test but still failing the tailpipe emissions test. Furthermore, oxides of nitrogen, or NOx is a key contributor to air pollution and is currently measured through the tailpipe emissions test. ASCCA recommends that OBD II-only testing be performed on 2000 model year and newer vehicles." This bill follows that recommendation and provides BAR the authority to employ the OBD II-only testing option on model year 2000 and newer vehicles. c) Impact Upon Remaining Fleet. According to ARB, eliminating tailpipe testing for the newer fleet would result in changes to the current smog check equipment and practices within the industry. Even in 2008, the newer fleet (i.e., OBD II-equipped vehicles) made up over 66% of all vehicles inspected, and the percentage is growing every year. The number of older cars in the fleet that need a tailpipe test, on the other hand, will continue to diminish over time. At some point, tailpipe testing volumes may be reduced to the point that it is impractical or not cost effective to have tailpipe testing equipment at every smog AB 2289 Page 8 check station, and other infrastructure options would need to be considered (e.g., tailpipe testing at a subset of stations, allowing individual stations to opt in or out of tailpipe testing from a business point of view, etc.). Maintaining a tailpipe testing infrastructure, however, is a vital element to the smog check program. As the test-only stations currently handle approximately 60% of smog inspections, the impact upon that segment of the smog check industry could result in the majority of those stations to be economically unviable, according to the California Emissions Testing Industries. 3.Sierra Research Report (March 2009). ARB, in cooperation with BAR, hired Sierra Research, Inc. to conduct an independent research and analysis of the smog check program using data collected from roadside inspections conducted in 2003-2006. It is believed that the study's findings spurred the need for smog program changes, thus leading to the introduction of this bill. The study compared roadside inspection results for 1976-95 (pre-OBD II) model year vehicles to the smog check inspection results reported by smog check stations for these same vehicles. Findings from the study included: Of the 1976-95 vehicles sampled, 19% of the vehicles initially passed a tailpipe inspection at a licensed smog check station, but failed a roadside audit inspection within a year. The data also showed that 49% of the vehicles that failed a roadside audit inspection had failed, and then subsequently passed, a tailpipe inspection at a smog check station within the past year. To better address the extent to which improper and/or falsified test results may be factors in the smog check program, the report recommended corrective steps, some of which are incorporated in this bill. 1.Smog Check Equipment Change: Transitioning from BAR-97 to BAR-2012. Approximately 10,000,000 smog check inspections are performed on motor vehicles each year in California. Smog check inspections are performed by approximately 7,300 licensed smog check stations located throughout California. Smog check inspections are currently performed using a BAR-97 Emissions Inspection System (EIS). The BAR-97 EIS equipment is required in all smog check stations located in enhanced areas, or California's smoggiest regions. The BAR-97 EIS tests vehicles under simulated driving conditions to detect oxides of nitrogen, hydrocarbons, and carbon monoxide emissions. These are the major chemical components of smog. The equipment AB 2289 Page 9 consists of a 5-gas analyzer, additional hardware, software, a fuel cap tester, and a dynamometer with safety restraints. The most distinctive component of the equipment is the dynamometer, a treadmill-like device that simulates driving conditions. Originally certified by BAR in 1997/1998, the state's current BAR-97 EIS units are more than 13 years old. The BAR-2012 EIS Project is an information technology project to procure the development of standardized state-owned software and integrate that software with various equipment components of the BAR-2012 EIS. According to BAR, the current BAR-97 EIS relies on older technology that cannot be easily updated to respond to needed smog check program improvements. The BAR-2012 EIS will be flexible, scalable, and responsive to the demands for program change and allow increased program effectiveness and efficiency. BAR anticipates awarding a contract to develop the new equipment on September 2010. Furthermore, they expect a transition from BAR-97 to BAR 2012 at the end of 2012. Accordingly, to give business some certainty in making informed business decisions, this bill prohibits BAR from requiring the use of the new equipment prior to January 1, 2013. Further, under current law, if equipment purchases are mandated and exceed $10,000 in costs, BAR is required to submit recommendations to the Governor and the Legislature for any appropriate mitigation measures. This bill expands those mitigation measures and also includes cost considerations for certified training institutions. 2.Enforcement Issues: Increased Fines and Penalties. According to IMRC, problems identified in the Sierra Research report indicate that current fines for conducting improper smog check inspections fail to change technician's behavior. "When technicians are issued a citation under current provisions of the Health and Safety Code, they are only required to undergo additional training. They pay no monetary fine . Unfortunately, this training appears to have little impact since almost 50% of the inspections conducted on vehicles that originally failed appear to have been performed improperly. Further, although BAR's enforcement division identifies stations and technicians that fail to perform in this area, the penalties, as specified in statute, are too small to change their poor behavior. Therefore, BAR needs a statutory change that will increase penalties in order to change poor and fraudulent behavior." This bill increases and expands existing fines and penalties for violations committed by smog station owners, technicians, and customers. 3.Annual Report Required. On an on-going basis, BAR conducts random roadside audits (smog tests) on vehicles. The results from these inspections are used to evaluate the performance of the smog check AB 2289 Page 10 program in achieving Clean Air Act requirements. This bill requires that the results of these audits be evaluated and reported annually, beginning July 1, 2011. This bill also requires approval by the Legislature, through enactment of statute, prior to the implementation of any report recommendation pertaining to contracting out the management of the smog check program. 4.Funding for Technician Training Programs. Currently, the California community colleges and private institutions provide smog check training for technicians. The community colleges also provide the basic source of referees to mediate smog check compliance issues. This bill establishes intent language that directs BAR to work with the colleges to identify funding options for the development of innovative vehicle technician training programs. 5.Arguments in Support. The Air Resources Board (ARB) and the Department of Consumer Affairs, Bureau of Automotive Repair (BAR) in sponsoring the bill writes that when implemented, AB 2289 has the capability to remove approximately 70 tons of pollution from the air daily, the equivalent of taking 800,000 cars off the road every day. ARB indicates that a study by Sierra Research shows that 49% of 1996 model vehicles failed roadside audits after having received a passing smog check inspection. These vehicles comprise 25% of the California fleet, and are responsible for an estimated 70 tons of harmful emissions per day. By directing BAR and ARB to rank the performance of smog check stations, and vehicles most likely to need repairs will be referred the high performing stations. The bill streamlines the enforcement process for disciplining stations with violations, and improves consumer convenience by authorizing the use of on-board diagnostic systems instead of dynamometer for smog checks. Thirty one other states already conduct inspections based on on-board diagnostics, which takes half the time and costs about half as much as California consumers typically pay. The Sponsors state that these streamlined procedures could apply to 75% of the California passenger vehicle fleet (model 2000 and newer vehicles). 6.Arguments in Opposition. The California Emission Testing Industries Association (CETIA) representing test-only vehicle emissions inspection stations in California opposes the bill, arguing that the bill will cause the loss of 2,200 small businesses and the loss of 5,400 jobs with an annual economic impact of $216,000,000. CETIA suggests that the information and data in the recent Sierra Research study has been mischaracterized to place program failure at the feet of the industry, but a casual read of the study would clearly place a large measure, if not all, of the programmatic problems at the feet of the responsible regulatory agencies. AB 2289 Page 11 CETIA states that without amendments, AB 2289 would have catastrophic economic impact on the Test-Only Industry and its employees. "Test-Only Stations were created by the Legislature, with both privileges and restrictions in market, to provide the most critical tenant of the Smog Check Program; the separation of the Test from the Repair. Test Only Station Owners have made a substantial business investment in equipment and facilities, established business models within the criteria of legislation. AB 2289 will end the core requirement the test be separate from the repair thereby returning to the previous smog check station practice that enables the testing facility to also repair a failing vehicle." CETIA recommends the following amendments to the bill : (1) Effective January 1, 2011, authorize test-only stations facilities to hold ownership of both test and repair and gold shield stations. (2) Remove language to provide BAR with authority to shut down a station after 24-hour notice without an administrative hearing. For test-only station owners, the immediate suspension of privileges in market would have immediate and disastrous economic impact. CETIA believes that as written, this provision has the potential to cause the loss of businesses whether they have violated state law or not. (3) Include language to protect the directed vehicle program for test-only and gold shield stations. Without the directed vehicle program, test only stations would not be economically viable and able to participate in the new program. Additionally, by removing the incentive for test and repair stations to participate in the gold shield program, participation in that program would erode, negatively impacting low-income Californians. BAR shall not expand the directed vehicle program to include Test & Repair stations without legislative approval. (4) Include a mutual settlement agreement for resolving enforcement violation citations. CETIA states that mutual settlement agreements, are implemented by most of the Air Districts, and have proven effective and reduced enforcement costs by 20% and shortened the time line for disciplinary actions. (5) Require annual testing for all vehicles model year 1995 and older. It is these vehicles that contribute 75% of California's mobile source emissions. Clean Air Performance Professionals (CAPP) opposes the bill and requests the bill be amended to include an in-field vehicle repair audit program. CAPP believes an in-field vehicle repair audit program would create maximum vehicle owner satisfaction, and provide a mechanism for continuous improvements in how vehicles are repaired so that customers will be better satisfied with repairs made under the smog check program. CAPP says that presently fear AB 2289 Page 12 of loss of license or legal sanctions is a barrier to improving the quality of vehicle repairs. CAPP argues that such a program would improve quality and productivity in vehicle repairs and result in emission reductions, as mandated under California's emissions inspection and maintenance program. NOTE : Double-referral to Transportation and Housing Committee (second.) Any amendments to this bill taken in BP&ED should be made in T&H. SUPPORT AND OPPOSITION: Support: Department of Consumer Affairs, Bureau of Automotive Repair (Sponsor) Air Resources Board (Sponsor) American Lung Association in California Bay Area Air Quality Management District Breathe California California Air Pollution Control Officers California Council for Environmental and Economic Balance Clean Power Campaign Consumer Federation of California Environmental Defense Fund National Parks Conservation Association Natural Resources Defense Council Planning and Conservation League Sierra Club California South Coast Air Quality Management District Union of Concerned Scientists Opposition: Automotive Service Councils of California California Automotive Business Coalition California Emissions Testing Industries Clean Air Performance Professionals Consultant:G. V. Ayers AB 2289 Page 13