BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  SB 1192|
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                                 THIRD READING


          Bill No:  SB 1192
          Author:   Oropeza (D)
          Amended:  6/2/10
          Vote:     27

           
           SENATE JUDICIARY COMMITTEE  :  4-0, 5/4/10
          AYES:  Corbett, Harman, Hancock, Leno
          NO VOTE RECORDED:  Walters

           SENATE LOCAL GOVERNMENT COMMITTEE  :  5-0, 5/5/10
          AYES:  Cox, Aanestad, Kehoe, DeSaulnier, Price

           SENATE APPROPRIATIONS COMMITTEE  :  7-2, 5/27/10
          AYES:  Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
          NOES:  Denham, Wyland
          NO VOTE RECORDED:  Cox, Walters


           SUBJECT  :    Airports:  rental car facility fees

           SOURCE  :     City of Los Angeles


           DIGEST  :    This bill expands the definition of customer  
          facility charge to include a fee that is required by an  
          airport to be collected from the purposes of financing,  
          designing, and constructing terminal modifications to  
          accommodate and provide customer access to common use  
          transportation systems.  This bill requires the Bob Hope  
          Airport, Fresno-Yosemite International Airport, the Los  
          Angeles International Airport and the San Diego  
          International Airport to provide reports on an annual basis  
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          to the Senate and Assembly Committees on Judiciary  
          detailing the total amount of the customer facility charge  
          collected, how the funds are being spent, and whether  
          certain airport concession fees have been increased since  
          the prior report, if any.  This bill also requires the  
          above noted airports to complete an independent audit upon  
          initial collection of the customer facility charge and  
          every three years thereafter.  This bill requires the  
          Bureau of State Audits to review those audits and  
          independently examine the collection of the customer  
          facility charge, as necessary, and to report to the  
          Legislature on its conclusions.

           ANALYSIS  :    Existing law governs contracts between rental  
          car companies and their customers.  Existing law authorizes  
          a company that rents passenger vehicles to the public to  
          collect a customer facility charge, which means a fee that  
          is required by an airport to be collected for certain  
          purposes, if specified circumstances apply, including, but  
          not limited to, the collection of the fee is required by an  
          airport operated by a city, a county, a city and county, a  
          joint powers district, or a special district, the fee is  
          calculated on a per contract basis, the fee is a user fee  
          and not a tax, as specified, and the fee is $10 per  
          contract, except as specified.

          This bill expands the definition of customer facility  
          charge to include a fee that is required by an airport to  
          be collected for the purpose of financing, designing, and  
          constructing terminal modifications to accommodate and  
          provide customer access to common-use transportation  
          systems, as specified.

          Existing law provides that a statute that imposes a  
          requirement that a state agency submit a periodic report to  
          the Legislature is inoperative on a date four years after  
          the date the first report is due.

          The bill, notwithstanding that requirement, also requires  
          the Bob Hope Airport, Fresno-Yosemite International  
          Airport, and the Los Angeles International Airport and the  
          San Diego International Airport to provide reports on an  
          annual basis to the Senate and Assembly Committees on  
          Judiciary detailing the total amount of the customer  

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          facility charge collected, how the funds are being spent,  
          and whether certain airport concession fees have increased  
          since the prior report, if any.  The bill also requires the  
          airport to complete a specified independent audit beginning  
          one year after the initial collection of customer facility  
          charge and every three years thereafter.  The bill requires  
          the Bureau of State Audits to review those audits and  
          independently examine the collection of the customer  
          facility charge, as necessary, with costs to be reimbursed  
          by the individual airport being audited, and to report to  
          the Legislature on its conclusions.

          This bill appropriates the sum of $550,000 from the General  
          Fund to the bureau of State Audits for expenditure in the  
          2012-13 fiscal year to carry out the duties imposed upon  
          the bureau pursuant ot the provisions of this bill.

          This bill makes legislative findings and declarations as to  
          the necessity of a special statute for Los Angeles  
          International Airport.

           Background
           
          In recent years, many airports have located rental car  
          facilities off-site, often in consolidated facilities that  
          house all car rental companies in one location.  Common-use  
          transportation systems, including bus shuttle systems,  
          transport rental car customers to and from terminals and  
          the consolidated rental car facility. 

          In 1999, the Legislature passed and the governor signed SB  
          1228 (Vasconcellos), Chapter 760, Statutes of 1999, which  
          permitted San Jose International Airport to collect a  
          customer facility charge of $10.15 to finance and construct  
          these consolidated rental car facilities and common-use  
          transportation systems, subject to certain conditions.  San  
          Francisco and San Diego were also permitted similar  
          statutory authority.  AB 491 (Frommer), Chapter 661,  
          Statutes of 2001) authorized other public airports to  
          collect a $10 fee per contract to finance, design, and  
          construct consolidated rental car facilities and common-use  
          transportation systems.  In 2007, SB 641 (Corbett), Chapter  
          44, Statutes of 2007, repealed the special authorization  
          for San Jose International Airport and instead applied the  

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          more general provisions enacted by AB 491 to San Jose  
          International Airport, thus permitting it to collect a $10  
          per contract customer facility charge (CFC). 

          In Los Angeles, the Los Angeles International Airport (LAX)  
          plans to build a consolidated rental car facility.  A  
          recent Los Angeles Times article noted the following about  
          the project: 

             Los Angeles International Airport officials are  
             drafting plans to build a terminal that will house  
             many of the area's rental car companies, providing  
             space for 33,000 vehicles while helping untangle the  
             airport's notorious congestion and cutting pollution.  
              The terminal, which could cost as much as $800  
             million, is also expected to make it easier for  
             people to find their rental agencies or switch from  
             one to another if the line is too long or it doesn't  
             have the right car.  LAX has collected $47 million  
             for the project since 2007 by charging a flat $10 fee  
             on rentals from the 10 companies whose vans circle  
             the airport looking for customers. 

             But the fee is not bringing in enough money, said  
             Mark Adams, chief government affairs representative  
             for Los Angeles World Airports, which operates LAX.   
             In order to raise more funds, the airport is hoping  
             to boost the surcharge through a daily fee rather  
             than the current flat fee on rentals.  The airport is  
             still several years from beginning construction of  
             the terminal.

             . . .  Although airport traffic is down substantially  
             since 9/11, rental agency vans make about 800,000  
             trips a year into the main airport, according to  
             airport statistics, often with just one or two  
             passengers.  With a consolidated rental facility,  
             buses would shuttle passengers between it and airline  
             terminals, dropping the number of trips to 437,000  
             annually.  Trips would be cut even further if a  
             planned light-rail system with stops at the rental  
             car terminal is built.  Adams said the rental  
             terminal is "considered the most significant air  
             quality mitigation" effort in the airport's master  

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             plan.  ("LAX plans a consolidated car rental  
             facility," Los Angeles Times, February 26, 2010.)

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Senate Appropriations Committee analysis:

                          Fiscal Impact (in thousands)

           Major Provisions                2010-11     2011-12     
           2012-13   Fund  
          Bureau of State Audits             $550*
          Review

          *Costs on a triennial basis ($100 to $175 per audit times  
          four); cost reimbursed

           SUPPORT  :   (Verified  6/1/10)

          Alliance for a Regional Solution to Airport congestion
          Bob Hope International Airport
          California Airports Council
          California Chamber of Commerce
          Fresno-Yosemite International Airport
          Inglewood-Airport Area Chamber of Commerce
          Los Angeles County Major's Office
          Los Angeles World Airports
          San Francisco International Airport

           ARGUMENTS IN SUPPORT  :    The author's office states,  
          "Construction of consolidated rental-car outlets at  
          California commercial airports is now a fairly common  
          practice.  These centralized rental locations aggregate the  
          operations of the on-airport rental car companies into one  
          large site and house rental offices such as service centers  
          and ready/return parking lots.  Consolidated rental-car  
          outlets are a vital step toward alleviating airport traffic  
          congestion and air pollution.  Consumer choice at many  
          airports is also limited or non-existent by the many  
          separate rental-car outlets and use of dedicated shuttles,  
          vans and buses.

          "Airports currently use Consumer Facility Charges (CFCs) to  

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          finance the insurance of long-term debt to pay for the  
          design, construction and operations of these rental offices  
          and the operation of the common-use transportation systems  
          at airport terminals.  With limited exceptions, existing  
          state statute passed in 2001 only allows collection of the  
          CFC at a fixed rate of $10 per rental-car transaction.   
          This one-size-fits-all approach is failing to provide  
          sufficient revenues to: 1) issue or service existing bonds  
          to finance the construction of these car-rental offices; 2)  
          cover ongoing operational costs of the offices and their  
          common-use transportation systems.  The current transaction  
          fee does not offer an airport authority the flexibility to  
          tailor its fee to local market conditions.  In addition,  
          when new car-rental outlets planned in California airports  
          cannot be sufficiently funded under the current $10 per  
          contract fee without airport subsidies, other vital airport  
          services are effected."

          This bill is sponsored by the City of Los Angeles which  
          argues that the bill would "provide California's airports  
          with the funding mechanism they need to construct essential  
          consolidated rental car facilities.  These facilities  
          reduce traffic congestion and air pollution and increase  
          consumer choice.  It 
          is for these reasons our city is proposing to construct  
          such a facility at Los Angeles International Airport (LAX).  
           However our state's airports are currently locked into a  
          fixed $10 per contract Customer Facility Charge (CFC) first  
          set in 1999 that is often insufficient to fully fund  
          construction of these facilities or to pay for the ones  
          that have already been built." 



          RJG:do  6/2/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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