BILL ANALYSIS Ó AB 1524 Page 1 Date of Hearing: March 19, 2012 ASSEMBLY COMMITTEE ON TRANSPORTATION Bonnie Lowenthal, Chair AB 1524 (Allen) - As Introduced: January 19, 2012 SUBJECT : Commercial carriers: hot air balloons SUMMARY : Eliminates the sunset date for the exemption for commercial balloon operators from regulation by the California Public Utilities Commission (CPUC) and extends, indefinitely, the requirements for insurance coverage and local notifications that are set to expire on January 1, 2013. EXISTING LAW : 1)Exempts, until January 1, 2013, commercial balloon operators from regulation by the CPUC and requires commercial balloon operators to maintain a minimum of $1 million of liability insurance for a balloon carrying up to 10 passengers, with additional liability coverage of $100,000 for every additional passenger. 2)Requires, until January 1, 2013, a commercial balloon operator to display their business license only within the city or county that is the person's primary place of business frequented by customers and potential customers. 3)Imposes, until January 1, 2013, a state-mandated local program by requiring local governments to give reasonable notice of the evidence of insurance coverage requirement with any business license renewal notification and to maintain as a public record every business license issued by the local government to a person providing transportation by hot air balloon for hire. A local government is authorized to charge a reasonable fee for purposes of carrying out these provisions. 4)Excludes from the definition of "commercial air operator" a person furnishing or providing transportation by hot air balloon for hire and excludes from the definition of "aircraft" a hot air balloon. 5)Requires the CPUC to require every commercial air operator, as AB 1524 Page 2 defined, to procure, and continue in effect, adequate protection against liability for personal bodily injuries and property damage as a result of an accident, that may be imposed by law upon the operator and upon any person using, operating, or renting an aircraft, as defined, with the permission of the operator. 6)Makes it a misdemeanor to fail to obtain and maintain a current valid local business license as required or to fail to maintain insurance as required. FISCAL EFFECT : Unknown COMMENTS : Before 2005, commercial operators of hot air balloons, who primarily provide sightseeing rides for tourists, were regulated by the CPUC as commercial air operators. Because they were lumped in with other commercial air operators such as small aircraft engaged in cargo, charter, and sightseeing services, these hot air balloon operators were subject to increasingly expensive and limited liability insurance requirements. As a result of the standards established by the CPUC, insurers withdrew from the hot air balloon liability insurance market, offered coverage that did not meet the criteria set under the rules, or offered insurance coverage that was cost prohibitive for the business. According to the author, "From 2000-2004, the number of insurance companies providing hot air balloon insurance dwindled from several to two, primarily due to the events of September 11, 2001, and poor performance of insurance companies' portfolios. In 2004, balloon operators expressed concerns about the ballooning cost of liability insurance, the lack of availability of such insurance, and frustration with the regulatory mechanisms of the CPUC. They contended that California was the only state to establish minimum liability requirements for commercial ballooning and that California had the lowest accident rate among the major ballooning states." Also, Susan Kennedy, CPUC commissioner, expressed in a letter dated April, 2004, to the CPUC that the CPUC has absolutely no business regulating hot air balloons as they are not true transportation and that some other state agency, not the CPUC, should ensure that hot air balloon operators maintain an appropriate level of insurance. Responding to the concern of the CPUC-regulated hot air balloon AB 1524 Page 3 industry, AB 2430 (Wiggins), Chapter 881, Statutes of 2004, with the support of the CPUC, was enacted that removed commercial balloon operators from CPUC's jurisdiction, as well as established minimum insurance requirements, required notification to passengers of the operator's liability coverage, and required proof of coverage to the local government entity granting the ballooning company a business license. These changes were made effective for four years to allow experience with the new rules. Subsequently, as the provisions of AB 2430 were set to expire on January 1, 2009, legislation was enacted, SB 911 (Wiggins), Chapter 706, Statutes of 2008, that extended from January 1, 2009, to January 1, 2013, the sunset dates on provisions regulating commercial balloon operators and the minimum liability insurance and noticing requirements. To contend with the impending sunset date, this bill removes the January 1, 2013, sunset date and extends, indefinitely, the exemption for commercial balloon operators from the jurisdiction of the CPUC as well as other insurance and local notification requirements. The author contends that "the Legislature removed hot air balloon operators from the CPUC's jurisdiction on a temporary basis in 2004 and again in 2008. To date, the CPUC has reported no negative consequences caused by the shift from state to local regulation. AB 1524 will permanently remove the hot air balloon industry from the CPUC's jurisdiction and protect small businesses owners from any future unnecessary and cost prohibitive regulations." Affected Industry : According to the author's office, there are approximately 30-50 companies in California offering hot air balloon rides, almost all for compensation. These companies are located throughout California operating in the Napa and Sonoma Valleys, the Palm Springs/Palm Desert area, Los Angeles/Ventura, and the San Diego areas. Additionally, since 2005, as several new insurance companies started offering liability insurance for commercial operators of hot air balloons, the price of this insurance has declined, and the industry's overall safety record has not significantly changed. Further, the author's office indicates that, since 2008, there have only been a few accidents with none resulting in fatalities. Arguments in Support of the bill : Writing in support of this bill, the CPUC contends that "The Legislature removed hot air AB 1524 Page 4 balloonists from the CPUC's oversight in 2004 after the industry made a convincing argument that the CPUC's insurance requirements for "aircraft" were not appropriate to hot air balloons. Since that time, cities and counties have had the authority to require balloonists operating in their jurisdiction to obtain a business license and to provide evidence of not less than $1,000,000 in liability insurance coverage. The CPUC's Consumer Protection and Safety Division (CPSD) is not aware of any negative consequences to the public caused by the shift from state to local regulation. Moreover, CPSD believes that local authorities are in a better position to enforce the insurance requirements." Previous legislation : AB 2430 (Wiggins), Chapter 881, Statutes of 2004, removed commercial balloon operators from CPUC's jurisdiction and established minimum insurance and local notification requirements. SB 911 (Wiggins), Chapter 706, Statutes of 2008, extended the provisions of AB 2430 that were to sunset on January 1, 2009, to January 1, 2013. REGISTERED SUPPORT / OPPOSITION : Support California Public Utilities Commission Napa Valley Aloft, Inc. Napa Valley Balloons, Inc. Opposition None on file Analysis Prepared by : Ed Imai / TRANS. / (916) 319-2093