BILL ANALYSIS Ó
SB 225
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Date of Hearing: August 17, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 225 (Simitian) - As Amended: July 13, 2011
Policy Committee: Banking and
Finance Vote: 11-0
JEDE 6-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes the California Pollution Control Financing
Authority (CPCFA) to establish a loss reserve accounts program
for the purpose of financing truck leases. Specifically, this
bill:
1)Authorizes the establishment of loss reserve accounts for the
purpose of including the terminal rental adjustment clause
(TRAC) leasing mechanism within California Capital Access Loan
Program's (CalCAP) group of loss reserve account programs,
which will enable the lease purchase of 2007 or newer heavy
duty diesel trucks by small businesses.
2)Prohibits the use of CPCFA funds for the TRAC leasing program.
3)Authorizes the executive director to establish conditions for
the TRAC leasing loss reserve accounts program.
FISCAL EFFECT
This bill will not have a significant fiscal impact.
COMMENTS
1)Purpose of the bill : According to the author, "SB 225 makes
TRAC leases, used by small trucking businesses, eligible for
CalCAP. In so doing SB 225 expands financing for upgrades
that improve air quality and are required by Air Resources
Board (ARB) regulations."
SB 225
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2)Background-what is a TRAC? In general, a TRAC provision
provides that at the end of the lease term the total rental
payment for the vehicle can be adjusted upward or downward,
depending upon the condition of the vehicle at the end of the
lease, in order to make up for any difference between the
projected value of the vehicle estimated at the beginning of
the lease and the actual value of the vehicle upon lease
termination.
3)CalCAP. CalCAP was established by legislation enacted in 1994
and the program makes it easier for small businesses to obtain
financing through participating financial institutions.
CalCAP maintains a loan loss reserve account. With the funds
in the loan loss reserve accounts available, financial
institutions are more comfortable lending to small businesses
and typically offer more favorable terms than would normally
be offered to a specific business. Loan fees, which are used
to capitalize the loan reserve account, are set by the lender
and are in the range of 2% to 3.5% of the total loan amount.
4)The need for truck leasing. In 2008, the California Air
Resources Board (ARB) approved a new regulation to
significantly reduce emissions from existing diesel vehicles
operating on California's roads. The regulation requires
affected trucks and buses to meet performance requirements
between 2011 and 2023. By January 1, 2023 all vehicles must
have a 2010 model year engine or equivalent. In addition, the
ARB developed a regulation to reduce greenhouse gas emissions
produced by heavy-duty tractors that pull 53-foot or longer
box-type trailers by making them more fuel efficient.
The CalCAP program is working with the ARB to make it easier
for truck owners to obtain financing to meet the new
requirements. The maximum loan amount is $1.5 million.
Businesses that are eligible must have 100 or fewer employees
and $10 million or less in annual revenues and business with
40 or fewer heavy-duty diesel vehicles in the fleet. The
business must meet the lending criteria established by
financial institutions but the availability of CalCAP funding
should make it easier for financial institutions to approve a
loan.
SB 225
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Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081