BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 225| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 225 Author: Simitian (D), et al. Amended: 8/22/11 Vote: 27 - Urgency SENATE ENVIRONMENTAL QUALITY COMMITTEE : 5-0, 03/21/11 AYES: Simitian, Strickland, Hancock, Kehoe, Lowenthal NO VOTE RECORDED: Blakeslee, Pavley SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 SENATE FLOOR : 40-0, 04/25/11 AYES: Alquist, Anderson, Berryhill, Blakeslee, Calderon, Cannella, Corbett, Correa, De León, DeSaulnier, Dutton, Emmerson, Evans, Fuller, Gaines, Hancock, Harman, Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio, Runner, Simitian, Steinberg, Strickland, Vargas, Walters, Wolk, Wright, Wyland, Yee ASSEMBLY FLOOR : 78-0, 08/25/11 (Consent) - See last page for vote SUBJECT : California Pollution Control Financing Authority SOURCE : Author DIGEST : This bill allows the California Pollution Control Financing Authority to establish loss reserve CONTINUED SB 225 Page 2 accounts for the purposes of terminal rental adjustment clause (TRAC) leasing, if funds are available for contribution into the loss reserve account from any source other than the authority. Assembly Amendments prohibit, for purposes of the loss reserve accounts for terminal rental adjustment clause leasing, the use of funds provided by the federal government for the purposes of providing a loan loss reserve program, and add a coauthor. ANALYSIS : Existing law: 1.Establishes the California Pollution Control Financing Authority (CPCFA) with specified powers and duties, and authorizes CPCFA to approve financing for projects or pollution control facilities to prevent or reduce environmental pollution. 2.Authorizes CPCFA to establish loss reserve accounts for financial institutions participating in the California Capital Access Program (CalCAP) which provide loans to qualifying small businesses. 3.Authorizes CPCFA to make use of funds provided by federal capital access programs or other sources. This bill authorizes the authority to establish loss reserve funds for lending that include TRAC leases if and only if funds from other sources than CPCFA are available. This bill authorizes CPCFA executive director to establish conditions for TRAC leasing loss reserve accounts. Purpose of the bill According to the author, the TRAC lease is a common form of financing in the trucking industry. Specifically for trucks, it is often less expensive and offers some tax benefits compared to typical loans. Currently CPCFA is unable to include TRAC leases among the financing tools available under CalCAP. This bill adds TRAC leases to the list of permissible CPCFA financing tools. What is a TRAC lease? CONTINUED SB 225 Page 3 Terminal rental adjustment clause leases are substantially similar to a loan with a balloon payment. Defined in federal law, TRAC leases are specifically for motor vehicles where a value of the vehicle at the end of the lease term is predetermined. At the end of the lease the lessee is given the option to purchase the vehicle at the predetermined price. If the vehicle is sold above that price the lessee is compensated whereas if it is below the agreed upon price the lessor is compensated. The California Air Resources Board (ARB) recently established new regulations with the goals of reducing emissions of particulate matter, nitrogen oxides, and other pollutants. Compliance for some trucks begins in January 2012, with deadlines for credits beginning in July 2011. The ARB has partnered with the State Treasurer's CalCAP to provide financial assistance to truckers affected by these recent regulations. Eligible trucking companies have fewer than 40 trucks, fewer than 100 employees, and less than $10 million in annual revenue. This bill allows eligible companies who use TRAC leases to participate in the CalCAP program. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 7/6/11 - per Assembly Jobs, Economic Development and the Economy Committee) State Treasurer Bill Lockyer California Trucking Association Clean Fleets Coalition Pena's Disposal, Inc. South Tulare Richgrove Refuse, Inc. Westside Waste Management Co., Inc. ARGUMENTS IN SUPPORT : The California Trucking Association states in support that this bill provides small business trucking companies with access to an additional financing tool, which is important during these tough economic times. It authorizes the California Pollution Control Financing Authority to establish loss reserve accounts for the purposes of TRAC leasing within the CONTINUED SB 225 Page 4 Capital Access Loan Program. This program provides small businesses with access to loans through participating financial institutions, and TRAC leasing is designed for purchase of vehicles and trailers. The California Trucking Association represents a range of companies, including small businesses. The trucking industry is facing increasing regulatory pressure to ease the environmental impact of their fleets. The bill provides another financing option, which may be more cost effective for some operators for purchase of more environmentally friendly vehicles. ASSEMBLY FLOOR : 78-0, 08/25/11 (Consent) AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall, Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Smyth, Solorio, Swanson, Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Bonilla, Gorell DLW:nl 8/26/11 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED