BILL ANALYSIS Ó
AB 359
Page 1
Date of Hearing: May 7, 2013
ASSEMBLY COMMITTEE ON JUDICIARY
Bob Wieckowski, Chair
AB 359 (Holden) - As Introduced: February 14, 2013
As Proposed to be Amended
SUBJECT : AIRPORTS: RENTAL CAR FACILITY FEES
KEY ISSUE : SHOULD THE AUDIT REQUIRMENTS FOR AIRPORT USES OF
CUSTOMER FACILITY CHARGES BE REVISED TO BE MORE WORKABLE IN
LIGHT OF EXPERIENCE WHILE MAINTAINING THE GOAL OF PUBLIC
ACCOUNTABILITY?
FISCAL EFFECT : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
This bill is sponsored by the California Airport Council to
reduce the audit obligation for customer facility charges
imposed by the airports on rental car customers. Customer
facility charges (CFCs) fund consolidated rental car facilities
at airports. For many years these CFCs were set at $10 per
rental. In 2010, the airports sponsored legislation that became
law (SB 1192 (Oropeza)) to increase the amount of the fee to a
level each airport is allowed to set, and to use it for new
purposes, subject to certain conditions and oversight, including
review by the State Controller. These controls were believed to
be appropriate in light of the new funding levels and
discretionary authority that bill allowed, and were the result
of a negotiated agreement with this Committee. As proposed to
be amended, this bill would revise the audit obligations and
their associated costs in light of experience gained over the
intervening two years, without undermining the important goal of
public accountability.
SUMMARY : Clarifies and limits existing law regarding
independent audits, paid for by airports, to determine
reasonable costs of customer facility charges used to finance,
design, construct, and operate consolidated airport rental car
facilities. Specifically, this bill :
1)Clarifies that an airport does not need to have an additional
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and separate audit regarding the customer facility charge
fees.
2)Limits the existing requirement to conduct periodic audits at
three-year intervals.
EXISTING LAW :
1)Permits a customer facility charge (CFC) to be imposed on a
rental car renter and defines "customer facility charge" as a
fee required by an airport to be collected from a renter for
either: (1) financing, designing, and constructing
consolidated airport car rental facilities; (2) financing,
designing, constructing, and providing common-use
transportation systems that move passengers between airport
terminals and the car rental facilities; or (3) to finance,
design, and construct terminal modifications solely to
accommodate and provide customer access to common-use
transportation systems. (Civil Code Section 1936(a).)
2)Requires the aggregate amount to be collected not to exceed
the reasonable costs of these purposes, as determined by an
independent audit paid for by the airport. (Civil Code
Section 1936(a)(4)(B).)
3)Requires airports to complete the independent audit prior to
initial collection of the customer facility charge, prior to
any increase, and every three years after initial collection
and any increase until the fee authorization has become
inoperative. (Civil Code Section 1936 (I).)
COMMENTS : The author explains the bill as follows: "AB 359
streamlines the Airport Rental Car Facility charge audit process
by permitting California's airports, many of which are financed
and operated by local governments, to submit to the Legislature
the same facility information contained in mandatory disclosures
currently required by other regulatory agencies. This bill will
remove the financial burden of duplicative audits while
maintaining all existing consumer protections enacted by the
Legislature."
Background information provided by the author states:
In 2010, the Legislature passed SB 1192 (Oropeza)
authorizing California airports to increase airport
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customer facility charges in order to pay for expanded on
and off site consolidated rental car facilities and
common-use transportation systems between terminals and the
facilities. To prevent abuses of the new fee authority, the
Legislature placed numerous conditions on the charges. One
such condition, aimed at safeguarding the reasonableness of
the fees collected, required any airport increasing
consumer facility charges to conduct an independent audit
and have the results verified by the State Controller's
Office. Once the audit was verified, the information is to
be shared with the Judiciary and the Transportation
Committees of each legislative house.
Burbank, Fresno and San Jose airports were the first
airports subject to the audit requirement. The independent
audit cost Burbank airport approximately $80 thousand
dollars in addition to $45,000 required to reimburse the
State Controller for its work.
After an initial review of the airports' independent
audits, the State Controller's Office better equipped
focusing on state funding projects and requested they be
removed from the audit process. SB 1006, a 2012 budget
trailer bill, removed the State Controller from the audit
process. As a result of SB 1006, airports seeking to enact
customer facility charges must now submit an independent
audit to the Judiciary and Transportation legislative
committees of each house.
Currently, various regulatory agencies at the city and
county level require all airports to conduct annual
financial and operations audits. The information contained
in these audits is identical to the information required to
be submitted to the Legislature pursuant to Civil Code
section 1936.
ARGUMENTS IN SUPPORT : This bill is supported by the California
Airports Council, which states:
Collectively, three airports spent over $250,000 to pay for
the outside audits AND the State Controller to review those
audits. The California Airport Council asserts this was an
extremely costly endeavor for airports at a time when local
government finances are and continue to be under tremendous
strain.
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California commercial airports are among the most regulated
of government entities. All are owned and operated by
local governments or special districts and hence
accountable to their local governments. Financial
decisions, planning, capital and safety projects, community
relations and other matters are all managed by airports and
their local government elected officials. ? Prior to SB
1192, airport financial oversight was exclusively the
domain of local government.
Also in support, the City of San Jose airport states:
Independent audits can be costly. The audit required
before Mineta San Jose International airport could
implement the daily CFC cost $70,000. The Airport paid an
additional $40,000 to the State Controller's Office to
review the audit. The two other airports that have
implemented the daily CFC (Burbank and Fresno) experienced
similar expenditure. Each future independent audit will
cost the Airport between $50,000 and $70,000, if required
to be performed. The city would like to eliminate this
unnecessary expenditure.
Brief Explanation of Airport Customer Facility Charges. In
recent years, many airports have constructed rental car
facilities, often in consolidated facilities that house all car
rental companies in one location. These facilities may be
served by common-use transportation systems, including bus
shuttle systems, which transport rental car customers to and
from terminals and the consolidated rental car facility.
These facilities and systems are made possible by rental car
user fees for customers who choose to rent from an on-airport
rental car company. The authority to collect these customer
facility fees began in 1999 when the Legislature passed and the
Governor signed SB 1228, which permitted San Jose International
Airport to collect a customer facility charge of $10.15 to
finance and construct a consolidated rental car facility and
common-use transportation systems, subject to certain
conditions. San Francisco and San Diego were also permitted
similar statutory authority.
In 2001, AB 491 (Frommer) authorized other public airports to
collect a $10 fee per contract to finance, design, and construct
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consolidated rental car facilities and common-use transportation
systems. In 2007, SB 641 (Corbett) repealed the special
authorization for San Jose International Airport and instead
applied the more general provisions enacted by AB 491 to San
Jose International Airport, thus permitting it to collect a $10
per-contract CFC. These fees were subject to an audit
requirement.
SB 1192 of 2010 Was Substantially Amended In This Committee To
Give Airports New CFC Fee Authority To Be Accompanied By New
Financial Controls. At the request of the airports, SB 1192 was
enacted in 2010 to permit new CFC fee authority. According to
the airports, the then-existing CFC rate of $10 per contract was
inadequate to fund some proposed consolidated rental car
facilities, including a proposed facility at LAX. The bill was
negotiated and substantially amended by this Committee.
SB 1192 allowed airports to collect a CFC calculated on an
alternative basis - a varying amount per day during each day of
the rental period, rather than the $10 rate per-contract - and
allowed the CFC to be increased at the covered airports over a
period of time. SB 1192 also expanded the uses of CFC revenue
to allow for the acquisition of vehicles to be used for the
transportation of customers in a common-use transportation
system, and to allow for terminal modifications for the purpose
of accommodating and providing access to a common-use
transportation system.
In order to ensure that this new fee authority was necessary,
and that the fee level selected by each airport was appropriate,
SB 1192 required the higher CFC to be collected after a review
and approval process, beginning with a public hearing at the
airport, in recognition of the discretion that SB 1192 gave to
each airport to set the amount of the CFC, and to use it for new
and ongoing purposes. SB 1192 also provided that the audits
were to be conducted at specific intervals, and that the State
Controller was to review the audits. Because the chosen fee
level is required to be set at a reasonable rate, SB 1192
established criteria for making that determination.
This Bill Would Clarify The Standards By Which The
Reasonableness of These Fees Is To Be Assessed . The
Controller's review of the audits was eliminated in a budget
trailer bill last year, without consideration by this Committee
or any policy committee. As proposed to be amended, this bill
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would restore the reasonableness standards that were
inadvertently deleted in the process of removing the
Controller's review.
Elimination of Controller's Oversight Has Saved Money For
Airports; This Bill Would Result In Additional Savings By
Eliminating Any Redundancy In Required Audits. As proposed to
be amended, this bill would address the airports' concern about
audit costs by clarifying that the required audit is to be done
by an independent auditor but need not duplicate or be done in
addition to any other audit the airports may have done for
another purpose. Moreover, the proposed amendments would delete
the existing obligation to conduct an audit every three years,
except to the extent there are ongoing expenditures regarding
the operation of a transportation system. These savings are
believed to be significant.
Author's Proposed Amendments. To clarify and reduce the audit
obligation of SB 1192, the author proposes the following
constructive amendments to replace the amendments currently
reflected in both sections 1 and 2 of the bill:
1936(a)(4)(B) The aggregate amount to be collected shall not
exceed the reasonable costs, as determined by an independent
audit by an independent auditor, paid for by the airport, costs
to finance, design, and construct those facilities. The auditor
shall independently examine and substantiate the necessity for
and the amount of the customer facility charge, including
whether the airport's actual or projected costs are supported
and justified, any steps the airport may take to limit costs,
potential alternatives for meeting the airport's revenue needs
other than the collection of the fee, and whether and to what
extent car rental companies or other businesses or individuals
using the facility or common-use transportation system may pay
for the costs associated with these facilities and systems other
than the fee from rental customers, or whether the airport did
not comply with any provision of this subparagraph . Copies of
the audit shall be provided to the Assembly and Senate
Committees on Judiciary, the Assembly Committee on
Transportation, and the Senate Committee on Transportation and
Housing Housing , and posted on the airport's internet web site .
In the case of a transportation system, the audit also shall
consider the reasonable costs of providing the transit system or
busing network pursuant to subparagraph (a)(4)(A)(ii). Any audit
required by this subparagraph may be included as a part of an
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audit of airport finances . Notwithstanding clause (iii) of
subparagraph (A), the fees designated as a customer facility
charge shall not be used to pay for terminal expansion, gate
expansion, runway expansion, changes in hours of operation, or
changes in the number of flights arriving or departing from the
airport.
M(1)(I)(ii). The airport shall complete the independent audit
required by subparagraph (B) of paragraph (4) of subdivision (a)
prior to initial collection of the customer facility charge, and
prior to any increase pursuant to paragraph (2). Only if the
customer facility charge is used for the purpose of operating a
common-use transportation system or to acquire vehicles for use
in such a system pursuant to subparagraph (a)(4)(A)(ii), an
audit of those expenditures shall be completed and every three
years after initial collection. and any increase This audit may
be included in an annual Audit of Airport Finances . Nothing in
this section shall be construed to require an airport to audit a
common-use transportation system not financed by a customer
facility charge and used for the purposes permitted by
subparagraph (a)(4)(A)(ii). This obligation shall continue until
such time as the fee authorization becomes inoperative pursuant
to subparagraph (C) of paragraph (4) of subdivision (a).
REGISTERED SUPPORT / OPPOSITION :
Support
California Airports Council
City of San Jose
Opposition
None on file
Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334