BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                AB 359
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        ASSEMBLY THIRD READING
        AB 359 (Holden)
        As Amended May 13, 2013
        Majority vote 

         JUDICIARY           10-0                                        
         
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        |Ayes:|Wieckowski, Wagner,       |     |                          |
        |     |Alejo, Chau, Dickinson,   |     |                          |
        |     |Garcia, Gorell,           |     |                          |
        |     |Maienschein, Muratsuchi,  |     |                          |
        |     |Stone                     |     |                          |
        |-----+--------------------------+-----+--------------------------|
        |     |                          |     |                          |
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        SUMMARY  :  Clarifies and limits existing law regarding independent  
        audits, paid for by airports, to determine reasonable costs of  
        customer facility charges (CFC) 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 and  
          separate audit regarding the customer facility charge fees.  

        2)Limits the existing requirement to conduct periodic audits at  
          three-year intervals.

         FISCAL EFFECT  :  None
         
        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  
             customer facility charges in order to pay for expanded on  








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             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.

        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  








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        Legislature passed and the Governor signed SB 1228 (Vasconcellos),  
        Chapter 760, 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.

        SB 1192 (Oropeza), Chapter 642, Statutes of 2010 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.  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.  

        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 that  
        determination.  

        The Controller's review of the audits was eliminated in a budget  
        trailer bill last year, without consideration by the Assembly  
        Judiciary Committee or any policy committee.  This bill would  
        restore the reasonableness standards that were inadvertently deleted  
        in the process of removing the Controller's review.  

        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,  
        recent 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.
         








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        Analysis Prepared by  :    Kevin G. Baker / JUD. / (916) 319-2334 
                                                                  FN: 0000514