BILL ANALYSIS Ó AB 359 Page 1 ASSEMBLY THIRD READING AB 359 (Holden) As Amended May 13, 2013 Majority vote JUDICIARY 10-0 ----------------------------------------------------------------- |Ayes:|Wieckowski, Wagner, | | | | |Alejo, Chau, Dickinson, | | | | |Garcia, Gorell, | | | | |Maienschein, Muratsuchi, | | | | |Stone | | | |-----+--------------------------+-----+--------------------------| | | | | | ----------------------------------------------------------------- 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 AB 359 Page 2 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 AB 359 Page 3 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. AB 359 Page 4 Analysis Prepared by : Kevin G. Baker / JUD. / (916) 319-2334 FN: 0000514