BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    THIRD READING


          Bill No:  AB 359
          Author:   Holden (D), et al.
          Amended:  8/30/13 in Senate
          Vote:     21


           SENATE JUDICIARY COMMITTEE  :  6-0, 7/2/13
          AYES:  Walters, Anderson, Corbett, Jackson, Leno, Monning
          NO VOTE RECORDED:  Evans

           ASSEMBLY FLOOR  :  69-0, 5/24/13 - See last page for vote


           SUBJECT  :    Vehicle rental agreements:  customer facility charge

           SOURCE  :     California Airports Council


           DIGEST  :    This bill provides guidelines regarding the scope of  
          a Customer Facility Charge (CFC) audit, and requires the audit  
          to be posted on an airport's Internet Web site.  This bill  
          removes the requirement that an airport conduct the audit every  
          three years after the initial collection of the CFC, and instead  
          requires an airport to conduct an audit every three years after  
          the initial collection of the CFC only if the charge is used for  
          the purpose of operating a common-use transportation system or  
          to acquire vehicles for use in such a system.  This bill also  
          provides that any audit of an airport's CFC may be included as a  
          part of a larger audit of the airport's finances.

           Senate Floor Amendments  of 8/30/13 clarify that an airport may  
          satisfy the audit requirements pertaining to CFC increases by  
          updating the information contained in its initial CFC audit, and  
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          that regularly conducted audits of airport finances produced in  
          accordance with the accounting principles of the Government  
          Accounting Standards Board may be used to satisfy the three-year  
          audit requirement.  The amendments further clarify that an  
          airport's continuing obligation to audit CFC funds is not  
          subject to the automatic sunset provision in Section 10231.5 of  
          the Government Code, and require airports to post copies of all  
          audits required under this section on their Internet Web site  
          for a period of six years.

           ANALYSIS  :    

          Existing law:

          1.Defines a "CFC" as any fee, including an alternative fee,  
            required by an airport to be collected by a rental company  
            from a renter for any of the following purposes:

             A.   To finance, design, and construct consolidated airport  
               car rental facilities.

             B.   To finance, design, construct, and operate common-use  
               transportation systems that move passengers between airport  
               terminals and those consolidated car rental facilities, and  
               acquire vehicles for use in that system.

             C.   To finance, design, and construct terminal modifications  
               solely to accommodate and provide customer access to  
               common-use transportation systems.

          1.States that the aggregate amount of CFC revenue to be  
            collected shall not exceed the reasonable costs, as determined  
            by an independent audit paid for by the airport, to finance,  
            design, and construct these facilities.

          2.Requires, in the case of a transportation system, the audit to  
            also consider the reasonable costs of providing the transit  
            system or busing network.

          3.Requires copies of audits of CFC funds to be provided to the  
            Assembly and Senate Committees on Judiciary, the Assembly  
            Committee on Transportation, and the Senate Committee on  
            Transportation and Housing.


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          4.Requires an airport to complete the independent audit required  
            by the above provision prior to the initial collection of the  
            CFC, prior to any increase, and every three years after  
            initial collection and any increase until such time as the fee  
            authorization becomes inoperative.

          5.Prohibits fees designated as a CFC from being 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.

          This bill:
           
           1.Provides that an auditor independently examine and  
            substantiate the necessity for and the amount of the CFC,  
            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 complied with existing law  
            governing the collection and use of CFC revenue.

          2.Requires copies of CFC audits to be posted on an airport's  
            Internet Web site.

          3.Specifies that any required CFC audit may be included as a  
            part of an audit of an airport's finances.

          4.Specifies that an audit be completed every three years after  
            the initial collection of CFC funds only if the CFC is used  
            for the purpose of operating a common-use transportation  
            system or to acquire vehicles for use in such a system.

          5.Clarifies that an airport may satisfy the audit requirement  
            pertaining to the CFC increases by updating the information  
            contained in its initial CFC audit, and that regularly  
            conducted audits of airport finances produced in accordance  
            with the accounting principles of the Government Accounting  
            Standards Board may be used to satisfy the three-year audit  
            requirement.

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          6.Makes other clarifying changes.

           Background
           
          In recent years, many airports have adopted the practice of  
          locating rental car services in consolidated facilities that  
          house all car rental companies in one location.  Common-use  
          transportation systems, including shuttle bus systems and  
          automated trains, are often used to transport rental car  
          customers to and from terminals and the consolidated rental car  
          facility.  These facilities and their associated transport  
          systems are financed largely via CFCs collected from rental car  
          patrons who choose to rent a vehicle from a company housed in  
          the consolidated rental facility.

          The authority to collect CFCs began in California in 1999 when  
          the Legislature passed and the governor signed SB 1228  
          (Vasconcellos, Chapter 760, Statutes of 1999) which permitted  
          San Jose International Airport to collect a CFC of $10.15 per  
          rental contract to finance and construct a consolidated rental  
          car facility.  In 2001, AB 491 (Frommer, Chapter 661, Statutes  
          of 2001) authorized other public airports in California to  
          collect a $10 fee per contract to finance, design, and construct  
          consolidated rental car facilities.  In 2007, SB 641 (Corbett,  
          Chapter 44, Statutes of 2007) 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.

          For approximately ten years, the allowable CFC fee was set at  
          $10 per rental contract, regardless of the duration of the car  
          rental.  In 2010, the Legislature revised the CFC fee structure  
          in response to feedback from the airports that the existing $10  
          per contract fee was inadequate to fund some proposed  
          consolidated rental car facilities.  SB 1192 (Oropeza, Chapter  
          642, Statutes of 2010) permitted airports to impose a CFC  
          calculated on an alternative basis, which, under existing law,  
          allows up to $6 per day for a maximum of five days per rental  
          contract to be collected.  The new CFC fee structure allows an  
          airport to increase its daily CFC according to a statutory  
          schedule which would permit the collection of up to $45 over the  
          length of a rental contract by January 1, 2017.  SB 1192 also  
          expanded the range of uses for which CFC revenue could be spent,  

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          including purchasing vehicles for a common-use transport system  
          that would shuttle passengers between the consolidated rental  
          facility and the airport terminals, and for terminal  
          modifications undertaken to provide access to a common-use  
          transport system. 

          In order to protect customers and ensure that the CFC charged by  
          an airport was appropriately and necessarily spent on  
          consolidated rental facilities and associated common-use  
          transport systems, SB 1192 also imposed an audit requirement,  
          directing airports to complete independent audits of CFC funded  
          projects prior to the initial charge of a CFC, prior to any  
          increase in the CFC, and every three years after its initial  
          collection or any increase.  SB 1192 initially required the  
          State Controller's Office to review these audits, but SB 1006  
          (Senate Budget and Fiscal Review Committee, Chapter 32, Statutes  
          of 2012) eliminated this requirement.  SB 1006, a Budget Trailer  
          Bill, also struck language in existing law that set out  
          guidelines regarding the scope of a CFC audit and the standards  
          for determining whether an airport's chosen CFC rate was  
          necessary and justified based on how the funds were being spent.
          Since the new CFC fee structure went into effect, airports have  
          found that the independent audit requirements are or will cause  
          them to have to complete separate audits of CFC funded projects  
          despite the fact that these projects and the expenditure of CFC  
          funds are already analyzed under other required audits.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No

           SUPPORT  :   (Verified  8/31/13)

          California Airports Council (source)
          City of San Jose
          Fresno Yosemite International Airport

           ARGUMENTS IN SUPPORT  :    The author writes, "AB 359 clarifies  
          the existing law regarding independent audits, paid for by  
          airports, to determine reasonable costs of CFCs used to finance,  
          design, construct, and operate consolidated airport rental car  
          facilities.  This bill permits airports to provide the  
          legislature the CFC information as a subset of the broader,  
          annual, Audit of Airport Finances.  This bill limits the audit  
          to every increase in the CFC and those ongoing CFC costs related  

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          to a transportation system.  This bill is anticipated to save  
          airports, and their associated local taxpayers, hundreds of  
          thousands of dollars by limiting duplicative audits."

           ASSEMBLY FLOOR  :  69-0, 5/24/13
          AYES:  Achadjian, Alejo, Allen, Bigelow, Bloom, Blumenfield,  
            Bocanegra, Bonilla, Bradford, Brown, Buchanan, Ian Calderon,  
            Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dahle, Daly,  
            Dickinson, Donnelly, Fong, Fox, Frazier, Beth Gaines, Garcia,  
            Gatto, Gomez, Gordon, Gorell, Gray, Hagman, Hall, Harkey,  
            Roger Hernández, Jones, Jones-Sawyer, Levine, Linder, Logue,  
            Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mitchell,  
            Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan,  
            Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,  
            Salas, Stone, Ting, Wagner, Weber, Wieckowski, Williams,  
            Yamada, John A. Pérez
          NO VOTE RECORDED:  Ammiano, Atkins, Bonta, Eggman, Grove,  
            Holden, Skinner, Waldron, Wilk, Vacancy, Vacancy


          AL:ej  8/31/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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