BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 459 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: pavley VERSION: 9/11/13 Analysis by: Erin Riches FISCAL: yes Hearing date: September 12, 2013 SUBJECT: Vehicle retirement: Enhanced Fleet Modernization Program DESCRIPTION: This bill requires the state Air Resources Board (ARB) to update the Enhanced Fleet Modernization Program (EFMP) guidelines, as specified. ANALYSIS: Smog Check Program Existing law establishes the Motor Vehicle Inspection Program, commonly known as the smog check program. The Department of Consumer Affairs administers this program through the Bureau of Automotive Repair (BAR). The smog check program generally requires vehicle owners to have their vehicles tested every two years, with some exceptions, including gas-powered vehicles manufactured prior to 1976, alternatively-fueled vehicles, and vehicles six years or newer. Consumer Assistance Program (CAP) If a vehicle fails a smog check, the owner must, in most cases, repair the vehicle and pass a subsequent smog check in order to register a vehicle or renew its registration. A vehicle owner whose vehicle fails a smog test can obtain financial assistance through CAP, administered by BAR. CAP provides three options: Repair cost waiver . A repair cost waiver allows a vehicle owner to register the vehicle for two years even if it fails the smog test. In order to qualify for the waiver, the owner must spend at least $450 on repairs. Low-income vehicle owners (defined as those with household income at or below 185 percent of the federal poverty level) qualify if the repair estimate exceeds $250. SB 459 (PAVLEY) Page 2 Repair cost assistance . Vehicle owners who are current on their vehicle registration fees and whose vehicle has failed a smog test qualify for $500 toward emission-related repairs. In addition, the owner's household income must be at or below 225 percent of the federal poverty level and the owner cannot have previously received CAP assistance for the same vehicle. Vehicle retirement . If a vehicle has failed a smog test, the owner may apply for up to $1,500 (household income at or below 225 percent of the federal poverty level) or $1,000 (all other individuals) towards a replacement vehicle. The vehicle must be currently registered as operable, with registration paid, and: o have been continuously registered for two years prior to application; or o registered as non-operational for a maximum of 60 days during the prior two years, occurring at least 90 days prior to application; or o have had lapsed registration for less than 121 days during prior two years, provided the vehicle is registered for at least 90 days prior to application. Under this program, the owner takes the BAR approval letter to a BAR-approved vehicle dismantler, who destroys the vehicle and issues the owner a check. Existing law requires the Department of Consumer Affairs, in consultation with ARB, to disseminate information about the smog check program. Enhanced Fleet Modernization Program (EFMP) Existing law also establishes the EFMP, administered by ARB in consultation with BAR for vehicle retirement, and by ARB in consultation with two local air districts for vehicle replacement. This program provides for the voluntary retirement of passenger vehicles and light- and medium-duty trucks that are high polluters. A vehicle need not have failed a smog check in order to be eligible for EFMP, but a vehicle owner whose vehicle has failed a smog check may apply to BAR for vehicle retirement assistance under EFMP. BAR determines whether the owner is eligible for CAP or EFMP (or neither). SB 459 (PAVLEY) Page 3 Under the statewide program, EFMP offers: A $1,000 voucher to all vehicle owners to retire a high-polluting vehicle. A $1,500 voucher to low-income vehicle owners (household income at or below 225 percent of federal poverty level) to retire a high-polluting vehicle. Under the local air district program, EFMP offers: A $2,500 voucher to low-income vehicle owners (household income at or below 225 percent of federal poverty level) to replace a high-polluting vehicle, by either purchasing a vehicle eight years old or newer, or using the voucher toward public transit. A $2,000 voucher to all other vehicle owners to replace a high-polluting vehicle by either purchasing a vehicle four years old or newer, or using the voucher toward public transit. Local air districts have issued only a dozen replacement vouchers under EFMP, all in the South Coast Air Quality Management District. This bill : Allows a motor vehicle that has failed a smog check and has been registered for at least two years in the state without substantial lapse, as defined by BAR, to be eligible for CAP assistance. Requires ARB, in consultation with BAR, to update the EFMP regulations by June 30, 2015, but BAR shall continue to administer the EFMP, pursuant to the updated regulations. The updated EFMP guidelines shall: o Consider requiring a vehicle owner to take, complete, or pass a smog check. o Establish $1,500 as the minimum retirement voucher amount for low-income owners and $1,000 as the maximum retirement voucher amount for all other owners. o Allow an owner to obtain a replacement voucher in addition to a retirement voucher. o Establish $2,500 as the minimum replacement voucher for low-income owners and provide that replacement compensation SB 459 (PAVLEY) Page 4 for all other owners shall not exceed that of low-income owners. o Allow for larger retirement or replacement vouchers in order to maximize the program's air quality benefits while also ensuring participation by low-income motor vehicle owners. o Allow voucher increases to be based on factors including, but not limited to, the age of the vehicle, the emissions benefits of the vehicle, the emissions impact of any replacement vehicle, participation by low-income vehicle owners, and the location of the vehicle in an area of the state with the poorest air quality. o Allow program eligibility to be limited on the basis of income to ensure the program adequately serves low- and moderate-income individuals. o Provide coordination with vehicle retirement under CAP to ensure that vehicle owners participate in the appropriate program to maximize emissions reductions. o Streamline administration to simplify participation while protecting the accountability of monies spent. o Ensure that the vehicle replacement component of the program is available in areas designed as federal extreme nonattainment. o Require that vehicles eligible for retirement have sufficient remaining life, such as passing a recent smog check or proof of current registration. Requires ARB, when updating the EFMP guidelines, to study and consider all of the following: o Methods of financial assistance other than vouchers. o An option for automobile dealerships or other used car sellers to accept cars for retirement, provided the cars are dismantled consistent with program requirements. o An incentive structure with varied incentive amounts to maximize program participation and cost-effective emissions reductions. o Increased emphasis on replacing high-polluting vehicles with cleaner vehicles or increased use of public transit to increase use of the vehicle replacement component of the program. o Increased emphasis on reducing greenhouse gas emissions through increased vehicle efficiency or transit use as a result of the program. o Increased partnerships and outreach with community-based organizations. SB 459 (PAVLEY) Page 5 COMMENTS: 1.Purpose . The author states that 75 percent of vehicular pollution is caused by just 25 percent of the vehicle fleet, and that vehicle retirement programs are one of the most effective ways to reduce vehicular air pollution. Although AB 787 (see "Previous legislation" below) helped increase the number of vehicles retired each year, only 39,413 vehicles were retired under CAP in 2011-12, leaving millions of high-polluting cars on California roads. The author states that EFMP, the primary tool for ensuring that retired vehicles are replaced with clean vehicles, has not yet successfully attracted substantial consumer participation. The author states that ARB is scheduled to begin reviewing EFMP regulations this fall; this bill directs ARB to consider specific ways to make the program more accessible, convenient, and financially feasible for low-income vehicle owners to replace their high-polluting vehicles with cleaner cars. 2.Registration requirements . Currently, CAP requires a vehicle owner to provide proof of two continuous years of vehicle registration in order to qualify for vehicle retirement assistance. The intent of this requirement is to help ensure that out-of-state vehicle owners do not take advantage of the program. This bill allows a vehicle that has been registered for at least two years without a substantial lapse, as defined by BAR, to be eligible for CAP assistance. The author states that many low-income car owners fail to register their cars continuously for two years because they cannot afford it. Thus, this bill will make more low-income vehicle owners eligible for CAP. In addition, because a vehicle is smog-tested when an owner brings it in as part of vehicle registration, relaxing the requirement for two continuous years of registration could lead to more vehicles being smog tested and ultimately, more high-polluting vehicles being retired. 3.Previous legislation . AB 787 (Hill), Chapter 231, Statutes of 2010, authorized BAR to pay up to $1,500 to a low-income individual and up to $1,000 to any other individual who retires his or her vehicle under the smog check program or EFMP. 4.29.10 hearing . When this committee passed this bill in April, it established a one-year pilot program within CAP to help SB 459 (PAVLEY) Page 6 low-income vehicle owners retire high-polluting vehicles. It was subsequently amended in the Assembly to instead primarily address EFMP. Because of these amendments, the Senate Rules Committee referred this bill back to this committee for a hearing under Senate Rule 29.10. At today's hearing, the committee may, with a majority vote, (1) hold the bill; (2) return the bill as approved by the committee to the Senate Floor; or (3) refer the bill to the Committee on Appropriations. Assembly Votes: Floor:53-23 (Unofficial) Trans:10-5 Floor: 53-25 Appr: 12-5 Trans: 11-5 Senate Votes: Floor: 36-0 Appr: 6-0 T&H: 10-0 SB 459 (PAVLEY) Page 7 POSITIONS: (Communicated to the committee by 2p.m. on Thursday, September 12, 2013.) SUPPORT: American Lung Association in California Asian Pacific Environmental Network Breathe California California Council for Environmental and Economic Balance Coalition for Clean Air Consumer Action Consumer Federation of California Consumers for Auto Reliability and Safety Greenlining Institute Natural Resources Defense Council San Joaquin Valley Air Pollution Control District South Coast Air Quality Management District Union of Concerned Scientists ValleyCAN OPPOSED: Association of California Car Clubs