BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 913
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          Date of Hearing:   June 23, 2014

                        ASSEMBLY COMMITTEE ON TRANSPORTATION
                               Bonnie Lowenthal, Chair
                   SB 913 (DeSaulnier) - As Amended:  June 16, 2014

           SENATE VOTE  :  34-0
           
          SUBJECT  :  Vehicular air pollution: vehicle retirement

           SUMMARY  :  Requires the state Air Resources Board (ARB) and the  
          Bureau of Automotive Repair (BAR) to cooperate in issuing a  
          specified number of vouchers to retire and replace  
          high-polluting cars through the Enhanced Fleet Modernization  
          program (EFMP) and the Consumer Assistance Program (CAP).   
          Specifically,  this bill  :  

          1)Requires ARB and BAR to issue the following number of vouchers  
            for the respective programs per year, as specified:

             a)   Not less than 15,000 retirement vouchers through CAP for  
               the 2014-15 FY, increasing to 20,0000 in FY 2015-16;

             b)   Not less than 25,000 retirement vouchers through EFMP  
               for FY 2014-15, increasing to 28,000 for FY 2015-16; and,

             c)   Not less than 1,000 replacement vouchers for FY 2014-15  
               for EFMP increasing to 2,000 for FY 2015-16.  

          1)States the intent of the Legislature that the additional  
            vouchers issued (as a result of this bill) will be funded by  
            the EFMP Subaccount, the High Polluter Repair or Removal  
            Account, and the Vehicle Inspection and Repair Fund.  

          2)States the intent of the Legislature that if monies in the  
            EFMP Subaccount, the High Polluter Repair or Removal Account,  
            and the Vehicle Inspection and Repair Fund are insufficient to  
            fully fund the bill's requirements, any and all outstanding  
            loans from those accounts to the General Fund must be repaid  
            to fund the this bill's requirements.  

          3)Requires ARB and BAR to produce a report and post it on their  
            respective Internet Web sites on or before September 1, 2016,  
            stating whether the goals for increased issuance of vehicle  
            retirement or replacement vouchers were met and, if not, what  








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            revisions will be made to CAP and EFMP to increase the number  
            of vehicle retirements to meet the goals.  

          4)Requires ARB, when updating EFMP and CAP guidelines, to  
            consider adding a variety of consumer protection measures for  
            purchasing and financing vehicle replacements to ensure that  
            consumers gain as much benefit as possible from the incentive  
            programs.  

          5)Makes related, clarifying amendments.  

           EXISTING LAW  :

          1)Required ARB, pursuant to AB 32 (Nunez), Chapter 488, Statutes  
            of 2006, to develop and implement a plan of how to reduce  
            greenhouse gas (GHG) emissions to 1990 levels by the year  
            2020.  

          2)Established the Motor Vehicle Inspection Program (smog check)  
            administered by the Department of Consumer Affairs (DCA)  
            through BAR which requires a vehicle owner to have their  
            vehicles tested every two years, with some exceptions, to  
            ensure the vehicle meets specified emissions requirements.  

          3)Established CAP, administered by BAR, which allows owners  
            whose vehicles fail smog check to obtain a repair cost waiver,  
            repair cost assistance, or vehicle retirement voucher.  

          4)Established EFMP, administered by ARB, which allows for  
            voluntary retirement of high-polluting passenger vehicles and  
            light- and medium-duty trucks, provided the vehicle is  
            currently registered as operable and has been continuously  
            registered for two years prior to the application.  EFMP is  
            administered , in two ways:

             a)   Statewide administration, in consultation with BAR,  
               where $1,000 vouchers are offered to all qualifying vehicle  
               owners to retire a high polluting vehicles ($1,500 for low  
               income vehicle owners); and, 

             b)   Region specific administration, in consultation the San  
               Joaquin Valley Air Pollution Control District and the South  
               Coast Air Quality Management District, to replace  
               high-polluting vehicles by offering $2,000 vouchers for to  
               vehicle owners ($2,500 for low-income vehicle owners) to  








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               purchase an eight years old or newer vehicle, or use the  
               voucher toward public transit or the purchase of a vehicle  
               four years old or newer.  

           FISCAL EFFECT  :  The Senate Appropriations Committee identified  
          that the issuance of 15,000 vouchers in 2014-15 for CAP vehicle  
          retirement would represent an absorbable cost at current funding  
          levels; however, the issuance of 20,000 vouchers in 2015-16  
          would require expenditures of approximately $8 million beyond  
          current program funding levels.  

          For the EFMP vehicle retirement vouchers, the Senate  
          Appropriations Committee estimates that the issuance of 25,000  
          vouchers in 2014-15 and 28,000 vouchers in 2015-16 would be  
          absorbable at current funding levels as would the issuance of  
          1,000 vouchers in 2014-15.  The issuance of 2,000 vouchers in  
          2015-16, however, would require expenditure of $1.84 million  
          beyond current funding levels for the program.  

          The Senate Appropriations Committee also indicates that ARB  
          would incur an additional $81,500 in 2014-15 and $163,000 for 1  
          personnel year (PY) of staff time for increased monitoring and  
          oversight of EFMP, and for increased coordination with BAR and  
          local air quality management districts and that a fund transfer  
          of approximately $6.5 million from the Vehicle Inspection and  
          Repair Fund (VIRF) to the High Polluter Repair or Removal  
          Account would be needed to cover fund deficiencies in 2015-16 as  
          a result of the requirement for voucher issuance.  The costs to  
          ARB to implement consumer protection measures when purchasing  
          and financing any replacement vehicles to ensure consumer  
          benefits was added to the bill after it left the Senate  
          Appropriations Committee and was therefore not considered.  

           COMMENTS  :  According to US Environmental Protection Agency, a  
          small percentage of older vehicles on our roadways are  
          responsible for generating of the greatest percentage of  
          smog-forming emissions.  Along these lines, ARB notes that a  
          typical 20-year old vehicle emits 30 times more smog-forming  
          pollutants per mile than does a 5-year old vehicle.  For this  
          reason, programs like EFMP and CAP were initiated, in an attempt  
          to get older, dirty cars off our roadway and replace them with  
          cleaner cars or move owners out of dirty cars and into transit.   


          SB 459 (Pavley), Chapter 437, Statutes of 2013, addressed  








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          concerns that EFMP and CAP were not accelerating the turnover of  
          high-polluting vehicles at a fast enough rate.  Specifically, SB  
          459 directed ARB, by June 15, 2015, to improve EFMP by  
          increasing the benefits of the program for low-income California  
          residents, promoting cleaner replacement vehicles, enhancing  
          emissions reductions, and increasing outreach to community-based  
          organizations.  SB 459 goals included ensuring that vehicles  
          have sufficient remaining life before retirement, streamlining  
          administration to simplify participation, improving coordination  
          with CAP, and ensuring that the replacement component is focused  
          in federal nonattainment areas.  In updating the EFMP  
          guidelines, SB 459 required ARB to study and consider methods of  
          financial assistance other than vouchers, create incentives with  
          varied amounts, increase outreach efforts to community-based  
          organizations, increase incentives for cleaner vehicles, and  
          increase public transit use.  

          ARB is in the process of developing program guidelines and  
          addressing other requirements set forth in SB 459 and released a  
          staff report on May 6, 2014, addressing SB 459 requirements.   
          The staff report is slated for consideration at the ARB hearing  
          on June 26, 2014.  It provides a variety of program improvements  
          related to EFMP with the majority of amendments focused on two  
          areas: a Retirement-Only program and a new Pilot Retire and  
          Replace program.  The Retirement-Only Program would be limited  
          to low-income participants, require the vehicle to complete a  
          smog check test to demonstrate functionality, provide  
          modifications to ensure consistency with CAP and simplify  
          implementation and monitor program participation.  The proposed  
          Retire and Replace Program includes, but is not necessarily  
          limited to, an income eligibility and outreach component,  
          retirement and replacement components, and transportation  
          mobility options.  

          The author has introduced this bill to ensure that ARB continues  
          on a path to update vehicle replacement programs pursuant to SB  
          459 requirements.  To ensure that an aggressive approach is  
          taken by ARB, this bill proposes specific vehicle retirement and  
          replacement goals that ARB and BAR must meet within EFMP and  
          CAP.  The author notes it is his intention that the goals create  
          an increase in current program volumes and points out that the  
          bill allows for future "fine tuning" of the goals based through  
          ARB and BAR suggested program revisions.  Additionally, the bill  
          codifies some elements ARB's May 6, 2014, staff report to help  
          to inform and protect consumers from lending scams to help  








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          ensure that the value and benefits of the incentives are  
          realized by the consumer.  

          By setting a vehicle retirement target rather than an emissions  
          reduction target, the vehicle retirement goals set forth in this  
          bill could run counter to the broader goal of reducing emissions  
          in California. For example, the bill could have the effect of  
          incentivizing vehicle retirement regardless of whether or not  
          the vehicles are gross polluters currently in use on our  
          roadway.  While retiring all qualifying vehicles would certainly  
          "count" toward the goal, it may not generate the greatest  
          overall emissions reduction benefit and, therefore, may not  
          represent the best use of the funds.  
          Writing in support of this bill, the California Electric  
          Transportation Coalition (CalETC) contends that cleaning up  
          California's transportation system is critical to meeting the  
          goals of AB 32.  They point out that the EFMP is a critical  
          incentive program designed to address the concerns of air  
          quality in low-income communities, which tend to have a higher  
          population of dirty-vehicles.  They also state that enhancing  
          vehicle retirement and replacement programs would serve as an  
          integral part of other, large low carbon transportation efforts,  
          namely SB 1204 (Hueso) and SB 1276 (De Leon) which are currently  
          under consideration in the Assembly.  CalETC notes that  
          increasing the percentage of voluntarily-retired dirty passenger  
          vehicles and light- and medium-duty trucks would provide  
          significant benefits for the stat and for communities in which  
          they are used.  

          Writing in opposition to this bill, the Department of Finance  
          (DOF) notes that this bill is premature since ARB and BAR are  
          currently revising EFMP guidelines to align emissions reduction  
          targets within the state implementation Plan (SIP), which  
          targets vehicle reduction instead of emission-related reductions  
          as required by the SIP.  They also point out that the bill, in  
          setting targets for retirement of vehicles rather than reducing  
          emissions, is in conflict with California's emissions reduction  
          goals.  

          While this bill is well intentioned in its attempts to increase  
          the number of vehicle that are retired through the EFMP and CAP,  
          as pointed out by DOF, it has the potential to undermine the  
          ability of the programs to maximize emissions reductions.  By  
          going for "quantity over quality" this bill could diminish  
          efforts to achieve AB 32 goals.  If the bill continues to move  








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          forward, the author may wish to consider aligning the bill with  
          the ARB's May 6, 2014, staff recommendations.  

           Related legislation  :  SB 1204 (Lara) creates a Clean Truck, Bus,  
          and Off-Road Vehicle and Equipment Technology Program to fund  
          development, demonstration, pilot projects, and commercial  
          deployment of zero- and near-zero-emission trucks, buses, and  
          off-road vehicles and equipment technologies.  SB 1204 provides  
          that the program shall be funded from the Greenhouse Gas  
          Reduction Fund, and shall prioritize projects located in  
          disadvantaged communities.  That bill is currently in the  
          Assembly Appropriations Committee.  

          SB 1275 (De Leon) requires ARB to expand EFMP to provide for  
          ridesharing and car-sharing vouchers as an alternative to  
          vehicle-replacement vouchers.  It also requires ARB to adopt a  
          funding plan for projects under the Air Quality Improvement  
          Program (AQIP), adopt specified revisions to AQIP, and establish  
          programs to increase access to and direct benefits for  
          disadvantaged and low- and moderate-income communities from  
          electric transportation.  That bill is currently in the Assembly  
          Natural Resources Committee.  

           Previous legislation  :  SB 359 (Corbett), Chapter 415, Statutes  
          of 2013, provides $48 million in additional funding in the  
          current fiscal year to ARB to support EFMP and several other  
          programs.  

          SB 459 (Pavley), Chapter 437, Statutes of 2013, requires ARB, in  
          consultation with BAR, to update the EFMP guidelines as  
          specified by June 30, 2015.  

          AB 8 (Perea), Chapter 401, Statutes of 2013, extends until  
          January 1, 2024, a $1 extra fee on vehicle registrations to fund  
          EFMP.  

          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.  

          AB 823 (Hill) of 2009, which Governor Schwarzenegger vetoed,  
          would have limited eligibility for financial assistance under  
          the Consumer Assistance Program to low-income individuals,  
          defined as a vehicle owner whose income does not exceed 225% of  








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          the federal poverty level.  

          AB 32 (Nunez), Chapter 488, Statutes of 2006, required the ARB  
          to develop a plan of how to reduce emissions to 1990 levels by  
          the year 2020 and also required ARB to ensure that, to the  
          extent feasible, GHGs reduction requirement and programs direct  
          public and private investment toward the most disadvantaged  
          communities.  


           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Breathe California
          CalETC
          California New Car Dealers Association
          Sacramento Municipal Utilities District
           
            Opposition 
           
          Department of Finance

           
          Analysis Prepared by  :   Victoria Alvarez / TRANS. / (916) 319-  
          2093