BILL ANALYSIS Ó SB 913 Page 1 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 SB 913 Page 2 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 SB 913 Page 3 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 SB 913 Page 4 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 SB 913 Page 5 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 SB 913 Page 6 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 SB 913 Page 7 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