BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 941 (Monning) - Vessel operator cards.
          
          Amended: April 22, 2014         Policy Vote: NR&W 7-1
          Urgency: No                     Mandate: Yes (see staff comment)
          Hearing Date: May 23, 2014      Consultant: Marie Liu
          
          SUSPENSE FILE. AS AMENDED.
          
          
          Bill Summary: SB 941 would require the Division of Boating and  
          Waterways (division) to develop a vessel operator education  
          program and issue a vessel operator card, which would be  
          required for operating a vessel within state waters.

          Fiscal Impact (as approved on May 23, 2014):
              One-time cost of $4 million from the Harbors and Watercraft  
              Revolving Fund (HWRF) (special fund) for a loan to the  
              Vessel Operator Certification Account in 2015, with  
              repayments beginning in 2023.
              One-time cost of $2.3 million from the Vessel Operator  
              Certification Account (special) for FY 2015-16 to the  
              division for the creation of the vessel operator and rental  
              operator card.
              Unknown ongoing costs of at least $3.9 million from the  
              Vessel Operator Certification Account (special) beginning in  
              FY 2016-17 for the division to issue vessel operator cards  
              with a potential significant drop in costs after 2025.
              Unknown ongoing revenues, likely in the low millions of  
              dollars to the Vessel Operator Certification Account  
              (special) beginning in 2017 from vessel operator card fees  
              with a potential significant drop in revenues after 2025.

          Background: The division, within the Department of Parks and  
          Recreation (DPR), regulates the operation of vessels in the  
          state's inland and coastal waterways. Existing law states that  
          it is the state's policy to promote boating safety. To this end,  
          the division recommends that a boating safety class be taken  
          prior to boating. Existing law (§760 et seq.) also requires  
          operators of for-hire vessels that can carry passengers must  
          hold an operator's license. The division is primarily funded by  
          the HWRF, which consists of revenues from vessel registration  
          fees, gas tax, yacht and ship salesmen fees, and interest and  








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          loan repayments made to local governments.

          Proposed Law: This bill would require the division to:
           By December 31, 2017, develop a vessel operator and rental  
            operator card that is evidence of completion of a vessel  
            operator examination.
           Develop and provide a vessel operator examination on its  
            website. The division would also be required to provide links  
            to other examinations approved by the division that are  
            administered by a vendor.
           Develop a rental vessel operator examination and approve  
            site-specific rental vessel operator examinations. 
           Charge a fee for the vessel operator card that is sufficient  
            to cover the reasonable costs of the development,  
            establishment, and operation of the program. The bill also  
            sets an unspecified maximum fee amount. Fee revenues would be  
            deposited into the Vessel Operator Certification Account  
            within the HWRF.
           Annually report to the Legislature beginning April 1, 2019 on  
            the number of vessel operator cards issued, the fees collected  
            and costs incurred by the division, the correlation between  
            the number of cards issued and the number of accidents,  
            injuries, and fatalities related to vessel operation, and the  
            number of citations for vessel operation without a card. 

          The requirement for an operator card to operate a vessel would  
          be phased-in by age beginning in 2018 for persons 20 years old  
          or younger and increasing in 5-year age increments until 2025 at  
          which point all persons would be required to hold a card to  
          operate a vessel. The requirement for an operator of a rental  
          vessel to have either a vessel operator card or a rental vessel  
          operator card would begin January 1, 2018.

          This bill would also loan $4 million from the HWRF to the Vessel  
          Operator Certification Account, upon appropriation by the  
          Legislature, to develop and establish the program. The loan  
          would be prohibited from impairing the intended expenditure  
          purposes of the HWRF. The division would be required to repay  
          the loan within three years of the effective date of the  
          regulations. 

          Related Legislation: AB 1287 (Davis, 1999), AB 2110 (Duvall,  
          2008), and AB 1458 (Duvall, 2007) would have required the  
          Department of Boating and Waterways to institute a boater safety  








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          education program. These bills were vetoed, held on the Assembly  
          Appropriations suspense file, and stalled in Assembly  
          Appropriations, respectively.

          Staff Comments: In order to develop the vessel operator and  
          rental operator cards, DPR estimates that it would need four PYs  
          at a cost of $524,000 plus $1.8 million for contracted work.  
          This is based on the assumption that the division would develop  
          the exam, but contract out the exam administration. Once the  
          program is developed, DPR estimates that it would need seven PYs  
          at an annual cost of $910,000 plus $3.1 million for contracted  
          work to operate the vessel operator card program through 2025,  
          when the phase-in period ends. These costs are based on the  
          assumptions that are approximately 1.8 million vessel operators  
          in the state and that the age distribution of the vessel  
          operators is roughly even. (There are 815,216 vessels currently  
          registered with the Department of Motor Vehicles, but there is  
          no data on the number of operators, let alone the age of the  
          operators.) If these assumptions are not correct, revenues and  
          operation costs for the program may fluctuate, perhaps  
          substantially, during the card requirement phase-in period.

          Staff notes that these costs are only based on administering  
          vessel operator cards and exclude potential costs of  
          administering rental operator cards. The division currently has  
          no information on number of people who rent vessels, and thus  
          has no estimate of the likely demand for rental operator cards.  
          Staff estimates that there will likely be millions of rental  
          operator cards issued annually.

          Costs after 2025 are uncertain because it is unknown how many  
          new boaters there would be annually, though the number is likely  
          to drop substantially after the phase-in period because cards  
          are valid for the life of the person. Rental operator card  
          demand is likely to be more constant as the rental cards are  
          only valid for 30-days. 

          Revenues to the program are uncertain as this bill establishes a  
          cap on the vessel operator card fee and a cap on the cost for a  
          duplicate card, however the amount of that cap is not specified.  
          The bill does not suggest a cap for the rental operator cards.  
          Staff notes that the bill explicitly requires that the fees  
          shall be in amounts sufficient to cover the reasonable costs of  
          the development, establishment, and operation of the program  








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          without exceeding those costs. Given this requirement,  
          presumably revenues through 2025 should be in the millions of  
          dollars. However, if the bill ultimately specifies a cap amount  
          that prevents the collection of sufficient revenue for the  
          operation of the card program, this program will have cost  
          pressures on the General Fund. Staff recommends that given the  
          limitations of fee recovery under this bill, and the inherent  
          limitation on fees from Proposition 26, a fee cap is unnecessary  
          and should be deleted. 

          Staff notes that the phase-in period for the card requirement (8  
          years) does not correspond to the bill's three-year loan  
          repayment requirement to the HWRF. As a result, the fee for the  
          persons getting a card in the first few years will necessarily  
          be significantly higher in order to provide revenue sufficient  
          to cover both the loan repayment and ongoing operation costs  
          compared to the later years when the fee only needs to cover  
          ongoing operation costs. The relatively high cost for an  
          operator card in the early years may discourage people from  
          voluntarily obtaining a vessel operator card earlier than the  
          law would require. Staff recommends that the loan repayment  
          period and the phase-in period be better matched. 

          This bill requires the division to approve site-specific rental  
          vessel operator examinations. Presumably the beneficiaries of  
          such a site-specific test are the vessel rental companies in  
          that area. Staff notes that if the division anticipates a large  
          number of requests for site-specific examinations, it may be  
          appropriate to allow the division to charge a separate one-time  
          fee for this approval instead of having all boaters statewide  
          pay for this activity through card fees. 

          This bill requires the division to report annually on the total  
          number of violations of the card requirement and the number of  
          accidents related to vessel operation, among other things. Staff  
          notes that the division will have limited information for these  
          reporting requirements. In regards to accidents, under existing  
          law, the division is only required to be notified of accidents  
          that cause more than $500 in damage or complete destruction of  
          the vessel. In regards to violations of the card requirement,  
          local law enforcement is likely to issue most, if not all, of  
          the violations. This bill does not require local law enforcement  
          to notify the division of the violations and it is unclear  
          whether all local law enforcement would track this data in the  








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          absence of a state mandate. DPR notes that their ongoing costs  
          assume one PY solely for the staff time that would be necessary  
          for this reporting requirement. 

          The bill requires that the Vessel Operator Certification Account  
          receive a $4 million loan from the HWRF upon appropriation by  
          the Legislature. Given that the HWRF currently has a reserve of  
          approximately $30 million, staff believes that a $4 million loan  
          can likely be made without impairing the intended expenditures  
          of the HWRF, which is a condition required by the bill. 

          Staff notes that there are technical issues that may need to be  
          resolved. Specifically, it is unclear if the requirement for an  
          operator of a rented vessel to have an operator card after 2018  
          overrides the phase-in date based on age. That is, for example,  
          would a 50-year old need an operator card to rent a vessel in  
          2018?

          This bill constitutes a mandate because it creates a new crime.  
          However this mandate is not reimbursable.

          Author Amendments: Sets the maximum fee at $30 for the operator  
          card and $10 for a replacement, extends the loan to 2023 (8  
          years), exempts a person who has an international license from  
          the operator card requirement, allows the division to charge a  
          separate one-time fee for approving a site-specific examination,  
          modifies the reporting requirements, and other technical  
          amendments.