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 SB 941 (Monning) Page 1 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 SB 941 (Monning) Page 2 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 SB 941 (Monning) Page 3 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 SB 941 (Monning) Page 4 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.