BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1275 (De León) - Charge Ahead California Initiative.
          
          Amended: May 6, 2014            Policy Vote: T&H 11-0; EQ 6-1
          Urgency: No                     Mandate: No
          Hearing Date: May 23, 2014      Consultant: Mark McKenzie
          
          SUSPENSE FILE.
          
          
          Bill Summary: SB 1275 would establish the Charge Ahead  
          California Initiative, to be administered by the Air Resources  
          Board (ARB) with the goals of placing at least 1 million  
          zero-emission and near-zero-emission vehicles in service by  
          2023, to create a self-sustaining industry for these vehicles,  
          and increase access to those vehicles in disadvantaged  
          communities.  The bill would require ARB to consult with  
          specified entities and stakeholders to adopt a funding plan for  
          specified programs to meet the goals of the Initiative, require  
          ARB to make specified changes to certain vehicle rebate and  
          voucher incentive programs, and establish specified new  
          programs.  The bill would also require ARB to expand the  
          Enhanced Fleet Modernization Program to allow for public  
          transportation and car-sharing vouchers as an alternative to  
          vehicle replacement vouchers.

          Fiscal Impact: 
              ARB indicates it will incur costs of approximately $619,000  
              and 4 PY in 2014-15, and ongoing costs of $454,000 and 3 PY  
              ongoing to adopt the specified funding plan and administer  
              the components of that plan.  (Greenhouse Gas Reduction Fund  
              -GGRF) 

              ARB indicates it will incur ongoing costs of approximately  
              $165,000 and 1 PY beginning in 2014-15 to develop and  
              administer each of the following new programs specified in  
              the bill: a loan-loss credit enhancement program, a car  
              sharing program in disadvantaged communities, and deployment  
              of a charging infrastructure program. (GGRF) Actual costs  
              and staffing needs would depend upon the amount of funding  
              dedicated to the specified programs.

              ARB indicates it will incur annual costs of $344,000 and 2  








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              PY, beginning in 2016-17, to develop and implement a  
              certification program for truck and bus hybrid and  
              zero-emission vehicle retrofits and remanufactures. (GGRF)

              Unknown ongoing costs to fund additional program  
              expenditures, likely in the millions to tens of millions  
              annually. (GGRF)

          Background: Existing law, AB 118 (Nunez), Chap. 750/2007,  
          established additional surcharges and fees on vehicle and vessel  
          registrations and certain identification plates, and increased  
          the smog abatement fee as funding sources for several new air  
          quality and emission reduction programs.  The fees and  
          surcharges established by AB 118 provide approximately $180  
          million annually for the following programs.

          The Enhanced Fleet Modernization Program (EFMP) is administered  
          by ARB in consultation with the Bureau of Automotive Repair for  
          vehicle retirement, and in consultation with 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.  Under the state  
          retirement component of EFMP, the owner of a high-polluting  
          vehicle may apply to ARB for a voucher of up to $1,500 towards a  
          replacement vehicle under specified conditions.  Under the local  
          replacement component of EFMP, the owner of a high-polluting  
          vehicle may apply to participating local air quality management  
          districts for a voucher of up to $2,500 towards a replacement  
          vehicle or a public transit voucher, as specified.   
          Approximately 25,000 high-polluting vehicles were retired  
          through the state component of EFMP in 2012-13.  Less than two  
          dozen replacement vouchers have been issued under the local  
          component of EFMP since its inception in 2010.

          The Alternative and Renewable Fuel and Vehicle Technology  
          Program (ARFVTP) is administered by the State Energy Resources  
          Conservation and Development Commission (CEC) to provide funding  
          for development and deployment of alternative and renewable  
          fuels and advanced transportation technologies to help attain  
          the state's climate change goals.  Eligible projects include,  
          among other things, improvement of light-, medium-, and  
          heavy-duty vehicle technologies, and retrofitting medium- and  
          heavy-duty on-road and off-road vehicle fleets.  









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          The Air Quality Improvement Program (AQIP) is comprised of three  
          programs administered by ARB in conjunction with local air  
          districts that provide, among other things, vouchers for the  
          purchase of hybrid and zero-emission trucks and buses, and  
          grants that fund advanced technology vehicle, equipment, or  
          emission-control projects that are not yet commercialized.   
          Specifically AQIP includes the following component programs:  
           The Clean Vehicle Rebate Program (CVRP), administered by ARB's  
            contractor, the California Center for Sustainable Energy,  
            provides rebates of up to $2,500 for purchasing or leasing a  
            new zero-emission vehicle (ZEV) or plug-in hybrid electric  
            vehicle.  

           The Hybrid and Zero-Emission Truck and Bus Voucher Incentive  
            Project (HVIP), administered by ARB and its contractor  
            CALSTART, provides vouchers to California fleet owners to help  
            purchase hybrid and zero-emission trucks and buses.

           AB 118 Advanced Technology Demonstration Projects,  
            administered by ARB, provides grants to local air districts  
            and other public agencies to fund advanced-technology vehicle,  
            equipment, or emission-control projects that are not yet  
            commercialized.

           The On-Road Heavy-Duty Vehicle Air Quality Loan Program (Truck  
            Loan Assistance Program), administered by ARB and the  
            California Pollution Control Financing Authority, provides  
            loans to fleets to help implement ARB emissions reduction  
            regulations related to trucks, buses, and heavy-duty  
            (tractor-trailer) vehicles.   

          Existing law, AB 32 (Nunez), Chap. 488/2006, requires ARB to  
          adopt greenhouse gas (GHG) emission reduction measures to ensure  
          that statewide emissions are reduced to 1990 levels by 2020.  As  
          part of the implementation of AB 32 market-based compliance  
          measures, ARB adopted a cap-and-trade program that caps the  
          allowable statewide emissions and provides for the auctioning of  
          emission credits, the proceeds of which are quarterly deposited  
          into the GGRF.   Existing law, SB 535 (deLeón), Chap. 830/2012,  
          requires that a minimum of 10 percent of cap-and-trade revenues  
          fund projects located within disadvantaged communities, and that  
          25 percent of available revenues fund projects that benefit  
          those communities.  To date, ARB has conducted six auctions of  
          GHG emission allowances, generating approximately $663 million.








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          Proposed Law: SB 1275 would require ARB to update the EFMP  
          guidelines to ensure that public transit or car sharing vouchers  
          are available as an alternative to vehicle replacement vouchers,  
          and that those vouchers be equal in value to a vehicle  
          replacement voucher.  Car sharing is defined as a model of  
          vehicle rental where users who are preapproved members can rent  
          vehicles for short periods of time.

          SB 1275 would also require ARB to administer a new Charge Ahead  
          California Initiative with the goals of placing at least 1  
          million zero-emission and near-zero-emission vehicles in service  
          by 2023, to create a self-sustaining industry for these  
          vehicles, and increase access to, and placement of those  
          vehicles in disadvantaged communities.  The bill would require  
          ARB, in consultation with CEC, air districts, and public  
          stakeholders to do the following:
                 Adopt a plan by June 30, 2015 that establishes an  
               estimate of the total funding necessary for specified  
               programs and projects to meet the Initiative's goals.  The  
               programs funded would include the CVRP, HVIP, various  
               components of the ARFVT, precommercial demonstration  
               projects of advanced freight and transit technology for  
               goods and passenger movement, and specified new programs.
                 Update the funding plan at least every three years  
               through January 1, 2023.
                 Adopt revisions to CVRP criteria and guidelines by June  
               30, 2015 to ensure rebate levels are phased down in  
               multiyear increments and to expand access and eligibility  
               to low- and moderate-income persons, as specified.
                 Adopt revisions to HVIP by June 30, 2015 to ensure  
               program eligibility for a truck and bus retrofitted or  
               remanufactured to be a zero- or near-zero-emission vehicle.
                 Establish programs that increase access and benefits for  
               disadvantaged and low- and moderate-income communities from  
               electric transportation, including: loan and loss reserve  
               financing, car sharing programs, and charging  
               infrastructure in multi-unit dwellings in disadvantaged  
               communities.
                 Require these new programs to provide adequate outreach  
               to disadvantaged and low- and moderate-income communities.

          Related Legislation: SB 1204, currently pending in this  
          Committee, would require ARB, in conjunction with the CEC, to  








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          administer a California Clean Truck, Bus, and Off-Road Vehicle  
          and Equipment Technology Program to fund specified projects to  
          develop and demonstrate technologies for zero- and near-zero  
          emission medium and heavy duty trucks, buses, and off-road  
          vehicles and equipment.  Funding for the program would be from  
          the GGRF and priority would be given to projects located in  
          disadvantaged communities.  

          Staff Comments: SB 1275 requires ARB, in consultation with  
          specified entities to adopt a financing plan to fund specified  
          projects and programs at a level that is necessary to achieve  
          the specified goals.  As noted above, the various  
          vehicle-related fees and surcharges imposed under AB 118 provide  
          approximately $180 million annually to fund most of the programs  
          identified in this bill, but it is unlikely that this amount is  
          sufficient to also meet the goals of the Charge Ahead California  
          Initiative.  Although the bill does not explicitly authorize the  
          use of GGRF funds, the findings and declarations in the bill  
          state that low carbon transportation, low-carbon freight, and  
          zero-emission passenger transportation are eligible and  
          recommended expenditures from the GGRF.  It is unclear how much  
          additional revenues would be needed to both maintain existing  
          expenditures on AB 118 programs and make the additional  
          investments specified in this bill, but staff estimates the bill  
          could require additional allocations in the millions to tens of  
          millions, which could be from the GGRF.

          The Governor's 2014-15 proposed budget includes appropriations  
          of $850 million in cap-and-trade revenues to fund various  
          projects and programs designed to reduce GHG emissions.  As part  
          of the Administration's overall strategy, ARB submitted a Budget  
          Change Proposal (BCP) requesting $200 million from the GGRF and  
          15 PY of staff to support the expansion of existing clean  
          transportation programs that provide incentives for sustainable  
          freight technology, zero and low-emission vehicles, and clean  
          trucks and buses.  According to the BCP, these funds would  
          benefit disadvantaged communities through the retirement and  
          replacement of older, high-emitting vehicles with low-emission  
          passenger vehicles in these communities, and supporting the  
          demonstration of advanced freight technology to move cargo,  
          which will benefit communities near freight hubs.  This proposal  
          is consistent with the May 2013 Cap-and-Trade Auction Proceeds  
          Investment Plan, which emphasizes investments in existing  
          programs in sectors which have the greatest GHG emissions,  








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          namely transportation, energy, waste, and natural resources,  
          with proposed investments commensurate with relative emissions.   
          Investment in existing programs, rather than creating new  
          programs, expedites investments in GHG-reducing projects.  The  
          Legislature has yet to act on the Administration's proposal, but  
          it could be modified through the budget process to incorporate  
          the goals and expenditures envisioned by this bill.