BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      AB 88


                                                                    Page  1





          Date of Hearing:  May 27, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          88 (Gomez) - As Amended May 20, 2015


           ----------------------------------------------------------------- 
          |Policy       |Revenue and Taxation           |Vote:|9 - 0        |
          |Committee:   |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |
           ----------------------------------------------------------------- 


          Urgency:  Yes State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill establishes, beginning the first day of the first  
          calendar quarter commencing more than 90 days after the  
          effective date, and until December 31, 2020, a sales and use tax  
          exemption for any energy or water efficient refrigerator or  
          clothes washer purchased by a public utility and provided at no  
          cost to a participant in a federal, state, or ratepayer-funded  
          energy efficiency program.  The bill requires that any amount  
          saved by the public utility as a result of not paying the sales  
          and use tax must be used to purchase additional energy and water  
          efficient appliances to be provided at no cost to low-income  
          participants in energy efficient programs.









                                                                      AB 88


                                                                    Page  2






          FISCAL EFFECT:


          1)Minor and absorbable costs to the Board of Equalization (BOE)  
            to update systems and procedures.


          2)Estimated revenue decreases for the state and local  
            jurisdictions of $4.5 million per year, $2.1 million of which  
            is from the General Fund.


          COMMENTS:


          1)Purpose.  According to the author, this bill helps further the  
            state's environmental and energy efficiency goals by reducing  
            energy and water consumption while reducing costs for a  
            greater number of low-income customers.  Proponents note that  
            following an audit in 2014, BOE determined there is no  
            exemption for energy or water efficient appliances purchased  
            by public utilities and provided, at no cost, to qualified  
            low-income customers participating in energy efficiency  
            programs.  As a result, BOE established a sales tax for these  
            appliances.  The author believes appliance replacement  
            programs already serve too few of those who qualify, and an  
            additional sales tax only weakens the effectiveness of those  
            programs.


          2)County Opposition.  The California State Association of  
            Counties (CSAC) opposes the bill because it exempts the  
            qualifying purchases from all state and local sales and use  
            taxes.  Total revenue losses are estimated to be $4.5 million  
            per year, with local governments suffering the majority of  
            those losses.  CSAC argues almost half of county revenue is  
            derived from sales and use tax, and much of that revenue is  
            used to provide local public safety services, criminal justice  








                                                                      AB 88


                                                                    Page  3





            and rehabilitation services, and child welfare services.  CSAC  
            has requested AB 88 be further narrowed to apply only to the  
            state portion of the sales tax.


          3)The Energy Savings Assistance Program.  In general, the  
            state's Energy Savings Assistance Programs (ESAP) provide  
            no-cost services to low-income households to improve energy  
            efficiency, such as weatherization and insulation.  Certain  
            ESAP customers may also be eligible to receive  
            energy-efficient replacement appliances, for example when  
            older units are either too old or inefficient to reasonably  
            repair, or when those units are unsafe.  The author notes ESAP  
            helps reduce energy and water consumption while lowering  
            utility costs for low-income customers.  The program also  
            fosters safer recycling of older appliances, helping to reduce  
            illegal dumping and ensuring hazardous components are handled  
            properly.


            According to the California Public Utilities Commission,  
            preliminary 2014 ESAP expenditures for the four largest  
            investor-owned utilities was $230 million, reflecting a broad  
            range of purchased appliances and devices, as well as  
            installation costs.








          Analysis Prepared by:Joel Tashjian / APPR. / (916)  
          319-2081












                                                                      AB 88


                                                                    Page  4