BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 904            Hearing Date:    7/7/2015
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          |Author:   |Perea                                                 |
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          |Version:  |6/23/2015                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Erin Riches                                           |
          |:         |                                                      |
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          SUBJECT:  Air Quality Improvement Program:  Clean Reused Vehicle  
          Rebate Project


            DIGEST:  This bill establishes a new program to provide  
          incentives for the purchase or lease of used clean vehicles.

          ANALYSIS:
          
          Air Quality Improvement Program (AQIP)

          Existing law establishes AQIP, which is administered by the  
          state Air Resources Board (ARB) in consultation with local air  
          districts.  AQIP is funded through, among other things,  
          surcharges on vehicle registration fees and a portion of the  
          Smog Abatement Fee (paid to register vehicles less than six  
          model years old and therefore exempt from smog check).  AQIP  
          also receives a significant amount of Greenhouse Gas Reduction  
          Fund (GGRF) monies.  AQIP, which encompasses multiple programs,  
          provides competitive grants to fund projects to improve the air  
          quality impacts of alternative fuels and vehicles, vessels, and  
          equipment technologies.  

          Clean Vehicle Rebate Project (CVRP)

          CVRP, which is part of AQIP, is administered by ARB's  
          contractor, the California Center for Sustainable Energy.  CVRP  
          provides a rebate of up to $5,000 for purchasing or leasing a  
          new zero-emission vehicle or plug-in hybrid electric vehicle.   
          Specifically, a consumer may obtain a $5,000 rebate for a  







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          hydrogen fuel-cell vehicle; a $2,500 rebate for a zero-emission,  
          battery electric vehicle; a $1,500 voucher for a plug-in hybrid  
          electric vehicle; or a $900 rebate for a neighborhood electric  
          vehicle.

          As of June 8, 2015, CVRP had issued 107,885 rebates ($228  
          million).  There is no cap on the number of rebates which may be  
          issued, but rebates are subject to funding availability and the  
          program has more than once been forced to stop issuing rebates  
          and create a waiting list due to funds running out.  A consumer  
          can apply for a rebate within 18 months of purchasing or leasing  
          an eligible vehicle.  The consumer must retain ownership of the  
          vehicle in California for at least 30 consecutive months after  
          the purchase or lease date or reimburse ARB for part or all of  
          the rebate amount.  The consumer must also agree to other  
          conditions, such as not tampering with the emissions control  
          system of the vehicle.  Rebates are distributed on a first-come,  
          first-served basis and issued within 90 days of application  
          approval.  

          Enhanced Fleet Modernization Program

          Existing law also establishes the Enhanced Fleet Modernization  
          Program (EFMP) under ARB.  EFMP provides for the voluntary  
          "retirement" (scrappage) of high-polluting passenger vehicles  
          and light- and medium-duty trucks.  The vehicle must be  
          currently registered as operable and must have been continuously  
          registered for two years prior to the application, unless the  
          owner can demonstrate that the vehicle has been operated in  
          California during that period.  EFMP is funded by an additional  
          $1 surcharge on the vehicle registration fee.  EFMP has a  
          statewide component and a local component.  

          Under the statewide component, ARB administers the Consumer  
          Assistance Program (CAP), in consultation with the Bureau of  
          Automotive Repair.  This program offers a $1,500 voucher to  
          low-income vehicle owners, or a $1,000 voucher to other owners,  
          to retire a high-polluting vehicle.  CAP is funded by $6 of the  
          Smog Abatement Fee, in addition to citation fees imposed by the  
          Bureau of Automotive Repair on smog stations.

          Under the local component, ARB administers a program, authorized  
          in the San Joaquin Valley and South Coast air districts, to  
          replace high-polluting vehicles.  In addition to the  
          "retirement" vouchers described above, the local EFMP program  








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          offers a $2,500 "replacement" voucher to low-income vehicle  
          owners to replace a high-polluting vehicle by either purchasing  
          a vehicle eight years old or newer, or using the voucher toward  
          public transit.  

          ARB is also currently implementing the new EFMP Plus-Up Program  
          (Plus-Up) in the San Joaquin and South Coast air districts.   
          Plus-Up provides additional incentives above and beyond EFMP  
          base incentives for individuals in disadvantaged communities who  
          retire high-polluting vehicles and replace them with used or new  
          hybrid, plug-in hybrid, or zero-emission vehicles.  Eligible  
          participants can receive additional incentives ranging from  
          $1,500 to $5,000, depending on the vehicle type that is  
          purchased.  The EFMP, Plus-Up, and CVRP rebates can be "stacked"  
          for a total of up to $12,000.

          Charge Ahead Initiative

          In March 2012, Governor Brown issued an Executive Order setting  
          a goal of 1.5 million zero-emission vehicles on California roads  
          by 2025.  SB 1275 (De León, Chapter 530, Statutes of 2014)  
          builds on this goal by establishing the Charge Ahead California  
          Initiative at ARB, which outlines a vision of placing 1 million  
          electric cars, trucks, and buses on California's roads by 2023.   
          SB 1275 directs ARB to provide incentives to increase the  
          availability of zero-emission vehicles and near-zero-emission  
          vehicles, particularly in disadvantaged communities.  Pursuant  
          to SB 1275, ARB's FY 2015-16 Funding Plan, which will be voted  
          on by the ARB board on June 25, 2015, includes, among other  
          programs and actions:

          1)An income eligibility cap for CVRP that would exclude the  
            higher income consumers most likely to purchase a  
            zero-emission vehicle without a CVRP rebate;

          2)Higher rebate levels under CVRP for lower income consumers  
            most in need of financial incentives to purchase a  
            CVRP-eligible vehicle; 

          3)A new pilot project to create vanpooling for Central Valley  
            agricultural workers; and

          4)Expansion of the four existing pilot projects, including  
            increased incentives for public fleets to purchase  
            CVRP-eligible vehicles, advanced technology car-sharing and  








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            mobility options, increased EFMP incentives for vehicle  
            replacement, and financing assistance.

          This bill:

          1)Requires ARB to establish a Clean Reused Vehicle Rebate  
            Project (CRVRP) by July 1, 2017, to provide an applicant with  
            any of the following:

             a)   A rebate or other incentive of up to $2,500 for  
               acquisition of an eligible used vehicle from a licensed  
               dealer.
             b)   A rebate or other incentive of an unspecified dollar  
               amount for the replacement or refurbishment of a battery  
               and related components for an eligible used vehicle, for an  
               extended warranty for the battery and related components,  
               or for both.
             c)   A rebate or other incentive of an unspecified dollar  
               amount for an extended service warranty to cover unexpected  
               vehicle repairs not covered by the manufacturer's warranty  
               related to unique problems in eligible used vehicles.  

          1)Limits rebates or other incentives issued under this program  
            to one per vehicle.  

          2)Limits rebates or other incentives issued under this program  
            to low- and moderate-income consumers living in disadvantaged  
            communities.

          3)Requires ARB to coordinate CRVRP with CVRP, EFMP, and the  
            Charge Ahead Initiative, to, including but not limited to:

             a)   Coordinate CRVRP eligibility with EFMP eligibility.
             b)   Ensure appropriate outreach and targeting to low- and  
               moderate-income communities.
             c)   Expand financing mechanisms, including but not limited  
               to a loan or loan-loss reserve credit enhancement program  
               to increase consumer access to zero-emission and  
               near-zero-emission financing and leasing options, to help  
               increase participation rates among low- and moderate-income  
               consumers.

          1)Requires ARB to establish safeguards for CRVRP to prevent  
            fraudulent activity by sellers and acquirers of eligible used  
            vehicles and practices that could prevent intended CRVRP  








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            recipients from benefiting from this program.

          COMMENTS:

          Purpose.  The author states that although Fresno County is one  
          of the most polluted areas in the state, it accounts for less  
          than 1% of CVRP rebates.  According to ARB's CalEnviroScreen 2.0  
          data, Fresno County includes eight of the top 10 most  
          disadvantaged communities in California.  In order for a  
          successful deployment of clean cars, more efforts need to be  
          made to target disadvantaged communities.  The author states  
          that this bill would create a secondary clean vehicle  
          marketplace that is more affordable than the new clean vehicle  
          market.  The new CRVRP would enable low- and middle-income  
          buyers to participate in the clean economy.  The author notes  
          that more than 100,000 clean vehicles have been sold or leased  
          in California in the past four years; with clean vehicle leases  
          approaching their expiration date, the time is opportune for  
          more Californians to own a clean vehicle.

          Should the state provide double vouchers?  While this bill  
          provides that CRVRP may only provide one voucher per vehicle, it  
          does not address whether a vehicle may also receive a CVRP  
          voucher.  The intent of CVRP is to help put more clean vehicles  
          on the roads; while providing an additional voucher to a vehicle  
          under CRVRP would help low- and moderate-income buyers and  
          leasers obtain a used clean vehicle, it would not actually put  
          an additional clean vehicle on the road.  The committee may wish  
          to consider amending this bill to exclude vehicles that have  
          already received a CVRP voucher.  The committee may also wish to  
          consider amending this bill to eliminate or reduce the cash  
          rebate option.  

          Duplicative of other efforts?  Pursuant to several legislative  
          directives, ARB is currently in the process of implementing  
          multiple programs aimed at helping to get low- and middle-income  
          consumers into the clean car market.  The committee may wish to  
          consider whether it is necessary to add another program to the  
          mix.
          
          Where will the money come from?  This bill does not specify a  
          funding source for CRVRP.  Currently, CVRP is highly subscribed  
          and has more than once run out of funds midyear and been forced  
          to establish a waiting list.  It is unclear whether a new  
          funding source will be established for CRVRP or it if it might  








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          be part of CVRP.  

          Targeting the program.  The author states that the primary  
          purpose of this program is to get more clean vehicles into areas  
          with extreme air quality issues.  The committee may wish to  
          consider amending this bill to be a pilot program in the San  
          Joaquin Valley Air Pollution Control District.

          Double referred.  This bill has also been referred to the  
          Environmental Quality Committee.  

          RELATED Legislation:
          
          AB 1176 (Perea) - would establish an Advanced Low-Carbon Diesel  
          Fuels Access Program to fund low-carbon diesel fueling  
          infrastructure projects in communities that are  
          disproportionately impacted by environmental hazards and where  
          the greatest air quality impacts can be identified.  AB 1176  
          passed out of this committee on a 10-0 vote on June 30th.  

          SB 1275 (De León, Chapter 530, Statutes of 2014) - established  
          the Charge Ahead California Initiative under ARB to provide  
          incentives to increase the availability of zero-emission  
          vehicles and near-zero-emission vehicles, particularly in  
          disadvantaged communities.  

          SB 459 (Pavley, Chapter 437, Statutes of 2013) - required ARB,  
          in consultation with the Bureau of Automotive Repair, to update  
          EFMP regulations by June 30, 2015.  SB 459 required the  
          guidelines to include a variety of new policies, including  
          allowing for retirement and replacement vouchers of larger  
          amounts, focusing the program more heavily on lower-income  
          owners, and streamlining program requirements to facilitate  
          participation.  

          SB 535 (De León, Chapter 830, Statutes of 2012) - requires the  
          Department of Finance, when developing the three-year investment  
          plan for cap-and-trade monies, to allocate 25% of these funds to  
          projects that provide benefits to disadvantaged communities, and  
          at least 10% to projects located within disadvantaged  
          communities.  

          Assembly Votes:

            Floor:    58-20








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            Appr:     12-5
            Trans:    14-2
          
          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  Yes     
          Local:  No


            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          July 1, 2015.)
          
            SUPPORT:  

          American Lung Association in California
          California Environmental Justice Alliance
          Coalition for Clean Air
          Environment California
          Greenlining Institute
          Latino Coalition for a Healthy California 
          Natural Resources Defense Council
          San Joaquin Valley Air Pollution Control District
          Union of Concerned Scientists

          OPPOSITION:

          None received

                                      -- END --