BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 904 (Perea) - Air Quality Improvement Program: Clean Reused Vehicle Rebate Project ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: July 13, 2015 |Policy Vote: T. & H. 9 - 0, | | | E.Q. 5 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 17, 2015 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 904 would require the State Air Resources Board (ARB) to establish a Clean Reused Vehicle Rebate Project (CRVRP) within the Air Quality Improvement Program (AQIP) by July 1, 2017 to provide rebates or incentives for eligible consumers for the acquisition of used clean vehicles, or for extended warranties or batteries and related components for eligible used vehicles. Fiscal Impact: ARB estimates it would incur costs of approximately $700,000 AB 904 (Perea) Page 1 of ? and 4 PY of staff to develop and administer the program. (Air Quality Improvement Fund or Greenhouse Gas Reduction Fund - GGRF) Program costs (local assistance), likely in the tens of millions annually (Air Quality Improvement Fund or GGRF). For illustrative purposes, ARB has issued an average of over $45 million annually in rebates under CVRP since 2010. Background: Existing law establishes AQIP, which is administered by ARB in consultation with local air districts, to provide competitive grants to fund projects to reduce criteria air pollutants, improve air quality, and support research to improve the air quality impacts of alternative fuels and vehicles, vessels, and equipment technologies. AQIP encompasses several programs and is partially funded through 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), as well as GGRF monies. Existing law establishes the Clean Vehicle Rebate Program (CVRP), within the AQIP, to promote accelerated widespread commercialization of zero-emission vehicles by providing rebates of up to $5,000 for the purchase or lease of an eligible light-duty vehicle. This program was not created through statute, but developed and initiated by ARB pursuant to its existing statutory authority through AQIP. As of June 23, 2015, 109,660 CVRP rebates ($231.8M) have been issued since March 2010. There is no cap on the number of rebates that may be issued, but rebates are subject to funding availability and the program has been oversubscribed during several fiscal years. Existing law establishes the Enhanced Fleet Modernization Subaccount to implement the Enhanced Fleet Modernization Program (EFMP), which was developed by ARB in consultation with the Bureau of Automotive Repair, and allows for the voluntary retirement of high-polluting passenger vehicles and light-duty and medium-duty trucks. EFMP is funded by an additional $1 surcharge on vehicle registrations, and has both a local and state administered component. Under the statewide component, ARB administers the Consumer Assistance Program (CAP), in consultation with the Bureau of AB 904 (Perea) Page 2 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 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. Proposed Law: AB 904 would require ARB to establish CRVRP by July 1, 2017 to provide an applicant who is a low- or moderate-income consumer residing in a disadvantaged community with any of the following incentives for a single vehicle: A rebate or other incentive with a value of up to $1,800 for the acquisition of an eligible used vehicle from a licensed dealer. A rebate or other incentive for the replacement or refurbishment of a battery and related components of an eligible used vehicle, or an extended warranty for those items, or both. A rebate or other incentive 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. AB 904 (Perea) Page 3 of ? This bill would also do the following: Limit eligibility to battery electric, plug-in hybrid, and fuel cell vehicles that have been sold or registered for operation on highways, as specified. Limit the issuance of rebates or incentives to one per vehicle to an applicant who is a low- or moderate-income consumer residing in a disadvantaged community that is located in one of the following: (1) a county where less than two percent of rebates have been issued under the CVRP, or (2) an air district designated as being in nonattainment with federal ambient air quality standards. Require ARB to coordinate the CRVRP with the CRRP, the EFMP, and the Charge Ahead Initiative, including all of the following: (1) coordinating eligibility with eligibility for EFMP; (2) ensuring appropriate outreach and targeting to eligible households to encourage participation; and (3) expanding financing mechanisms, including a loan or loan-loss reserve credit enhancement program and prequalification or point-of-sale rebates, as specified. Require ARB to establish safeguards to prevent both fraudulent activity by sellers and acquirers of eligible used vehicles and practices that could prevent targeted consumers from benefiting from the program. Staff Comments: AB 904 would limit participation to applicants in disadvantaged communities in counties where less than two percent of rebates have been issued under the CVRP, or in an air district designated as being in nonattainment with federal ambient air quality standards. This would limit participation to applicants in disadvantaged communities in the following 25 counties: Butte, Fresno, Imperial, Kern, Kings, Los Angeles, Madera, Merced, Monterey, Orange, Riverside, San Bernardino, Sacramento, San Bernardino, San Joaquin, Santa Barbara, Santa Cruz, Solano, Stanislaus, Tehama, Tulare, Ventura, Yolo, and Yuba. This bill establishes a rebate program for used clean vehicles, and specifies that CRVRP may only provide one voucher per vehicle. Staff notes that it would be difficult to determine whether a used vehicle eligible for a CRVRP received a voucher AB 904 (Perea) Page 4 of ? under CVRP when it was first purchased. While the bill would make clean vehicles more accessible to lower income applicants who may not be able to purchase a new clean vehicle, it is likely that the program would result in multiple state vouchers being issued for the purchase of the same vehicle (with a CVRP rebate when purchased new, and with a CRVRP rebate when purchased as a used vehicle). Staff notes that there has been high demand for rebates issued under the existing CVRP; it has been fully subscribed in past years, and oversubscribed in several fiscal years. The creation of a second AQIP rebate program through the proposed CRVRP would likely mean that fewer resources could be dedicated to the existing CVRP. The programs would compete for the same funding sources (the Air Quality Improvement Fund and GGRF). In addition, there are currently several other programs that provide state incentives towards the purchase of used clean vehicles in disadvantaged communities in nonattainment areas, including the "Plus-Up" Program and "retire and replace" program under the EFMP. This bill creates a new incentive program that would be duplicative of those programs, with the distinction that this bill is also targeted to counties that have not received a high proportion of incentives under the CVRP. ARB indicates it would need 4 additional PY of staff at a cost of approximately $700,000 to develop and administer the CRVRP created by this bill. Staff notes, however, that there are only 3 PY of staff dedicated to the current CVRP, and 3.5 PY dedicated to the EFMP "retire and replace" program. To the extent the program created by this bill diverts funding away from these existing programs, ARB's staffing costs could be partially offset by reductions to existing programs. -- END -- AB 904 (Perea) Page 5 of ?