BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 904 (Perea) - Air Quality Improvement Program:  Clean Reused  
          Vehicle Rebate Project
          
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          |Version: July 13, 2015          |Policy Vote: T. & H. 9 - 0,     |
          |                                |          E.Q. 5 - 1            |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 17, 2015   |Consultant: Mark McKenzie       |
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          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  







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            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  








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          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.









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          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  








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          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.




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