BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1851


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          Date of Hearing:  May 11, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          1851 (Gray) - As Amended April 13, 2016


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          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          SUMMARY:


          This bill creates and expands a broad array of incentives to  
          increase the sales of clean air vehicles. Specifically, this  
          bill: 









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          1)Requires the Air Resources Board, beginning January 1, 2017,  
            until January 1, 2026, to provide the following Clean Vehicle  
            Rebate Program (CVRP) rebates, on the first $60,000 of the  
            manufacturer's suggested retail price (MSRP) or the final  
            sales price, whichever is lower:


             a)   10% qualified plug-in hybrid electric vehicles;
             b)   15%  for qualified plug-in battery-electric vehicles;  
               and, 


             c)   25%  for qualified fuel cell vehicles;


          2)Requires the following rebates, as in (1), for residents of  
            disadvantaged communities:


             a)   40% for qualified plug-in hybrid electric vehicles;
             b)   45% for qualified plug-in battery-electric vehicles;  
               and, 


             c)   55% for qualified fuel cell vehicles.


          3)Requires the ARB to suspend the CVRP pre-approval process if  
            there are insufficient funds available to award CVRP  
            incentives and to provide dealers and consumers with no less  
            than 


          30-days advanced notice if the pre-approval process is to be  
            suspended.
          4)Requires the ARB, until January 1, 2026, to issue rebates to a  
            property owner or lessee for the purchase and installation of  
            up to two electric vehicle (EV) charging stations on  








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            residential properties, for residents of disadvantaged  
            communities, and up to 10 EV charging stations on commercial  
            or multifamily properties, with rebates provided as follows:


             a)   $2,000 for the first year of installation;


             b)   $1,500 following the first year of installation; and,


             c)   $1,000 following the second year of installation.


          5)Requires that monies in the Greenhouse Gas Reduction Fund  
            (GGRF) be available, upon appropriation by the Legislature,  
            for the enhanced CVRP rebates and the charging station  
            rebates.


          6)Removes the cap on the green sticker program, thereby allowing  
            an unlimited number of qualifying vehicles (plug-in electric  
            hybrid vehicles) access to high-occupancy vehicle lanes with  
            single occupants.


          7)Excludes until January 1, 2026, from the sales price or gross  
            receipts on which Sales and Use Tax (SUT) is imposed, the  
            value of a motor vehicle traded in for a "qualified motor  
            vehicle" (QMV), which is defined as meeting either:


             a)   California's super ultra-low emission vehicle standard  
               for exhaust emissions and the federal inherently  
               low-emission vehicle evaporative emission standard, as  
               defined in Part 88 of Title 40 of the Code of Federal  
               Regulations as that part read on January 1, 2016; or,










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             b)   California's enhanced advanced technology partial  
               zero-emission vehicle standard or transitional  
               zero-emission vehicle standard.


          8)Provides that moneys from the GGRF, upon appropriation of the  
            Legislature, are available to reimburse counties and cities  
            for any SUT revenue losses resulting from the SUT exclusion.


          FISCAL EFFECT:


          1)To create and expand various incentive programs, annual  
            administrative costs to the ARB will be around $800,000  
            ongoing for five full-time positions plus part-time legal  
            support. [GGRF]


          2)CVRP Enhancements. The potential cost of the increased rebate  
            amounts will put substantial funding pressure on the CVRP. The  
            total cost will depend on the number, type, and MSRP of  
            vehicles for which rebates are obtained and the proportion of  
            vehicles sold to resident of disadvantage communities and thus  
            eligible for the much higher rebates. According to the ARB,  
            the current CRVP could fund rebates for up to 55,000 in  
            2015-16 at a cost of $123 million. (In the 12 months ending  
            March 31, 2016, almost 48,000 rebates were issued at cost of  
            $103 million.) Based on assumptions about the factors  
            discussed above, providing rebates pursuant to this bill for  
            55,000 vehicles could cost over $500 million. [GGRF]


          3)Charging Stations. Cost are unknown, but likely in the tens of  
            millions of dollars annually. [GGRF]


          4)Tax Exemption. The General Fund revenue loss associated with  
            the SUT exemption is estimated at $40 million in 2017-18, and  








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            would likely increase slightly each year assuming increase  
            sales of qualifying vehicles. Of this amount, about $21  
            million would be a revenue loss to cities and counties, which,  
            subject to an appropriation, could be backfilled by the GGRF.


          COMMENTS:


          1)Purpose. According to the author, "?California's consumers are  
            not purchasing ZEVs [zero emission vehicles] at a rate that  
            will meet the California Air Resources Board's ZEV mandate of  
            15.4% of new vehicles delivered for sale by 2025.  In 2015,  
            California's new car dealers sold more than two million new  
            vehicles with a combined 3.1% of those sales comprising ZEVs  
            and plug-in hybrid vehicles.  The market share for these  
            vehicles dropped from 3.2% in 2015.  We estimate that 308,000  
            ZEVs must be delivered for sale in California by 2025; in just  
            nine years this represents 25% of all vehicles other than  
            SUVs, pickups and vans.  This would be an unprecedented  
            adoption rate for new technology in automotive history.


            "Nations throughout Europe provide massive incentives up to 50  
            percent of the vehicle's MSRP.  In these countries the  
            adoption rate for alternative fueled vehicles is much more  
            favorable than in the US, including California." (It should be  
            noted that European countries tend to have much higher  
            gasoline prices than in the U.S.)


          2)Additional Price Incentives. Under the existing CRVP, ZEV  
            hydrogen fuel cell vehicles qualify for a $5,000 rebate; ZEV  
            battery electric vehicles qualify for a $2,500 rebate; and  
            plug-in hybrid electric vehicles qualify for a $1,500 rebate.  
            There is also a federal tax credit of $2,500 to $7,500 for the  
            purchase of an electric vehicle depending on its battery  
            capacity. 









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            This bill would increase the above rebates substantially. For  
            example, individuals purchasing a Chevy Volt currently receive  
            a $1,500 rebate. Under this bill, the consumer would receive a  
            $3,300 rebate (or $13,000 for disadvantaged community  
            residents). For battery electric vehicles (such as a Nissan  
            LEAF) for which current rebates are set at $2,500, this bill  
            would provide rebates of $4,350, or $13,050 for disadvantaged  
            community residents.  


            As discussed in the Assembly Transportation Committee's  
            analysis of this bill, "If the state wishes to meet its clean  
            air and climate goals, it must definitely help complete the  
            transformation of the passenger fleet from traditional  
            petroleum fuel vehicles to zero- and near-zero-emission  
            vehicles.  Yet despite spending millions of dollars,  lagging  
            sales of ZEVs leaves one wondering if the efforts have been  
            for not or if additional effort, and expense, should be  
            imparted.  This is a complex question with even more complex  
            answers and it is unclear if incentives alone, no matter how  
            much money is spent, will encourage buyers to adopt ZEVs,  
            particularly when gas prices are low and the cost of  
            conventional vehicles is competitive or lower than ZEVs."


          3)Related Legislation. AB 1964 (Bloom), pending in the Assembly,  
            creates a green sticker program (upon expiration of the  
            existing program) to allow plug-in hybrid electric vehicles  
            access to HOV lanes for a three-year period, regardless of  
            vehicle occupancy level.  



            AB 1965 (Cooper), pending on this committee's Suspense file,  
            expands the Enhanced Fleet Modernization Program Plus-Up (EFMP  
            Plus-Up) in disadvantaged communities and in additional areas  
            with poor air quality. 









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            AB 1691 (Gipson), on today's committee agenda, requires the  
            ARB to enhance EFMP guidelines to ensure that the program is  
            not misused and that priority is given to replacement of the  
            oldest, high-mileage vehicles.  .





            AB 1710 (Calderon), also on today's agenda, requires the ARB  
            to establish a comprehensive incentive program for purchase of  
            (ZEVs) or near zero-emission vehicles (NZEVs), and provides  
            specified sales tax and personal income tax exemptions for  
            purchase of such vehicles.


          Analysis Prepared by:Chuck Nicol / APPR. / (916)  
          319-2081