BILL ANALYSIS Ó AB 1851 Page 1 Date of Hearing: May 11, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 1851 (Gray) - As Amended April 13, 2016 ----------------------------------------------------------------- |Policy |Transportation |Vote:|10 - 5 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Revenue and Taxation | |6 - 3 | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- 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: AB 1851 Page 2 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 AB 1851 Page 3 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, AB 1851 Page 4 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 AB 1851 Page 5 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. AB 1851 Page 6 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. AB 1851 Page 7 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