BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 2051 (O'Donnell)
Version: June 13, 2016
Hearing Date: June 28, 2016
Fiscal: No
Urgency: No
TH
SUBJECT
Rental Passenger Vehicles
DESCRIPTION
Existing law governs contracts between rental car companies and
their customers in connection with the rental of passenger
vehicles. Under existing law, a rental car company may collect,
in addition to the rental rate, certain fees and charges,
including a customer facility charge. Existing law authorizes
airports to require rental companies to collect a customer
facility charge to finance, design, and construct consolidated
airport vehicle rental facilities, common-use transportation
systems that move passengers between airport terminals and car
rental facilities, and terminal modifications made solely to
provide customer access to common-use transportation systems.
This bill would recast and reorganize these provisions, and
would establish separate authority for the Los Angeles
International Airport to require rental companies to collect a
customer facility charge that can be used for additional
specified purposes.
BACKGROUND
In recent years, many airports have adopted the practice of
locating rental car services in consolidated facilities that
house all car rental companies in one location. Common-use
transportation systems, including shuttle bus systems and
automated trains, are often used to transport rental car
customers to and from terminals and the consolidated rental car
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facility. These facilities and their associated transport
systems are financed largely via Customer Facility Charges (CFC)
collected from rental car patrons who choose to rent a vehicle
from a company housed in the consolidated rental facility.
The authority to collect CFC charges began in California in 1999
when the Legislature passed and the governor signed SB 1228
(Vasconcellos, Ch. 760, Stats. 1999), which permitted San Jose
International Airport to collect a customer facility charge of
$10.15 per rental contract to finance and construct a
consolidated rental car facility. In 2001, AB 491 (Frommer, Ch.
661, Stats. 2001) authorized other public airports in California
to collect a $10 fee per contract to finance, design, and
construct consolidated rental car facilities. In 2007, SB 641
(Corbett, Ch. 44, Stats. 2007) repealed the special
authorization for San Jose International Airport and instead
applied the more general provisions enacted by AB 491 to San
Jose International Airport, thus permitting it to collect a $10
per contract CFC.
For approximately ten years, the allowable CFC fee was set at
$10 per rental contract, regardless of the duration of the car
rental. In 2010, the Legislature revised the CFC fee structure
in response to feedback from the airports that the existing $10
per contract fee was inadequate to fund some proposed
consolidated rental car facilities. SB 1192 (Oropeza, Ch. 642,
Stats. 2010) permitted airports to impose a CFC calculated on an
alternative basis, which, under current law, allows up to $6 per
day for a maximum of five days per rental contract to be
collected. The new CFC fee structure allows an airport to
increase its daily CFC according to a statutory schedule which
would permit the collection of up to $45 over the length of a
rental contract by January 1, 2017. SB 1192 also expanded the
range of uses for which CFC revenue could be spent, including
purchasing vehicles for a common-use transport system that would
shuttle passengers between the consolidated rental facility and
the airport terminals, and for terminal modifications undertaken
to provide access to a common-use transport system.
In order to protect customers and ensure that the CFC charged by
an airport was appropriately and necessarily spent on
consolidated rental facilities and associated common-use
transport systems, SB 1192 also imposed an audit requirement,
directing airports to complete independent audits of CFC funded
projects prior to the initial charge of a CFC, prior to any
increase in the CFC, and every three years after its initial
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collection or any increase. SB 1192 initially required the
State Controller's Office to review these audits, but SB 1006
(Senate Budget and Fiscal Review Committee, Chapter 32, Statutes
of 2012) eliminated this requirement. SB 1006, a budget trailer
bill, also struck language in existing law that set out
guidelines regarding the scope of a CFC audit and the standards
for determining whether an airport's chosen CFC rate was
necessary and justified based on how the funds were being spent.
Under existing law, CFC revenue is generally used to pay back
bonds issued for the construction of combined rental facilities,
certain terminal modifications, and the construction and
operation of common-use transportation systems. Existing law
states that upon repayment of these bonds, the authority to
collect a CFC is eliminated. This bill would, for the Los
Angeles International Airport, expand the types of debts that
may be repaid with CFC revenue to include capital contributions,
availability payment contracts, lease agreements, or other forms
of financing. This bill would also, for the Los Angeles
International Airport, increase the range of allowable uses to
which CFC revenue could be directed to include improving
combined rental facilities, maintaining or improving common-use
transportation systems, and improving terminal modifications, as
specified. Finally, this bill would recast and reorganize
existing law pertaining to contracts between rental car
companies and their customers in connection with the rental of a
passenger vehicle, and make technical and clarifying changes to
existing law throughout these provisions.
CHANGES TO EXISTING LAW
Existing law , Civil Code Section 1936, governs contracts between
rental car companies and their customers in connection with the
rental of passenger vehicles.
Existing law defines a "Customer Facility Charge" (CFC) as any
fee, including an alternative fee, required by an airport to be
collected by a rental company from a renter for any of the
following purposes:
to finance, design, and construct consolidated airport car
rental facilities;
to finance, design, construct, and operate common-use
transportation systems that move passengers between airport
terminals and those consolidated car rental facilities, and
acquire vehicles for use in that system; or
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to finance, design, and construct terminal modifications
solely to accommodate and provide customer access to
common-use transportation systems. (Civ. Code Sec.
1936(a)(6)(A).)
Existing law states that the aggregate amount of CFC revenue to
be collected shall not exceed the reasonable costs, as
determined by an independent audit paid for by the airport, to
finance, design, and construct these facilities. Existing law
requires, in the case of a transportation system, the audit to
also consider the reasonable costs of providing the transit
system or busing network. (Civ. Code Sec. 1936(a)(6)(B).)
Existing law prohibits fees designated as a customer facility
charge from being used to pay for terminal expansion, gate
expansion, runway expansion, changes in hours of operation, or
changes in the number of flights arriving or departing from the
airport. (Civ. Code Sec. 1936(a)(6)(B).)
Existing law specifies that the authorization for an airport,
except for the Oakland International Airport, to impose a CFC
shall become inoperative when the bonds used for financing are
paid. (Civ. Code Sec. 1936(a)(6)(C).)
Existing law specifies that if a bond or other form of
indebtedness is not used for financing, or the bond or other
form of indebtedness used for financing has been paid, the
Oakland International Airport may require the collection of a
customer facility charge for a period of up to 10 years from the
imposition of the charge. (Civ. Code Sec. 1936(a)(6)(D).)
Existing law defines a "Vehicle Registration Fee" to mean any
fee imposed pursuant to any provision of Chapter 6 (commencing
with Section 9101) of Division 3 of the Vehicle Code." (Civ.
Code Sec. 1936(a)(16).)
Existing law states that a rental company shall not use, access,
or obtain any information relating to the renter's use of the
rental vehicle that was obtained using electronic surveillance
technology, except in specified circumstances. (Civ. Code Sec.
1936(n).)
Existing law states that the above subdivision does not prohibit
a rental company from obtaining, accessing, or using information
from electronic surveillance technology for the sole purpose of
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determining the date and time the vehicle is returned to the
rental company, and the total mileage driven and the vehicle
fuel level of the returned vehicle, as specified. (Civ. Code
Sec. 1936(n)(6).)
This bill would, for the Los Angeles International Airport,
expand the range of permissible uses for which a CFC may be
applied to include the maintenance and improvement of
consolidated airport vehicle rental facilities, common-use
transportation systems, and authorized terminal modifications,
as specified.
This bill would, for the Los Angeles International Airport,
expand the types of financing arrangements toward which CFC
revenue may be directed to include bonds, capital contributions,
availability payment contracts, lease agreements, or other forms
for financing, and would specify that the authorization to
collect CFC revenue shall become inoperative when the financing
is paid or reimbursed.
This bill would expand the definition of a "Vehicle Registration
Fee" to include any fee imposed pursuant to any law that imposes
a fee upon the registration of vehicles in this state.
This bill would specify that any person or entity other than a
rental company, including a passenger carrier or a seller of
travel services, that advertises a rental rate for a vehicle
rental that includes additional mandatory charges must clearly
disclose the existence and amount of the charges. This bill
specifies that if a rental company provides the person or entity
with rental rate and additional mandatory charges information,
the rental car company is not responsible for the failure of
that person or entity to comply with this requirement.
This bill would specify that a rental company is not prohibited
from obtaining, accessing, or using information from electronic
surveillance technology for the sole purpose of determining the
date and time the vehicle departs from and is returned to the
rental company, and the total mileage driven and the vehicle
fuel level of the returned vehicle, provided such information
obtained or accessed from electronic surveillance technology is
only used for this purpose.
This bill would recast and reorganize these provisions, and make
other technical and clarifying changes to existing law.
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COMMENT
1.Stated need for the bill
The author writes:
Civil Code section 1936, which governs rental car
transactions, was originally put into place in 1988. In the
past 28 years, changes to the statute have resulted in
duplicative code sections and in some instances, conflicting
terms and definitions. This has led to several implementation
and interpretation issues. State statute also does not
reflect the technological and consumer convenience
advancements made in today's market. AB 2051 includes much
needed statute modernization and also provides rental car
companies the ability to better serve and protect its
consumers by cleaning up outdated requirements, granting the
use of GPS in limited circumstances and providing a clearer
comprehension of the requirements placed on the industry.
2.Reorganization of existing law
This bill reorganizes and reconciles the entirety of several
Civil Code sections addressing rental cars and rental car
facilities. As indicated in the History below, this area of law
is frequently amended - almost on an annual basis - and several
years of cumulative amendments have made the law internally
inconsistent and difficult to understand. Beginning late last
year, Committee staff and staff from the Legislative Counsel's
office began reconciling inconsistent provisions within these
code sections to bring uniformity to the law. The draft
language produced by Counsel and the Committee forms the
framework of this bill. Throughout the bill, non-substantive
and substantive changes are made to existing law to reconcile
terms and definitions, to strike repetitive and extraneous
language, and to clarify language that has proven to be
ambiguous in practice. The author of this bill has expanded it
beyond Counsel and the Committee's original aim to make
additional changes to existing law, and the subsequent comments
below discuss the principal changes. Beyond these principal
changes, the changes to existing law proposed here would replace
specific statutory disclosures regarding the advertising of
rental rates and the imposition of additional mandatory charges
with a requirement to provide general disclosures that clearly
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disclose the same information without prescribing the wording of
the disclosure. This bill would also reinsert a safe harbor
that was inadvertently struck in AB 675 (Alejo, Ch. 333, Stats.
2015) concerning rental car advertising performed by third
parties, such as sellers of travel services, that holds rental
car companies harmless for the failure of third parties to make
the required disclosures.
3.Expansion of vehicle registration fee
In addition to the changes noted above, this bill would expand
the types of government-imposed fees that may be passed on to
rental car customers in the form of a "Vehicle Registration
Fee." Under existing law, recoverable vehicle registration fees
are limited to those fees imposed pursuant to Chapter 6 of
Division 3 of the Vehicle Code, which encompasses the current
range of fees that must be paid to register a vehicle in
California. This bill would expand the scope of recoverable
vehicle registration fees to include those required by "any
other law that imposes a fee upon the registration of vehicles
in this state." This expansion anticipates future vehicle
registration programs that impose alternate fee structures, such
as a tax based on annual miles travelled by a vehicle. Enacting
this change would authorize rental car companies to pass these
new fees on to rental car consumers as separate line items in
their bill or contract should they be imposed in the future.
4.New allowable uses for Consumer Facility Charge revenues
Over the last 17 years, several California airports have
financed the design and construction of consolidated rental car
facilities and their associated transport systems via the
collection of Customer Facility Charges (CFC) from rental car
patrons who choose to rent a vehicle from a company housed in a
consolidated rental facility. Existing law governing the
collection and use of CFC funds includes strong consumer
protection provisions designed to ensure that airports do not
misuse or overcollect these funds. Under existing law, an
airport that imposes a CFC fee for the first time or that
increases its CFC fee must conduct an audit that ensures the
fees are necessary to construct consolidated rental facilities
and their associated transport systems, that the fees would not
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or are not being used to fund unauthorized airport construction,
and that the chosen CFC fee level is reasonable, taking into
account alternate revenue sources for constructing these
facilities. Existing law also limits the uses to which CFC
revenues can be directed to, principally, the design and
construction of combined rental facilities, certain terminal
modifications, and the construction and operation of common-use
transportation systems. Existing law also specifies that, with
the exception of the Oakland International Airport (OAK), CFC
funds may be directed to pay off bonds used for the financing of
these projects, and in the case of OAK, that if alternate
financing is used, the authority to impose a CFC is limited to
10 years.
This bill would, in the case of the Los Angeles International
Airport (LAX), authorize CFC revenue to be collected and used
for the improvement of these facilities, and would also
authorize CFC revenue to be directed toward paying off other
financing arrangements for the facilities, including capital
contributions and lease agreements, without any time period
limitations. Writing in support, the Mayor of Los Angeles
states:
Investing in the modernization of LAX is necessary to ensure
it keeps up with growing the demand and needs of a 21st
century economy. Critical improvements needed at LAX include
a consolidated rental car facility and an automated people
mover to facilitate the flow of passengers to and from the
airport. AB 2051 will allow financing from an alternate
Customer Facility Charge at LAX to fund portions of these
important projects. Doing so will ensure that these projects
have a local funding stream. AB 2051 will better ensure that
these projects, which will create jobs, reduce traffic, and
reduce pollution, remain on time and on budget.
Authorizing CFC revenue to be directed toward financing
arrangements other than bonds could have several benefits to
LAX, including allowing the airport to transfer some of the risk
involved in a project to a third party through a public-private
partnership. Involvement of third parties through leaseback
agreements could also allow an airport to potentially lower the
cost of a combined rental car facility and related
infrastructure by allowing the third party to depreciate the
value of these assets - something a city cannot typically do.
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However, authorizing these new forms of financing could also
significantly increase the cost passed on to consumers. Market
pressure in bond markets tends to confine the amount of
financing and repayment terms an airport can obtain for a
project. Other financing arrangements, such as a sale-leaseback
or lease-leaseback, would potentially allow an airport to avoid
these market confines by liberalizing the terms on which
combined rental car facilities are constructed and paid off.
Whether any alternate financial arrangement is economical for a
local agency depends on a variety of factors, including market
conditions, tax laws, lease structure, and the relative costs of
other financing arrangements. The normal pressure of limited
resources that drives government decisionmakers to make
economically sound decisions concerning infrastructure finance
may not be present in this case, since much of the cost can be
passed on to rental car customers. Without explicit repayment
timelines similar to those in existing CFC authorizations, and
with the expanded purposes to which CFC revenue can be directed,
this new authorization for LAX may turn CFC revenue into an
unending source of funding at the expense of Californians and
others who rent cars.
5.New use of surveillance technology
This bill would also authorize a minor expansion in the range of
uses for which a rental car company can use electronic
surveillance technology. Under existing law, a rental car
company is prohibited from using electronic surveillance
technology to use, access, or obtain any information relating to
the renter's use of the rental vehicle except in specified
situations, including:
to locate a stolen, abandoned, or missing rental vehicle, as
specified;
in response to a specific request from law enforcement
pursuant to a subpoena or search warrant;
to discover or repair a defect in the GPS-based technology
that provides navigation assistance to the occupants of the
rental vehicle;
to allow for the remote locking or unlocking of a vehicle at
the request of the renter;
to provide roadside assistance, such as towing, flat tire, or
fuel services, at the request of the renter; and
for the sole purpose of determining the date and time the
vehicle is returned to the rental company, and the total
mileage driven and the vehicle fuel level of the returned
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vehicle.
Existing law explicitly prohibits a rental car company from
using electronic surveillance technology to track a renter in
order to impose fines or surcharges relating to the renter's use
of the rental vehicle.
This bill would additionally allow a rental car company to use
electronic surveillance technology for the sole purpose of
determining the date and time a vehicle departs from the rental
car company. Under existing practice, rental car company
employees record the date and time rental vehicles leave
possession of the company to determine the starting point of the
rental period. This change in existing law would allow these
companies to automate the checkout process through the use of
on-board or nearby electronic surveillance infrastructure, like
license plate reading cameras.
Support : City of Los Angeles
Opposition : None Known
HISTORY
Source : Avis Budget Group; Enterprise; Hertz
Related Pending Legislation : None Known
Prior Legislation :
AB 675 (Alejo, Ch. 333, Stats. 2015) authorized a rental
company, when quoting a rental rate, to separately state the
rental rate, additional mandatory charges, if any, and a mileage
charge, if any, that a renter must pay to hire or lease the
vehicle for the period of time to which the rental rate applies.
This bill defined "additional mandatory charges" to mean any
separately stated charges that the rental car company requires
the renter to pay to hire or lease the vehicle for the period of
time to which the rental rate applies, which are imposed by a
governmental entity and specifically relate to the operation of
a rental car business, including, but not limited to, a customer
facility charge, airport concession fee, tourism commission
assessment, vehicle license recovery fee, or other government
imposed taxes or fees.
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AB 1981 (Brown, Ch. 417, Stats. 2014) removed the manufacturer's
suggested retail price as one of the criteria for determining
the rate of a damage waiver sold by a rental company, and
instead set the rate of damage waivers according to the
vehicle's classification using criteria set by the 2014
Association of Car Rental Industry Systems Standards for North
America. This bill increased the maximum rate of the damage
waiver to $11 per rental day for vehicles designated as an
"economy car," "compact car," or another term denoting the two
smallest categories of vehicles described by the standards.
This bill increased the maximum rate of the damage waiver to $17
per rental day for vehicles in the next three body-size
categories of vehicles designated in the standards, except as
specified.
AB 2747 (Cmte. on Jud., Ch. 913, Stats. 2014), the Assembly
Committee on Judiciary's Omnibus Bill, extended until January 1,
2020, a sunset provision pertaining to a requirement for rental
companies to accept service of a summons and complaint against a
renter who resides out of this country for an accident or
collision resulting from the operation of the rental vehicle in
this state, as provided.
AB 359 (Holden, Ch. 549, Stats. 2013) provided guidelines
regarding the scope of a CFC audit, and required audits to be
posted on an airport's Internet Web site. This bill removed the
requirement that an airport conduct an audit every three years
after the initial collection of the CFC, and instead require an
airport to conduct an audit every three years after the initial
collection of the CFC only if the charge is used for the purpose
of operating a common-use transportation system or to acquire
vehicles for use in such a system.
SB 1006 (Cmte. on Budget, Ch. 32, Stats. 2012) See Background.
SB 1192 (Oropeza, Ch. 642, Stats. 2010) See Background.
SB 641 (Corbett, Ch. 44, Stats. 2007) See Background.
AB 491 (Frommer, Ch. 661, Stats. 2001) See Background.
SB 1228 (Vasconcellos, Ch. 760, Stats. 1999) See Background.
Prior Vote :
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Assembly Floor (Ayes 78, Noes 0)
Assembly Privacy and Consumer Protection Committee (Ayes 11,
Noes 0)
Assembly Judiciary Committee (Ayes 10, Noes 0)
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