BILL ANALYSIS                                                                                                                                                                                                    Ó






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                                   THIRD READING 


          Bill No:  AB 2051
          Author:   O'Donnell (D) 
          Amended:  8/2/16 in Senate
          Vote:     21 

           SENATE JUDICIARY COMMITTEE:  7-0, 6/28/16
           AYES:  Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,  
            Wieckowski

           ASSEMBLY FLOOR:  78-0, 5/12/16 (Consent) - See last page for  
            vote

           SUBJECT:   Rental passenger vehicles


          SOURCE:    Avis Budget Group
                     Enterprise
                     Hertz


          DIGEST:  This bill recasts and reorganizes provisions of  
          existing law governing contracts between rental car companies  
          and their customers in connection with the rental of passenger  
          vehicles.  This bill also specifies 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 a vehicle departs from and is  
          returned to the rental company, the total mileage driven, and  
          the fuel level of the returned vehicle.


          ANALYSIS:  









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          Existing law:
           
           1)Governs contracts between rental car companies and their  
            customers in connection with the rental of passenger vehicles.

          2)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


                 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).)

          1)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).)

          2)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).)

          3)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.  







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             (Civ. Code Sec. 1936(a)(6)(C).)

          4)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).)

          5)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).)

          6)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).)

          7)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  
            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:

          1)Expands 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.

          2)Specifies 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  







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            requirement.

          3)Specifies 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.

          4)Recasts and reorganizes provisions of existing law governing  
            contracts between rental car companies and their customers in  
            connection with the rental of passenger vehicles, and makes  
            other technical and clarifying changes to existing law.


          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  
          facility.  These facilities and their associated transport  
          systems are financed largely via CFCs collected from rental car  
          patrons who choose to rent a vehicle from a company housed in  
          the consolidated rental facility.

          The authority to collect CFCs began in California in 1999 when  
          the Legislature passed and the Governor signed SB 1228  
          (Vasconcellos, Chapter 760, Statutes of 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,  
          Chapter 661, Statutes of 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, Chapter 44, Statutes of 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. 







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          For approximately 10 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, Chapter  
          642, Statutes of 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  
          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 recasts and reorganizes  
          existing law pertaining to contracts between rental car  







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          companies and their customers in connection with the rental of a  
          passenger vehicle, and makes technical and clarifying changes to  
          existing law throughout these provisions.


          Comments
          
          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.


          Related/Prior Legislation
          
          AB 675 (Alejo, Chapter 333, Statutes of 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.  The 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 CFC, airport concession fee, tourism commission  
          assessment, vehicle license recovery fee, or other government  
          imposed taxes or fees.
          AB 1981 (Brown, Chapter 417, Statutes of 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  







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          the vehicle's classification using criteria set by the 2014  
          Association of Car Rental Industry Systems Standards for North  
          America.  The 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.  The  
          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 (Committee on Judiciary, Chapter 913, Statutes of 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, Chapter 549, Statutes of 2013) provided  
          guidelines regarding the scope of a CFC audit, and required  
          audits to be posted on an airport's Internet Web site.  The bill  
          removed the requirement that an airport conduct an audit every  
          three years after the initial collection of the CFC, and instead  
          required 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 (Committee on Budget, Chapter 32, Statutes of 2012) See  
          Background.

          SB 1192 (Oropeza, Chapter 642, Statutes of 2010) See Background.

          SB 641 (Corbett, Chapter 44, Statutes of 2007) See Background.

          AB 491 (Frommer, Chapter 661, Statutes of 2001) See Background.

          SB 1228 (Vasconcellos, Chapter 760, Statutes of 1999) See  
          Background.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No








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          SUPPORT:   (Verified8/3/16)


          Avis Budget Group (co-source)
          Enterprise (co-source)
          Hertz (co-source)
          City of Los Angeles 


          OPPOSITION:   (Verified8/3/16)


          None received

          ASSEMBLY FLOOR:  78-0, 5/12/16
          AYES:  Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,  
            Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,  
            Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,  
            Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Williams, Wood, Rendon
          NO VOTE RECORDED:  Burke, Jones-Sawyer

          Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
          8/3/16 18:56:54


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