BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                    AB 2145

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          Date of Hearing: April 4, 2016  


                                 Jim Frazier, Chair

          AB 2145  
          (Linder) - As Introduced February 17, 2016

          SUBJECT:  Vehicle replacement:  rebates

          SUMMARY:  Requires the Department of Motor Vehicles (DMV), for  
          the purposes of calculating vehicle license fees (VLF), to  
          adjust the purchase price of the vehicle downward to reflect the  
          amount of compensation that low- or moderate-income recipients  
          receive from incentive programs toward the purchase of certain  
          clean air vehicles.  Specifically, this bill:  

          1)Requires the California Air Resources Board (ARB) to develop  
            and issue certifications to low- and moderate-income  
            recipients of Enhanced Fleet Modernization Program (EFMP) and  
            the Charge Ahead California Initiative incentives used for the  
            purchase of a newer, cleaner replacement vehicle.

          2)Requires DMV, once provided with the appropriate certification  
            from ARB, to deduct the amount of incentive funding received  
            toward the purchase of the vehicle for the purposes of  
            calculating VLF.

          3)Makes related, clarifying amendments. 


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          EXISTING LAW:  

          1)Requires ARB, pursuant to California Global Warming Solutions  
            Act of 2006 [AB 32 (Núñez), Chapter 488, Statutes of 2006], to  
            reduce statewide greenhouse gas (GHG) emissions to 1990 levels  
            by 2020 by adopting regulations to achieve maximum  
            technologically feasible and cost-effective GHG emission  

          2)Establishes the California Alternative and Renewable Fuel,  
            Vehicle Technology, Clean Air, and Carbon Reduction Act of  
            2007 [AB 118 (Núñez), Chapter 750, Statutes of 2007], to  
            support three programs including EFMP, under which ARB, in  
            consultation with the Bureau of Automotive Repair (BAR), pays  
            to permanently remove cars and small trucks from operation  
            through voluntary retirement by their owners.  

          3)Establishes the Charge Ahead California Initiative, [SB 1275  
            (de León), Chapter 530, Statutes of 2014], that, among other  
            things, set the goal of placing 1 million zero- and near  
            zero-emission vehicles (ZEVs) into service on California's  
            roadways by January 1, 2023, increasing access to these  
            vehicles for disadvantaged, low-, and moderate-income  
            communities and consumers, and providing additional incentives  
            for ZEV, near-ZEV, or high-efficiency replacement vehicles.

          4)Requires DMV, upon the sale of a new or used vehicle, to  
            determine the market value of the vehicle based on the cost  
            price to the purchaser, not including California sales taxes  
            or local tax, for the purpose of calculating VLF.

          5)Establishes by executive order B-16-2012 that set the goal of  
            placing 1.5 million ZEVs on California's roadways by 2025.


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          FISCAL EFFECT:  Unknown

          COMMENTS:  According to the author, there are a number of  
          incentive programs created to make clean air vehicles more  
          affordable to low- and moderate income purchasers but these  
          incentives, while lowering the up-front purchase price of the  
          vehicle, do nothing to address ongoing costs associated with  
          owning the vehicle-such as higher VLFs.  Specifically, the  
          author notes that VLFs are based on the retail value of the  
          vehicle and, as a result, low- and moderate income consumers who  
          buy higher-value ZEVs using incentive funding, are then required  
          to pay higher VLFs (based on the vehicle's actual value or sales  
          price) rather than the lower, out-of-pocket cost that were  
          actually paid by the buyer (after incentives were applied).  To  
          correct this perceived inequity, the author has introduced this  
          bill which would ensure that low- and moderate income  
          individuals who purchase clean air vehicles using incentive  
          funding, pay VLF on the vehicle's price after incentives are  
          applied rather than before incentives are applied.  

          The VLF was established by the Legislature in 1935 in lieu of a  
          property tax on vehicles.  The formula for VLF assessment,  
          established by the Legislature, is based upon the purchase price  
          of the vehicle or the value of the vehicle when it is acquired.   
          The VLF decreases with each renewal for the first 11 years or  
          until the vehicle is transferred.  When transferred, the  
          depreciation of the VLF is based on the new purchase price when  
          acquired.  The VLF is part of the total fees due upon initial  
          and annual vehicle registration renewal and is currently set at  
          0.65% of the vehicle's value.  VLF revenues are returned to  
          cities and counties by the DMV.  



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          Pursuant to AB 32, it is the state's goal to reduce GHG  
          emissions to 1990 levels by 2020.  Given that the transportation  
          sector account for nearly 40% of GHG emissions, substantial  
          efforts have been taken to reduce the numbers of high-polluting  
          cars in the state. To accomplish this, the state has developed a  
          number of incentive programs to encourage individuals to retire  
          their high-polluting cars and replace them with cleaner cars.   
          Given that areas of the state with the poorest air quality  
          typically coincide with higher numbers of disadvantaged  
          communities, greater effort has been placed on increasing  
          incentives for low- and moderate- income individuals in these  

          A number of programs have been established to incentivize the  
          replacement of high polluting vehicles for low- and moderate  
          income individuals and program incentives can be "stacked" to  
          further incentivize the purchase and use of cleaner cars and  
          especially ZEVs.  For example, EFMP provides incentives ranging  
          from $2,500 up to $4,500, depending on income level and the type  
          of vehicle purchased.  Residents living in disadvantaged  
          communities are also eligible for up to an additional $2,500 for  
          the purchase of a conventional hybrid vehicle or up to an  
          additional $5,000 for the purchase of a plug-in hybrid or ZEV.   
          All told, low-income individuals within certain areas of the  
          state are eligible to receive up to $9,500 if they scrap their  
          high-polluting cars and replace them with a ZEV such as a  
          plug-in hybrid (like a Chevy Volt) or a battery electric car  
          (such as a Nissan Leaf).  Moderate-income individuals in these  
          same areas who opt to scrap and replace their high-polluting  
          cars for a ZEVs can receive up to $7,500 in incentive funding  
          toward the purchase of that car.  


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          Low- and moderate-income individuals are also eligible to  
          receive incentives for the purchase of new, qualifying ZEV's  
          through the Clean Vehicle Rebate Program (CVRP).  CVRP is  
          designed to promote the purchase of new battery electric,  
          plug-in, and fuel cell vehicles and offers rebates of up to  
          $5,000 per qualifying new light-duty vehicle.  As of March 29,  
          2016, as required by the Charge Ahead California Initiative (SB  
          1275), CVRP rebate amounts for low-income households will be  
          increased by $1,500.  

          According to Valley Clean Air Now (Valley CAN), most qualifying  
          low- and moderate-income individuals who opt to scrap their  
          high-polluting cars and replace with a cleaner cars, typically  
          purchase used (rather than new) ZEVs.  This is the case because  
          used ZEVs are typically more affordable (ranging in price from  
          $10,000 to $15,000) while new ZEVs typically range in price from  
          $35,000 to $50,000, or more depending on the make and model.   
          Valley CAN notes that for low-income households, when the full  
          incentives values are applied ($9,500) toward the purchase of a  
          used ZEV, most applicants owe between $500 to $4,500, depending  
          on the vehicle that is purchased.  With available financing  
          options, these individuals typically end up with very manageable  
          monthly payments.

          Post incentive program participation surveys conducted by Valley  
          CAN indicate that program participants have overwhelmingly high  
          satisfaction ratings not only about the programs but also about  
          the ZEVs. The majority of respondents noted ZEVs saved them  


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          money because they no longer need to spend money on gas (at all  
          or, at best, infrequently) and the cars have much lower  
          maintenance requirements--which also saves them money.  One  
          participant reported that after opting to purchase a Nissan  
          LEAF, after using "stacked" incentives, his monthly vehicle  
          payments were only $60 per month, an expense that he described  
          was more than offset by not having to purchase gasoline or pay  
          vehicle maintenance and repair costs.  

          Committee concerns:  While this bill is well intentioned, it  
          seems to offer a solution where no problem exists.  While VLF  
          costs may rise slightly (in the vicinity of $100) with the  
          purchase of a higher-value ZEV, this increased cost does not  
          appear to be an undue burden for low- and moderate income  
          buyers.  This is evidenced by the fact that the incentive  
          programs are consistently oversubscribed and surveys of program  
          participants fail to reveal that slightly increased VLF fees are  
          a deterrent to program participation.  In fact, surveys of  
          individuals who have participated in the incentive programs,  
          indicate extreme satisfaction with the program (bordering on  
          "giddiness") because they were able to lower their overall  
          monthly expenses with regard to vehicle maintenance and fueling  
          costs as well as having access to reliable transportation. 

          AB 2145, if implemented, would also likely result in program  
          impacts and costs for ARB and DMV.  ARB would be required to  
          absorb costs associated with preparing certifications for all  
          incentives issued and DMV would likely be required to increase  
          program expenditures to retroactively adjust VLF after the point  
          of sale.  This added burden on DMV, to manually process  
          thousands refund applications annually would likely result in  


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          increased costs to DMV as well as increased processing times.   
          It is also likely that additional transactions to retroactively  
          correct vehicle records and process refunds would be necessary.

          Related legislation: AB 1965 (Cooper), would require ARB to  
          expand incentive programs in disadvantaged communities and in  
          areas with poor air quality.  AB 1965 is awaiting a hearing in  
          his committee.

          Previous legislation:  AB 32 (Núñez), Chapter 488, Statutes of  
          2006, required ARB to develop a plan of how to reduce emissions  
          to 1990 levels by the year 2020 and also required ARB to ensure  
          that, to the extent feasible, GHG reduction requirement and  
          programs that direct public and private investments toward the  
          most disadvantaged communities.

          AB 118 (Núñez), Chapter 750, Statutes of 2007, established the  
          Air Quality Improvement Program administered by ARB in  
          consultation with local air districts, and funded through  
          surcharges on vehicle and vessel registration fees, smog  
          abatement fees, and identification plates.

          SB 535 (de León), Chapter 830, Statutes of 2012, required the  


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          Department of Finance, when developing the three-year investment  
          plan for cap and trade monies, to allocate 25% of the funds to  
          projects that benefit disadvantaged communities, and to allocate  
          a minimum of 10% of available cap and trade revenues to projects  
          allocated within disadvantaged communities.

          SB 1275 (de León), Chapter 530, Statutes of 2014, established  
          the Charge Ahead Initiative that, among other things, set the  
          goal of placing 1 million zero- and near zero-emission vehicles  
          into service on California's roadways by January 1, 2023, and  
          increasing access to these vehicles for disadvantaged, low-, and  
          moderate-income communities and consumers.




          None on file


          None on file


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          Analysis Prepared by:Victoria Alvarez / TRANS. / (916) 319-2093