BILL ANALYSIS Ó
AB 2145
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Date of Hearing: April 4, 2016
ASSEMBLY COMMITTEE ON TRANSPORTATION
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
reductions.
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
areas.
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.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
None on file
AB 2145
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Analysis Prepared by:Victoria Alvarez / TRANS. / (916) 319-2093