BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2280|
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THIRD READING
Bill No: AB 2280
Author: Ridley-Thomas (D)
Amended: 8/15/16 in Senate
Vote: 27 - Urgency
PRIOR VOTES NOT RELEVANT
SENATE JUDICIARY COMMITTEE: 7-0, 8/29/16 (pursuant to Senate
Rule 29.10)
AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,
Wieckowski
SUBJECT: Rental companies: customer facility charge
SOURCE: Los Angeles World Airports
DIGEST: This bill establishes a new authority for the Los
Angeles International Airport (LAX) to require rental car
companies to collect a customer facility charge (CFC) that can
be used for specified purposes, including for the design,
construction, and improvement of consolidated airport vehicle
rental facilities. This bill also authorizes LAX to use CFC
revenue to pay or repay bonds, capital contributions,
availability payment contracts, lease agreements, or other forms
of authorized financing used to design, construct, or improve
consolidated airport vehicle rental facilities and specified
related infrastructure, for a period not to exceed 35 years.
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.
(Civ. Code Sec. 1936 et seq.)
2)Defines a "Customer Facility Charge" 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 CFC 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
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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).)
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 CFC for a period of up
to 10 years from the imposition of the charge. (Civ. Code
Sec. 1936(a)(6)(D).)
This bill:
1)Expands, for LAX, the range of permissible uses to which CFC
revenue 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.
2)Expands, for LAX, 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 specifies that
the authorization to collect CFC revenue shall become
inoperative when the financing is paid or reimbursed.
3)Specifies, for LAX, that the maximum term for financing toward
which CFC revenue may be directed shall not exceed 35 years.
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 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 CFC charges 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 CFC 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.
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
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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.
The following year, AB 359 (Holden, Chapter 549, Statutes of
2013) re-inserted guidelines regarding the scope of CFC audits,
and required audits to be posted on an airport's Internet Web
site.
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, for LAX, expands 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 also, for
LAX, increases 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 specifies that the maximum term for financing
backed by this separate CFC authority shall not exceed 35 years.
Comments
The author writes:
Section 1936 of the California Civil Code defines "customer
facility charge." Section 50474.1 of California Government
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Code authorizes an airport operated by a city and county to
"require a rental car company, in writing, to collect a fee
from its customers on behalf of the airport for the use of an
airport-mandated common use busing system or light rail
transit system operated for the movement of passengers between
the terminal and a consolidated on-airport rental car
facility." Section 50474.1 of California Government Code also
lays out provisions related to use of that fee.
AB 2280, as amended, will add Section 50474.22 to the
California Government Code to expand the types of financing
arrangements that customer facility charge (CFC) revenue
collected at LAX can cover 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. AB 2280
would also clarify that CFC revenue collected at LAX fund
consolidated airport vehicle rental facilities, common-use
transportation systems, and authorized terminal modifications.
This bill is needed due to the unique circumstances and
operations of the Los Angeles International Airport. Further,
this bill will address pressing public safety concerns at LAX
by providing necessary financing tools.
Related/Prior Legislation
AB 2051 (O'Donnell, Chapter 183, Statutes of 2016) recast and
reorganized law pertaining to contracts between rental car
companies and their customers in connection with the rental of a
passenger vehicle, and made technical and clarifying changes to
existing law.
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
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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
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
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.
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SB 1006 (Committee on Budget and Fiscal Review, 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
SUPPORT: (Verified8/29/16)
Los Angeles World Airports (source)
California Conference of Carpenters
City of Los Angeles
Service Employees International Union, California
State Building and Construction Trades Council
OPPOSITION: (Verified8/29/16)
None received
Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
8/30/16 14:36:18
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