BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2280| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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: AB 2280 Page 2 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 AB 2280 Page 3 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 AB 2280 Page 4 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 AB 2280 Page 5 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 AB 2280 Page 6 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 AB 2280 Page 7 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. AB 2280 Page 8 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 AB 2280 Page 9 **** END ****