BILL ANALYSIS                                                                                                                                                                                                    Ó






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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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