BILL ANALYSIS Ó
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator Wieckowski, Chair
2015 - 2016 Regular
Bill No: SB 513
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|Author: |Beall |
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|Version: |April 6, 2015 |Hearing |April 29, 2015 |
| | |Date: | |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Joanne Roy |
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SUBJECT: Carl Moyer Memorial Air Quality Standards Attainment
Program: fees.
ANALYSIS:
Existing law:
1. Pursuant to California Constitution Article XIII C, provides
requirements for voter approval for local tax levies. (Also
known as Proposition 218 (1996) and amended by Proposition 26
(2010)).
2. Pursuant to case law, provides the Sinclair Paint test to
determine whether a levy is a tax or a fee for charges prior
to Proposition 26.
3. Defines "motor vehicle" as a vehicle that is self-propelled.
(Vehicle Code (VC) §415).
4. Defines "vehicle" as "a device by which any person or
property may be propelled, moved, or drawn upon a highway,
excepting a device moved exclusively by human power or used
exclusively upon stationary rails or tracks." (VC §670).
5. Establishes the state Carl Moyer Memorial Air Quality
Standards Attainment Program (Carl Moyer Program), which is
administered by the California Air Resources Board (ARB), to
fund the incremental cost of eligible projects that reduce
emissions of air pollutants from vehicular sources in the
state and for funding a fueling infrastructure demonstration
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program and technology development efforts. Authorizes the
funding of projects reducing NOx, particulate matter (PM),
and reactive organic gasses emissions under the Carl Moyer
Program until January 1, 2024. (Health and Safety Code (HSC)
§44275 et seq.).
6. Authorizes a local air district that has been designated as
in nonattainment by the state to levy a fee of up to $2 on
motor vehicles registered within the air district. Provides
that a district may only levy this fee if the district board
adopts a resolution providing for both the fee and a
corresponding program for the reduction of air pollution from
motor vehicles. (HSC §44223).
7. Authorizes a local air district that has been designated as
in nonattainment by the state to increase the fee to a
maximum of $6 on motor vehicles under specified conditions
including adopting a resolution that the funds will be used
for the reduction of air pollution from motor vehicles
pursuant to the California Clean Air Act. (HSC §44225).
8. Requires those local air districts, upon approval by the
local district board, to use the revenue from that fee to
implement specified programs that the district determines
"remediate air pollution harms created by motor vehicles on
which the surcharge is imposed." (HSC §44229).
9. Pursuant to the California Global Warming Solutions Act of
2006, requires all moneys, except for fines and penalties,
collected by ARB from the auction or sale of allowances as
part of a market-based compliance mechanism to be deposited
in the Greenhouse Gas Reduction Fund and to be available upon
appropriation by the Legislature. (Government Code
§16428.8).
This bill:
1. Authorizes a local air district, regardless of its state
attainment designation, to levy a fee up to $6 on motor
vehicles registered within the air district and use the fees
for the attainment or maintenance of state or federal ambient
air quality standards or the reduction of toxic air
contaminant emissions from motor vehicles and for alternative
fuel and electric infrastructure projects.
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2. For schoolbuses, broadens the pool of potential funding
recipients and eligibility requirements.
3. Adds alternative fuel and electric infrastructure projects to
be eligible for funding.
4. Adds a new term, "ancillary benefits," which includes
"additional project benefits beyond the reductions in covered
emissions, including reductions in greenhouse gases,
short-lived climate pollutants, and other benefits, such as
benefits to communities?, fuel-efficiency improvements, or
the deployment of advanced technology" and requires ARB to
define "ancillary benefits."
5. Expands the definition of "covered source" as follows:
A. Deletes the requirement that a marine vessel must be
diesel, thus expanding a covered source to any marine
vessel; and,
B. Broadens a purpose of funding from "other high-emitting
engine categories" to "other categories necessary for the
state and districts to meet air quality goals."
6. Adds to the provision related to local air districts
authorization to increase the fee on motor vehicles, that the
funds may also be used for "the attainment or maintenance of
state or federal ambient air quality standards or the
reduction of toxic air contaminant emissions from motor
vehicles?"
7. Changes the definition of "incremental cost".
8. Expands program funding to include installation of fueling or
energy infrastructure to fuel or power "covered sources".
9. Changes the formula for evaluating and calculating
cost-effectiveness.
10.Authorizes ARB to adjust, rather than just reduce, the values
of the maximum grant award criteria to improve the ability of
the program to achieve its goals.
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11.Authorizes ARB to reserve up to 10% of the program funds
available each year to directly fund any project ARB
determines contributes toward the achievement of state air
quality goals.
12.Removes the prohibition on using specified motor vehicle
registration fees as matching funds.
13.Requires ARB, instead of the State Energy Resources
Conservation and Development Commission (CEC), to publish
procedures to monitor and audit infrastructure projects.
14.Removes the sunset date of January 1, 2024, from the
provisions on how funds in the Air Pollution Control Fund are
allocated and segregated.
15.Removes the sunset date of January 1, 2024, from the
provisions regarding the terms and conditions for an
allocation of funds to a local air district.
16.Requires a local air district to liquidate the moneys by a
specified date four years following the year of allocation
and to return those moneys that have not been liquidated to
ARB within 90 days.
17.Increases the percentage of fee revenue that may be used for
administrative costs.
18.Authorizes ARB to allocate funds from the Greenhouse Gas
Reduction Fund and other specified sources for the Carl Moyer
Program without those funds being required to be factored
into the criteria emission reduction cost-effectiveness
calculations.
Background
1. Carl Moyer Program/AB 923: Brief History.
AB 1571 (Villaraigosa), Chapter 923, Statutes of 1999,
established the state Carl Moyer Program through which ARB
provides grants to offset the incremental costs of purchasing
or retrofitting engines in order to reduce specified air
emissions.
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AB 923 (Firebaugh), Chapter 707, Statutes of 2004, authorized an
increase in the surcharge local air districts may levy on
motor vehicle registrations within their jurisdictions from
$4 to $6, expanded the types of emissions covered by the Carl
Moyer Program to include emissions of particulate matter and
reactive organic gases from defined covered sources in the
state, prohibited projects funded with Carl Moyer Program
grants to be used as credits under emission banking or
trading programs, revised how Carl Moyer Program funds are
distributed to local air districts, authorized ARB to update
and adopt regulations to implement the bill, and increased
the California Tire Fee by $0.75 to fund programs under ARB
and local air districts to mitigate or remediate air
pollution caused by tires.
AB 8 (Perea), Chapter 401, Statutes of 2013, included a
provision extending the fees to fund the Carl Moyer Program
until January 1, 2024. AB 8 also required ARB to convene a
workgroup to evaluate the program. ARB and the local air
districts convened two public meetings of the workgroup, in
June and October 2014, to solicit input from stakeholders.
ARB and the local air districts then worked together to
develop statutory language to implement the program
improvements identified by the workgroup. This bill is the
result of those efforts.
2. Carl Moyer Program: Overview.
ARB administers the state Carl Moyer Program, which provides
grants through the state's 35 local air quality management
and air pollution control districts (local air districts) for
deployment of engines, equipment, and emission-reduction
technologies that are cleaner than required by current laws
or regulations. According to ARB, the Carl Moyer Program
provides about $60 million for projects each year statewide.
The program pays up to 85% of the cost to repower engines and
up to 100% to purchase an ARB-verified retrofit device.
Maximum grant amounts vary for purchase of new vehicles and
equipment.
A. Statewide Carl Moyer Program.
Funding sources for the statewide Carl Moyer Program is
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funded with the tire sale charge and fines and penalties
from the Air Pollution Control Fund. These are General
Fund moneys; these are not special trust moneys. Special
trust moneys are regulatory fees or administrative fees
and must have a nexus as to how they are being spent.
Because these are General Fund moneys, they may be used
for any purpose as appropriated by the Legislature.
B. Local Carl Moyer Programs.
Funding sources for local Carl Moyer Programs are the motor
vehicle registration fee (up to $6). The motor vehicle
registration fee is a regulatory fee and has a special
trust nexus attached to it. These moneys can only be
spent for limited regulatory purposes affecting motor
vehicle air pollution.
Comments
1. Purpose of Bill.
According to the author, "The Carl Moyer and AB 923 programs
have enjoyed significant success: since 1998, these programs
have cleaned up more than 46,000 engines, reduced 174,600
tons of ozone precursors, and reduced 6,400 tons of
particulate matter. However, the time has come to update the
program in recognition of changes that have occurred over the
past 15 years. ARB and CAPCOA worked with stakeholders last
year through a public process to identify program limitations
and discuss how best to address those limitations. This bill
is the result of those negotiations, and has the support of
all 35 of California's local air districts. This bill will
help make the Carl Moyer and AB 923 programs more effective
by:
Expanding project categories for both programs and
allowing the Carl Moyer Program to adapt quickly to
current and emerging clean technologies;
Establishing a process to adjust the
cost-effectiveness calculation to recognize both
increasing costs of technology and projects that provide
co-benefits, such as greenhouse gas reductions,
technology advancement, and air quality improvements in
the most polluted communities;
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Providing air districts the flexibility to
recognize co-benefits when funding projects;
Encouraging leveraging with other funding sources
to accomplish multiple goals;
Streamlining and updating program administrative
requirements."
1. Local Air Districts Imposing Motor Vehicle Fee:
Pre-Proposition 26: Sinclair Paint Test.
Regulatory fees established prior to 2010 (due to Proposition
26) are subject to the Sinclair Paint test, which helps
determine whether a levy is a fee or a tax.
Sinclair Paint Co. v. State Board of Equalization, 15 Cal. 4th
866 (1997), is a case that concerned the Childhood Lead
Poisoning Prevention Act, which provided evaluation,
screening, and medical follow-up services to children at risk
of lead poisoning. The program was entirely supported by
fees imposed on former and current manufacturers of lead or
products containing lead, based on the manufacturers "market
share" responsibility for the contamination. The California
Supreme Court in Sinclair Paint found that a levy is a
legitimate fee as long as the revenue of the levy does not
exceed the costs of the regulatory activity and the levy is
not imposed for an unrelated revenue purpose, and the levy
allocated to the payer bears a fair or reasonable
relationship to the payer's burdens on or benefits from the
regulatory activity. The Sinclair Paint test is a two-part
test: 1) nexus and 2) proportionality.
A. Nexus. The Sinclair Paint nexus test, which is derived
from the case above, requires that a clear nexus must
exist between an activity for which a fee is used and the
adverse effects related to the activity on which that fee
is levied. In order to use the locally imposed motor
vehicle fees to pay for remediation of air pollution harm
created by motor vehicles, it appears that the funds
should be used only to decrease the emissions or the harms
directly caused by motor vehicles.
B. Proportionality. The Sinclair Paint test also has a
proportionality component, which requires those burdened
with the fee proportionally benefit from the fee - if
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assessing a fee to reduce emissions from motor vehicles
and motor vehicles are the only item assessed the fee,
then 100% of those funds are from motor vehicles.
However, not all of the revenue from the fee is used to
fund motor vehicle projects. Some of those funds are used
to pay for reducing emissions from non-motor vehicle
sources, such as locomotives and stationary agriculture
equipment, which are not assessed a motor vehicle fee.
Proponents contend that this issue has not been raised before
by a legislative committee. However, in 2013, the Senate
Environmental Quality Committee analysis for SB 11 (Pavley),
which failed in the Assembly Transportation Committee, noted
opposition's concern, stating, "The Automobile Club of
Southern California objects to fees and taxes imposed on
gasoline powered on-road vehicles being used to pay for
environmental mitigation stemming from off-road equipment,
heavy-duty vehicles and school buses." In addition, the
issue was raised in the Assembly floor analysis for AB 923
(Firebaugh), Chapter 707, Statutes of 2004, which stated that
"[t]his bill is also opposed by the Automotive Repair
Coalition and the California Service Station and Automotive
Repair Association. These organizations complain that the
bill raises fees on car owners by $750 million over the next
ten years to pay for the cleanup of diesel emissions caused
by other sources."
The statute authorizes air districts to charge the motor
vehicle fee and non-motor vehicle projects are being funded
with revenue from this fee. Although this bill does not
create a possible Sinclair Paint issue, it could be viewed as
exacerbating one.
2. Local Air Districts Imposing Motor Vehicle Fee:
Post-Proposition 26.
In November 2010, voters statewide approved Proposition 26,
which broadened the definition of a local tax by defining a
tax to be any fee, charge or exaction of any kind by a local
government unless it fits one of seven exceptions. Every
local tax is either a general tax (which requires a majority
vote) or a special tax (which requires a 2/3 vote). A
special purpose district, such as an air district, has no
power to levy a general tax, but can levy a special tax if
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approved by the voters in that district. An issue may be
raised as to whether the additional $2 charge after 2010
would fit an exception under Proposition 26.
The statute authorizing the additional $2 motor vehicle fee had
a repeal date of January 1, 2015, which was extended by AB 8
(Perea), Chapter 401, Statutes of 2013, to January 1, 2024.
It appears that in order for a local air district to extend
the additional $2 fee as authorized by AB 8, then the local
air district would likely need to pass another resolution to
allow them to extend that fee.
Such an extension would likely require a Proposition 26
analysis, and if it is determined that Proposition 26 applies
and none of the exemptions apply, then the extension of the
additional $2 would be considered a special tax. If this is
the case, then the proposal to extend the additional $2 fee
would have to go to the voters for approval by a 2/3 vote.
Some may contend that the original resolution imposing the
additional $2 fee is enough to allow the fee to continue on
past January 1, 2015, the original repeal date. However,
when a local district adopts a resolution, how can it
lawfully incorporate future legislation that does not exist
at the time of adoption?
The authorization for the additional $2 ended in January 1,
2015. Like the Legislature had to extend the authorization
to collect the fee by statute (AB 8), so too, does the local
air district need to re-adopt a resolution extending the
collection of the additional $2 surcharge?
3. Local Air Districts That Have Yet to Impose Motor Vehicle
Fee.
This bill expands to all local air districts, not just ones with
a state non-attainment designation, and allows them to levy a
fee on motor vehicles. Lake County is the only air district
in state attainment currently for all air pollutants. Also,
there are some non-attainment local air districts that may
have not levied the maximum amount yet.
However, this new fee, or increase of it, is likely subject to
Proposition 26, which would then likely require the action of
levying a fee be subject to voter approval. As mentioned
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above, if it does not meet one of the exceptions provided in
California Constitution Article XIII C §1, then this fee may
be a special tax.
4. Remediation of Air Pollution Harms Created by Motor Vehicles.
HSC §44229(b) states, "a district shall use the revenues
resulting from the next two dollars ($2) of each fee?to
implement the following programs that the district determines
remediate air pollution harms created by motor vehicles on
which the surcharge is imposed?" The dictionary definition
of "remediate" is to reverse or stop. In this case, it seems
that "remediate" means to reverse or stop the environmental
damage caused by motor vehicles on which the fee is levied.
The use of the local motor vehicle fees is constrained by HSC
§44229. The district's resolution adopting the program
cannot go beyond the statutory authorization when adopting
the program to spend the fee. This is applicable to a fee
adopted both prior to and post Proposition 26.
SB 513, as well as existing statute, allows for the additional
$2 surcharge to be used for non-motor vehicles such as
locomotives and stationary sources like agricultural water
pumps. Proponents contend that funding non-motor vehicle
projects with revenue from motor vehicle fees is appropriate
because the same types of emissions that come from motor
vehicles are being addressed.
However, a question arises as to whether using a motor vehicle
fee to fund non-motor vehicle projects is constitutional
(California Constitution Article XIII C and Sinclair Paint )
and consistent with statute (HSC §§44223, 44225, and 44229).
5. Resolution for "Reduction of Toxic Air Contamination
Emissions from Motor Vehicles."
HSC §§44223 and 44225 authorize a local air district to levy and
increase the fee on motor vehicles under specified conditions
including adopting a resolution that the funds will be used
for the reduction of air pollution from motor vehicles
pursuant to the California Clean Air Act. This bill adds
another purpose to the resolution that the fee and
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corresponding program may also be used for "the attainment or
maintenance of state or federal ambient air quality standards
or the reduction of toxic air contaminant emissions from
motor vehicles?"
A. Approval of Fee by Resolution of the Local Air District
Board.
As mentioned above, a proposal to levy or increase a fee is
subject to Proposition 26. Current law and this bill
authorize a levy or increase in a fee by a resolution of
the district board approving the fee. A resolution by
itself would likely be insufficient and such a proposal
would likely have to be decided by the voters.
Clarification is needed to show that approval of the fee is
not decided solely by a resolution of the local air
district board, but also might be subject to the voter
requirements of Proposition 26.
B. Reduction.
HSC §§44223 and 44225 specifically refer to the "reduction"
of air pollution and toxic air contaminant emissions "from
motor vehicles." The plain meaning of such wording means
that the source from which there needs to be a decrease in
pollution/emissions is motor vehicles. However, the fee
is used for non-motor vehicle emitters as well.
Clarification is likely needed in the resolution requirement
to limit the funding to motor vehicle projects as
specified in the statute.
C. "State or Federal Ambient Air Quality Standards."
This bill, as well as current law, authorizes a local air
district to levy or increase the motor vehicle fee to up
to $6 only if the district board adopts a resolution for
both the fee and a corresponding program for the reduction
of air pollution from motor vehicles. SB 513 adds another
purpose, which is for the attainment or maintenance of
state or federal ambient air quality standards or the
reduction of toxic air contaminant emissions from motor
vehicles. However, it is unclear whether the "attainment
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or maintenance of state or federal ambient air quality
standards" must come from motor vehicle sources.
Clarification is needed regarding the attainment or
maintenance of state or federal ambient air quality
standards and that they are from motor vehicle sources.
6. "Ancillary Benefits."
SB 513 adds the term "ancillary benefits," which includes
"additional project benefits beyond the reductions in covered
emissions, including reductions in greenhouse gases,
short-lived climate pollutants, and other benefits, such as
benefits to communities described in subdivision (a) of
Section 43023.5, fuel-efficiency improvements, or the
deployment of advanced technology" and further requires ARB
to "define ancillary benefits."
This bill provides examples of what is considered an ancillary
benefit before ARB is required to establish a definition for
the term. This sequence of events seems backwards - would it
not be more prudent to define the term first and then include
examples of what fits within the parameters of the definition
rather than working a definition around already established
examples?
Also, "ancillary benefits" includes "other benefits" and
provides examples of what may be considered "other benefits,"
but is not limited to those examples. Such a term that
merely means "additional" without any boundaries is too
broad.
ARB and California Air Pollution Control Officers Association
contend that "ancillary benefits" will allow more "bang for
the buck" with projects under the Carl Moyer Program/AB 923.
However, at what point does something considered ancillary
become the main benefit?
The issues raised above regarding ancillary benefits need to be
addressed.
7. "Incremental Cost" (HSC §44275(a)(12)).
Current law defines "incremental cost" as the cost of the
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project less a baseline cost that would otherwise be incurred
by the applicant in the normal course of business. SB 513
expands the definition, stating that an incremental cost
"means the cost of the project that would not otherwise be
incurred by the applicant in the normal course of business."
An "increment" is an addition or an increase and makes sense
to require a baseline. It appears that what was once a true
increment is proposed in the bill to be an entirely separate,
whole cost. Without a baseline, the defined term is
inconsistent with the plain meaning of "increment".
More clarity is needed as to what is meant by "incremental cost"
or change the term entirely.
8. "Cost-effectiveness": Overlapping definition and criteria.
(HSC §44283).
HSC §44275 provides a fairly descriptive definition for
"cost-effectiveness." HSC §44283 provides separate criteria
for "cost-effectiveness" that may possibly override the
definition and create legal ambiguity.
Clarification is needed to address ambiguity to the term,
"cost-effectiveness," and how the two sections relate to one
another.
9. "Other Economic Factors" (HSC §44283(i)).
HSC §44283(i) requires ARB to "adjust the maximum
cost-effectiveness amount established in subdivision (a) and
any per-project maximum set by the state board pursuant to
subdivision (h) to account for inflation and other economic
factors, as determined by the board." "Other economic
factors" is a broad term. Proponents state that "other
economic factors" may include the cost of emission controls,
technology in vehicles that already are clean or required.
Sometimes economic factors may refer to the Consumer Price
Index (CPI). The California Department of Industrial
Relations determines CPI. If "other economic factors"
include CPI, is it appropriate for ARB to determine the CPI?
More specificity to "other economic factors" is needed.
10.Up to 10% of Carl Moyer Program Funds Reserved for ARB
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Discretion (HSC §44286(d)).
Existing law authorizes ARB to reserve up to 10% of Carl Moyer
Program funds each year to directly fund a project that is
multidistrict in nature. SB 513 further specifies that a
project that is multidistrict in nature is one that fits
within eligible projects listed in HSC §44281 under Carl
Moyer Program. This bill also adds that ARB may directly
fund any project that ARB "determines contributes toward the
achievement of state air quality goals." The Carl Moyer
Program is about achieving air quality attainment standards,
which began as a motor vehicle pollution prevention program
"State air quality goals" has a broader scope beyond
vehicular air pollution control such as greenhouse gas
emissions or black carbon. Is it too expansive for one
program to use Carl Moyer Program funds for any air quality
goal?
The "state air quality goals" provision needs to be deleted or
narrowed in scope to be consistent with addressing vehicular
air pollution.
11."Liquidated" (HSC §44287(j) and HSC §44299.2(c)).
HSC §44287(j) states, "Funds not liquidated by a district by
June 30 of the fourth calendar year following the date of the
reservation shall be returned to [ARB] within 90 days for
future allocation pursuant to this chapter." The bill
replaces "expended" with "liquidated," which is a nebulous
term. Proponents state that "liquidated" refers to the local
air district spending or transferring funds to an applicant.
"Liquidated" needs to be defined.
12."Return" vs. "Recapture" (HSC §44291(d)(e)).
HSC §44291(d) and (e) use the terms "return" and "recapture".
Proponents of the bill state "return" means a district is
sending money back to ARB whereas "recapture" means the money
goes back to the district from the grant recipient. However,
it is unclear in the bill what these terms mean.
"Return" and "recapture" need to be defined.
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13.Eliminating Sunsets That Were Just Extended.
This bill repeals two sunsets that were just extended in 2013.
The two sunsets of January 1, 2024 relate to provisions
regarding: 1) how funds in the Air Pollution Control Fund are
allocated and segregated; and, 2) terms and conditions for
allocation of funds to a local air district.
Sunsets provide a sense of accountability for the subject of the
repeal and the opportunity for the Legislature to review the
efficacy of provisions or a program before the date of
repeal. Such legislative review is transparent and provides
the public an opportunity to participate through the
legislative process since legislation is required to extend
the sunset. A sunset provides the Legislature the
opportunity to make changes to the provisions, continue the
provisions as is, or let the provisions disappear on the date
of repeal. A question arises as to whether it is prudent to
let these provisions go on in perpetuity without the benefits
that a sunset provides especially considering these sunsets
were just less than two years ago.
The sunsets need to be put back into the bill.
14.Conclusion.
Amendments are needed to address the issues raised in the
analysis. The author should work on the amendments with the
affected committees, which are the Senate Committees on
Transportation & Housing, Environmental Quality, and
Appropriations, prior to this bill being heard in Senate
Appropriations Committee.
Related/Prior Legislation
AB 8 (Perea), Chapter 401, Statutes of 2013, among other
provisions, extended the sunset for fees to fund the Carl Moyer
Program to January 1, 2024.
AB 923 (Firebaugh), Chapter 707, Statutes of 2004, expanded the
Carl Moyer Program to cover additional pollutants and engines,
imposed a $0.75 fee on tire sales to fund the Carl Moyer
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Program, and authorized local air districts to levy a surcharge
on vehicle registrations to fund certain emission reductions
programs, including eligible projects under the Carl Moyer
Program.
AB 1571 (Villaraigosa), Chapter 923, Statutes of 1999,
established the state Carl Moyer Program through which ARB
provides grants to offset the incremental costs of purchasing or
retrofitting engines in order to reduce specified air emissions.
SOURCE: California Air Pollution Control Officers
Association
SUPPORT:
American Lung Association
Bay Area Air Quality Management District
California Electric Transportation Coalition
California Natural Gas Vehicle Coalition
CALSTART
Imperial County Air Pollution Control District
Sacramento Metropolitan Air Quality Management District
San Joaquin Valley Air Pollution Control District
Santa Barbara Air Pollution Control District
US Hybrid
Yolo-Solano Air Quality Management District
OPPOSITION: None on file
DOUBLE-REFERRAL:
This measure was heard in Senate Transportation and Housing
Committee and the Senate Environmental Quality Committee on
April 21, 2015, and passed out of the committee with a vote of
10-0.
-- END --
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