BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 823
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: hill
VERSION: 6/24/09
Analysis by: Jennifer Gress FISCAL: yes
Hearing date: July 7, 2009
SUBJECT:
Motor Vehicle Inspection and Maintenance program (smog check):
consumer assistance
DESCRIPTION:
This bill increases the amount of money from $1,500 to $2,000
that the Bureau of Automotive Repair (BAR) may pay to a person
who retires his or her vehicle under the smog check program and
adds that in lieu of payment in cash, BAR may offer a transit
voucher with a value equivalent to the cash payment. This bill
also deletes the provision of law that provides for repair
assistance to vehicle owners whose vehicles have been directed
to a test-only smog check station.
ANALYSIS:
Smog Check Program
To meet federal air quality standards, existing law requires
California-registered, gasoline-powered vehicles, and beginning
January 1, 2010 certain diesel-powered vehicles, to undergo
biennial smog inspections to measure motor vehicle-related
pollutants. New vehicles six model years old and newer,
vehicles with a pre-1976 model year, electric vehicles,
motorcycles, and large commercial vehicles are exempt from the
smog check program.
Upon initial registration and upon a change of ownership and
registration of a vehicle, the vehicle owner must submit to the
Department of Motor Vehicles (DMV) a valid certificate of
compliance indicating that the vehicle has passed its smog
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inspection. If a vehicle fails any component of a smog
inspection, the vehicle owner must, with some exceptions, repair
the vehicle and pass a subsequent smog inspection before being
able to register or renew the registration of the vehicle.
Each year, BAR directs a certain percentage of vehicles that it
deems to be "high emitters" (currently about 42 percent of
vehicles subject to the program) to specified "test-only"
stations. Test-only stations are those that test, but do not
repair, vehicles.
Under existing law, BAR administers a Consumer Assistance
Program that provides financial support to assist vehicle owners
who have failed their smog inspection. Vehicle owners have the
following options:
1.Repair cost waiver: A waiver allows a vehicle owner to
register his or her vehicle, even if it does not pass a smog
inspection. A vehicle owner qualifies for a repair cost
waiver after he or she spends at least $450 for repairs,
including parts and labor. For low-income vehicle owners,
defined as persons whose income does not exceed 185 percent of
the federal poverty level, the vehicle owner qualifies for the
repair cost waiver (known in this case as an "economic
hardship extension") if an estimate for repairs exceeds $250.
A vehicle owner may apply for only one repair cost waiver for
the life of a vehicle. Failures resulting from emissions
control equipment that is missing or that has been tampered
with are not eligible for a repair cost waiver.
2.Repair assistance: Two categories of vehicle owners are
currently eligible for repair assistance under this program.
The first consists of low-income vehicle owners, defined as
persons whose income does not exceed 185 percent of the
federal poverty level, which BAR has authority to increase to
225 percent, whose vehicles fail a smog inspection. The
second category of eligible vehicle owners consists of persons
who were directed to a test-only facility and whose vehicles
fail the smog inspection. Under the repair assistance
program, BAR will pay up to $500 for repair costs, subject to
a co-payment of $20 for low-income persons and $100 for all
other persons.
3.Vehicle retirement: The vehicle retirement program provides
vehicle owners compensation to voluntarily retire (or scrap)
their vehicles that have failed a smog inspection. Under this
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option, a vehicle owner applies to BAR and receives an
approval letter by mail. The owner then takes the approval
letter to a vehicle dismantler under contract with BAR for
retirement and payment. The vehicle is removed from operation
and dismantled. Existing law allows BAR to pay an owner who
elects to retire his or her vehicle up to $1,500 and to opt to
pay more than $1,500 if it determines that doing so will be
cost-effective. Currently, BAR provides $1,000 to a vehicle
owner who retires his or her vehicle and is working in
cooperation with ARB to amend BAR's regulations to provide
$1,500 owners who are low-income.
To be eligible for any of these consumer assistance options, the
vehicle must have failed its smog inspection and have been
continuously registered for at least 24 months, with some
exceptions, in an area where vehicles are subject to biennial
smog inspection.
AB 118: Enhanced Fleet Modernization Program
AB 118 (N??ez), Chapter 750, Statutes of 2007, established the
Enhanced Fleet Modernization Program, a voluntary vehicle
retirement program intended to augment existing vehicle
retirement programs by targeting the highest emitting vehicles
in areas with the worst air quality. ARB adopted guidelines for
the program on June 25, 2009, which BAR will implement beginning
January 1, 2010. In general, the eligibility criteria are more
liberal than those for the Consumer Assistance Program. Under
the Enhanced Fleet Modernization Program, vehicle owners will
receive a cash incentive of $1,000 to retire their vehicle,
$1,500 if the owner is low-income. In the South Coast air basin
and the San Joaquin Valley, which have the worst air pollution
in the state, the program targets and solicits high-emitting
vehicles to participate in the program, providing an additional
$2,000 voucher to be used to replace the high-emitting vehicle
with a qualified low-emission vehicle. For low-income vehicle
owners, the voucher is worth $2,500.
This bill :
Increases the maximum payment that BAR may offer for vehicle
retirement under the smog check program from $1,500 to $2,000.
Allows BAR to offer a transit voucher in lieu of cash for
vehicle retirement in an amount equivalent to what BAR would
have paid in cash.
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Deletes the provision that vehicle owners directed to
test-only smog facilities are eligible for repair assistance
and makes conforming changes.
Establishes that a "low-income motor vehicle owner" is a
person whose income does not exceed 225 percent of the federal
poverty level.
COMMENTS:
1.Purpose . The author argues that 75 percent of vehicular
pollution is caused by just 25 percent of the vehicle fleet.
Unfortunately, BAR's vehicle retirement program is continually
raided for General Fund expenditures instead of being used to
retire high polluting vehicles. In addition, the author
asserts that not enough Californians are utilizing the vehicle
retirement program. There are over three million vehicles 15
years old or older in California yet only about 22,000
vehicles are retired through the program annually. Because
vehicle retirement programs are one of the most productive
ways to reduce air pollution, this bill seeks to increase the
incentive so that more people will participate in the program
and prevent funds intended for vehicle retirement from being
used for other purposes.
This bill also eliminates repair assistance for vehicle owners
who are directed to test-only facilities and whose vehicle
fails its smog inspection. This form of repair assistance
does not have an eligibility criterion based on income; any
owner who is directed to a test-only facility and fails is
eligible. In fiscal year 2007-08, approximately 46 percent of
total expenditures for the repair assistance program were for
vehicle owners who were directed to test-only facilities.
(BAR notes that some of these may have been eligible under the
income provision but chose not to specify their income.) The
author argues that this is an unnecessary subsidy for those
who are otherwise likely able to afford vehicle repairs. This
bill closes this loophole, and limits participation in the
repair assistance program to vehicle owners whose income level
does not exceed 225 percent of the federal poverty level
(approximately $49,600 annually for a family of four).
2.Questionable likelihood BAR will increase payment from $1,500
to $2,000 . AB 1870 (Lieber), Chapter 761, Statutes of 2006,
increased the maximum amount that BAR may pay a vehicle owner
to retire his or her vehicle and authorized BAR to increase
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the amount if it deems doing so is cost-effective. Since
passage, BAR has not increased the amount it pays, though it
is currently, three years following passage of AB 1870, in the
process of revising its guidelines to provide $1,500 for
low-income vehicle owners. Based on this experience, it may
be unlikely to expect BAR will increase funding to $2,000,
especially considering that the incentives provided for
vehicles under the Enhanced Fleet Modernization Program
($1,000 for most vehicles, $1,500 for low-income vehicles) are
equivalent to those provided by BAR for vehicle retirement
under the Consumer Assistance Program. If the author's
objective is to require that payment be increased to $2,000,
the author or committee may wish to consider an amendment to
delete "up to" prior to $2,000.
3.Consistency with Enhanced Fleet Modernization Program . Under
existing law, as implemented via regulation, the amount of
compensation paid to a vehicle owner who retires his or her
vehicle under the Consumer Assistance Program is the same as
it will be for vehicle retirement in many areas of the state
under the Enhanced Fleet Modernization Program. Under the
Enhanced Fleet Modernization Program, however, the incentives
will be enhanced for high-emitting vehicles in the San Joaquin
Valley and the South Coast air basin such that the incentive
will total $3,000 for most vehicle owners and $4,000 for
low-income owners. Increasing the maximum that BAR may pay
to $2,000 has the potential to make the amounts for the two
programs inconsistent with one another, which may be confusing
to consumers, complicate implementation unnecessarily, and
deter some vehicle owners from participating in the program
that pays less. The author notes that the bill only
authorizes BAR to increase the amount so BAR is not required
to do so. If the author's intent is simply to authorize BAR
to pay more, the author or committee may wish to consider an
amendment to increase the maximum compensation to $3,000 for
most vehicle owners and $4,000 for low-income vehicle owners
so that BAR has maximum flexibility to make compensation for
both vehicle retirement programs consistent.
4.Benefits of vehicle retirement . By incentivizing the early
retirement of fully functional vehicles, vehicle retirement
programs accelerate emission benefits that would have
otherwise occurred by the natural turnover of the fleet.
Accelerating emission reductions will help to improve air
quality and public health, and further the state's ability to
attain federal air quality standards. In addition to these
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environmental and public health benefits, vehicle retirement
programs have economic benefits by incentivizing the purchase
of newer vehicles. Automobile manufacturers and dealers are
likely to benefit by accelerated vehicle purchases, which may
be particularly valuable in the state's current economic
climate.
5.How will transit voucher work ? Because some vehicle owners
who retire their vehicles may not be interested in or able to
afford purchasing a newer vehicle, the idea of allowing BAR to
provide a transit voucher in lieu of cash has merit. It is
unclear, however, the process by which BAR would do so under
this bill. Under current law, vehicle owners take an approval
letter to a dismantler and receive compensation from the
dismantler once the vehicle is actually retired. Will the
dismantler become responsible for the transit voucher? Will
the vehicle owner be required to submit proof to BAR that the
vehicle was retired before receiving the voucher? It is also
not clear whether BAR or the vehicle owner would decide
whether the owner would receive cash compensation or a transit
voucher. Because the vehicle owner retiring his or her
vehicle is in the best position to determine his or her
transportation needs, the author or committee may wish to
consider an amendment specifying that the vehicle owner may
choose a transit voucher in lieu of cash payment.
Assembly Votes:
Floor: 56-19
Appr: 12-5
Trans: 10-1
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
July 1, 2009)
SUPPORT: Alliance of Automobile Manufacturers (sponsor)
Association of International Automobile
Manufacturers
Automobile Club of Southern California
California Emissions Testing Industries
Association
California New Car Dealers Association
California State Automobile Association
California Transit Association
National Parks Conservation Association
AB 823 (HILL) Page 7
OPPOSED: Automotive Aftermarket Industry Association
California Automotive Wholesalers' Association
California Service Station and Automotive Repair
Association
LKQ Corporation