BILL ANALYSIS
AB 1981
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Date of Hearing: May 12, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1981 (Hill) - As Amended: April 27, 2010
Policy Committee: Natural
ResourcesVote:9-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill exempts new vehicle dealers from paying the per-tire
"California tire fee" on vehicles they sell and, instead,
requires them to pay a per-vehicle "California vehicle tire fee"
on only the new vehicles they sell. Specifically, this bill:
1)Exempts from the $1.75 California tire fee all tires on
vehicles sold by a new vehicle dealer.
2)Requires new vehicle dealers instead to collect a vehicle tire
fee of $9.50 for every new vehicle sold before January 1, 2015
and reduces the fee to $5.00 on and after that date. Exempts
from the vehicle tire fee any used vehicles sold by new
vehicle dealers.
3)Of the $9.50 vehicle tire fee, directs $5.41 to fund the waste
tire program; the remaining $4.09 of the vehicle tire fee goes
to the Air pollution Control Fund (APCF).
4)Imposes a civil penalty of up to $25,000 for fraud.
5)Imposes a maximum $5,000 administrative penalty, in addition
to the civil penalty.
FISCAL EFFECT
1)One-time costs to the Board of Equalization (BOE) of an
unknown amount, but at least several hundred thousand dollars,
to develop a new California vehicle tire fee program,
applicable to new car sellers only (California Tire Recycling
Management Fund (CTRMF)). BOE's work would include
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identifying affected vehicle dealers, creating and revising
forms and publications, and developing or modifying computer
programs.
2)Minor ongoing costs in the tens of thousands of dollars to BOE
administer the fee collection program.
3)The bill declares the intent that the fee changes be revenue
neutral. This, however, is likely not to be the case. Car
sales are dynamic. As the economy deteriorates, used car
sales tend to increase relative to new car sales; when the
economy improves, the opposite tends to happen. As a result,
the bill may result in increased annual revenue to the APCF
and the CRRMF, or decreased annual revenue to those funds,
possibly in the millions of dollars. The direction and
magnitude of revenue change in a given year would depend upon
the ratio of new vehicle sales to used vehicle sales and the
ratio of used vehicles sold by new vehicle dealers, which
would not be subject to fee, to used vehicles sold by used
vehicle dealers, which would still be subject to the fee.
COMMENTS
1)Rationale . According to the New Car Dealers Association
(sponsor), car dealers find it difficult to collect the tire
fees. This is because the tire fee is the only fee not
charged on a per-vehicle basis. New vehicle dealers sell
vehicles with a varying number and combination of new and used
tires. To accurately collect tire fees, dealers must
determine whether a new vehicle has a spare tire or dual rear
tires, and, on used vehicles, whether any new tires were
installed on the vehicle prior to sale. The New Car Dealers
Association contends their members have difficulty keeping
track of the number of new tires mounted on vehicles sold and
charging customers accordingly, thereby subjecting them to
liability and audit costs. They conclude the per-vehicle fee
proposed by this bill will simplify their members' fee
collection without decreasing the amount of tire fee
collected.
2)Background . The Department of Resources Recycling and Recovery
(Calrecycle) administers the state's Waste Tire Recycling
Management Program. The program was statutorily created in
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1990 to reduce the landfill disposal and stockpiling of whole
tires through the establishment of a statewide tire recycling
program. Calrecycle administers the program to encourage the
diversion of waste tires from the state's landfills through a
number of activities, including technology and market
research, demonstration projects, project grants and
curriculum development.
3)The waste tire recycling program is supported entirely by
fees. The amount of the fee, as well as its point of
collection, has varied over time. Currently, the fee is $1.75
per new tire, collected when the tire is purchased. Of that
amount, 75 cents is deposited in the APCF to fund local air
district programs to mitigate or remediate air pollution
caused by tires, including waste tire pile fires. The balance
of the fee-$1.00-is deposited into the CTRMF to fund
Calrecycle's waste tire activities.
4)Support . This bill is supported by the California New Car
Dealers Association (sponsor), who contends their members find
it hard to accurately track the number of new tires they place
on the vehicles they sell and hence, have trouble collecting
tire fees.
5)Opponents . This bill is opposed by California Tire Dealers
Association and the Rubber Manufacturer's Association, who
contend the bill, despite its stated intent, will not be
revenue neutral since the revenue amount will depend on the
ratio of new vehicle sales to used vehicle sales, which is
dynamic. These opponents express concern that, in some years,
there will not be sufficient revenue generated to maintain the
state's tire recycling program.
Analysis Prepared by : Jay Dickenson / APPR. / (916) 319-2081