BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 1192 (Oropeza)
As Amended March 22, 2010
Hearing Date: May 4, 2010
Fiscal: No
Urgency: No
SK:jd
SUBJECT
Airports: Rental Car Facility Fees
DESCRIPTION
This bill, sponsored by the City of Los Angeles, would provide
that an airport operator may either impose a customer facility
charge (CFC) on a rental car customer of $10 per contract, as
provided under existing law, or instead impose that charge in an
amount to be determined by the airport operator after a review
and approval process. The bill would also permit the airport
operator to determine whether to charge the fee on a per
contract or per day basis.
BACKGROUND
In recent years, many airports have located rental car
facilities off-site, often in consolidated facilities that house
all car rental companies in one location. Common-use
transportation systems, including bus shuttle systems, transport
rental car customers to and from terminals and the consolidated
rental car facility.
In 1999, the Legislature passed and the governor signed SB 1228
(Vasconcellos, Ch. 760, Stats. 1999) which permitted San Jose
International Airport to collect a customer facility charge of
$10.15 to finance and construct these consolidated rental car
facilities and common-use transportation systems, subject to
certain conditions. San Francisco and San Diego were also
permitted similar statutory authority. In 2001, AB 491
(Frommer, Ch. 661, Stats. 2001) authorized other public airports
to collect a $10 fee per contract to finance, design, and
(more)
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construct consolidated rental car facilities and common-use
transportation systems. In 2007, SB 641 (Corbett, Ch. 44,
Stats. 2007) repealed the special authorization for San Jose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.
In Los Angeles, the Los Angeles International Airport (LAX)
plans to build a consolidated rental car facility. A recent Los
Angeles Times article noted the following about the project:
Los Angeles International Airport officials are drafting plans
to build a terminal that will house many of the area's rental
car companies, providing space for 33,000 vehicles while
helping untangle the airport's notorious congestion and
cutting pollution. The terminal, which could cost as much as
$800 million, is also expected to make it easier for people to
find their rental agencies or switch from one to another if
the line is too long or it doesn't have the right car. LAX
has collected $47 million for the project since 2007 by
charging a flat $10 fee on rentals from the 10 companies whose
vans circle the airport looking for customers.
But the fee is not bringing in enough money, said Mark Adams,
chief government affairs representative for Los Angeles World
Airports, which operates LAX. In order to raise more funds,
the airport is hoping to boost the surcharge through a daily
fee rather than the current flat fee on rentals. The airport
is still several years from beginning construction of the
terminal.
. . . Although airport traffic is down substantially since
9/11, rental agency vans make about 800,000 trips a year into
the main airport, according to airport statistics, often with
just one or two passengers. With a consolidated rental
facility, buses would shuttle passengers between it and
airline terminals, dropping the number of trips to 437,000
annually. Trips would be cut even further if a planned
light-rail system with stops at the rental car terminal is
built. Adams said the rental terminal is "considered the most
significant air quality mitigation" effort in the airport's
master plan. ("LAX plans a consolidated car rental facility,"
Los Angeles Times, February 26, 2010.)
This bill would permit an airport operator to charge an
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alternative fee in an amount and on a basis to be determined by
the airport operator. This bill has been double-referred to
this Committee and the Local Government Committee.
CHANGES TO EXISTING LAW
1.Existing law permits a customer facility charge to be imposed
on a rental car renter and defines "customer facility charge"
as a fee required by an airport to be collected from a renter
for either: (1) financing, designing, and constructing
consolidated airport car rental facilities; or (2) financing,
designing, constructing, and providing common-use
transportation systems that move passengers between airport
terminals and the car rental facilities. (Civ. Code Sec.
1936(a).)
This bill would additionally define "customer facility charge"
to include a fee to finance, design, and construct terminal
modifications to accommodate and provide customer access to
common-use transportation systems.
2.Existing law requires rental car companies to "bundle," or
include the entire amount in any rental rate that is
advertised, quoted, and charged to rental car customers, but
permits certain other specified fees, such as customer
facility charges to be unbundled and advertised, quoted, and
charged separately. (Civ. Code Sec. 1936(n)(1).)
Existing law requires a rental car company, when a rental rate
is stated in an advertisement, quotation, or reservation in
connection with a car rental at an airport where a customer
facility charge is imposed, to clearly disclose the existence
and amount of the CFC. (Civ. Code Sec. 1936(n)(5)(A).)
Existing law provides that a CFC may be collected by a rental
car company if collection of the fee is required by an
airport, as specified, and the fee is calculated on a
per-contract basis. Existing law provides that the fee shall
be $10 per contract for customers of on-airport rental car
companies if the fee is imposed for both a consolidated rental
car facility and a common-use transportation system. For
customers of off-airport rental companies, existing law
provides that the fee must be proportionate to the cost of the
common-use transportation system. (Civ. Code Sec. 1936(m).)
Existing law provides that the CFC must be separately identified
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on the rental agreement. Under existing law, the fee is a
user fee, not a tax imposed upon real property or an incidence
of property ownership under the California Constitution and
the revenues from the fee may not exceed the reasonable costs
of financing, designing, constructing, or operating the
facility or transportation services and shall not be used for
any other purpose. (Civ. Code Sec. 1936(m).)
This bill would provide that, as an alternative to the existing
fee described above, a CFC may be collected from a customer
if:
(a) the fee is calculated following a review and approval
process by the airport operators to determine the amount of
the fee and whether the fee should be charged on a per
contract or per day basis; and
(b) collection of the fee is required by an airport, as
specified.
This bill would require that the fee must be separately
identified on the rental agreement.
This bill would also provide that revenues from the fee may not
exceed the reasonable costs of improving the facility or
transportation services and shall not be used for any other
purpose.
This bill would provide, consistent with existing law, that the
fee is a user fee, not a tax imposed upon real property or an
incidence of property ownership under the California
Constitution.
COMMENT
1. Stated need for the bill
The author writes:
Construction of consolidated rental-car outlets at California
commercial airports is now a fairly common practice. These
centralized rental locations aggregate the operations of the
on-airport rental car companies into one large site and house
rental offices such as service centers and ready/return
parking lots. Consolidated rental-car outlets are a vital
step toward alleviating airport traffic congestion and air
pollution. Consumer choice at many airports is also limited
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or non-existent by the many separate rental-car outlets and
use of dedicated shuttles, vans and buses.
Airports currently use Consumer Facility Charges (CFCs) to
finance the insurance of long-term debt to pay for the design,
construction and operations of these rental offices and the
operation of the common-use transportation systems at airport
terminals. With limited exceptions, existing state statute
passed in 2001 only allows collection of the CFC at a fixed
rate of $10 per rental-car transaction. This
one-size-fits-all approach is failing to provide sufficient
revenues to: 1) issue or service existing bonds to finance the
construction of these car-rental offices; 2) cover ongoing
operational costs of the offices and their common-use
transportation systems. The current transaction fee does not
offer an airport authority the flexibility to tailor its fee
to local market conditions. In addition, when new car-rental
outlets planned in California airports cannot be sufficiently
funded under the current $10 per contract fee without airport
subsidies, other vital airport services are effected
This bill is sponsored by the City of Los Angeles which argues
that the bill would "provide California's airports with the
funding mechanism they need to construct essential consolidated
rental car facilities. These facilities reduce traffic
congestion and air pollution and increase consumer choice. It
is for these reasons our city is proposing to construct such a
facility at Los Angeles International Airport (LAX). However
our state's airports are currently locked into a fixed $10 per
contract Customer Facility Charge (CFC) first set in 1999 that
is often insufficient to fully fund construction of these
facilities or to pay for the ones that have already been built."
The sponsor provided committee staff a survey of the CFC charged
in other large hub U.S. airports for consolidated rental car
facilities. That survey showed that airports imposed fees
ranging from $2.50 per day (Orlando, Fl.) to $6.20 per day (New
Orleans, La.) Of the 12 non-California airports surveyed, the
majority (five airports) were in the $2.50 to $4.00 range. Two
airports charged fees in the $4.01 to $5.00 range; four airports
in the $5.00 to $6.00 range; and one airport was above $6.00.
2. Removal of $10 cap per contract
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This bill would eliminate the requirement that renters only be
charged a CFC of $10 per contract. Instead, airports would be
permitted to impose, after a "review and approval process" (see
Comment 3 for further discussion), a charge in an amount to be
determined by the airport on a per contract or per day basis,
again as determined by the airport. For the reasons explained
below, the Committee should consider whether it is appropriate
to permit an airport operator to charge consumers a customer
facility charge that is an unspecified and uncapped amount.
a. Cost to consumers
The City of Los Angeles, sponsor of this measure, estimates
that, should this bill be enacted, it would likely impose a
customer facility charge of $5 to $7 per day. On average,
most rental terms at LAX are about four days. As a result,
renters, who currently pay $10 per contract for a four-day
rental term could pay $20 to $28 per four-day rental term.
This is a potentially significant increase considering all of
the other taxes and fees that are added on to the base rate of
the rental price.
For example, in addition to the CFC, renters are also charged
for state and local taxes, an airport concession fee, vehicle
license cost recovery fee, and California Tourism Commission
Assessment. The following chart, based upon estimated rental
charges for a rental from LAX during April 2010, illustrates
the significant fees already paid by rental car customers:
-----------------------------------------------------
| |Base car |Additional |Total |
| |rental rate |fees & |approximate |
| | |taxes |charge |
|--------------+------------+------------+------------|
|Four-day |$110.67 |$39.42 |$150.09 |
|rental | | | |
|--------------+------------+------------+------------|
|One-week |$285.49 |$84.07 |$369.56 |
|rental | | | |
-----------------------------------------------------
The total approximate charges described above include a CFC of
$10 per contract. By removing the $10 per contract cap in
existing law and instead permitting an airport to impose a fee
on a per day basis in an unspecified amount to be determined
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by the airport operator, this bill could substantially
increase the CFC paid by consumers.
b. Charging the customer facility fee separately
Existing law requires a rental car company, when a rental rate
is stated in an advertisement, quotation, or reservation in
connection with a car rental at an airport where a CFC is
imposed, to clearly disclose the existence and amount of the
customer facility charge. That charge is in addition to the
rental rate and taxes. Under existing law, rental car
companies must "bundle," or include the entire amount in any
rental rate that is advertised, quoted, and charged to rental
car customers.
However, certain specified fees, including customer facility
charges, may be unbundled and advertised, quoted, and charged
separately. As a result, that charge is not included in the
rental rate and is instead charged separately. Many consumers
already express consternation, if not surprise, at the taxes
and fees that are added onto their base rental rate. This
bill would appear to exacerbate that situation by
increasing-potentially substantially-the amount that may be
unbundled and charged separately.
c. Application of bill
This bill is intended to apply to all rental car customers who
rent cars at airport facilities. This would include both
in-state and out-of-state (and international) consumers as
well as business travelers. It would also include state
entities, as well as the Legislature and the Judicial branch,
whose employees rent rental cars at airports and would be
subject to the potential additional cost.
d. Review and approval process
This bill would permit the alternative customer facility
charge to be imposed on renters after a "review and approval"
process. While the author and sponsor indicate that this is
intended to be a public process, there is nothing in the bill
that specifies this. In fact, the language currently in the
bill could be read to mean that the airport reviewed the
amount of the fee and whether to charge it on a per day or per
contract basis and then approved the amount and the per day or
per contract basis.
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In addition, this bill would provide an airport operator with
complete discretion to revise the CFC (likely increasing it if
needed to cover the costs of the consolidated car rental
facilities and common-use transportation systems) at any time
and potentially on a regular basis, as long as the operator
had completed a review and approval process.
At a time when fiscal uncertainty and crisis are hitting working
families, small businesses, and the state, the Committee should
consider whether it is appropriate to increase, potentially
significantly and frequently, the burden placed on consumers.
As a result, the Committee should consider the following
suggested amendments:
Suggested amendments:
Limit this bill just to Los Angeles International Airport.
Permit an airport operator at LAX to, in light of the
economic crisis, impose a more reasonable customer facility
charge on a rental car customer of up to $5 per day or $20
per contract, whichever is less.
The sponsor provided the Committee with information showing that
the current CFC of $10 per contract brings in $25 million per
year for LAX (based on 2.5 million rental car transactions), and
the average rental period at LAX is 4 days. Given those
numbers, the average CFC would be $20 under the proposed
amendment. This would result in $50 million per year, double
the amount of CFC currently collected. Assuming the bond period
is 30 years, as indicated by the sponsor, and the rental
activity at LAX remains constant for the next 30 years, the
amount of CFC collected would be approximately $1.5 billion,
well above the estimated $600-800 million cost of LAX's proposed
consolidated rental car facility.
3. Oversight: how is the money being spent?
Existing law requires that the aggregate amount to be collected
as a customer facility charge shall not exceed the reasonable
costs, as determined by an independent audit, to finance,
design, and construct consolidated rental car facilities. The
sponsor provided the Committee with a survey of airports in the
state indicating whether they were collecting the CFC and, if
so, the amount collected and whether an audit had been
performed.
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According to the survey, six airports are currently collecting a
CFC. All six of those are collecting the statutory amount-$10
per rental contract. None of the six have completed an audit;
San Jose International Airport indicates that it has an audit
scheduled for 2011. The sponsor explains that in several cases,
the collection of the CFC is too recent to provide sufficient
data for a complete audit. Yet, the statute clearly states that
"the aggregate amount to be collected as a customer facility
charge shall not exceed the reasonable costs, as determined by
an independent audit" to finance, design, and construct
consolidated rental car facilities.
The Committee should consider whether sufficient mechanisms
exist to provide oversight and ensure that airports are not
collecting the CFC in excess of the reasonable costs. The
following amendment-which would be limited to LAX as suggested
in the amendments described in Comment 2-would address this
issue:
Suggested amendments:
Require annual reports to the Senate and Assembly
Committees on Judiciary detailing the amount of customer
facility charges collected, what the funds are being spent
on, and whether airport concession fees charged to
consumers have increased.
Given that several airports appear to be collecting the CFC
without having performed an audit, the Committee may also wish
to consider amending the bill to revise existing law's audit
requirement so that it is performed when the CFC is first
collected and every three years thereafter.
Require the audit mandated by existing law to be
completed upon collection of the customer facility charges
and then every three years thereafter.
Require the Bureau of State Audits to review this audit,
independently examine the collection of the customer
facility charges, as necessary, and afterward report to the
Legislature on its conclusions.
4. Operating costs: who should bear the burden?
Existing law provides that the authority to collect the customer
facility charge expires when the bonds used for financing are
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paid. The sponsors have indicated that the CFC would be used
for operating costs, but if that is the case, the possibility
exists that the charge will be imposed in perpetuity. While it
may be appropriate to ask users of the facility to pay for the
operating costs of the common-use transportation systems which
move users to and from the airport and the rental car facility
(this use is already permitted by law), it is arguably
inappropriate to make them bear the burden of paying for
operating costs such as electricity or water.
As a result, the Committee should consider amending the bill to
provide that the bonds may only be used for construction and
design of the consolidated rental car facility, not for
operating costs (with the exception of common-use transportation
systems).
Suggested amendment:
Restrict use of the bonds to construction and design of
the consolidated rental car facility and operating costs of
the common-use transportation system only.
5. Allowing for modification of terminals
Under existing law, a CFC may be collected from a rental car
renter for the purposes of financing, designing, and
constructing consolidated airport car rental facilities or
financing, designing, constructing, and providing common-use
transportation systems that move passengers between airport
terminals and the car rental facilities. Existing law also
prohibits a CFC from being used to pay for, among other things,
terminal expansion.
This bill would provide that a customer facility charge could be
collected for the purposes of financing, designing, and
constructing terminal modifications to accommodate and provide
customer access to common-use transportation systems. The
sponsor intends that this provision be an exception to the
prohibition on terminal expansion in cases where such expansion
is necessary to accommodate and provide access to common-use
transportation systems, but it is arguably another cost imposed
solely on consumers. As a result, the Committee should consider
whether to delete this provision. The following amendment would
achieve this:
Suggested amendment:
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On page 3, delete lines 4-6
Support : Alliance for a Regional Solution to Airport
Congestion; Bob Hope Airport; California Airports Council;
Fresno Yosemite International Airport; Inglewood-Airport Area
Chamber of Commerce; Los Angeles World Airports; San Francisco
International Airport
Opposition : None Known
HISTORY
Source : City of Los Angeles
Related Pending Legislation :
AB 1731 (Tran) would, among other things, increase the limit on
a renter's responsibility for physical damage to the rental car
from $500 to $1,000, and would revise the rate limitations on
damage waivers sold by a rental car company. This bill has been
referred to the Assembly Judiciary Committee.
AB 2059 (Calderon), among other things, would require a rental
car company, if it enters into a rental contract with a renter
who resides out of state in which third-party liability
insurance is provided, to defend and indemnify the renter to the
extent of the insurance coverage, to accept service of process
on behalf of the renter, and to obtain contact information from
the renter. This bill is pending in the Assembly.
Prior Legislation :
AB 491 (Frommer, Ch. 661, Stats. 2001) (See Background.)
SB 1228 (Vasconcellos, Ch. 760, Stats. 1999) (See Background.)
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