BILL ANALYSIS                                                                                                                                                                                                    �



                                                                SB 225
                                                                       

                      SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
                        Senator S. Joseph Simitian, Chairman
                              2011-2012 Regular Session
                                           
           BILL NO:    SB 225
           AUTHOR:     Simitian
           AMENDED:    As Introduced
           FISCAL:     Yes               HEARING DATE:     March 21, 2011
           URGENCY:    No                CONSULTANT:       Peter Cowan
            
           SUBJECT  :     CAPITAL ACCESS LOAN PROGRAM

            SUMMARY  :    
           
            Existing law  : 

           1) Establishes the California Pollution Control Financing 
              Authority (CPCFA) with specified powers and duties, and 
              authorizes CPCFA to approve financing for projects or 
              pollution control facilities to prevent or reduce 
              environmental pollution.  (Health and Safety Code �44550 et 
              seq.).

           2) Authorizes CPCFA to establish loss reserve accounts for 
              financial institutions participating in the California 
              Capital Access Program (CalCAP) which provide loans to 
              qualifying small businesses.  (�44559 et seq.).

           3) Authorizes CPCFA to make use of funds provided by federal 
              capital access programs or other sources.  (�44559.4 and 
              �44559.11).

            This bill  :

           1) Authorizes the authority to establish loss reserve funds 
              for lending that include a terminal rental adjustment 
              clause (TRAC) leases if and only if funds from other 
              sources than CPCFA are available.

           2) Authorizes CPCFA executive director to establish conditions 
              for TRAC leasing loss reserve accounts.











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            COMMENTS  :

            1) Purpose of Bill  .  According to the author, the TRAC lease 
              is a common form of financing in the trucking industry.  
              Specifically for trucks, it is often less expensive and 
              offers some tax benefits compared to typical loans.  
              Currently CPCFA is unable to include TRAC leases among the 
              financing tools available under CalCAP.  SB 225 adds TRAC 
              leases to the list of permissible CPCFA financing tools.

            2) What is a TRAC lease?   Terminal rental adjustment clause 
              leases are substantially similar to a loan with a balloon 
              payment.  Defined in federal law, TRAC leases are 
              specifically for motor vehicles where a value of the 
              vehicle at the end of the lease term is predetermined.  At 
              the end of the lease the lessee is given the option to 
              purchase the vehicle at the predetermined price.  If the 
              vehicle is sold above that price the lessee is compensated 
              whereas if it is below the agreed upon price the lessor is 
              compensated.

            3) Clearing the air.   The California Air Resources Board (ARB) 
              recently established new regulations with the goals of 
              reducing emissions of particulate matter, nitrogen oxides, 
              and other pollutants.  Compliance for some trucks begins in 
              January 2012, with deadlines for credits beginning in July 
              2011. The ARB has partnered with the State Treasurer's 
              CalCAP to provide financial assistance to truckers affected 
              by these recent regulations.  Eligible trucking companies 
              have fewer than 40 trucks, fewer than 100 employees, and 
              less than $10 million in annual revenue.  This bill allows 
              eligible companies who use TRAC leases to participate in 
              the CalCAP program.  
            
            SOURCE  :        Senator Simitian  

           SUPPORT  :       California Trucking Association, Clean Fleets 
                          Coalition, Pe�a's Disposal, Inc., Westside 
                          Waste Management Co., Inc.
            
           OPPOSITION  :    None on file  
            










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