BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1602
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Patterson
VERSION: 3/13/14
Analysis by: Nathan Phillips FISCAL: YES
Hearing date: June 17, 2014
SUBJECT: Vending machines: business enterprises for the blind
DESCRIPTION:
This bill prohibits the Department of Transportation (Caltrans)
from being reimbursed for utility costs incurred by vendors
operating under the Business Enterprises Program for the Blind.
ANALYSIS:
Existing law :
Establishes the Business Enterprises Program within the
Department of Rehabilitation to provide blind persons with
employment, economic opportunities, and the means to be
self-sufficient.
Gives priority to blind persons to operate vending business on
state properties, including rest areas on state and interstate
highways.
Directs Caltrans to allow placement of vending facilities in
roadside rest areas, unless prohibited by federal law.
Requires blind vendors to reimburse Caltrans for costs of
maintenance, operations, design review, and other activities
related to operating vending machines in state roadside rest
areas.
Requires blind vendors to be solely responsible for payment of
all rent or utility charges in accordance with the terms and
conditions of the vendor operating agreement, permit, or
contract.
This bill prohibits Caltrans from being reimbursed for utility
costs (e.g., electricity, water, sewer) incurred by vendors
operating at roadside rest areas under the Business Enterprises
Program for the Blind and requires Caltrans to pay for those
AB 1602 (PATTERSON) Page 2
utility costs using state funds.
BACKGROUND:
According to a 2013 annual report of the Department of
Rehabilitation's (DOR) Business Enterprises Program for the
Blind, 17 blind vendors operated vending facilities at 29
roadside rest areas along interstate highways in California,
averaging just over $50,000 in annual income per vendor.
Vendors sell items from automated vending machines, including
refrigerated soft drinks, snacks, ice cream and hot beverages.
A single vendor conducts business at each rest stop (and for
some vendors more than one rest stop), operating between seven
and 11 vending machines per site. Monthly utility costs depend
on the number and type of vending machine (and the need for
refrigeration or heating, in particular) and the climate,
season, and placement of machines (indoor vs. outdoor).
According to the author, electricity costs range from around
$350 per month to $700-$900 per month depending on these
factors. These estimates come from 10 of the 29 rest areas
which have independent electric meters.
Vendors pay up to 6% of their net sales to the DOR for deposit
into a trust fund, used to pay for services provided by the
Business Enterprises Program for the Blind. Vendors must secure
all necessary business and health permits, obtain required
insurance policies, hire and supervise employees, pay business
and sales taxes, develop menus, and purchase merchandise for
sale.
A current interagency agreement between the DOR and Caltrans
requires vendors to pay for utility costs at the roadside rest
areas. In the 10 facilities in which meters are installed,
vendors pay utility costs directly to the electricity provider.
At the remaining sites, the interagency agreement requires
vendors to pay $200 per month per vending site and DOR
reimburses Caltrans for the balance of electricity costs.
COMMENTS:
1.Purpose . According to the author, this bill addresses the
discrepancy in how the state treats participants in the
Business Enterprises Program for the Blind with respect to
utility costs. Participants operating in state buildings have
their costs paid for by the DOR, whereas participants
operating at roadside rest areas must pay either $200 per
AB 1602 (PATTERSON) Page 3
month per vending site or the amount recorded on the direct
electricity meters. Supporters of this bill contend that
costs of hundreds of dollars per month cut deep enough into
vendor income as to threaten the viability of their business.
2.Utility costs relative to vendor income . The most recent
annual report (2013) of the Business Enterprises Program for
the Blind indicates that the average income of vendors is
about $50,000. Utility expenses of $200 per month for
unmetered facilities and up to $900 per month at metered
locations amount to 5% to perhaps 20% of net income. These
represent significant overhead costs that would be added to
both the other overhead costs of doing business described
above and the 6% fee from vending sales that are paid by
vendors to the BEP program. It does not appear that this bill
would provide an excessive subsidy to these businesses.
3.Opportunity costs . Caltrans estimates costs of $200,000 -
$250,000 in expenses for utilities by vendors, which it would
pay from its maintenance account. This is a small number in
comparison with Caltrans' baseline maintenance budget which
exceeds $500 million per year, but $250,000 nevertheless
represents an annual opportunity cost of funding that, by way
of comparison, would build a half-mile of protected bikeway or
2 to 3 sidewalk curb extensions, or provide nearly the full
cost of a traffic signal.
4.An incentive for energy conservation . The substantial cost of
electricity for roadway rest stops is caused in part by the
unique feature of outdoor vending in many of these locations.
Although the vending machines are protected from rain, they
are not as well insulated from extremes of heat and cold in
the outdoor environments, and these conditions increase
electricity use and cost. This bill shifts costs from vendors
to the state, but does not address how costs might be saved by
conserving energy. Should Caltrans bear substantial vending
machine utility costs as a result of this bill, those costs
may be reduced if Caltrans and vendors at its roadside rest
areas work with vending machine manufacturers to produce and
install at rest areas vending machines that are more energy
efficient across a range of thermal environments.
Assembly Votes:
Floor: 79-0
Appr: 17-0
AB 1602 (PATTERSON) Page 4
Trans: 15-0
POSITIONS: (Communicated to the committee before noon on
Wednesday,
June 11, 2014.)
SUPPORT: The California Vendors Policy Committee
California Council of the Blind
Goodwill (Redwood Empire)
The National Federation of the Blind's
Entrepreneurs Initiative
Six blind vendors
Twenty-four individuals
OPPOSED: None received.