Posted September 14, 2023
A key California legislative committee has approved a bill to extend until 2035 billions of dollars in higher fees on vehicle owners that fund several clean transportation and zero-emission vehicle (ZEV) subsidy programs, following months of negotiations that resulted in part in an agreement to allocate 15 percent of the funds for hydrogen fueling infrastructure.
"This bill secures over $2 billion in ZEV funding to help transition the transportation sector toward cleaner vehicles. It also includes the infrastructure and mobility options," said Assemblywoman Eloise Gomez Reyes (D-Colton) during a Sept. 13 hearing of the Senate Budget & Fiscal Review Committee on the bill, AB 126.
"It strikes a balance, between providing dedicated funding to the hydrogen industry, providing the public with accountability and transparency measures for state-funded infrastructure, and ensuring that funding is prioritized in communities that need it the most," added Reyes, who is a co-author of the measure.
The committee approved the bill on a 10-5 party-line vote, sending it to the Senate floor for consideration. At press time, AB 126 was expected to pass by the last day of the legislative session, Sept. 14, with the required two-thirds vote to extend taxes. Gov. Gavin Newsom (D), who has until Oct. 14 to sign or veto bills, is expected to sign the measure into law.
AB 126 would extend higher smog abatement and vehicle registration fees -- which were due to expire at the end of this year after being extended 10 years ago -- until July 1, 2035, for deposit into the state's Air Quality Improvement Fund, the Alternative and Renewable Fuel and Vehicle Technology Fund, and the Enhanced Fleet Modernization Subaccount.
Those funds generally pay for a variety of programs that subsidize the purchase of light-, medium- and heavy-duty battery-electric and hydrogen-fueled electric vehicles (EVs) as well as the construction of EV charging infrastructure and hydrogen fueling stations.
Reyes noted that AB 126 was recently amended to require that at least 15 percent of the program funds be allocated annually to hydrogen refueling infrastructure until 2030 -- a compromise with lawmakers and stakeholders who believe hydrogen should play a significant role in the state's push to decarbonize its transportation and industry sectors.
"It establishes a preference for clean hydrogen that is the least carbon-intensive and is consistent with the clean hydrogen federal tax credit," she added.
An environmentalist closely following AB 126 notes that prior to that amendment, AB 126 would have only provided 10 percent of program funding for hydrogen refueling infrastructure.
However, even the 15 percent figure in AB 126 is a decrease from previous program requirements that were in place for many years.
AB 126 also requires the California Energy Commission, beginning in 2025, to "expend at least 50% of the moneys" on "programs and projects that directly benefit or serve residents of disadvantaged and low-income communities and low-income Californians."
While Democrats on the committee and numerous stakeholder groups hailed the bill as crucial for California's drive toward clean transportation and achievement of its greenhouse gas and climate change targets, Republicans criticized it as another tax hike on consumers who are already struggling financially and as undercutting efforts to bolster hydrogen.
"I don't quite share the enthusiasm that's been expressed," said Sen. Roger Niello (R-Fair Oaks) during the hearing. "First of all, this is an 11-plus-year extension of a tax. . . . The problem here is this tax is imposed upon drivers who will not directly benefit from the programs that the tax pays for. In fact, some lower-income drivers are subsidizing higher-income people that can afford electric vehicles at this point."
AB 126 "actually reduces" funding for hydrogen, Niello added, pointing out that "existing law provides for more hydrogen -- and it's moving toward the Legislature picking winners and losers. We seem to have a significant struggle getting broad buy-in in the Legislature toward hydrogen as part of the mix. And I find that very concerning."
During the public comment period of the hearing, no stakeholder representatives spoke in opposition to AB 126.
However, the Howard Jarvis Taxpayer Association (HJTA) is opposing the bill, stating in a Sept. 12 letter to Reyes that when "these 'temporary' fee hikes were last reauthorized" in 2013, "it was estimated that they would generate more than $214 million annually in higher vehicle-related costs to taxpayers. There is nothing so permanent as a temporary tax and, make no mistake, this is a tax increase."
Further, "California taxpayers, and especially vehicle owners who pay $1.63 more than the national average (and $1.87 more than Floridians) for gas, are taxed enough," the letter adds.
In past debate over extending the fees, HJTA and the California New Car Dealers Association argued it would be even more unfair to extend the higher fees on California motorists because of other annual state and local government fees they pay.
For example, the auto dealer group pointed out that many California motorists also pay air quality district fees, abandoned vehicle trust fees, California Highway Patrol fees, freeway call box fees, theft deterrence fees, fingerprint identification fees, and tire fees. -- Curt Barry (firstname.lastname@example.org)