Proposal:

Approve Alternative Fuel ULEV/LEV Incentive Program as Part of FY 1997-99 AB 2766 Discretionary Fund Work Program; Authorize the MSRC to Approve All Manufacturers that Offer Vehicles Meeting ARB Certification for Alternatively Fueled ULEV/LEV Passenger Vehicles; and Authorize Execution of Agreements

Synopsis:

The Governing Board’s April 11, 1997 approval in concept of the FY 1997-99 AB 2766 Discretionary Fund Work Program included a ZEV/ULEV Program at $8.55 million. This Program includes a $3 million Alternative Fuel ULEV/LEV Incentive providing funding toward the incremental cost of ARB-certified alternatively fueled ULEV/LEV passenger vehicles. At its July 24, 1997 meeting, the MSRC approved a buydown incentive of $3,000 for ULEVs and $1,000 for LEVs, retroactive to July 1, 1997. Since only ARB-certified ULEV/LEV passenger vehicles are eligible, the MSRC seeks authorization to approve all manufacturers that offer vehicles meeting this ARB certification. In addition, the MSRC seeks authorization to execute agreements with those manufacturers.

Committee:

Mobile Source Air Pollution Reduction Review, July 24 , 1997, Approved Unanimously

Recommended Action:

1. Approve Alternative Fuel ULEV/LEV Incentive Program as Part of FY 1997-99 AB 2766 Discretionary Fund Work Program;

2. Authorize the MSRC to Approve All Manufacturers that Offer Vehicles Meeting ARB Certification for Alternatively Fueled ULEV/LEV Passenger Vehicles; and

3. Authorize the Chairman of the Board to Execute Agreements with Manufacturers.

Mayor John Longville
Chair, MSRC

Background

In September 1990 Assembly Bill 2766 was signed into law (Health & Safety Code Sections 44220-44247) authorizing the imposition of an annual $4 motor vehicle registration fee to fund the implementation of programs exclusively to reduce air pollution from motor vehicles. AB 2766 provides that 30 percent of the annual $4 vehicle registration fee subvened to the AQMD be placed into an account to be allocated pursuant to a work program developed and adopted by the MSRC and approved by the AQMD Governing Board.

On April 11, 1997, the Governing Board approved in concept the two-year, $26 million FY 1997-99 AB 2766 Discretionary Fund Work Program, including a ZEV/ULEV Program at $8.55 million. The ZEV/ULEV Program includes four components, among them a $3 million Alternative Fuel ULEV/LEV Incentive. The Alternative Fuel ULEV/LEV Incentive is designed similar to the FY 1995-97 ZEV "Quick Charge" $5,000 Manufacturers Buydown. The ULEV/LEV incentive would provide funding toward the incremental cost of ARB-certified alternatively fueled ULEV/LEV passenger vehicles. Such an incentive will reduce vehicle price comparable to gasoline vehicles until market forces can take over.

Proposal

On July 24, 1997, the MSRC discussed the Alternative Fuel ULEV/LEV Incentive and unanimously approved a modified program such that buydown incentives will be offered as follows:

• $3,000 for ULEVs
• $1,000 for LEVs

The incentive was originally set at $2,000 for both ULEVs and LEVs. The modified incentive structure more properly reflects the incremental benefit above conventional gasoline-fueled vehicles. The incentive will be available retroactive to July 1, 1997, and end June 30, 1999, unless further extended by the MSRC. Incentives will be distributed on a first-come, first-serve basis and reimbursed to manufacturers after vehicle sales.

Since only ARB-certified ULEV/LEV passenger vehicles are eligible for this incentive, the MSRC seeks authorization to approve all manufacturers that offer vehicles meeting this ARB certification. In addition, the MSRC seeks authorization to execute agreements with those manufacturers.

Outreach

The ARB has provided the MSRC a list of ARB-certified ULEV/LEV passenger vehicles. At this time Ford has four 1998 model-year ULEV/LEV vehicles that are ARB certified, and these vehicles will be on the market in September 1997. Honda also has one ARB-certified vehicle but it has not yet been introduced into the market. The MSRC’s
Technical Advisor has been working with the automobile manufacturers’ corporate offices to inform them of the ULEV/LEV incentive, and Ford is ready to begin offering the incentive as soon as it is available.

At this time the automobile manufacturers are conducting considerable outreach to local governments, especially targeting those cities that have indicated an interest in purchasing ULEV/LEV passenger vehicles for their fleets.

Resource Impacts

Health & Safety Code Section 44243(2)(c) requires the AQMD to deposit the discretionary fund revenues "in an account to be used, pursuant to Section 44244, to provide grants to fund projects for the exclusive purpose of reducing air pollution from motor vehicles." Since the monies for these projects will be drawn from this special fund, there would be no fiscal impact on the AQMD’s operational budget.

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