SACRAMENTO, Calif. -- California Gov. Gray Davis this month vetoed a proposed 5% car rental surcharge, a portion of which would have offset the industry's financial burden arising from a new California vehicle license fee hike.

The proposed rental transaction fee comprised two parts: 1)a 2.71% pass-through charge to pay for 80% of the VLF hike imposed on rental vehicles and 2)a 2.29% charge to help repay the General Fund's loan from the Transportation Congestion Fund and to help repay the latter fund's loan from the State Highway Account.

Supporters of the bill had included Cendant Car Rental Group, ANC Rental Corp., Hertz Corp. and the California Coalition of Independent Car Rental Operators.

Governor-elect Arnold Schwarzenegger has pledged to rescind the VLF hike, although it's in question whether doing so will require a legislative vote.