BILL NUMBER: AB 1495 CHAPTERED 10/05/01 CHAPTER 530 FILED WITH SECRETARY OF STATE OCTOBER 5, 2001 APPROVED BY GOVERNOR OCTOBER 4, 2001 PASSED THE ASSEMBLY SEPTEMBER 6, 2001 PASSED THE SENATE AUGUST 30, 2001 AMENDED IN SENATE AUGUST 27, 2001 AMENDED IN SENATE JUNE 27, 2001 AMENDED IN SENATE JUNE 26, 2001 AMENDED IN SENATE JUNE 13, 2001 AMENDED IN ASSEMBLY APRIL 17, 2001 INTRODUCED BY Assembly Member Cox FEBRUARY 23, 2001 An act to amend Sections 56658, 56666, 56800, 56815, 56895, 57002, and 57050 of the Government Code, relating to local agency formation. LEGISLATIVE COUNSEL'S DIGEST AB 1495, Cox. Local agency formation. (1) Under the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, a local agency formation commission may not approve a proposal that includes an incorporation unless it finds that revenues currently received by the transferor will accrue to the transferee and that expenditures currently made by the transferor that will be assumed by the transferee are substantially equal. However, the proposal may be approved if the commission finds that the county and all of the subject agencies agree to the proposed transfer or the negative fiscal effect of the proposal is mitigated pursuant to an agreement. This bill would declare the intent of the Legislature that this revenue neutrality requirement be implemented in a rational and predictable process and that the financial stability of the county and other affected agencies is insured while permitting the incorporation of communities demonstrating the necessary resources and capacity for self-governance. (2) Existing law requires the commission to hold a hearing on any proposal for a change of organization or reorganization. This bill requires that prior to any continuance of a hearing regarding a proposal that includes an incorporation, the chief petitioners shall have an opportunity to address the commission on potential impacts or hardships for the incorporation effort that may result from a delay. (3) Existing law requires the executive officer to prepare a comprehensive fiscal analysis for any proposal that includes an incorporation. The fiscal analysis is required to review and document the costs to the proposed city of providing public services and facilities during the 3 fiscal years following incorporation. The bill would delineate the criteria to be followed in determining the costs to the proposed city of providing public services and facilities during the 3 fiscal years following incorporation. By imposing additional responsibilities on local agency formation commissions and county auditors, the bill would impose a state-mandated local program. (4) Existing law requires the executive officer of the commission, upon receipt of an application to initiate proceedings for a change of organization or a reorganization, to give mailed notice to each interested agency, each subject agency, the county committee or school district organization, and each school superintendent whose school district overlies the subject area. This bill would require the affected state and local agencies to submit data required by the executive officer when the application includes an annexation. (5) Existing law authorizes any person or affected agency to file a written request with the executive officer requesting amendments to or reconsideration of a commission resolution making determinations. The request is required to state the specific modification that is requested and to state what new or different facts or law are claimed to warrant the reconsideration. The commission has up to 70 days to consider the request. This bill would delete the requirement of stating what new or different facts or law would warrant reconsideration and would reduce the consideration period to 35 days. (6) Existing law requires the commission to set the proposal for hearing within 35 days of adopting its resolution making determinations. This bill would require that a proposal that includes an incorporation be set for hearing within 15 days following adoption of the resolution making determinations. (7) This bill would incorporate changes to Section 56895 of the Government Code proposed by AB 720, to be operative if AB 720 and this bill are both enacted and become effective on or before January 1, 2002, and this bill is enacted last. (8) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature finds and declares that citizens often seek to form new municipalities to provide more direct local control and accountability over a variety of municipal services including, land use, police, fire, code enforcement, and many other services. The Legislature has allowed for the formation of new municipalities through the general policies of the Cortese-Knox-Hertzberg Reorganization Act of 2000 and prior laws. It is the intent of the Legislature to provide a process for the incorporation of communities that demonstrate the necessary resources and capacity for self-governance, while at the same time protecting the financial stability of the new city, the county, and other affected agencies. It is the intent of this act to require the incorporation process to be implemented through a rational and predictable process of gathering information, and determining the appropriate mitigation of financial impacts and incorporation conditions. SEC. 2. Section 56658 of the Government Code is amended to read: 56658. (a) Any petitioner or legislative body desiring to initiate proceedings shall submit an application to the executive officer of the principal county. (b) (1) Immediately after receiving an application and before issuing a certificate of filing, the executive officer shall give mailed notice that the application has been received to each interested agency and each subject agency, the county committee on school district organization, and each school superintendent whose school district overlies the subject area. The notice shall generally describe the proposal and the affected territory. The executive officer shall not be required to give notice pursuant to this subdivision if a local agency has already given notice pursuant to subdivision (b) of Section 56654. (2) It is the intent of the Legislature that an incorporation proposal shall be processed in a timely manner. With regard to an application that includes an incorporation, the executive officer shall immediately notify all affected local agencies and any applicable state agencies by mail and request the affected agencies to submit the required data to the commission within a reasonable timeframe established by the executive officer. Each affected agency shall respond to the executive officer within 15 days acknowledging receipt of the request. Each affected local agency and the officers and departments thereof shall submit the required data to the executive officer within the timelines established by the executive officer. Each affected state agency and the officers and departments thereof shall submit the required data to the executive officer within the timelines agreed upon by the executive officer and the affected state departments. (c) If a special district is, or as a result of a proposal will be, located in more than one county, the executive officer of the principal county shall immediately give the executive officer of each other affected county mailed notice that the application has been received. The notice shall generally describe the proposal and the affected territory. (d) Except when a commission is the lead agency pursuant to Section 21067 of the Public Resources Code, the executive officer shall determine within 30 days of receiving an application whether the application is complete and acceptable for filing or whether the application is incomplete. (e) The executive officer shall not accept an application for filing and issue a certificate of filing for at least 20 days after giving the mailed notice required by subdivision (b). The executive officer shall not be required to comply with this subdivision in the case of an application which meets the requirements of Section 56663 or in the case of an application for which a local agency has already given notice pursuant to subdivision (b) of Section 56654. (f) If the appropriate fees have been paid, an application shall be deemed accepted for filing if no determination has been made by the executive officer within the 30-day period. An executive officer shall accept for filing, and file, any application submitted in the form prescribed by the commission and containing all of the information and data required pursuant to Section 56652. (g) When an application is accepted for filing, the executive officer shall immediately issue a certificate of filing to the applicant. A certificate of filing shall be in the form prescribed by the executive officer and shall specify the date upon which the proposal shall be heard by the commission. From the date of issuance of a certificate of filing, or the date upon which an application is deemed to have been accepted, whichever is earlier, an application shall be deemed filed pursuant to this division. (h) If an application is determined not to be complete, the executive officer shall immediately transmit that determination to the applicant specifying those parts of the application which are incomplete and the manner in which they can be made complete. (i) Following the issuance of the certificate of filing, the executive officer shall proceed to set the proposal for hearing and give published notice thereof as provided in this part. The date of the hearing shall be not more than 90 days after issuance of the certificate of filing or after the application is deemed to have been accepted, whichever is earlier. Notwithstanding Section 56106, the date for conducting the hearing, as determined pursuant to this subdivision, is mandatory. SEC. 3. Section 56666 of the Government Code is amended to read: 56666. (a) The hearing shall be held by the commission upon the date and at the time and place specified. The hearing may be continued from time to time but not to exceed 70 days from the date specified in the original notice. (b) At the hearing, the commission shall hear and receive any oral or written protests, objections, or evidence that shall be made, presented, or filed, and consider the report of the executive officer and the plan for providing services to the territory prepared pursuant to Section 56653. (c) Prior to any continuance of a hearing pursuant to this section regarding a proposal that includes an incorporation, the chief petitioners shall have an opportunity to address the commission on any potential impacts or hardships on the incorporation effort that may result from a delay. The commission shall consider the potential impacts on the incorporation proponents prior to making a decision on the duration of any continuance. SEC. 4. Section 56800 of the Government Code is amended to read: 56800. For any proposal that includes an incorporation, the executive officer shall prepare, or cause to be prepared by contract, a comprehensive fiscal analysis. This analysis shall become part of the report required pursuant to Section 56665. Data used for the analysis shall be from the most recent fiscal year for which data are available, preceding the issuances of the certificate of filing. When data requested by the executive officer in the notice to affected agencies are unavailable, the analysis shall document the source and methodology of the data used. The analysis shall review and document each of the following: (a) The costs to the proposed city of providing public services and facilities during the three fiscal years following incorporation in accordance with the following criteria: (1) When determining costs, the executive officer shall include all direct and indirect costs associated with the current provision of existing services in the affected territory. These costs shall reflect the actual or estimated costs at which the existing level of service could be contracted by the proposed city following an incorporation, if the city elects to do so, and shall include any general fund expenditures used to support or subsidize a fee-supported service where the full costs of providing the service are not fully recovered through fees. The executive officer shall also identify which of these costs shall be transferred to the new city that result in an administrative cost reduction to other agencies. In the analysis, the executive officer shall also review how the costs of any existing services compare to the costs of services provided in cities with similar populations and similar geographic size that provide a similar level and range of services and shall make a reasonable determination of the costs expected to be borne by the newly incorporated city. (2) When determining costs, the executive officer shall also include all direct and indirect costs of any public services that are proposed to be assumed by the new city and that are provided by state agencies in the area proposed to be incorporated. (b) The revenues of the proposed city during the three fiscal years following incorporation. (c) The effects on the costs and revenues of any affected local agency during the three fiscal years of incorporation. (d) Any other information and analysis needed to make the findings required by Section 56720. SEC. 5. Section 56815 of the Government Code is amended to read: 56815. (a) It is the intent of the Legislature that any proposal that includes an incorporation should result in a similar exchange of both revenue and responsibility for service delivery among the county, the proposed city, and other subject agencies. It is the further intent of the Legislature that an incorporation should not occur primarily for financial reasons. (b) The commission shall not approve a proposal that includes an incorporation unless it finds that the following two quantities are substantially equal: (1) Revenues currently received by the local agency transferring the affected territory that, but for the operation of this section, would accrue to the local agency receiving the affected territory. (2) Expenditures, including direct and indirect expenditures, currently made by the local agency transferring the affected territory for those services that will be assumed by the local agency receiving the affected territory. (c) Notwithstanding subdivision (b), the commission may approve a proposal that includes an incorporation if it finds either of the following: (1) The county and all of the subject agencies agree to the proposed transfer. (2) The negative fiscal effect has been adequately mitigated by tax sharing agreements, lump-sum payments, payments over a fixed period of time, or any other terms and conditions pursuant to Section 56886. (d) Nothing in this section is intended to change the distribution of growth on the revenues within the affected territory unless otherwise provided in the agreement or agreements specified in paragraph (2) of subdivision (c). (e) Any terms and conditions that mitigate the negative fiscal effect of a proposal that contains an incorporation shall be included in the commission resolution making determinations adopted pursuant to Section 56880 and the terms and conditions specified in the questions pursuant to Section 57134. SEC. 6. Section 56895 of the Government Code is amended to read: 56895. (a) When a commission has adopted a resolution making determinations, any person or affected agency may file a written request with the executive officer requesting amendments to or reconsideration of the resolution. The request shall state the specific modification to the resolution being requested and shall state what new or different facts that could not have been presented previously, or applicable new law, are claimed to warrant the reconsideration. If the request is filed by a school district that received notification pursuant to Section 56658, the commission shall consider that request at a public hearing. (b) Notwithstanding Section 56106, the deadlines set by this section are mandatory. The person or agency shall file the written request within 30 days of the adoption of the initial or superseding resolution by the commission making determinations. If no person or agency files a timely request, the commission shall not take any action pursuant to this section. (c) Upon receipt of a timely request, the executive officer shall not take any further action until the commission acts on the request. (d) Upon receipt of a timely request by the executive officer, the time to file any action, including, but not limited to, an action pursuant to Section 21167 of the Public Resources Code and any provisions of Part 4 (commencing with Section 57000) governing the time within which the commission is to act shall be tolled for the time that the commission takes to act on the request. (e) The executive officer shall place the request on the agenda of the next meeting of the commission for which notice can be given pursuant to this subdivision. The executive officer shall give notice of the consideration of the request by the commission in the same manner as for the original proposal. The executive officer may give notice in any other manner as he or she deems necessary or desirable. (f) At that meeting, the commission shall consider the request and receive any oral or written testimony. The consideration may be continued from time to time but not to exceed 35 days from the date specified in the notice. The person or agency that filed the request may withdraw it at any time prior to the conclusion of the consideration by the commission. (g) At the conclusion of its consideration, the commission may approve or disapprove with or without amendment, wholly, partially, or conditionally, the request. If the commission disapproves the request, it shall not adopt a new resolution making determinations. If the commission approves the request, with or without amendment, wholly, partially, or conditionally, the commission shall adopt a resolution making determinations that shall supersede the resolution previously issued. (h) The determinations of the commission shall be final and conclusive. No person or agency shall make any further request for the same change or a substantially similar change, as determined by the commission. (i) Notwithstanding subdivision (h), clerical errors or mistakes may be corrected pursuant to Section 56854. SEC. 6.5. Section 56895 of the Government Code is amended to read: 56895. (a) When a commission has adopted a resolution making determinations, any person or affected agency may file a written request with the executive officer requesting amendments to or reconsideration of the resolution. The request shall state the specific modification to the resolution being requested and shall state what new or different facts that could not have been presented previously, or applicable new law, are claimed to warrant the reconsideration. If the request is filed by a school district that received notification pursuant to Section 56658, the commission shall consider that request at a public hearing. (b) Notwithstanding Section 56106, the deadlines set by this section are mandatory. The person or agency shall file the written request within 30 days of the adoption of the initial or superseding resolution by the commission making determinations. If no person or agency files a timely request, the commission shall not take any action pursuant to this section. (c) Upon receipt of a timely request, the executive officer shall not take any further action until the commission acts on the request. (d) Upon receipt of a timely request by the executive officer, the time to file any action, including, but not limited to, an action pursuant to Section 21167 of the Public Resources Code and any provisions of Part 4 (commencing with Section 57000) governing the time within which the commission is to act shall be tolled for the time that the commission takes to act on the request. (e) The executive officer shall place the request on the agenda of the next meeting of the commission for which notice can be given pursuant to this subdivision. The executive officer shall give notice of the consideration of the request by the commission in the same manner as for the original proposal. The executive officer may give notice in any other manner as he or she deems necessary or desirable. (f) At that meeting, the commission shall consider the request and receive any oral or written testimony. The consideration may be continued from time to time but not to exceed 35 days from the date specified in the notice. The person or agency that filed the request may withdraw it at any time prior to the conclusion of the consideration by the commission. (g) At the conclusion of its consideration, the commission may approve or disapprove with or without amendment, wholly, partially, or conditionally, the request. If the commission disapproves the request, it shall not adopt a new resolution making determinations. If the commission approves the request, with or without amendment, wholly, partially, or conditionally, the commission shall adopt a resolution making determinations that shall supersede the resolution previously issued. (h) The determinations of the commission shall be final and conclusive. No person or agency shall make any further request for the same change or a substantially similar change, as determined by the commission. (i) Notwithstanding subdivision (h), clerical errors or mistakes may be corrected pursuant to Section 56883. SEC. 7. Section 57002 of the Government Code is amended to read: 57002. (a) Within 35 days following the adoption of the commission's resolution making determinations, and following the reconsideration period specified in subdivision (b) of Section 56895, the executive officer of the commission shall set the proposal for hearing and give notice of that hearing by mailing, publication, and posting, as provided in Chapter 4 (commencing with Section 56150) of Part 1. The date of that hearing shall not be less than 15 days, or more than 60 days, after the date the notice is given. (b) Notwithstanding subdivision (a), for any proposal that includes an incorporation, the executive officer of the conducting authority shall set the proposal for hearing within 15 days following the adoption of the commission's resolution making determinations. The hearing shall be set for the next regularly scheduled hearing that provides sufficient time to give public notice of that hearing by mailing, publication, and posting, as provided in Chapter 4 (commencing with Section 56150) of Part 1. (c) Where the proceeding is for the establishment of a district of limited powers as a subsidiary district of a city, upon the request of the affected district, the date of the hearing shall be at least 90 days, but no more than 135 days, from the date the notice is given. (d) If authorized by the commission pursuant to Section 56663, a change of organization or reorganization may be approved without notice, hearing, and election. SEC. 8. Section 57050 of the Government Code is amended to read: 57050. (a) The protest hearing on the proposal shall be held by the commission on the date and at the time specified in the notice given by the executive officer. The hearing may be continued from time to time but not to exceed 60 days from the date specified for the hearing in the notice. The hearing on a proposal that includes an incorporation may be continued from time to time but not to exceed 35 days from the date specified for the hearing in the notice. (b) At the protest hearing, prior to consideration of protests, the commission's resolution making determinations shall be summarized. At that hearing, the commission shall hear and receive any oral or written protests, objections, or evidence that is made, presented, or filed. Any person who has filed a written protest may withdraw that protest at any time prior to the conclusion of the hearing. SEC. 9. Section 6.5 of this bill incorporates amendments to Section 56895 of the Government Code proposed by both this bill and AB 720. It shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2002, (2) each bill amends Section 56895 of the Government Code, and (3) this bill is enacted after AB 720, in which case Section 6 of this bill shall not become operative. SEC. 10. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act, within the meaning of Section 17556 of the Government Code.