BILL ANALYSIS
SENATE REVENUE & TAXATION COMMITTEE
Senator Jenny Oropeza, Chair
SB 1617 - Kehoe
Amended: April 1, 2008
Hearing: April 9, 2008 Fiscal: Yes
SUMMARY: Enacts a regulatory fee to pay for California
Department of Forestry and Fire Protection (CAL
FIRE) costs for life and structure protection in
State Responsibility Areas (SRAs)
EXISTING LAW requires the Board of Forestry (BOF) to
identify all lands where the state has primary financial
responsibility to prevent and suppress fires, called State
Responsibility Areas (SRAs). The California Department of
Forestry and Fire Protection (CAL FIRE) must provide
wildland fire prevention and firefighting personnel and
equipment within SRAs. SRAs do not include federally-owned
property, land within the boundaries of a city, or areas
with more than three structures per acre. The Director of
CAL FIRE determines fire hazard severity zones - very high,
high, and moderate - within SRAs based on several factors.
EXISTING LAW, provides that regulatory fees, licenses
and service charges imposed by the state include the energy
resources surcharge; genetic disease testing fees; fish and
game license tag permits; beverage container redemption
fees; hazardous waste control fees; abandoned vehicle fees;
vehicle theft program fees; vehicle fees to support the
California Highway Patrol; vehicle fees for air pollution
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programs; vessel fees to fund oil spill and contingency
planning program requirements; vessel fees to fund ballast
water discharge requirements; hazardous materials
environmental fees to fund the scientific, public-health,
and toxic waste cleanup activities of the Department of
Toxic Substances Control; state beach and park service
fees; emergency telephone users surcharge; and consumer
services licensing fees.
As interpreted in a unanimous decision by the
California Supreme Court in Sinclair Paint Company v. State
Board of Equalization (1997) 15 Cal.4th 866 [64 Cal.Rptr.
2d 447]. Sinclair provides that regulatory fees are lawful
exercises under the police power of the state, not the
taxing power. Sinclair held that special assessments based
on the value of benefits conferred on the property,
development fees exacted in return for permits or other
government privileges, and regulatory fees, are not taxes
subject to the supermajority legislative approval threshold
added by Proposition 13. The Court said regulatory fees
are different from taxes because:
Fees are not compulsory, but instead, are
in response to a voluntary decision to develop or
to seek other government benefits or privileges,
although compulsory fees may also be deemed
legitimate.
Fees cannot exceed the reasonable cost of
providing services necessary to the activity for
which the fee is charged.
Fees mitigate the actual or anticipated
adverse effects of the fee payers' operations and
cannot be levied for general revenue purposes.
The state must show that the estimated cost of
the service or regulatory activity and the basis
for determining the manner in which the costs are
apportioned so that a regulated party or
beneficiary's charges bear a fair and reasonable
relationship to the payer's burdens and benefits.
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Fees collected to benefit a specific group are
likewise not considered taxes, under Elaine Evans v. City
of San Jose (1992) 3 Cal. App. 4th 728 [4 Cal. Rptr. 2d
601]. That case held that Proposition 13 does not apply to
a Business Improvement District which levied assessments on
businesses for to enhance local business conditions,
stating that the fee in that case "was analogous to those
other schemes [regulatory fees and special assessments]
which imposes the financial burden for a special benefit
upon the person or entity receiving the benefit."
THIS BILL provides that land in a SRA with
improvements valued at $100,000 or more in the 2009-10 tax
years is subject to the appropriate minimum fire protection
and prevention benefit fee, which shall appear on the
property tax bill. The fee is charged to the owner of a
building or structure. The measure does not currently
specify the amount of the fee, but specifies a base fee
charged to the owner based on four categories of the "fire
hazard severity level." The fee must be commensurate with
the fire-related services that are provided for buildings
and structures in developed areas within a SRA, including
fire prevention, structural fire suppression, rescue, first
aid, and emergency services necessary to serve buildings
and structures within the SRA.
THIS BILL grants the Board of Forestry (BOF) emergency
regulatory powers to implement the fee, in consultation
with the Office of the State Fire Marshal, and require
further regulations to comply with the Administrative
Procedures Act. The measure also requires BOF to increase
the amount of the fee each year for inflation, as measured
by the Implicit Price Deflator for State and Local
Government Purchases of Goods and Services. The bill also
requires BOF to include a specified amount to cover the
county's costs as part of the fee.
THIS BILL provides that for the 2010-11 tax year, if
CAL FIRE inspects a property and determines that a home or
structure requires fire protection services beyond those
provided to similarly unimproved land, CAL FIRE must notify
the county auditor, and have the fee added to the owner's
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property tax bill, and add a fee retroactive the 2009-10
tax year. CAL FIRE can also notify the county auditor to
remove the fee after an inspection if the land does not
require fire protection services beyond similarly
unimproved land.
THIS BILL provides that the fee can be reduced to a
minimum of $100 or eliminated on either an individual or
countywide basis:
For individuals, the fee can be reduced
by meeting guidelines the structure's potential
fire hazard, as certified by CAL FIRE, by
maintaining defensible space, or full compliance
with the California Building Code with respect to
respect to materials and construction methods for
exterior wildfire exposure.
For individuals, the fee can be
eliminated if CAL FIRE determines that the
improvements to the land do not require fire
protection services beyond that provided to
otherwise unimproved lands, consistent with BOF
regulations.
Communitywide, the fee can be reduced if
BOF determines that the appropriate local land
use authority is in compliance with fire
prevention-related planning laws, including the
requirement that a local agency in a SRA submit
the safety element of their general plan to the
BOF and other local agencies providing fire
service within their boundaries for comment, and
consider their recommendations when adopting the
safety element. The fee can also be reduced
communitywide if the local land use authority has
made "structural community improvements" to
assist with fire response.
Communitywide, the fee can be eliminated
if BOF finds that the local jurisdiction
currently provides sufficient structural fire
protection.
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THIS BILL requires CAL FIRE to notify the county
auditor by August 10th of each year to specify the fee
included on the annual property tax bill. The fee is
collected in the same manner as property taxes, and subject
to the same laws regarding collection and enforcement.
THIS BILL requires the county auditor to remit the
proceeds of the fee to the State Treasurer at the same time
local property taxes are distributed to other local
agencies. The Treasurer shall deposit into the State
Responsibility Area Fire Protection and Prevention Fund,
which the bill creates. The Fund shall be appropriated by
the Legislature for fire prevention and suppression
activities in the applicable SRA, and at least 50% of the
total appropriations must be for fire prevention
activities.
THIS BILL requires that the fee not exceed the sum of
the reasonable costs of the county to collect the fee and
providing fire-related services to an owner or a building
or structure in a SRA. The fee must also bear a fair and
reasonable relationship to the fire prevention and
suppression services provided to the owner.
THIS BILL makes legislative findings and declarations
stating that the presence of structures in SRAs causes
increased burdens on state firefighting resources, the
incremental costs of which should be borne by the owners of
those structures, and that those owners receive
disproportionate benefit that the state's citizens
generally, among others.
FISCAL EFFECT:
In its current form, SB 1617 does not contain specific
fee amounts; however, CAL FIRE would likely incur
significant costs to perform inspections under the bill.
Committee staff estimates some implementation costs for BOF
to establish and administer the fee.
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COMMENTS:
A. Purpose of Bill
According to the Author, "The presence of homes and
other structures in SRAs pose an added burden to the
state's firefighting resources. There is little consistency
in the ability of special districts or agencies to meet the
structural fire suppression activities. Individual owners
of property with structures within SRAs receive a
disproportionate benefit greater than that realized by
those residing within the state's urban and urbanizing
areas, where cities provide structural fire protection. In
most cases, local firefighting entities are available to
provide structural fire protection within SRAs. SB 1617
provides specific incentives for local districts to meet
minimum standards for providing such services, and for
those areas where that level of service is not available, a
fee-based program to assist in meeting those needs."
B. Aligning Costs with Benefits
According to LAO reports, Protecting California's
rural areas from wildfires rests upon a tangled web of
federal, state, and local responsibilities woven together
through mutual aid agreements (A Primer: California's
Wildland Fire Protection System, April, 2005 and California
Department of Forestry and Fire Protection: State's
Wildland Firefighting Costs Continue to Escalate, March,
2007). CAL FIRE provides wildland fire protection in SRAs;
however, neither state nor local agencies are explicitly
responsible for life and structure protection in SRAs - CAL
FIRE responds if resources are available and when response
costs fit within its budget. Local agencies historically
provide emergency response and life and structure
protection in SRAs, and are generally supported by local
property taxes and special assessments. However, as the
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number of structures increase in SRAs, so do CAL FIRE's
costs to serve them, although LAO identifies several cost
drivers beyond more residents in the wildland urban
interface. Additionally, local service is not guaranteed -
local agencies serve only 70% of SRAs- and can often be
overrun during severe fire conditions. While many local
agencies have mutual aid agreements with CAL FIRE, the
agreements are not uniform, leaving a patchwork of various
service providers with costs dispersed between local
residents and state taxpayers without logical consistency
across SRAs. SB 1617 remedies this inequity by assessing a
fee on SRA landowners, but exempts landowners within
communities providing adequate service, and reduces fees
for individuals taking steps to protect their property,
ensuring that residents are neither doubly charged nor
allowed to ride for free.
C. Regulatory Fees in California
The Sinclair case distinguishes between regulatory
fees, enacted by a majority vote of the Legislature, and
taxes, which are subject to the 2/3 legislative vote
requirements imposed by Proposition 13 (1978). In 1991,
the Legislature enacted the Childhood Lead Poisoning Act of
1991 which provides for evaluating and screening children
determined to be at risk for lead poisoning, and ensuring
and monitoring appropriate case management (AB 2038,
Connelly). Among other things, the act assessed a fee on
manufacturers or other persons contributing to lead
poisoning to fund evaluation, screening, and medically
necessary follow-up services for potential lead poisoning
victims. The Sinclair Paint Company sued, stating that the
fees were taxes, and subject to the 2/3 vote requirement.
Sinclair asserted that "because the present fees have
been imposed solely to defray the cost of the state's
program of evaluation, screening, and follow-up services
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for children determined to be at risk for lead poisoning,
they are not analogous to either special assessments or
development fees, for they neither reimburse the state for
special benefits conferred on manufacturers of lead-based
products nor compensate the state for governmental
privileges granted to those manufacturers."
The trial court ruled that the Act imposed an
unconstitutional tax because it was not passed by a
two-thirds majority vote of the Legislature. The Court of
Appeal affirmed the trial court judgment.
The California Supreme Court reversed the Court of
Appeal's judgment and upheld the charge as a valid fee and
not a tax, concluding that the Childhood Lead Poisoning Act
of 1991 set regulatory fees, not taxes, to mitigate the
actual or anticipated adverse effects of the fee payers'
operations. In a unanimous decision, the Court held that
the act "requires manufacturers and other persons whose
products have exposed children to lead contamination to
bear a fair share of the cost of mitigating the adverse
health effects their products created in the community.
Viewed as a 'mitigating effects' measure, it is comparable
in character to similar police power measures imposing fees
to defray the actual or anticipated adverse effects of
various business operations."
The California Supreme Court ruled against Sinclair
and held that the fees were an appropriate exercise of a
state's regulatory power:
"We see no reason why statutes or ordinances calling
on polluters or producers of contaminating products to
help in the mitigation of cleanup efforts should be
deemed less 'regulatory' in nature than the initial
permit or licensing programs that allow them to
operate. Moreover, the imposition of 'mitigating
effects' fees in a substantial amount ? also regulates
future conduct by deterring further manufacture,
distribution, or sale of dangerous product, and by
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stimulating research and development efforts to
produce safer or alternative products."
D. Of Smoke and Fire
SB 1617 takes careful steps to ensure that the fire
prevention and benefit fee meets the test of Sinclair.
Courts offer three basic principles of determining whether
a fee is indeed a regulatory act, or a tax subject to
Proposition 13's supermajority vote thresholds:
First, the fee must have sufficient nexus to
benefit conferred to or the hazard caused by the fee
payer. In this case, SRA landowners place demand on
CAL FIRE life and structure protection services and
wildland fire protection services beyond that of urban
residents because they live in or near forests,
rangelands, and watersheds.
Second, the fee proceeds cannot be used for
unrelated revenue purposes. SB 1617 clearly confines
fee proceeds to fire prevention and suppression, and
segregates the fund into a special fund. However, SB
1617 does not call explicitly for funds to offset its
costs providing services in SRAs. CAL FIRE neither
calculates its costs to provide life and structure
protection in SRAs, nor quantifies the marginal
benefit SRA landowners receive from its wildland fire
protection services above the general benefit all
Californians receive when CAL FIRE protects against
fires. Additionally, the fee increases according to
an inflation indicator, not CAL FIRE's actual costs.
SB 1617 should seek to balance these costs with the
fee revenues generated by the bill to ensure that the
fee does not support unrelated programs.
Next, the amount of the fee must bear a "fair and
reasonable" relationship to the payor's burdens and
benefits. Because SB 1617 does not list actual fee
amounts, the relationship cannot be adequately
evaluated at this time. The "fair and reasonable
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relationship" is a key factual issue Courts analyze in
regulatory fee cases.<1> SB 1617 faces three
potential hurdles. First, SB 1617 solely uses the
fire hazard severity risk as a measurement for the fee
amount. Using only one measurement for the fee may
not account for individual circumstances. For
example, a structure in a high fire hazard severity
zone that is located across the street from a CAL FIRE
station and adjacent to a fire hydrant would incur
considerably less cost for fire response than a
property in a medium fire hazard severity zone located
several miles from a station without access to water.
Second, SB 1617 does not distinguish between the
service demand of larger structures and properties,
applying the same fee to owners of all structures
valued above $100,000. Assessing the fee based on
total acreage, or the square footage of the structures
may refine the relationship between fee and service
demand. Additionally, BOF would have to establish an
appellate process for fee payers to reduce or
eliminate fees when circumstances warrant. On the
other hand, SB 1617 makes positive steps to establish
the fair and reasonable relationship; the bill
requires the fee be commensurate with the level of
fire protection, and bear a fair and reasonable
relationship to the services provided the owner, a
standard taken directly from Sinclair. BOF must
reduce SB 1617 fees when land owners take positive
steps to reduce their risk of structural damage
resulting from a fire, and eliminated altogether in
those communities where local agencies provide
services.
F. Point of Collection
California does not assess a state property tax on
locally-assessed property, nor does it collect benefit
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<1> California Farm Bureau Federation v. California State
Water Resources Control Board, 146 Cal. App 4th 1126.
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assessments through the property tax bill. However, no
other points of collection make sense for an SRA fee. The
state could simply send owners a bill, but lacks the
collection and enforcement mechanisms currently in place at
the local level for property tax and benefit assessment
collection. The state may form a statewide benefit
assessment district, which would have to comply with the
landowner voter requirements of Proposition 218 (1996).
FTB could collect the fee along with state income taxes,
but would need considerable amounts of specific data to
enforce collections and audit fee payers. Governor Arnold
Schwarzenegger proposed a 1.25% fee on residential and
commercial property insurance to enhance the state's
firefighting capabilities as part of his budget proposal
this year. However, that fee paid for benefits provided to
all California taxpayers, and was not specific to the SRA
fire protection problem.
G. Once More, With Feeling
The Legislature previously enacted a fee to pay for
CAL FIRE's wildland fire protection and suppression costs
(SB 1049, Committee on Budget, 2003). Landowners were
subject to a $70 per parcel fee for the 2003-04 fiscal
year, and $35 per parcel thereafter that appeared on the
property tax bill. Proceeds were collected by counties,
which could increase the fee to recoup their collection
costs, and remitted to the state to pay for fire prevention
and suppression costs. However, the state faced
significant costs and administrative barriers to collect
the fee, and critics of the fee filed litigation
challenging the fee's compliance with Sinclair. Before the
state collected the fee, or courts adjudicated the
regulatory fee questions, the Legislature repealed the fee
(SB 1112, Committee on Budget and Fiscal Review, 2004).
Support and Opposition
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Support:Sierra Club
Defenders of Wildlife
California Native Plant Society
Endangered Habitats League
Cal Trout
California League of Conservation Voters
Oppose: California State Association of Counties
Regional Council of Rural Counties
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Consultant: Colin Grinnell