BILL ANALYSIS SB 1617 Page 1 Date of Hearing: June 18, 2008 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT Anna Marie Caballero, Chair SB 1617 (Kehoe) - As Amended: June 9, 2008 SENATE VOTE : 21-13 SUBJECT : State responsibility areas: fire prevention fees. SUMMARY : Requires the State Board of Forestry and Fire Protection, beginning with the 2009-10 tax year, to establish a fire prevention fee of $50 to be imposed on all structures with a certificate of occupancy subject to property tax in state responsibility areas. Specifically, this bill : 1)Requires the State Board of Forestry and Fire Protection (Board) to adopt emergency regulations to establish a fire prevention fee (fee) of $50 to be charged on each structure on a parcel that is subject to property taxes and is within a state responsibility area (SRA). 2)Specifies that the emergency regulations must be adopted with the rulemaking provision of the Administrative Procedure Act and shall be deemed an emergency and necessary for the immediate preservation of the public peace, health, and safety, or general welfare. 3)Specifies that the fire prevention fee shall be included on all 2009-10 fiscal year (FY) secured property tax bills issued for structures in SRAs. 4)Requires the Department of Forestry and Fire Protection (Department) to notify the county Auditor by August 10 to assess the fee as a direct charge on the annual secured property tax bill issued by the county for FY 2009-10. 5)Specifies for years after FY 2009-10 that if there are not sufficient amounts of money in the State Responsibility Area Fire Prevention Fund (Fund) to finance the costs of the program, the Department shall notify the county auditor by August 10 to have the fee assessed as a direct charge on the property tax bills. 6)Provides that a portion of the fee shall be retained by the SB 1617 Page 2 county to reimburse each county's actual and reasonable costs for levying and collecting the fee. 7)Establishes the Fund in the State Treasury and requires the fees collected to be deposited in the Fund. 8)Requires a county auditor to remit all fees, except the portion that serves as reimbursement to the county, to the State Treasurer for deposit in the Fund. 9)Specifies that money in the Fund shall be available to the Board and Department, upon appropriation by the Legislature, for fire prevention activities, in SRAs, attributable to benefits conferred on structures subject to the fire prevention fee. 10)Specifies that moneys in the Fund can only be used for the following fire prevention activities relating to the presence of structures within SRAs: a) Local assistance grants for fire prevention activities relating to the presence of structures within SRAs, including public education, that are provided by counties and other local agencies, including special districts. Grants shall be based on the number of structures in the SRA for which the applicant is legally responsible; b) Grants to Fire Safe Councils, the California Conservation Corps, or certified local conservation corps for fire prevention projects and activities; c) Inspections by the Department for compliance with defensible space requirements around structures in SRAs; d) Public education to reduce fire risk; e) Fire severity and fire hazard mapping by the Department; f) Recoupment of startup costs; and, g) Other prevention projects as authorized by the Board. 11)Specifies that the amount of each grant shall be based on the number of structures in an SRA for which the applicant is legally responsible and the amount of moneys made available in SB 1617 Page 3 the annual Budget Act for this local assistance program. 12)Defines a structure to mean a building that has a certificate of occupancy. 13)Specifies that the Legislature declares that the fire prevention fee is a reasonable amount for the necessary fire prevention activities that are appropriate and attributable to the presence of the structure within a state responsibility area. 14)Requires the Board to adjust the fire prevention fee to reflect the percentage of change in the average annual value of the Implicit Price Deflator for State and Local Government Purchases of Goods and Services for the United States, as calculated by the United States Department of Commerce for the 12-month period in the third quarter of the prior calendar year, as reported by the Department of Finance. 15)Requires the Board, starting January 1, 2011 to submit to the Legislature an annual written report on the status and uses of the Fund. 16)Establishes an appeals process for property owners to dispute the fee. 17)Declares that all revenues generated by the fire prevention fees are not proceeds of taxes subject to Article XIII B, C, or D of the California Constitution. 18)Declares that it is the intent of the Legislature that the economic burden of fire prevention activities that are associated with structures in SRAs shall be equitably distributed among the citizens of the state who generally benefit from those activities and those owners of structures in SRAs who receive a specific benefit other than that general benefit. EXISTING LAW : 1)Requires the state to have primary financial responsibility for preventing and suppressing fires in areas that the Board has determined are SRAs. 2)Requires the Board to identify all lands where the state has SB 1617 Page 4 the primary financial responsibility for preventing and suppressing fires. 3)Provides that fire prevention and suppression in areas not classified as SRAs are the responsibility of local or federal agencies. 4)Excludes from SRAs, federal lands and lands within the exterior boundaries of any city, except a city and county with a population of less than 25,000 if, at the time the city and county government is established, the county contains no municipal corporations. 5)Requires the Department, within SRAs, to provide wildland fire prevention and firefighting personnel and equipment, and may provide rescue, first aid, and other emergency services if the activity does not require additional funds. 6)Requires the director of the Department to classify and update or reclassify, if necessary, SRAs into fire hazard severity zones for the purposes of fire prevention and suppression. Each zone must be based on factors including fuel loading, slope, and fire weather. 7)Authorizes the Department to inspect all properties for compliance with state forest and fire laws. 8)States that under the provisions of Proposition 13 a 'special tax' shall not include any fee which does not exceed the reasonable cost of providing the service or regulatory activity for which the fee is charged and which is not levied for general revenue purposes. FISCAL EFFECT : Unknown COMMENTS : 1)SRAs primarily consist of privately owned forestlands, watersheds, and rangelands. According to the Legislative Analyst's Office (LAO), roughly one-third of the state is SRA (about 31 million acres) and about one percent of SRA acres are publicly owned lands. SRAs lands are found in every county expect San Francisco and Sutter Counties. These lands either serve a commercial purpose (e.g., ranching or timber harvesting) or provide natural resource values or benefits SB 1617 Page 5 such as watershed protection. Even though SRAs have structures on them, the Department removes lands from SRAs, every five years, when housing density reaches more than three units per acre. 2)Unambiguously, the Department's role in SRAs is to prevent and suppress wildland fires. However, the Department is also authorized, but not required, to provide rescue, first aid, and other emergency services if the activity does not require additional funds. Moreover, it is the Board's policy to respond to structure fires if there is a threat to wildlands. Even though state law does not require local governments to provide fire protection within SRAs, in practice they have assumed the responsibility for structure protection and basic medical assistance. According to the LAO, about 70% of SRAs are covered by some form of local fire protection, funded by property taxes or special assessments. 3)In 2006, while a vast majority of incidents the Department responded to in SRAs were non-fire medical emergencies, the Department spent about 75% of its time fighting wildland fires, 95% of which, according to the Department, are caused by humans. In its analysis of the 2008-09 budget, the LAO found that the Department's budget has increased 150% since 1997-98. One of the cost drivers of the Department's growing expenditures is increasing development in the wildland urban interface (WUI). Despite the fact that the total acreage in SRA has remained stable over the last 15 years, the number of housing units in SRA has increased by 15% over this period. Based on 2005 data, the LAO reports there are about 870,000 housing units in SRAs and the trend is upward. 4)The author believes that it is necessary for the property owners to help pay for the costs associated with the increased fire risk of having structures in SRAs. SB 1617 would require the Board to establish an annual fire prevention fee of $50 to be collected for all structures with a certificate of occupancy subject to property tax in SRAs beginning with the 2009-10 tax year 5)Under the Sinclair Paint Company v. State Board of Equalization (1997) 15 Cal.4th 866 [64 Cal.Rptr. 2d 447] at pages 873-874, the California Supreme Court discussed "certain general guidelines used in determining whether 'taxes' are involved in particular situations." As the court noted: "The SB 1617 Page 6 cases recognize that 'tax' has no fixed meaning, and that the distinction between taxes and fees is frequently 'blurred,' taking on different meanings in different contexts. In general, taxes are imposed for revenue purposes, rather than in return for a specific benefit conferred or privilege granted. Most taxes are compulsory rather than imposed in response to a voluntary decision to develop or to seek other government benefits or privileges. But compulsory fees may be deemed legitimate fees rather than taxes. The 'special tax' cases have involved three general categories of fees or assessments: a) special assessments, based on the value of benefits conferred on property; b)development fees, exacted in return for permits or other government privileges; and c)regulatory fees, imposed under the police power." In connection with the last category, the court in Kern County Farm Bureau v. County of Kern (1993)19 Cal.App.4th 1416, 1421 stated: " 'Special taxes must be distinguished from regulatory fees imposed under the police power, which are not subject to the constitutional provision [since they are not taxes at all]. Special taxes do not encompass fees charged to particular individuals in connection with regulatory activities or services when those fees do not exceed the reasonable cost of providing the service or activity for which the fee is charged, and are not levied for unrelated revenue purposes.' " 6)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 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." 7)However, in Bay Area Cellular Telephone Company v. City of Union City (2008) 1st District Court of Appeals the court stated "a fee for access to a governmental service is not the same as a fee for use of that service." The court elaborated on this point in footnote 11 stating "indeed, if it were, Proposition 218 could easily become meaningless. Taxes paid by the public to fund police or fire services available to all could be renamed "public safety access fees" and be exempt from the voter approval requirements. Taxes paid to maintain SB 1617 Page 7 city streets could be renamed "road access fees." The list of possibilities is endless." 8)Because the fee established in SB 1617 is created by the state and only collected by the counties it is not clear if any of the provisions of Proposition 218 will apply. It may be necessary, if this measure moves forward, to obtain more legal clarity on exactly which, if any, constitutional provisions apply to the levying of this fee. 9)The Legislature previously enacted a fee to pay for the Department's wildland fire protection and suppression costs [SB 1049 (Committee on Budget), Chapter 741, Statutes of 2003]. Landowners were subject to a $70 per parcel fee for the FY 2003-04, 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), Chapter 219, Statutes of 2004]. The Committee may wish to consider if it is prudent for the Legislature to enact another statute that might reach the same fate as SB 1049. 10)The Committee may also wish to consider whether a state imposed fee could possibly hinder the passage of a local assessment to pay for costs related to structural fire suppression services provided by a special district or county in an SRA since property owners could feel that they would be double paying for services. 11)SB 1617 requires county auditors to levy the fee by placing it on the local property tax rolls. This would require the Department, each year, to determine which properties are in an SRA in each county and then provide the information to the auditor. This would include making the determination of what properties have been sold, matching information to building permit records to ensure that there is a structure (which has received a certificate of occupancy) on the property, and determining if indeed the property is still in an SRA, since SB 1617 Page 8 the Department, every five years, is required to remove property from an SRA if there are more than three units per acre. Moreover, SB 1617 would require a county auditor to adjust the tax rolls every year with this new information. Furthermore, the bill requires that if there is a lien on a property for failure to pay the fee, the county auditor is required to remove this lien from the secured property tax roll to the unsecured property tax roll if the parcel changes ownership. This process is greatly different than the lien process used for any other type of delinquent taxes. Currently, a lien is attached to the property and remains there even if the property is sold and is only removed when it is finally paid. In current practice, liens follow the property not the owner. However, SB 1617 takes a drastic turn and removes a lien from the secured roll and requires the county auditor to place it on the unsecured roll and send it out for collection from the previous owner. According to some auditors, this process alone is quite lengthy and is not done on a regular basis; this would require extensive work on the county auditor's behalf. The Committee may wish to consider whether or not the cost of implementing this measure will greatly reduce the actual amount available for projects, and therefore, make the collection of the fee worthless. 12)Under SB 1617 the fee would be collected at the local level and then transmitted to the state. The state via the Department will place all the revenues from the fee into the Fund, which will be distributed through grants given out across the state. The Committee may wish to consider whether it is equitable to collect fees in one county and then possibly have them spent in another. 13)The Governor proposed in the budget this year a $125 million annual surcharge on property insurance policies statewide to offset Department budget reductions and to pay for program expansion. In the May Revise, the Governor revised and broadened this proposal to include all natural disasters and introduced a $78 million risk-based surcharge (1.4% or $12.60/household) based on the presence of structures in high-hazard zones (earthquake, flood, and fire). Homes in low-hazard areas would be assessed 0.75% ($6.75/household). The Assembly budget subcommittee approved the Governor's proposal and trailer bill language to implement the LAO SRA fee proposal in concept ($125 million), while the Senate rejected both. Thus, both items are being heard in the budget SB 1617 Page 9 conference committee. 14)PROPOSED AMENDMENTS : The author will be taking the following amendments at the request of the Assembly Natural Resources Committee: a) Page 5, line 18-19 should read: The fire prevention fee shall becollectedlevied by each county in the same manner and at the same time as secured property taxes. b) Page 6, after paragraph (2), insert a new paragraph (3): (3) Grants to a qualified nonprofit organization with a demonstrated ability to satisfactorily plan, implement, and complete a fire prevention project. The department may establish other qualifying criteria . c) Page 6, lines 30-31 should read: Other fire prevention projects in the state responsibility areas, authorized by the board. d) Page 7, lines 3-5 should read: By January 1, 2011, and annually thereafter, the board shall submit to the Legislature a written report on the status and uses of the fund pursuant to this chapter. The board shall also evaluate the effectiveness of its grants program, report the number of defensible space inspections in the reporting period, the degree of compliance with defensible space requirements, measure to increase compliance, if any, and any recommendations to the Legislature . 15)This bill is double-referred to the Committees on Natural Resources and Local Government. REGISTERED SUPPORT / OPPOSITION : SB 1617 Page 10 Support CA Fire Chiefs Association CA Fire Safe Council's Board of Directors CA League of Conservation Voters CA Native Plant Society CA Trout Defenders of Wildlife Design-Build Institute of America, Western Pacific Region Sierra Club CA Endangered Habitats League Opposition LeRoy Anderson, Tehama County Auditor Controller CA Association of County Treasurers and Tax Collectors CA Department of Finance CA Farm Bureau Federation (unless amended) CA State Association of Counties Counties of Alpine, Amador, Butte, Calaveras, Del Norte, Glenn, Inyo, Lassen, Mendocino, Placer, Plumas, Tehama, Trinity, and Tulare County of Plumas Planning and Building Departments Howard Jarvis Taxpayers Association Regional Council of Rural Counties Deborah Russell, Tuolumne County Auditor Controller State Association of County Auditors STOP Hidden Taxes Coalition Analysis Prepared by : Katie Kolitsos / L. GOV. / (916) 319-3958