BILL ANALYSIS                                                                                                                                                                                                    



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          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  








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            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  








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            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  








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            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  








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            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  








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            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  








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            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  








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            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  








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            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 be  collected  levied  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  :









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           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