BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 2746
                                                                  Page  1
          CONCURRENCE IN SENATE AMENDMENTS
          AB 2746 (Blakeslee)
          As Amended  June 15, 2010
          2/3 vote 
           
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          |ASSEMBLY:  |74-0 |(May 6, 2010)   |SENATE: |34-0 |(August 18,    |
          |           |     |                |        |     |2010)          |
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           Original Committee Reference:    INS.

          SUMMARY  :   Authorizes the California Earthquake Authority (CEA)  
          to contract for the services of a chief mitigation officer and  
          describes the general duties of that officer.

           The Senate amendments  :  

           1)Require the chief mitigation officer of the CEA to file  
            financial disclosure statements with Fair Political Practices  
            Commission.
           
           2)Provides that no reimbursement is required by this bill  
            because it creates a new crime or infraction (i.e., the bill  
            contains a crimes and infractions disclaimer).  
           
           EXISTING LAW  :  

           1)Authorizes the governing board of CEA to conduct the affairs  
            of the CEA and specifies its powers.  Among its powers are to:  
             employ or contract with officers and employees to administer  
            the CEA, retain outside actuarial and geological  
            professionals, invest moneys, obtain reinsurance, issue bonds,  
            and employ bond counsel and financial consultants in  
            connection with the issuance of bonds. 

          2)Specifies that the CEA may contract for the services of a  
            chief executive officer (CEO), a chief financial officer  
            (CFO), and an operations manager.  Additionally, the CEA may  
            contract for the services of reinsurance intermediaries,  
            financial market underwriters, modeling firms, a computer  
            firm, an actuary, an insurance claims consultant, counsel, and  
            private money managers.  For these purposes, the CEA is not  
            considered a state agency or other public agency.   

           AS PASSED BY THE ASSEMBLY  , this bill:








                                                                  AB 2746
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          1)Authorized the CEA to contract for the services of a chief  
            mitigation officer.

          2)Required the governing board of the CEA to establish the  
            duties of the chief mitigation officer which shall include the  
            following:

             a)   Program activities that mitigate against seismic risk  
               that will help homeowners, other property owners including  
               landlords with smaller holdings, and the general public;

             b)   Collaboration with academic institutions, nonprofit  
               entities, and commercial business entities in joint efforts  
               to conduct mitigation-related research and educational  
               activities, and conduct program activities to mitigate  
               against seismic risk;

             c)   Programs to provide financial assistance in the form of  
               loans, grants, rebates, or other financial incentives to  
               help mitigate against seismic risk, including structural  
               and contents retrofitting of residential structures; and,

             d)   Collaboration and joint programs with local, state, and  
               federal agencies that may further California's disaster  
               preparedness, protection, and mitigation goals.

          3)Authorized the CEA to accept grants and gifts of real or  
            personal property and services for the Earthquake Loss  
            Mitigation Fund or the related residential retrofit program  
            from federal, state, and local government sources and private  
            sources.

           FISCAL EFFECT  :   No direct fiscal impact.  The CEA is a  
          privately financed, publicly managed agency with 25 civil  
          service positions and a handful of temporary and exempt  
          positions.

           COMMENTS  :   

          1)The purpose of this bill is to authorize the CEA to contract  
            for the services of a chief mitigation officer with specified  
            duties.

          2)According to the Working Group on California Earthquake  
            Probabilities, there is a 99% chance of a magnitude 6.7 or  








                                                                  AB 2746
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            greater earthquake striking California within the next 30  
            years.  The author states that according to CEA estimates, a  
            region such as Los Angeles could experience $100 billion in  
            residential property losses.  In San Francisco, 80% of the  
            weakest wood-framed buildings (an estimated 2,000 buildings)  
            are expected to collapse or become damaged beyond repair in a  
            large earthquake (7.2 magnitude).  Agencies advise that an  
            effective retrofit program would dramatically reduce this  
            damage.

          The CEA has recommended the establishment of a chief mitigation  
            officer position to enhance the organization's mitigation  
            efforts and effectively utilize the Loss Mitigation Fund to  
            help protect California.  Currently, this fund has  
            approximately $12 million available to provide loans to  
            retrofit homes but relatively few homeowners have taken out  
            these loans. 

          3)Effective use of the Loss Mitigation Fund by the chief  
            mitigation officer will assist homeowners to retrofit their  
            homes and prepare for a major earthquake.  Without appropriate  
            mitigation retrofits, experts estimate that tens to hundreds  
            of thousands of homes in high population centers like Southern  
            California and San Francisco will be destroyed, leaving  
            thousands of families homeless.  Since the Chief Mitigation  
            Officer's salary will be subject to the 3% operating expense  
            ceiling, just as the CEO's and the CFO's, there will be no  
            increase in the cost to rate payers.

          4)In 2009, the Insurance Committee and the Legislature approved  
            AB 43 (Blakeslee) which proposed to create the position of  
            chief mitigation officer in the CEA and to eliminate a cap on  
            the number of civil service employees that could be employed  
            by the CEA.  The Governor vetoed AB 43 and stated that he was  
            supportive of establishing the chief mitigation officer in the  
            CEA, and that his veto was based on his opposition to  
            eliminating the limit on the number of civil service employees  
            in the CEA.  AB 2746 only contains the chief mitigation  
            officer provision.


           Analysis Prepared by :    Manny Hernandez / INS. / (916) 319-2086  
                                                       FN: 0005655