BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
SB 1035 (Hancock)
As Introduced
Hearing Date: April 13, 2010
Fiscal: Yes
Urgency: No
TW:jd
SUBJECT
Municipal Utility District: Utility Charges: Delinquencies
DESCRIPTION
This bill, sponsored by the East Bay Municipal Utility District
(EBMUD) and Alameda County, authorizes a municipal utility
district (MUD) to collect delinquent fees incurred by a
commercial or residential lessee, tenant, or subtenant by
charging the delinquent fees to the property owner's tax roll,
as specified. This bill deletes a provision of existing law
which exempts water and sewer service to residential property
from the lien remedy.
BACKGROUND
This bill is similar to last year's AB 1333 (Hancock, 2008),
which, among other things, would have deleted the exemption of a
MUD providing water or sewer services to residential property
and allowed this type of MUD to place a lien on a property for
delinquent fees or charges. This bill was vetoed.
When water bills are not paid, municipal utility districts, such
as EBMUD, are forced to either shut off water service or
subsidize the cost of continued water service by charging more
for water services to other ratepayers. When water is not
available to maintain landscaped exteriors, neighborhoods begin
to take on an unlived, blighted appearance, which in turn causes
property values to decline. To respond to the problem of water
shutoffs and resulting blighted areas, this bill would authorize
water and sewer municipal utility districts, which are currently
exempt from this remedy, to file a lien against the property
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owner for their lessee, tenant, and subtenant delinquencies.
All municipal utility districts, excluding electric, will also
be able to place the delinquent utility charges on the real
property tax roll.
Although other utility providers already can impose a lien on
property owners for delinquent utility fees, municipal utility
districts providing water, sewage, and electric are unable to
utilize this statutory remedy. This bill deletes the exemption
of residential water and sewage providers, thereby allowing them
to pursue this remedy.
This bill was approved by the Senate Local Government Committee
on April 7, 2010, by a vote of 4 to 1.
CHANGES TO EXISTING LAW
Existing law authorizes a municipal utility district to require
the owner of record of real property within the district to pay
the charges for services rendered to a lessee, tenant, or
subtenant, and provides that those delinquent utility charges
become a lien once a certificate is filed with the county
recorder, as specified. The lien has the force, effect, and
priority of a judgment lien. (Pub. Util. Code Sec. 12811.1(a).)
Existing law provides the lien remedy to municipal utility
districts (other than water, sewer, and electric) in addition to
any other remedy provided by law. (Pub. Util. Code Sec.
12811.1(d).)
Existing law provides that this code section does not apply to
municipal utility districts providing water or sewer services to
residential properties, or electric services. (Pub. Util. Code
Sec. 12811.1(e).)
This bill authorizes a municipal utility district, pursuant to a
resolution or ordinance, to collect delinquent utility fees,
tolls, rates, rentals, and other charges, together with interest
and penalties, including any delinquent fees, tolls, rates,
rentals, or other charges for services rendered to a lessee,
tenant, or subtenant, on the tax roll in the same manner as
property taxes.
This bill would delete the above exemption for delinquent fees
or charges for the furnishing of water or sewer services to
residential properties.
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This bill requires a municipal utility district seeking to apply
delinquent utility charges to the tax roll to: 1) prepare and
file an annual report of delinquent charges for each affected
parcel; 2) give published and mailed notice of the filing of the
report and the time and place for a public hearing; 3) require
the municipal utility district to hear and consider objections
or protests of the report at the public hearing and potentially
revise the report; and 4) by August 10 of each year, provide a
final report to the county recorder to be added to the current
tax assessment roll.
This bill authorizes the municipal utility district to recover
any delinquent fees, tolls, rates, rentals, or other charges,
together with interest and penalties thereon, including any
delinquent fees, tolls, rates, rentals, or other charges for
services rendered to a lessee, tenant, or subtenant.
This bill requires the municipal utility district to file a
release of the lien within 30 days of receipt of payment of the
delinquent charges.
This bill requires the municipal utility district to reimburse
the county for the reasonable expenses incurred by the county
under this bill.
This bill provides that the remedies in this bill are
cumulative, and the district may pursue the remedies
alternatively or consecutively.
COMMENT
1. Stated need for the bill
The author writes:
Blight is becoming a more significant problem in the East Bay
Municipal Utility District's (EBMUD) 331-square mile service
area in the East San Francisco Bay. Blighted properties can
lower the value of nearby properties, decrease the safety and
livability of communities and impact area businesses.
Maintaining landscaped exteriors can help keep blight at bay
by giving properties a vibrant "lived in" look. A
well-maintained exterior is an excellent deterrent to crime
and helps maintain the value of neighboring properties.
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On-going water service is necessary to keep exteriors vibrant.
However, unlike many water utilities that have the authority
to record a lien on a property when water bills are not paid,
EBMUD cannot. When water bills are not paid, EBMUD has no
option but to terminate water service to the property or
unfairly ask its other ratepayers to subsidize the cost of
service to the delinquent account holders.
A change in law is needed to provide EBMUD with same authority
already vested with other water utilities in the state to
record a lien for nonpayment. A lien places the obligation
for payment on the responsible party without unduly penalizing
other ratepayers.
The sponsors of this bill argue that it will enable local
residents and EBMUD to work together to keep communities vibrant
and stable and enable water and sewer MUDs to have access to the
same tools that other local utility providers use in the case of
delinquent accounts.
2. Allowing liens on property for the failure to pay for
residential water or sewer service
There are at least two types of public utilities:
"municipally-owned utilities," which are public utilities owned
by cities; and "municipal utility districts" (MUDs), which are
special districts organized for the purpose of providing utility
service. There are hundreds of "municipally-owned utilities" in
the state, but there are only several major MUDs (including the
sponsor, the East Bay Municipal Utility District (EBMUD)).
Under existing law, MUDs may lien a property for the failure to
pay charges for services that were rendered. This lien remedy
does not apply, however, to delinquent fees or charges for the
furnishing of water or sewer service to residential property or
electrical service. That exemption was enacted in 1986 with
respect to water service and broadened to include sewer service
in 1998. In a reversal of that longstanding exemption, this
bill would remove the exemption as it applies to residential
water or sewer service, thus allowing MUDs to lien a property
due to the failure of the property owner to pay for water or
sewer service. In support of that change, the author maintains
that:
Senate Bill 1035 would provide EBMUD with the same authority
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other water utilities already have by removing the statutory
barrier that precludes a municipal utility district, like
EBMUD, from recording liens for non-payment (PUC section
12811.1).
While this change would help ensure that MUDs are paid for
services provided to lessees, tenants, and subtenants, the bill
provides yet another lien which may subject a property owner to
foreclosure, and goes counter to the exemption that was enacted
in 1986. At the time the exemption was expanded in 1998 to
include sewer service, the Senate Judiciary Committee analysis
of the bill proposing that expansion (SB 2166, Costa, Ch. 739,
Stats. 1998) noted that the change was intended to address the
problem of public utilities combining billing for water and
sewer service to avoid the then-existing prohibition for water
service.
Due to the history of the lien provision, AB 1333 (Hancock,
2008), which like this bill also proposed to remove the
exemption for residential water and sewer service, was amended
by this Committee to include a five-year sunset on the ability
to lien for residential water or sewer service. The Committee
also amended the bill to require the MUDs to report back to the
Senate and Assembly Judiciary Committees on the effectiveness of
using those liens. Because this bill raises similar concerns,
the author's office agrees that the bill should also be
similarly amended. The following language was included in AB
1333 by this Committee, revised to reflect updated reporting and
sunset dates.
Suggested amendment:
1. On page 5, line 7, add a new subdivision (f) to read: "Any
district that places a lien on a property for water or sewer
service pursuant to this section shall submit to the Assembly
and Senate Committees on Judiciary, on or before January 1,
2015, a report containing all of the following information:
(1) The total number of liens created under this section for
water or sewer service and the total dollar amount of those
liens.
(2) The overall effectiveness of the liens and any problems
associated with the use of those liens.
2. Sunset the bill on January 1, 2016.
3. Liability of property owner for tenant utility debt
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The author notes that EBMUD has been forced to discontinue water
services or subsidize the delinquent fees by charging other
customers more for their water services. However, MUDs have the
benefit of requiring customers to provide a history of
creditworthiness, requiring a deposit, and continued monitoring
of customer accounts. MUDs are in the best position to monitor
the delinquent fees and end service as necessary. Under the
current version of the bill, if a residential or commercial
tenant is the utility account holder and delinquent on utility
bills, the residential or commercial property owner may be
unaware of any problems. This bill currently does not limit its
application to cases in which the property owner is the account
holder, not the tenant. Accordingly, the author's office has
agreed that the bill should be amended to include a
cross-reference to Public Utilities Code Section 12822.6, which
provides limitations on residential property owner liability for
residential tenant utility debt, and amended to add an
additional subdivision to protect commercial property owners
from commercial tenant debt.
Suggested amendments:
1. On page 2, line 3, strike out "A" and insert "Except when
prohibited by Section 12822.6, a".
2. On page 5, line 1, add a new subdivision (5) to read:
"The district may not recover on the tax roll any delinquent
fees, tolls, rates, rentals or other charges for services for
commercial use to a commercial tenant under an account
established by the commercial tenant, from any subsequent
tenant or the property owner, due to nonpayment of charges by
a previous commercial tenant. For this purpose, the term
"subsequent commercial tenant" shall not include any entity or
adult person that was located at the same address during the
period the charges or penalties accrued. This subdivision
(c)(5) shall not apply to master-metered accounts."
4. Public Hearing Notice Requirement
The bill requires the MUD general manager to give notice of
public hearing when proposing that the delinquent charges be
applied to the property owner's tax roll. The current language
requires notice of the time and place of the public hearing but
does not specify that the hearing date will be included on the
notice. The author's office agreed to a technical amendment to
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clarify that the hearing date should be included on the notice
of public hearing provided by the MUD general manager.
Suggested amendment:
On page 3, line 29 insert ", date, " after "time".
Additionally, the bill does not specify how many days' notice of
the public hearing that the MUD general manager is required to
give the property owners. In order to address this concern, the
author's office has agreed that an amendment is needed to
specify that the MUD general manager is required to publish and
mail the notice of public hearing at least 14 days prior to the
public hearing date.
Suggested amendment:
On page 3, line 32 insert "at least 14 days prior to the
date of the hearing" after "parcel".
5. Governor's veto of AB 1333
The Governor's veto message expressed his concern that allowing
utility liens against property owners for water and sewer
services could increase costs associated with foreclosed
property and allow utility companies to benefit at a time of
financial hardship for many property owners. As noted earlier,
however, this bill is narrower than AB 1333.
Support : California Special Districts Association
Opposition : None Known
HISTORY
Source : Alameda County; East Bay Municipal Utility District
Related Pending Legislation : None Known
Prior Legislation :
AB 1333 (Hancock, 2008) (See Background.)
AB 2586 (Torrico, 2008), among other things, would have required
that whenever a public utility, or a corporation that furnishes
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electrical, gas, heat, or water to residential units, as
specified, and where the owner, manager, or operator of the
residential units is listed by the corporation as the customer
of record, the public utility or corporation would be required
to provide written notification to the residential occupants at
least 15 days prior to termination, prevent a successor in
interest from terminating utility service with the intent to
terminate the tenant's tenancy, and extended the notice period
required to evict a tenant after a foreclosure. This bill was
vetoed.
SB 2166 (Costa, Chapter 739, Statutes of 1998) (See Comment 2.)
Prior Vote : Senate Local Government Committee (Ayes 4, Noes 1)
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