BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 912 HEARING: 6/22/11 AUTHOR: Gordon FISCAL: No VERSION: 5/27/11 TAX LEVY: No CONSULTANT: Detwiler SPECIAL DISTRICT DISSOLUTION Expedites the dissolution of special districts. Background and Existing Law The Cortese-Knox-Hertzberg Act controls how local officials change the boundaries of cities and special districts, putting local agency formation commissions (LAFCOs) in charge of the proceedings. LAFCOs' boundary decisions must be consistent with "spheres of influence" that LAFCOs adopt to show the future boundaries and service areas of the cities and special districts. Before LAFCOs can adopt their spheres of influence, they must prepare "municipal service reviews" which review population growth, public facilities, and service demands. LAFCOs may also conduct special studies of local governments. Most boundary changes begin when a city or special district applies to LAFCO, or when registered voters or landowners file petitions with a LAFCO. In limited circumstances, LAFCO can initiate some special district boundary changes: consolidations, dissolutions, mergers, subsidiary districts, or reorganizations (AB 1335, Gotch, 1993). Boundary changes, including district dissolutions, require four (sometimes five) steps: First, there must be a completed application to LAFCO, including a petition or resolution, an environmental review document, and a property tax exchange agreement between the county and the district. Second, LAFCO must hold a noticed public hearing, take testimony, and may approve the proposed district dissolution. LAFCO may impose terms and conditions that spell out what happens to the district's assets and liabilities. If LAFCO disapproves, the proposed AB 912 -- 5/27/11 -- Page 2 dissolution stops. Third, LAFCO must hold another public hearing to measure protests. In general, LAFCO must order an election on the proposed dissolution, but there are many statutory exemptions. For example, if a district has been inactive for three years, no election is required. Fourth, if state law requires an election, it occurs among the district's voters. A successful dissolution requires majority-voter approval. Finally, LAFCO's staff files formal documents to complete the dissolution. Responding to perceived problems, legislators required voter approval to dissolve local hospital districts (AB 1015, Johnston, 1985) and made it easier for the voters in the Newhall County Water District to force a dissolution election (SB 609, Costa, 2001). The courts have consistently explained that there is no constitutional right to vote on local governments' boundaries. Elections on district dissolutions are statutory opportunities, but not constitutionally required. Some LAFCOs say that these complicated procedures make it hard to dissolve special districts that have outlived their usefulness. Even after documentation by municipal service reviews and spheres of influence, it's hard to get rid of obsolete districts. They want an expedited procedure for dissolving districts. Proposed Law If the proposed dissolution of a special district is consistent with a prior action of a local agency formation commission (LAFCO) regarding a special study, a sphere of influence, or a municipal service review, Assembly Bill 912 allows LAFCO to order the dissolution either : Without an election or protest proceedings if the dissolution was initiated by the district's board, or After holding a noticed public hearing and protest proceedings if the dissolution was initiated by an affected local agency, LAFCO, or a petition. If a AB 912 -- 5/27/11 -- Page 3 majority-protest exists at the hearing, LAFCO must stop the dissolution. Absent a majority-protest, LAFCO must order the dissolution without an election. State Revenue Impact No estimate. Comment Purpose of the bill . Most of California's 3,300 special districts deliver the public facilities and services that their communities want, matching community services to community needs. But some districts have simply outlived their usefulness. Using special studies, municipal service reviews, and spheres of influence, LAFCOs have identified vestigial districts that linger because no one wants to take the time to get rid of them. Even when LAFCO uses the 1993 Gotch law to initiate the dissolution of a special district, the statutory hearing and protest requirements make it hard to do the right thing. AB 912 creates an expedited procedure for dissolving special districts. If a district's boards asks for permission to dissolve, the bill avoids protest hearings and elections altogether. If someone else (including LAFCO) initiates the proposed dissolution, the bill still requires the protest hearing. Absent majority-protest, the dissolution occurs without an election. For district dissolutions that are consistent with LAFCO policies, the bill trumps special statutory provisions, including those for hospital districts. AB 912 effectively shifts the statutory default from requiring dissolution elections, with exceptions, to avoiding elections. Assembly Actions Assembly Local Government Committee: 9-0 Assembly Floor: 79-0 Support and Opposition (6/16/11) Support : California Association of Local Agency Formation AB 912 -- 5/27/11 -- Page 4 Commissions; California Special Districts Association. Opposition : Unknown.