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 




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               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 





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               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 





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          Commissions; California Special Districts Association.

           Opposition  :  Unknown.