BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1125 HEARING: 6/22/11
AUTHOR: Achadjian FISCAL: No
VERSION: 4/28/11 TAX LEVY: No
CONSULTANT: Lui
LOS OSOS COMMUNITY SERVICES DISTRICT
Authorizes San Luis Obispo County and the Los Osos
Community Services District to develop discounted rate
programs for low-income households.
Background and Existing Law
About 5,000 septic tanks on small lots in Los Osos, an
unincorporated community in San Luis Obispo County, have
polluted the groundwater near Morro Bay. As a result, the
Central Coast Regional Water Quality Control Board ordered
a building moratorium and called for the construction of a
community sewer system. In 1998, local voters formed the
Los Osos Community Services District, which provides water,
drainage, fire protection, parks, street lights, and solid
waste services. The District is an independent special
district, governed by an elected, five-member board of
directors.
In 2005, the District signed contracts to build a sewer
system and a new wastewater treatment plant. After
controversies over the plant's location, local voters
recalled three of the District's board members in September
2005. The new board suspended the plant's construction,
desiring another location for the sewer plant. After the
suspended project drew litigation with the plant's
contractors and the State Water Resources Control Board, as
well as fines from the Central Coast Regional Water Quality
Control Board, San Luis Obispo County officials sought
special legislation that would not make them responsible
for the District's liabilities. In response, the County
suspended the District's powers and gained the authority to
plan, build, and operate the wastewater collection and
treatment system (AB 2701, Blakeslee, 2006). The County
may levy benefit assessments to pay for constructing and
operating the wastewater system, and charge sewer standby
AB 1125 - 4-28-11 -- Page 2
charges. The District can resume its operational duties
if:
There is a majority protest to the proposed benefit
assessment,
There is no majority protest, but the County
decides to no longer use these powers, or
The County constructs the wastewater system and
operates it for at least three years, and the County
and the District mutually apply to the Central Coast
Regional Water Quality Control Board for permission to
transfer the system from the County to the District.
Since 2006, the County has taken over the District's
original responsibilities, and the wastewater plant's
construction should be completed by 2014. Before the
County turns over the project to the District, the County
wants to develop a subsidized rate system for services, so
that qualifying low-income households can receive household
wastewater treatment at an affordable cost.
Proposed Law
Assembly Bill 1125 authorizes the County of San Luis Obispo
to develop a program to offset assessments, standby
charges, or user fees and charges for very low- or
low-income households. The program would be funded by, but
not limited to, grants, principal forgiveness, and
non-county funds from low-interest loans, approved by the
State Water Resources Control Board and the U.S. Department
of Agriculture. AB 1125 prohibits the County from
subsidizing the lower rates by including in an assessment
or charge, an amount to cover the costs to the county.
After the Los Osos Community Services District resumes its
powers, AB 1125 authorizes the District to continue the
program to offset assessments or charges for very low- or
low-income households with funding sources, including
grants. AB 1125 prohibits the District from including an
amount to cover the cost to the County in carrying out the
cost of offsetting the program in an assessment or charge.
If the County has not implemented the offset program, AB
1125 allows the District to adopt a program to offset
assessments or charges for very low or low-income
households.
AB 1125 - 4-28-11 -- Page 3
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Antiquated or damaged septic
systems can leak sewage into the ground, harming the
environment and threatening public health. Faulty septic
systems can contaminate surface waters and groundwater with
pathogens and nitrates. Yet, the improvements required to
correct these problems are costly. This is what happened
in Los Osos, and in 2006, the Legislature authorized San
Luis Obispo County to construct a sewer plant to address
public health and environmental contamination concerns.
Five years later, the County returns to the Legislature, as
promised, to propose a program to help low-income
households meet sewer rate payments and assessments. The
County recognizes that financial hardships affect
low-income residents' ability to pay for costly sewer later
connections, sewer assessments, or other standby charges.
If telephone and electricity services have tiered rates,
why shouldn't the local sewer system also have the ability
to offer discounted prices to low-income households? AB
1125 allows the County to develop a program to help
everyone in Los Osos have fair access to affordable
wastewater treatment services.
2. Sludging along . The County and the District recognize
that AB 1125 doesn't answer all questions. Once the sewer
assessments are in place, how will renters know that
landlords won't pass-on excessive costs? Is the District
creating other programs to help all families adjust to
additional assessments? Other than the State Water Board's
revolving loan program, how can the District help property
owners connect to costly sewer laterals? At this point,
the County wants to focus on its proposed discounted rate
program, and then plans how to spend its secured funding.
The Committee may wish to consider if legislators should
wait for answers before passing AB 1125.
3. Secured funding . The County has secured over $173
million, including $11.5 million in grants, from the U.S.
AB 1125 - 4-28-11 -- Page 4
Department of Agriculture and the State Water Board. Each
funding source-grant, loan, principal forgiveness-has a
different expiration date, providing for relative revenue
stability for the sewer-rate assistance program. The
County will use the state and federal grants to cut the
monthly cost of sewer services for all District residents
from about $200 to around $180. AB 1125 allows the County
to further reduce its sewer rate charges for qualifying
very-low to low-income households to around $140.
4. I'll make you a proposition . In November 2010,
California voters approved Proposition 26, re-defining a
local "tax" as any levy, charge, or exaction of any kind,
except charges for:
A specific benefit.
A specific government service or product.
Issuing licenses and permits, performing
investigations, inspections, and audits, enforcing
agricultural marketing orders, and the administrative
enforcement.
Entrance to or use of local government property, or
the purchase, rental, or lease of local government
property.
A fine, penalty, or other monetary charge imposed
by the judicial branch of government or a local
government, as a result of a violation of law.
A condition of property development.
Assessments and property-related fees.
New or increased special taxes require 2/3-voter approval,
but Proposition 218 (1996) said that an election is not
required for "fees or charges for sewer, water, and refuse
collection services." Moreover, since AB 1125 limits user
fees and charges to the reasonable cost to provide the
services, the bill authorizes a user fee collection, which
may not violate Proposition 26.
5. A lateral endeavor . On June 8, the Committee
unanimously passed AB 741 (Huffman, 2011), allowing local
sewer service providers, at a property owner's request, to
construct sewer improvements on private property and charge
the property owner for the costs. The estimated cost of
converting from a septic system to a sewer connection
ranges from $2,000 to $14,000. Because commercial loans
for sewer and septic improvements can be expensive, local
officials want to accelerate upgrades to sewer and septic
systems by loaning money to private property owners at
AB 1125 - 4-28-11 -- Page 5
below-market interest rates. AB 741 gives local officials
another tool to help property owners pay for sewer
upgrades.
Assembly Actions
Assembly Environmental Safety and Toxic Materials
Committee: 9-0
Assembly Local Government Committee: 9-0
Assembly Floor: 74-0
Support and Opposition (6/16/11)
Support : Area Agency on Aging Advisory Council; San Luis
Obispo Board of Supervisors.
Opposition : Unknown.