BILL ANALYSIS                                                                                                                                                                                                    Ó




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  AB 1801                     HEARING:  6/13/12
          AUTHOR:  Campos                       FISCAL:  No
          VERSION:  4/23/12                     TAX LEVY:  No 
          CONSULTANT:  Phan                     

                            SOLAR ENERGY SYSTEM FEES
          

          Prohibits cities and counties from charging solar energy 
          system permit fees based on the valuation method. 


                           Background and Existing Law  

          California historically has promoted solar energy projects. 
           In 1978, the Legislature enacted the Solar Rights Act to 
          make it easier for people to install solar energy systems 
          (AB 3250, Levine, 1978).  To further promote solar 
          installations, AB 1407 (Wolk, 2003) prohibits 
          state-sponsored solar energy grants or loans to public 
          entities that restrict solar energy installations, and AB 
          2473 (Wolk, 2004) declares that the implementation of 
          statewide standards for solar energy systems is not a 
          municipal affair but a matter of statewide concern.

          "A solar energy system" is any solar collector, solar 
          energy device, or structural design feature of a building 
          whose primary purpose is to collect, store, or distribute 
          solar energy for heating, cooling, electric generation, or 
          water heating.  Although exact procedures vary by location, 
          the approval procedure for a solar permit is similar to the 
          procedure for approving a building permit.  Typically, the 
          solar installation company or customer submits an 
          electrical diagram and roof layout plan to the city or 
          county planning department.  The installer or customer pays 
          a permit fee to get the plan approved in order to start the 
          installation project.

          When a local agency charges fees for building permits, 
          those fees may not exceed the estimated reasonable cost of 
          providing the service for which the fee is charged.  Fees 
          charged in excess of the estimated reasonable cost of 
          providing the services are taxes and must be approved by a 
          2/3-vote of the electors.  Building permit fees generally 




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          pay for the cost of the project plan examination and 
          on-site inspection.

          Most building permit fees are based on the "valuation 
          method" created by the International Conference of Building 
          Officials (ICBO).  The ICBO periodically publishes 
          industry-wide building standards and valuation tables for 
          different kinds of projects.  The construction valuation 
          measures the complexity of the project and suggests a 
          reasonable permit fee.  The other permit fee method, called 
          a "fixed method," calculates fees independent of the 
          project's valuation.  It typically charges fees based on 
          the cost of the labor required to issue the permit and 
          inspect the project, and flat fees for certain 
          administrative processes, such as record storage or 
          planning department reviews.  

          Currently, each local authority that has jurisdiction over 
          solar installations determines its fee structure.  Fees 
          vary widely by location, with the City of Lawndale charging 
          the highest fee at $1,471 for a 3kW system, while 31 cities 
          have no permit fees at all.  The average solar permit fee 
          across all cities and counties is $343.  In 2009, the 
          Sierra Club, Angeles Chapter, surveyed 250 Southern 
          Californian cities and counties and found that 83% of 
          jurisdictions that used a valuation method charged above 
          the maximum reasonable recovery fee, while only 8% of 
          jurisdictions that used a fixed method charged above the 
          maximum reasonable recovery fee. 


                                   Proposed Law  

          Assembly Bill 1801 prohibits cities and counties from using 
          the valuation method to calculate their fees, such as 
          charging fees based on the solar energy system's valuation, 
          the value of the property, materials, labor, or any other 
          factor not directly associated with the cost to review and 
          inspect the installation of the solar energy system.  AB 
          1801 also requires cities and counties to separately 
          identify each application fee assessed on the invoice 
          provided to the installer.  Last, AB 1801 restates current 
          law, which prohibits cities and counties from charging fees 
          to install solar energy systems that exceed the cost of 
          providing the service for which the fees are charged.  






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                               State Revenue Impact
           
          No estimate. 

                                         
                                    Comments  

          1.   Purpose of the bill  .  Excessive fees discourage the 
          installation of renewable energy systems by increasing 
          costs.  The Sierra Club's report indicates that 
          jurisdictions that use a valuation method tend to charge 
          higher fees than jurisdictions that use a fixed method.  
          The valuation method has no nexus with the labor cost to 
          issue the permit and tends to generate higher fees than the 
          actual costs incurred to issue the permit.  Since the 
          Sierra Club's report in 2009, many jurisdictions have 
          switched from the valuation method to the fixed method and 
          decreased their fees substantially.  Some jurisdictions, 
          like the City of Roseville, continue to use the traditional 
          valuation method.  AB 1801 furthers the state's goal of 
          promoting solar system installation by prohibiting cities 
          and counties from using the valuation method to calculate 
          permit fees.  It will also make the fee structure more 
          understandable by requiring cities and counties to itemize 
          the different components and costs of the fee.  More solar 
          energy consumption will reduce consumption of electricity 
          from traditional, environmentally harmful sources and 
          reduce consumers' electricity bill.  AB 1801 helps 
          California realize its ambitious solar energy goals by 
          making fee structures more transparent, consistent, and 
          certain for solar installers. 

          2.   Necessary  ?  The California Constitution and statutes 
          clearly prohibit local governments from charging a fee that 
          exceeds the reasonable cost of providing the service for 
          which the fee is charged.  If local governments aren't 
          limiting their fees for solar permits to comply with state 
          law, prohibiting them from using the valuation method may 
          reduce fees, but local governments could still overcharge 
          with the fixed system.  The practice of overcharging for 
          permits may be a regulatory problem, not a legislative 
          problem.  Additionally, many jurisdictions that used the 
          valuation method in the past no longer use it for solar 
          installations.  The Committee may wish to consider whether 
          amendments that will help fee payers dispute fees they 





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          consider too high may be more effective in achieving its 
          goals.

          3.   Special treatment  .  The solar industry has already 
          received numerous subsidies and special programs from the 
          state government.  AB 1801 is another effort to help the 
          solar industry. Some critics argue the benefits have not 
          outweighed the costs to the state, especially since solar 
          energy has not reached price parity with grid electricity.  
          Further, almost all other building permits are issued based 
          on the project's valuation.  Does the issue of excessive 
          fees exist for building permits other than solar?  The 
          Committee may wish to consider whether solar rooftop 
          installation permits merit a different treatment than other 
          building permits, and whether regulating the permitting 
          system for solar necessitates regulating the permitting 
          system for other kinds of building permits as well. 

          4.   State-mandated fees based on valuation  .  In addition to 
          charging local fees to issue a solar permit, local 
          governments are required to charge some state fees that use 
          the valuation method.  The Strong Motion Instrument Program 
          (SMIP) (AB 1747, Committee on Budget, 2003) charges either 
          a $10 or $21 fee for each $100,000 of the project's 
          valuation, depending on the building type.  The Building 
          Standards Administration Special Revolving Fund, known 
          locally as the Green Building Standards Fee (SB 1373, 
          Calderon, 2008), imposes a $4 fee for each $100,000 of the 
          project's valuation.  Prohibiting cities and counties from 
          using the valuation method to calculate all fees may create 
          confusion about how to calculate state fees that are based 
          on the valuation method.  The Committee may wish to 
          consider clarifying that cities and counties may use the 
          valuation method to calculate state fees but not local 
          fees. 

          5.   Related legislation  .  SB 1222 (Leno, 2011) tries to 
          ease the solar permitting process by placing a cap on 
          permit fees that cities and counties can charge for 
          residential and commercial solar rooftop installations.  It 
          passed out of the Senate Governance and Finance Committee 
          on a 6-2 vote.  It will next be heard in the Assembly Local 
          Government Committee. 

          6.   Technical amendment  .  To clarify AB 1801's language, 
          the Committee may wish to consider amending the bill:





          AB 1801 -- 4/23/12 -- Page 5



                 On page 2, lines 3-4, strikeout "Oversight of local 
               agency fees is a matter of statewide interest and 
               concern. Therefore, the" and insert:
               The 


                                 Assembly Actions  

          Assembly Local Government            8-0
          Assembly Floor                      74-0


                         Support and Opposition  (6/7/12)

           Support  :  Solar Energy Industries Association; Renewable 
          Energy Accountability Project.

           Opposition  :  Unknown.