BILL ANALYSIS Ó
AB 2069
Page 1
Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 2069 (Solorio) - As Amended: April 10, 2012
SUBJECT : Sanitation, sewerage, and water charges: collection.
SUMMARY : Enacts various changes to existing law that allows
sanitation and sewerage systems to collect delinquent charges,
unpaid installments of fees or charges, and interest on the
general tax rolls.
EXISTING LAW :
1)Authorizes various local public entities to prescribe fees or
other charges for services and facilities furnished by them in
connection with their water, sanitation, storm drainage, or
sewerage system, as well as for the privilege of connecting to
these sanitation or sewerage facilities.
2)Provides that these charges, under specified circumstances,
may be collected on the tax roll in the same manner as
property taxes and the amount of the charges constitutes a
lien against the lot or parcel against which the charge has
been imposed, unless the real property has been transferred or
conveyed to a bona fide purchaser for value, or a lien of a
bona fide encumbrancer for value has been created and attached
prior to the date upon which the first installment of the
property taxes would become delinquent.
FISCAL EFFECT : None.
COMMENTS :
1)Existing law contained in the Health and Safety Code
authorizes sewer agencies to use a common tax bill collection
procedure for sewer service and infrastructure. Counties,
cities, and other special districts use this collection
procedure for all kinds of services, including trash
collection, water, sewer, and nuisance and weed abatement.
The statutory authorization uses identical language in several
statutory codes to allow a wide range of agencies to use the
collection procedure.
AB 2069
Page 2
This common language authorizes the public agency to impose a
levy on real property for delinquent taxes and charges. The
levy becomes a lien - or "encumbrance" - on the property when
that property is sold. The statutes, however, provide an
exception to this encumbrance when the sale occurs before the
charge becomes delinquent. AB 1342 (Knox), Chapter 861,
Statutes of 1973, added this exception for bona fide
purchasers to the Health and Safety Code, the California Water
District law, and approximately 20 other statutes. The
California Land Title Association sponsored AB 1342 to protect
a new purchaser who buys a property with unknown delinquent
charges assessed against it for services the new purchaser did
not use.
This exception was intended to cover only sales and new
mortgage liens occurring in the "gap period" after the agency
submits the charge for placement on the tax bill and before
the tax bill becomes due. The 1973 Assembly Local Government
Committee analysis makes this intent explicit: "In effect, AB
1342 establishes the policy that if the property is sold
between July 1 and December 10 in any fiscal year, charges
appearing upon the property tax bill will not, if left unpaid,
become a lien on that property."
2)According to the author, a problem arose when a 1981 court
decision, County of Butte v. North Burbank Public Utility
District, interpreted the exception more broadly. That
decision expanded the exception to cover any existing mortgage
lien. The court held that, when a lender holding an existing
mortgage forecloses and sells the property, later-added unpaid
tax liens for delinquent utility charges are wiped out,
regardless of when they were added. This decision increased
risk to public agencies.
Public agencies that use this collection procedure for
customer water or sewer infrastructure may not be able to
collect from some homeowners, leaving the burden to pay for
infrastructure to other customers. If, for example, a
neighborhood used billing financing to convert from a septic
system to a sanitary sewer system, the public agency may be
unable to collect the costs of the private improvements on the
homeowner's property if the home went into foreclosure. While
the homeowner enjoyed the benefits of the sewer connection,
the agency's lien for sewer costs may not have attached to the
property and tax bill yet.
AB 2069
Page 3
One year following the Butte decision, the Legislature amended
the statutes relating to public utility district involved in
that decision and the Irrigation District Law. The amendments
narrowed the exemption to apply only to transfers and
encumbrances created during a specified window preceding the
tax bill showing the charges. That bill, however, did not
amend any of the other statutes with the bona fide encumbrance
exception to include this clarification.
3)This bill reduces the risk to public agency collections by
narrowing the bona fide encumbrance exception, and gives sewer
and water agencies the same collection tool that irrigation
agencies and public utility districts now enjoy.
4)Support arguments : Supporters believe this measure will
increase the ability of a public agency to collect the unpaid
and delinquent charges that it needs in order to provide its
services in a cost-effective manner.
Opposition arguments : None at this time.
REGISTERED SUPPORT / OPPOSITION :
Support
Irvine Ranch Water District ÝSPONSOR]
Association of California Water Agencies
California Association of Sanitation Agencies
Opposition
None on file
AB 2069
Page 4
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958