BILL ANALYSIS Ó
SB 555
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Date of Hearing: June 29, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 555 (Hancock) - As Amended: April 26, 2011
SENATE VOTE : 27-11
SUBJECT : Local government: community facilities districts.
SUMMARY : Adds the acquisition, installation, and improvement of
energy efficiency, water conservation, and renewable energy
improvements that are affixed to the types of facilities that a
community facilities district (CFD) may finance, or refinance,
regardless of whether the buildings or property are privately or
publicly owned. Specifically, this bill :
1)Adds the acquisition, installation, and improvement of energy
efficiency, water conservation, and renewable energy
improvements that are affixed to the types of facilities that
a CFD may finance, or refinance, regardless of whether the
buildings or property are privately or publicly owned.
2)Specifies that the energy efficiency, water conservation, and
renewable energy improvements financed by a CFD may only be
installed on a privately owned building and on privately owned
real property with the prior written consent of the owner or
owners.
3)Prohibits the financing mechanism established under this
measure from being used to finance the installation of energy
efficiency, water conservation, and renewable energy
improvements on a privately owned building or real property in
connection with the initial construction of a residential
building unless the initial construction is undertaken by the
intended owner or occupant.
4)Provides that work on privately owned buildings and real
property may be financed by a special tax levy only: a) if
all of the votes cast on the question of levying the special
tax are in favor of levying the special tax; and, b) with the
prior written consent to the special tax of all of the owners
of each property that may be subject to the special tax.
5)Specifies that the prior written consent constitutes a
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unanimous vote in favor of the special tax and any associated
bond indebtedness.
6)Authorizes an alternate procedure for forming a CFD that
initially consists solely of territory proposed for annexation
to the CFD in the future, with the condition that a parcel or
parcels within that territory may be annexed to the CFD and
subjected to the special tax only with the unanimous approval
of the parcel owner or owners at the time of annexation.
7)States that for any CFD formed to finance the installation of
energy efficiency and renewable energy improvements, the
appropriations limit for the CFD, the applicable rate of the
special tax and the method of apportionment and manner of
collection of that tax, and the authorization to incur bonded
indebtedness must be specified and be approved by the
unanimous approval of the owner or owners of each parcel or
parcels at the time that the parcel or parcels annex the CFD.
8)Declares that any improvement on private property authorized
to be financed by a CFD constitutes a "public facility" for
purposes of the Mello-Roos Community Facilities Act of 1982
(Mello-Roos); and, a "public improvement" for purposes of
specified statutes, whether the improvement is owned by a
private entity, if the legislative body has determined that
the improvement provides a public benefit, or the improvement
is owned by a public agency.
9)States that if a validation lawsuit is filed regarding the
special taxes levied against a parcel by a CFD formed under
the alternative process, it must be done so within 15 days
after the notice of special tax lien is recorded against the
parcel.
10)States that for any CFD formed to finance the installation of
energy efficiency and renewable energy improvements the local
agency may, without additional hearings or procedures,
designate a parcel or parcels as an improvement area within
the community facilities district.
11)Provides that after the designation of a parcel or parcels as
an improvement area, all proceedings for approval of the
appropriations limit, the rate and method of apportionment and
manner of collection of special tax, and the authorization to
incur bonded indebtedness for the parcel or parcels, shall
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apply only to the improvement area.
12)Specifies that the refusal of a developer to participate in
the formation of, or annexation to, a CFD established pursuant
to this bill's provisions shall not be a factor in the
consideration of the approval of a building permit or other
legislative or adjudicative act affecting the developer's
property.
13)Defines "Property Assessed Clean Energy bond" or "PACE bond"
as a bond that is secured by any of the following:
a) A voluntary contractual assessment on a property;
b) A voluntary contractual assessment or a voluntary
special tax on property to finance the installation of
distributed generation renewable energy sources, electric
vehicle charging infrastructure, or energy or water
efficiency improvements that is levied pursuant to a
chartered city's constitutional authority; or,
c) A special tax on property authorized under a CFD.
EXISTING LAW :
1)Authorizes, pursuant to Mello-Roos, a CFD to finance the
purchase, construction, expansion, improvement, or
rehabilitation of certain facilities, including, among others,
child care facilities, undergrounding of water transmission
and distribution facilities, and the cleanup of hazardous
materials.
2)Specifies the requirements for the establishment of a CFD,
including, among other things, a petition, a hearing,
establishment of the boundaries of the CFD, and an election on
the question of establishment.
3)Requires that if a lawsuit to test the validity of a CFD's
special taxes is filed, it must be done within 30 days after
voters approve the special tax.
FISCAL EFFECT : None
COMMENTS :
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1)Mello-Roos is an important feature of the local fiscal
landscape, providing local officials with a key tool for
accumulating the public capital needed to pay for the public
works projects that make new residential development possible.
Since 1985, CFDs have issued over $18 billion in long-term
bonds, mostly for capital improvements. Without access to
Mello-Roos bond funding, many builders would have to pay
higher development impact fees and raise housing prices.
2)SB 555 authorizes the use of Mello-Roos taxes to help finance
renewable energy, water conservation, and energy efficiency
improvements on private property. To simplify the process by
which property owners can voluntarily use Mello-Roos
financing, local officials want to be able to create a CFD
that initially contains no parcels of land, but consists only
of territory from which parcels may subsequently be annexed to
the CFD with the unanimous approval of parcel owners.
3)In addition to financing public works such as park, school,
and library facilities, CFDs can pay for improvements on
privately owned buildings or real property. For example, CFDs
may pay for work deemed necessary to bring buildings or real
property, whether privately or publicly owned, into compliance
with seismic safety standard and regulations.
To initiate the formation of a CFD, a local agency's
legislative body must adopt a resolution of intention to
establish the district, which must describe the district's
boundaries; describe the facilities and services proposed to
be finance; state that a special tax, secured by a lien
against real property, will be annually levied; specify, in
detail, the rate, method of apportionment, and manner of
collections of the special tax; and, fix a time and place for
public hearing.
4)Under existing law, after holding the hearing and considering
protests, if the legislative body determines to establish the
CFD, it must adopt a resolution of formation containing all of
the information provided in the resolution of intention; and,
if a special tax is to be levied, some additional information
about the tax levy.
This bill authorizes a separate procedure for establishing a
CFD where the district initially consists solely of territory
proposed for annexation to the community facilities district
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in the future, as specified, and provides an alternate
procedure for incurring bonded indebtedness for community
facility districts established in this manner.
5)AB 811 (Levine), Chapter 159, Statutes of 2008, proposed to
further the public interest of addressing climate change
through energy conservation efforts by authorizing cities to
provide up-front financing to property owners to install solar
or other renewable energy-generating devices or make specified
energy efficiency improvements to their properties through a
system of contractual assessments.
AB 1709 (Hancock, 2008) and SB 279 (Hancock, 2009), both
almost identical to SB 555, would have added the acquisition,
installation, and improvement of energy efficiency and
renewable energy improvements that are permanently fixed to
the types of facilities that a CFD may finance, or refinance,
regardless of whether the buildings or property are privately
or publicly owned. AB 1709 was vetoed by Governor
Schwarzenegger, stating that "while I support the use and
inclusion of energy efficiency products for the homes in our
state as demonstrated by my Million Solar Roofs Initiative,
this bill would allow Mello-Roos taxes to be imposed on
homeowners in order to finance energy efficiency improvements.
This provision represents a fundamental shift in the purpose
of Mello-Roos taxes and is one that I cannot support." SB 279
was also vetoed by Governor Schwarzenegger stating "I support
the use and inclusion of energy efficiency products for homes
in our state. However, by allowing Mello-Roos taxes to be
imposed on homeowners to finance energy efficiency
improvements, this bill would represent a fundamental shift in
the purpose of Mello-Roos taxes, which are intended to finance
core infrastructure needs such as roadways, sewers, and street
lighting. This is a shift that I cannot support."
AB 474 (Blumenfield), Chapter 444, Statutes of 2009, added
water efficiency improvements to the list of improvements that
can be paid for through a contractual assessment between a
willing property owner and a public agency.
6)Support arguments: Supporters, including the California
Advocacy Committee of the US Green Building Council, state
that "SB 555 builds on the principals of PACE and California
FIRST to enable cities and counties to establish a voluntary
community facility district to help finance energy
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efficiencies, renewable energy, water conservation. Property
owners who opt in to pay Mello-Roos taxes will be able to
leverage utility bill savings against their financing costs
over time on their property tax bills." Supporters believe
that SB 555 will help accelerate conservation savings
throughout the state.
Opposition arguments: Opposition could argue that this
measure adds yet another improvement to the laundry list of
improvements that a local government can finance through
Mello-Roos assessments; the Legislature may wish to consider
whether it is prudent to continue to authorize local
governments to become a glorified bank to help pay for on-site
property improvements. The Legislature may also wish to
consider if it would be wise to place some type of cap on the
amount of voluntary assessments a local government may enter
into at any one time in order to reduce the financial risk for
the local agency.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
AFL-CIO
California Advocacy Committee of the United States Green
Building Council
California Association of Realtors
California Municipal Utilities Association
East Bay Municipal Utility District
Sacramento Municipal Utility District
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Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958