BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 841|
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THIRD READING
Bill No: SB 841
Author: Wolk (D)
Amended: 5/12/11
Vote: 21
SENATE ENVIRONMENTAL QUALITY COMMITTEE : 7-0, 5/9/11
AYES: Simitian, Strickland, Blakeslee, Hancock, Kehoe,
Lowenthal, Pavley
SUBJECT : Solid waste: enterprises: contracts
SOURCE : Republic Services
Waste Management
DIGEST : This bill prohibits the enforcement of an
indemnity obligation that requires a solid waste enterprise
to defend and hold harmless the local agency in connection
with the local agency's imposition of fees, charges,
levies, exactions, or assessments that are found by final
judgment of a court to have been imposed in violation of
Article XIII C or XIII D of the California Constitution or
that require a solid waste enterprise to refund certain
fees. This bill only applies to a provision, term,
condition, or requirement contained in an ordinance,
contract, franchise, license, permit, or other entitlement
or right adopted, entered into, issued, or granted on or
after July 1, 2012. This bill becomes operative on July 1,
2012.
ANALYSIS :
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Existing law:
1. Under the California Integrated Waste Management Act of
1989 (Public Resources Code Section 40000 et seq.):
A. Authorizes a local agency to determine (1) aspects
of solid waste handling, including but not limited
to, frequency of collection, means of collection and
transportation, level of services, charges and fees,
and nature, location, and extent of providing solid
waste handling services; and (2) whether the services
are to be provided by means of nonexclusive
franchise, contract, license, permit, or otherwise,
either with or without competitive bidding, and under
terms and conditions prescribed by the governing body
of the local agency by resolution or ordinance.
(Section 40059)
B. Contains various requirements relating to
integrated waste management, and requires each city
or county source reduction and recycling element to
include an implementation schedule that shows a city
or county must divert 25 percent of solid waste from
landfill disposal or transformation by January 1,
1995, through source reduction, recycling, and
composting activities, and must divert 50 percent of
solid waste on and after January 1, 2000. (Section
41780). Administrative civil penalties may be
imposed upon a local agency of up to $10,000 per day
until the local agency implements its source
reduction and recycling element or its household
hazardous waste element. (Section 41850)
C. Contains requirements relating to an indemnity
obligation due to a local agency's failure to
establish and maintain a source reduction and
recycling element, and to meet the above solid waste
diversion requirements (Section 40059.1).
2. Sets numerous requirements relating to indemnity (Civil
Code Section 2772 et seq.). Indemnity is "a contract by
which one engages to save another from a legal
consequence of the conduct of one of the parties, or of
some other person."
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3. Under Articles XIII C and XIII D of the California
Constitution, sets various requirements relating to
assessments, fees, and taxes enacted by voter approved
Proposition 218 (November 5, 1996, election) and
Proposition 26 (November 2, 2010, election).
This bill, under the California Integrated Waste Management
Act of 1989:
1. Defines "indemnity obligation" to mean an indemnity
obligation directly or indirectly related to a local
agency's failure to obtain voter or property owner
approval that may be required by Articles XIII C or
XIII D of the California Constitution if that indemnity
obligation is expressly assumed by or imposed upon the
solid waste enterprise, including by "ordinance,
contract, franchise, license, permit, or other
entitlement or right, for the benefit of a local
agency."
2. Requires an indemnity obligation to be null and void,
and not enforceable, if it does either of the following:
A. Requires a solid waste enterprise to defend and
hold harmless the local agency in connection with the
local agency's imposition of fees, charges, levies,
exactions, or assessments that are found by final
judgment of a court to have been imposed in violation
of Articles XIII C or XIII D of the California
Constitution.
B. Requires a solid waste enterprise to refund fees
to its customers if the fees are collected on behalf
of the local agency by the solid waste enterprise and
have been remitted by the solid waste enterprise to
the local agency and if the fees are found by a final
judgment of a court to have been imposed in violation
of Article XIII C or Article XIII D of the California
Constitution.
3. Requires an indemnity obligation to be subject to the
above null and void provision if it meets either of the
following conditions:
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A. The indemnity obligation is authorized or required
by a provision, term, condition, or requirement
contained in an ordinance, contract, franchise,
license, permit, or other entitlement or right
adopted, entered into, issued, or granted by a local
agency for solid waste handling services, including
the recycling, processing, or composting of solid
waste.
B. The indemnity obligation is authorized or required
in a request for bids or proposals in connection with
a contract or franchise specified above.
4. Provides that provisions of this bill are not subject to
waiver, and any attempted waiver must be null and void
as against public policy.
5. Provides that this bill cannot be intended to do any of
the following: (a) add to or expand local agency
authority to determine aspects of solid waste collection
and handling; (b) alter the authority of business
entities to collect or process materials that are not
solid waste; or c) determine whether or not a fee, levy,
assessment, or exaction requires voter or property owner
approval by Articles XIII C or XIII D of the California
Constitution.
6. Requires this bill to only apply to a provision, term,
condition, or requirement contained in an ordinance,
contract, franchise, license, permit, or other
entitlement or right adopted, entered into, issued, or
granted on or after July 1, 2012.
7. Contains related legislative intent.
8. Becomes operative on July 1, 2012.
Comments
Previous attempts by solid waste interests to seek
indemnification restrictions . SB 1179 (Polanco), 1997-98
Session, set restrictions on the enforceability of an
indemnity obligation for solid waste collection. Governor
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Wilson vetoed the bill, noting that "To assert that solid
waste management enterprises cannot indemnify losses based
upon their own breach without the state's intervention to
negotiate the terms of the agreement is ludicrous on its
face." According to this veto message, "When government
ventures into the arena of contractual negotiations it is
generally to protect an obviously disadvantaged party. In
this instance it appears that the state is being asked to
protect the industry from itself. Indeed there is
significant evidence that the industry is responsible for
the proliferation of waste diversion indemnification
agreements. Various solid waste management providers have
offered to indemnify prospective clients to gain an
advantage in a competitive marketplace."
SB 1340 (Polanco), Chapter 987, Statutes of 1998, set
requirements relating to an indemnity obligation due to a
local agency's failure to establish and maintain a source
reduction and recycling element, and meet solid waste
diversion requirements. The bill prohibited an indemnity
obligation from being enforceable against a solid waste
enterprise until the local agency has affirmative sought in
good faith, all administrative relief or demonstrates good
cause for not pursuing that administrative relief.
However, any penalty must be apportioned in accordance with
the percentage of fault of the local agency and the solid
waste enterprise. The bill addressed court interpreter
compensation issues when approved by the Senate, and these
provisions were stricken in the Assembly where the
indemnification issues were added.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/11/11)
Republic Services (co-source)
Waste Management (co-source)
Inland Empire Disposal Association
Los Angeles County Waste Management Association
Solid Waste Association of Orange County
ARGUMENTS IN SUPPORT : The author is concerned that since
passage of Proposition 218 and Proposition 26 local
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agencies may require that "solid waste handling firms
indemnify these local agencies if their franchises and
other fees are successfully challenged in court. As a
matter of public policy indemnity should not be provided
for unlawful conduct."
The author is responding to this concern by requiring an
indemnity obligation to be null and void, and not
enforceable, if it either (1) requires a solid waste
enterprise to defend and hold harmless the local agency in
connection with the local agency's imposition of fees,
charges, levies, exactions, or assessments that are found
by a court to have been imposed in violation of Articles
XIII C or XIII D of the California Constitution; or (2)
requires a solid waste enterprise to refund fees to its
customers if the fees are collected on behalf of the local
agency by the solid waste enterprise and have been remitted
by the solid waste enterprise to the local agency.
"SB 841 is consistent with existing policy underlying
Public Resources Code section 40059.1, which establishes
reasonable limits on the form of indemnity obligations
local agencies can require from their solid waste
franchisees. Furthermore, SB 841 does not affect a local
agencies right to impose fees on waste haulers."
DLW:mw 5/12/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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