BILL ANALYSIS Ó
SB 841
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Date of Hearing: June 27, 2011
ASSEMBLY COMMITTEE ON NATURAL RESOURCES
Wesley Chesbro, Chair
SB 841 (Wolk) - As Amended: June 22, 2011
SENATE VOTE : 39-0
SUBJECT : Solid waste: enterprises: contracts
SUMMARY : Prohibits a local government from enforcing an
indemnity obligation against a solid waste enterprise for claims
arising out of Proposition 218 or Proposition 26 violations.
EXISTING LAW:
1)Under the California Integrated Waste Management Act of 1989:
a) Authorizes local governments 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 governmental
agency by resolution or ordinance.
b) Requires local governments to divert 50% of solid waste
generated from landfill disposal through source reduction,
reuse, recycling and composting activities.
c) Declares that those local governments that require an
indemnity obligation retain their responsibility for
implementing the diversion requirements.
d) Defines "indemnity," under the California Civil Code, as
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.
2)Under Proposition 218 (1996):
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a) Amends Article XIII C and Article XIII D of the
Constitution to require that increases in local taxes be
approved by the voters.
i) Prohibits a local government from imposing,
extending, or increasing any general tax unless and until
that tax is submitted to the electorate and approved by a
majority vote.
ii) Prohibits a local government from imposing,
extending, or increasing any special tax unless and until
that tax is submitted to the electorate and approved by a
two-thirds vote.
b) The local government bears the burden of proving by a
preponderance of the evidence that a levy, charge, or other
exaction is not a tax, that the amount is no more than
necessary to cover the reasonable costs of the governmental
activity, and that the manner in which those costs are
allocated to a payor bear a fair or reasonable relationship
to the payor's burdens on, or benefits received from, the
governmental activity.
3)Under Proposition 26 (2010):
a) Amends Article XIII C of the Constitution to define
"tax" as any levy, charge, or exaction of any kind imposed
by a local government, except:
i) A charge imposed for a specific benefit conferred or
privilege granted directly to the payor that is not
provided to those not charged, and which does not exceed
the reasonable costs to the local government of
conferring the benefit or granting the privilege.
ii) A charge imposed for a specific government service
or product provided directly to the payor that is not
provided to those not charged, and which does not exceed
the reasonable costs to the local governments of
providing the service or product.
iii) A charge imposed for the reasonable regulatory costs
to a local government for issuing licenses and permits,
performing investigations, inspections, and audits,
enforcing agricultural marketing order, and the
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administrative enforcement and adjudication thereof.
iv) A charge imposed for entrance to or use of local
government property, or the purchase, rental, or lease of
local government property.
v) 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.
vi) A charge imposed as a condition of property
development.
vii) Assessments and property-related fees imposed in
accordance with the provisions of Article XIII D.
b) The local government bears the burden of proving by a
preponderance of the evidence that a levy, charge, or other
exaction is not a tax, that the amount is no more than
necessary to cover the reasonable costs of the governmental
activity, and that the manner in which those costs are
allocated to a payor bear a fair or reasonable relationship
to the payor's burdens on, or benefits received from, the
governmental activity.
THIS BILL :
1)Defines "indemnity obligation" as an indemnity obligation
directly or indirectly related to the failure of a local
agency to obtain voter or property owner approval of a fee,
levy, charge, assessment, or other exaction, that may be
required pursuant to Proposition 218 or Proposition 26, if
that indemnity obligation is expressly assumed by, or imposed
upon, the solid waste enterprise.
2)Prohibits enforcement of an indemnity obligation that is
imposed or required if it either:
a) Purports to obligate a solid waste enterprise to
indemnify a local agency against liability for claims by a
third party for failure to obtain voter or property owner
approval of a fee, levy, charge, assessment, or other
exaction in violation of Proposition 218 or Proposition 26.
b) Requires a solid waste enterprise to refund fees to its
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customers, if the fees are collected an retained by the
local agency, or 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 in either
case have been found by a final judgment of a court to have
been imposed in violation of Proposition 218 or Proposition
26.
3)Provides that an indemnity obligation is subject to #2 if it
meets either of the following criteria:
a) The indemnity obligation is imposed 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, as the case may be, 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 the provisions in this bill are not subject to
waiver and any attempted waiver shall be null and void as
against public policy.
5)Provides that this bill is to be applied prospectively and
will become operative on July 1, 2012.
FISCAL EFFECT : Non-fiscal
COMMENTS :
1)Background. According to the author, since the passage of
Proposition 218 and increasingly after the passage of
Proposition 26, local agencies are likely to require that
private solid waste handling firms indemnify these local
agencies if their franchise and other fees are successfully
challenged in court. This practice removes the incentive on
local agencies to responsibly moderate their own fees and
charges. This situation is similar to insuring against
punitive damages or penalties or fines, all of which are
illegal in California as contrary to public policy. The author
contends that the bill's restrictions on indemnity obligations
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are necessary to protect waste companies from unfairly being
required to indemnify local agencies for Proposition 218 and
Proposition 26 compliance decisions.
The California Integrated Waste Management Act of 1989 allows
local government to determine most aspect of solid waste
handling and recycling services, including the assessment of
charges and fees and whether these services will be performed
by a private solid waste company by means of a nonexclusive
franchise, contract, license, or otherwise, under terms and
conditions prescribed by the local agency.
The sponsor of this bill, the California Refuse Recycling
Council, asserts that private solid waste companies have "no
role whatsoever in determining the amounts or types of these
local agency fees," nor do they determine whether a local
agency complies with Proposition 218 or Proposition 26.
The League of California Cities has a neutral position on this
bill as articulated in its letter to the author dated June 13,
2011.
2)Is this bill needed? There are no known cases that hold a
solid waste enterprise liable for a local agency's violation
of Proposition 218 and Proposition 26. The sponsor of the
bill acknowledges this point in its support letter. As such,
there is a question as to whether this bill is necessary at
this point.
3)Related Legislation .
AB 939 (Sher), Chapter 1095, Statutes of 1989, created the
California Integrated Waste Management Board (CIWMB) and set
up a new mandate for local jurisdictions to meet diversion
goals. Mandates local jurisdictions to meet solid waste
diversion goals of twenty-five percent (25%) by 1005 and fifty
percent (50%) by 2000.
SB 1179 (Polanco of 1997), would have restricted a local
agency's ability to penalize or be indemnified by a solid
waste enterprise that is the local agency's agent for
collecting or otherwise handling solid waste if the local
agency had failed to meet state solid waste diversion goals.
Vetoed by the governor.
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SB 1340 (Polanco), Chapter 987, Statutes of 1998, establishes
restrictions on a local agency's ability to enforce an
indemnification obligation included in a contract with a waste
or recycling company. Specifically, the bill requires 1) all
indemnity obligations as defined to be unenforceable against a
solid waste enterprise if the CIWMB-imposed penalty is based
solely on the failure of the local agency to establish and
maintain an source reduction and recycling element, 2) if the
solid waste enterprise is wholly or partly responsible for the
local agency's failure to meet diversion requirements, the
penalty is to be apportioned between the local agency and the
solid waste enterprise, 3) the solid waste enterprise is
liable if its breach or noncompliance with the local agency
resulted from the action, or failure to act, of the local
agency, 4) payments by a solid waste enterprise to the local
agency may not exceed that level which represents the portion
of the penalty that was caused by the solid waste enterprise's
breach or noncompliance, 5) the indemnity obligation is not
enforceable until the local agency has pursued all forms of
relief from the penalty, or the local shows good cause for not
doing so.
REGISTERED SUPPORT / OPPOSITION :
Support
California Refuse Recycling Council
Opposition
None on file
Analysis Prepared by : Lynn Kirshbaum / NAT. RES. / (916)
319-2092