BILL ANALYSIS Ó SB 1222 Page 1 Date of Hearing: August 16, 2012 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair SB 1222 (Leno) - As Amended: June 19, 2012 Policy Committee: Local GovernmentVote:7-1 Urgency: No State Mandated Local Program: Yes Reimbursable: Yes SUMMARY This bill places limitations and restrictions on the permit fees charged by a city or county for residential and commercial rooftop solar energy systems. Specifically, this bill: 1)Prohibits a city or county, including charter cities, from charging a residential or commercial permit fee for a residential or commercial rooftop solar energy system that produces direct current electricity that exceeds the estimated reasonable cost of providing the service for which the fee is charged. 2)Establishes a maximum level of the permit fee, plus an addition for each kilowatt (kW) above a specified level. Allows a city or county to charge a permit fee for a rooftop solar energy system that exceeds the applicable fee, if, as part of a written finding and an adopted resolution or ordinance, the city or county provides substantial evidence of the reasonable cost to issue the permit. Specifies the written finding. 3)States the intent of the Legislature to provide a city or county that meets the obligations of the bill's provisions to receive priority access to state funds for the purposes of distributed energy generation planning, permitting, training, or implementation. 4)Sunsets the bill's provisions as of January 1, 2018. 5)Provides that reimbursement shall be made to local agencies if the Commission on State Mandates determines that this act SB 1222 Page 2 contains costs mandated by the state. FISCAL EFFECT Negligible fiscal impact. Legislative Counsel has keyed SB 1222 a reimbursable mandate. However, this bill does not appear to be a reimbursable mandate because any mandated costs can be reimbursed with fees charged by local governments. The mandated costs include any administrative costs the local government incurs that cannot be reimbursed because the costs are higher than the permit fees specified in the bill. SB 1222 specifically states the costs of adopting an ordinance to charge fees higher than the bill's maximum can be recouped through permit costs. SB 1222 Page 3 COMMENTS 1)Purpose . According to the author, the solar industry continues to drive investment, jobs and savings in California. However, the author notes even with the decrease in equipment prices, inconsistency in permit fees continues to be a barrier to greater solar rooftop installation. The author explains that currently, each local authority with jurisdiction over solar installations determines its fee structure for rooftop permits. Permit fees range from less than $100 to more than $5,000. The author states some local jurisdictions employ a flat-fee and others base their fees on the value of the solar project. The author argues with a standardized and streamlined process, permitting fees and the cost of compliance for installers would be lower, triggering an increase in local investments, resulting in higher revenue from sales taxes, employment taxes and increased consumer spending as a result of electricity bill savings. The author also contends that property values would increase; resulting in greater property tax revenues upon property sale and lower energy costs for businesses, which would result in extra capital that could be used to hire more employees and reduce the costs of goods and services. The author concludes that with residential permitting reform the economic impact and job numbers will be boosted by $5 billion dollars and almost 4,000 jobs. 2)Support arguments : Sierra Club argues there are major disparities in the fees charged by local governments, as evidenced by multiple studies the Sierra Club has undertaken since 2005. The Sierra Club believes there is a need for the Legislature to address this inconsistency in permit fees in order to achieve price parity with grid electricity. 3)Opposition . A joint coalition of the League of California Cities (League), the Regional Council of Rural Counties (RCRC), the California Chapter of the American Planning Association (APA CA), the California State Association of Counties (CSAC), the Urban Counties Caucus (UCC), the California Municipal Utilities Association (CMUA), and the California Building Officials (CALBO), oppose SB 1222. They point out the existing Mitigation Fee Act prohibits a local government from imposing a fee that exceeds the estimated reasonable cost of providing the service for which the fee is SB 1222 Page 4 charged. Existing law already requires a local government fee that would exceed the reasonable cost to be submitted to the voters. The opponents do not believe it is the role of the state to undermine local decisions by setting the level of the fee in statute without regard to individual city or county costs. They also note they understand the $400 cap is based on a 2011 Sierra Club study, which cites a reasonable range for permits fees of $205 to $485. They question why the proposed cap should be less than the high end of the Sierra Club's study range. They object to the process for charging higher permit fees because it is not well defined and does not provide the direction local governments need to comply with the requirement to streamline the submittal and approval of permits for solar energy. 4)Constitutional requirements. Proposition 26 (2010) amended Article XIIIC to broaden the definition of what constitutes a tax to include many payments previously considered fees or charges. Language in Proposition 26 lists seven exceptions to what constitutes a local tax. These exceptions are widely believed to include building permit fees, provided the fees do not exceed the reasonable costs to local government of issuing the permit and any follow up enforcement. Proposition 26 also states it is the local government that 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 charged is not more than necessary to cover the reasonable costs of governmental activity, and that the manner in which those costs are allocated bear a fair or reasonable relationship to the burdens on, or benefits received from the governmental activity. 5)Relevant legislation . AB 1801 (Campos) limits the total amount of fees charged by a city or county for an applicant to install a solar energy system to the actual costs borne by the local agency in providing the service for which the fee is charged, prohibits a city or county from calculating a fee for a solar energy system by utilizing specified methods including the valuation method, and requires a city or county to identify the individual fees assessed on the invoice provided to the applicant. AB 1801 was not heard in this committee because it did not have a fiscal impact. AB 1801 is currently pending on the Senate Floor. SB 1222 Page 5 Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081