BILL ANALYSIS Ó
SB 1222
Page 1
SENATE THIRD READING
SB 1222 (Leno)
As Amended August 21, 2012
Majority vote
SENATE VOTE :25-13
LOCAL GOVERNMENT 7-1 APPROPRIATIONS 14-1
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|Ayes:|Smyth, Alejo, Bradford, |Ayes:|Gatto, Harkey, |
| |Campos, Davis, Hueso, | |Blumenfield, Bradford |
| |Norby | |Charles Calderon, Campos, |
| | | |Davis, Fuentes, Hall, |
| | | |Hill, Cedillo, Mitchell, |
| | | |Solorio, Wagner |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Knight |Nays:|Donnelly |
| | | | |
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SUMMARY : Places a cap on the amount of permit fees charged by a
city or county for both residential and commercial rooftop solar
energy systems, unless a city or county makes written findings
and adopts a resolution or ordinance providing substantial
evidence of the reasonable cost to issue the permit and why the
cost exceeds the specified caps. Specifically, this bill :
1)Prohibits, for a residential rooftop solar energy system that
produces direct current electricity, a city, county, city and
county, or charter city (hereafter referred to as 'city or
county') from charging a residential permit fee that exceeds
the estimated reasonable cost of providing the service for
which the fee is charged, not to exceed $500, plus $15 per
kilowatt (kW) for each kW above 15kW.
2)Allows a city or county to charge a residential permit fee for
a rooftop solar energy system that exceeds the fees specified
in 1) above, 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.
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3)Prohibits, for a commercial rooftop solar energy system that
produces current electricity, a city or county from charging a
commercial permit fee that exceeds the estimated reasonable
cost of providing the service for which the fee is charged,
not to exceed $1,000 for systems up to 50kW, plus $7 per kW
for each kW between 51kW and 250kW, plus $5 per kW for each kW
above 250kW.
4)Allows a city or county to charge a commercial permit fee for
a rooftop solar energy system that exceeds the applicable fee
specified in 3) above, 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.
5)Requires a written finding to include all of the following:
a) A determination that the municipality has adopted
appropriate ordinances, permit fees, and processes to
streamline the submittal and approval of permits for solar
energy systems pursuant to the practices and policies in
state guidelines and model ordinances;
b) A calculation related to the administrative cost of
issuing a solar rooftop permit; and,
c) A description of how the higher fee will result in a
quick and streamlined approval process.
6)Defines "administrative costs" for purposes of the bill to
mean "the costs incurred in connection with the review,
approval, and issuance of the permit, and the hourly site
inspection and followup costs, and may also include an
amortization of the costs incurred in connection with
producing a written finding and adopting an ordinance or
resolution Ýpursuant to the bill's provisions]."
7)Defines a "residential permit fee" for purposes of the bill to
mean "the sum of all charges levied by a county, city and
county, or charter city in connection with the application for
the rooftop solar energy system."
8)States the intent of the Legislature to provide a city or
county that meets the obligations
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of the bill's provisions to receive priority access to state
funds for the purposes of distributed energy generation
planning, permitting, training, or implementation.
9)Sunsets the bill's provisions as of January 1, 2018.
10)Provides that reimbursement shall be made to local agencies
if the Commission on State Mandates determines that this act
contains costs mandated by the state.
11)Makes various findings and declarations about the importance
of rooftop solar and the wide variations in permitting costs
by local agencies associated with the installation of rooftop
solar.
EXISTING LAW :
1)Provides that, notwithstanding any other provision of law,
when a local agency charges fees for zoning variances, zoning
changes, use permits, building inspections, building permits,
and other specified fees that those fees may not exceed the
estimated reasonable cost of providing the service for which
the fee is charged, unless a question regarding the amount of
the fee charged in excess of the estimated reasonable cost of
providing the services or materials is submitted to, and
approved by, a popular vote of two-thirds of those electors
voting on the issue.
2)Specifies that the fees listed in 1) above may include the
costs reasonably necessary to prepare and revise the plans and
policies that a local agency is required to adopt before it
can make any necessary findings and determinations.
3)Enacts the Solar Rights Act and declares that it is the policy
of the state to promote and encourage the use of solar energy
systems and to remove obstacles to their installation.
4)Defines the term "solar energy system" in the Civil Code to
mean either of the following:
a) Any solar collector or other solar energy device whose
primary purpose is to provide for the collection, storage,
and distribution of solar energy for space heating, space
cooling, electric generation, or water heating; or,
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b) Any structural design feature of a building, whose
primary purpose is to provide for the collection, storage,
and distribution of solar energy for electricity
generation, space heating or cooling, or for water heating.
5)Declares that any covenant, restriction, or condition
contained in any deed, contract, security instrument, or other
instrument affecting the transfer or sale of, or any interest
in, real property, and any provision of a governing document,
as defined, that effectively prohibits or restricts the
installation or use of a solar energy system is void and
unenforceable.
6)Allows for reasonable restrictions on solar energy systems
that do not significantly increase the cost of the system or
significantly decrease the efficiency or specified
performance, or that allow for an alternative system of
comparable cost, efficiency, and energy conservation benefits.
7)Requires solar energy systems to meet applicable health and
safety standards and requirements imposed by state and local
permitting authorities.
8)Requires, whenever approval is required for the installation
or use of a solar energy system, that the application for
approval be processed and approved by the appropriate
approving entity, as specified, and shall not be willfully
avoided or delayed.
9)Prohibits a public entity from receiving funds from a
state-sponsored grant or loan program for solar energy if that
entity fails to comply with specified requirements, and
requires a public entity to certify its compliance with the
specified requirements when applying for funds from a
state-sponsored grant or loan program.
10)Requires a city or county to administratively approve
applications to install solar energy systems through the
issuance of a building permit or similar nondiscretionary
permit, and requires review of the application to install a
solar energy system to be limited to the building official's
review of whether it meets all health and safety requirements
of local, state and federal law.
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11)Limits the requirements of local law to those standards and
regulations necessary to ensure that the solar energy system
will not have a specific, adverse impact upon the public
health or safety.
12)Prohibits a city or county from denying an application for a
use permit to install a solar energy system unless it makes
written findings based upon substantial evidence in the record
that the proposed installation would have a specific, adverse
impact upon the public health or safety, and that there is no
feasible method to satisfactorily mitigate or avoid the
specific, adverse impact.
13)States that the implementation of consistent statewide
standards to achieve the timely and cost-effective
installation of solar energy systems is not a municipal
affair, but is instead a matter of statewide concern, and
further states that it is the intent of the Legislature that
local agencies not adopt ordinances that create unreasonable
barriers to the installation of solar energy systems,
including, but not limited to, design review for aesthetic
purposes, and not unreasonably restrict the ability of
homeowners and agricultural and business concerns to install
solar energy systems.
14)States the intent of the Legislature to encourage the
installation of solar energy systems by removing obstacles to,
and minimizing the costs of, permitting for such systems.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill poses a "Ýn]egligible 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."
COMMENTS : In 1978, recognizing the importance of promoting
solar energy systems, the Legislature enacted the Solar Rights
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Act (Act), declaring that it is the policy of the state to
promote and encourage the use of solar energy systems and to
remove obstacles to their installation. The Act was initially
formulated to address issues related to the installation of
solar systems in areas where homeowners associations (HOAs)
placed restrictions on the utilization of solar systems in their
jurisdiction with the express or clearly implied intent of
preventing any such installation. When passed, the Act made any
instrument affecting the transfer of real property that
prohibited or restricted the installation of solar energy system
void and unenforceable. Subsequent amendments added specific
national and state standards for solar energy systems and
prohibited unreasonable restrictions on the installation of
solar energy systems.
Prior legislation from 2004 dealt with the issue of local
government permitting for solar energy systems. AB 2473 (Wolk),
Chapter 789, Statutes of 2004, required cities and counties to
permit the installation of solar energy systems by right if the
system meets specified requirements, and redefined the term
"significantly" with respect to restrictions on solar energy
systems that raise costs or decrease efficiency. According to
research conducted by the author, and by the sponsor of that
bill, the California Solar Energy Industries Association, a
number of jurisdictions were placing serious obstacles in the
way of solar power system installation, giving reason for the
need for the bill.
AB 2473 addressed this issue in two ways. The bill created
specific standards for what constituted "significant" increases
in solar energy system costs or decreases in those systems'
efficiency. The bill also declared that solar energy system
installation is a matter of statewide concern, and made a local
government's grant of permission to install a solar energy
system ministerial rather than discretionary unless the
permitting agency has good cause to believe doing so would
create an adverse impact on public health or safety, in which
case an application for a discretionary permit may be required.
The local government cannot refuse to approve that application
unless it makes detailed written findings based on substantial
evidence that granting the permit will create specific adverse
impacts on public health or safety. If conditions are placed on
an approval to mitigate public health or safety impacts, the
required mitigation must be designed to accomplish its goal at
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the lowest possible cost.
As a follow-up to AB 2473, Assembly Member Wolk sent a letter
dated June 7, 2006, to all California city attorneys, city
planners, county counsels, and county planners regarding the
legislative intent of AB 2473:
"It has come to my attention that a number of quite different
approaches have been taken in the design-review of solar
energy systems and in the process of establishing the cost of
issuing a permit for the installation of a solar energy
system. Some of these approaches appear to be inconsistent
with the intent of my legislation amending the California
Solar Rights Act. The purpose of this letter is to clarify
the Legislature's intent with respect to design review for
aesthetic purposes and the assessment of fees for the
permitting of solar energy systems?
California Government Code Section 66005 (a) provides that
"Ýdevelopment permit] fees or exactions shall not exceed the
estimated reasonable cost of providing the service?" On
December 2, 2005, the California State Supreme Court upheld
this statute by ruling that building permit fees must be based
on the "estimated reasonable costs of providing the services
for which the fees are charged" (Barratt v. C. of Rancho
Cucamonga, Ct. App. 4/2 E0325780).
I have been advised by industry experts that the average time
spent by local jurisdictions to permit and inspect a solar
system is between 2 and 5 hours. A fixed fee method to
compute solar permit fees has been shown to be an appropriate
method of establishing solar permit fees, since it takes about
the same amount of time to permit a 2 kilowatt photovoltaic
system, a 6 kilowatt system, or a residential or commercial
solar water heating system. A permit fee computation
methodology that is based on the monetary valuation of the
system or its sales price, rather than the estimated
reasonable costs of providing the permit service is
inconsistent with the intent of AB 2473 as well as the Supreme
Court case cited above and may unnecessarily discourage the
installation of solar energy systems.
I respectfully request that all permitting agencies enact
reasonable permitting policies that encourage affordable solar
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energy system installation (including over-the-counter
permits, permit fees based on the permitting agency's actual
costs, and cessation of design reviews for aesthetic
concerns."
This bill prohibits, for a residential rooftop solar energy
system, a city or county from charging a residential permit fee,
as defined, that exceeds the estimated reasonable cost of
providing the service for which the fee is charged, not to
exceed $500, plus $15 per kW for each kW above 15kW. The bill
also prohibits, for a commercial rooftop solar energy system, a
city or county from charging a commercial permit fee that
exceeds the estimated reasonable cost of providing the service
for which the fee is charged, not to exceed $1,000 for systems
up to 50kW, plus $7 kW for each kW between 51kW and 250 kW, and
$5 per kW for each kW above 250 kW.
The bill provides an exception to these caps of $500 and $1,000,
if a city or county, as part
of a written finding and an adopted resolution or ordinance,
provides substantial evidence of the reasonable cost to issue
the permit. The bill specifies that a written finding must
include the following: a) a determination that the municipality
has adopted appropriate ordinances, permit fees, and processes
to streamline the submittal and approval of permits for solar
energy systems pursuant to the practices and policies in state
guidelines and model ordinances; b) a calculation related to the
administrative cost, as defined, of issuing a solar rooftop
permit; and, c) a description of how the higher fee will result
in a quick and streamlined approval process.
The bill also contains intent language to the effect that a city
or county that meets the bill's obligations should receive
priority access to state funds for the purposes of distributed
energy generation planning, permitting, training, or
implementation; however, no exact funding source or pot of funds
is cited.
The bill contains a sunset clause of January 1, 2018, and is
author-sponsored.
According to the author, "the solar industry continues to drive
investment, jobs and savings in California. However, even with
the decrease in equipment prices, a barrier to greater solar
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rooftop installation continues to impact the industry -
inconsistency in permit fees.
"The installed cost of rooftop solar remains much higher than
necessary because of inconsistent and unnecessarily costly local
permitting and inspection processes that are ill-suited for
modern solar technology.
"Currently, each local authority having jurisdiction over solar
installations determines its fee structure for rooftop permits.
Permit fees can range from less than $100 to more than $5,000.
Some local jurisdictions employ a flat-fee and others base their
fees on the value of the solar project. Additionally, variation
in who has the authority to set the permitting fee can further
complicate the fee structure.
"Further, the total cost to obtain a permit from a local
jurisdiction can account for a major portion of the total
installed cost of the system. As equipment prices come down,
the percentage of the cost associated with permitting will only
increase. The percentage of total costs from permitting is
particularly high for small residential systems.
"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.
Property values would also increase, resulting in greater
property tax revenues upon property sale. Lower energy costs
for businesses would result in extra capital that could be used
to hire more employees and reduce the costs of goods and
services.
"In addition, rooftop solar energy systems will help California
reach its energy and environmental goals and create a
significant boost to the state economy. More than 1,000,000
additional net energy metered residential rooftops could be
deployed in the state in the coming years adding over $28
billion to the state economy and supporting nearly 22,000 jobs.
With residential permitting reform the economic impact and job
numbers will be boosted by $5 billion dollars and almost 4,000
jobs. Without it the economic benefit and jobs are in jeopardy
as it is unlikely that local jurisdictions have the capacity to
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process the forecasted demand."
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), in opposition to SB 1222, raise the following issues:
"Under the existing Mitigation Fee Act, when a local government
imposes a fee, it may not exceed the estimated reasonable cost
of providing the service for which the fee is charged. If a
local government fee exceeds the reasonable cost, then the local
government is required to submit the fee to the voters. Cities
and counties each set their own fees and many utilize the permit
fees that are based on the State Building Standards Code because
they find those fees reflect the reasonable costs of providing
the related services. Variations in fees are likely due to
individual variations between cities and counties statewide. In
addition, many local governments lower their building permit fee
for residential solar systems by subsidizing their permit costs
with funds from their General Fund. We ÝLeague, RCRC, APA CA,
CSAC, UCC, CMUA and CALBO] 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. While we understand that the $400 cap is based on a 2011
Sierra Club study, "Solar Electric Permit Fees in Northern
California: A Comparative Study", we would note that that study
also cites a range of 'reasonable low end of $205 to a
reasonable high end of $485' for a residential photovoltaic
project. This supports our position that there is a range of
reasonable costs of providing the service.
"Under SB 1222, any local government that has costs exceeding
Ýthe caps in the bill] will be required to justify those costs
in a finding and ordinance as well as provide substantial
evidence of the administrative cost to issue the permit. First,
the bill provides that the local agency has adopted 'appropriate
ordinances, permit fees, and processes to streamline the
submittal and approval of permits for solar energy systems
pursuant to the practices and policies in state guidelines and
model ordinances.' It remains unclear to us what the definition
of 'appropriate' is as well as what state guidelines and model
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ordinances permitting agencies must follow. Second, this
justification of our costs is duplicative given that a local
government must already provide a mitigation fee study
(including showing the nexus of the cost) when establishing the
fee, as noted above."
The Legislature may wish to consider the following:
1)How were the thresholds of $500 for residential rooftop and
$1,000 for commercial rooftop solar energy systems developed?
2)Do these thresholds take into account local governments that
may have unique local circumstances and variations in
permitting processes?
3)Is a one-size-fits-all approach to permitting costs the right
mechanism for encouraging the 'bad actor' jurisdictions to
lower their permitting costs? Does a one-size-fits-all
approach create complexities for those jurisdictions that are
'good actors' and are helping to promote and encourage
installation of solar energy systems?
4)What state guidelines and model ordinances should cities and
counties use to help them streamline their processes for
permitting? Have local agencies been involved in the
development of those guidelines and model ordinances? As
guidelines and model ordinances become more readily available,
will that help local governments create better processes that
result in lower permitting fees?
5)Are the requirements for a written finding and an adopted
resolution or ordinance necessary, given the provisions of the
existing Mitigation Fee Act?
A similar bill, AB 1801 (Campos), was heard by the Assembly
Local Government Committee on May 2, 2012. AB 1801 limits the
total amount of fees charged by a city or county for an
applicant to install a solar energy system to the 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. The main difference between AB 1801 and this bill is
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that AB 1801 does not contain any caps on permitting costs, and
instead, focuses on the costs borne by the city or county to
issue the permit. AB 1801 is currently pending before the
Governor.
The Legislature may wish to consider the differences in approach
taken by AB 1801 and
SB 1222 with respect to the mandates and prohibitions placed on
local agencies.
Proposition 26 (2010) amended Article XIII C of the California
Constitution to broaden the definition of what constitutes a tax
to include many payments previously considered fees or charges.
The language of Proposition 26 lists seven exceptions to what
constitutes a local tax, including three that are relevant to
this bill. Article XIII C excludes from the new definition of
"tax":
1)A charge imposed for a specific benefit conferred or privilege
granted directly to the payer 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;
2)A charge imposed for a specific government service or product
provided directly to the payer that is not provided to those
not charged, and which does not exceed the reasonable costs to
the local government of providing the service or product; and,
3)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 orders, and the administrative
enforcement and adjudication thereof.
Proposition 26 also added the following language regarding the
burden of proof:
"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 not more than
necessary to cover the reasonable costs of 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
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burdens on, or benefits received from the governmental
activity."
The Legislature may wish to consider whether existing law,
especially in light of Proposition 26, already prohibits local
governments from charging excessive amounts of permitting or
building fees, making legal action to enforce the terms of
Proposition 26 as they relate to unreasonable fees the more
appropriate course of action.
Support arguments: Sierra Club argues that there are major
disparities in the fees charged by local governments, as
evidenced by multiple studies that Sierra Club has undertaken
since 2005. Sierra Club believes that there is a need for the
Legislature to address this inconsistency in permit fees in
order to achieve price parity with grid electricity.
Opposition arguments: The California Municipal Utilities
Association argues that this bill "is duplicative of existing
local permitting processes?.and creates yet another process
requiring 'substantial evidence' and action through local
ordinances in justifying permit fees above a cap."
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0005125