SB 17 Senate Bill - Bill Analysis

BILL ANALYSIS Ó

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| SENATE COMMITTEE ON NATURAL RESOURCES AND WATER |
| Senator Fran Pavley, Chair |
| 2013-2014 Regular Session |
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BILL NO: SB 17 HEARING DATE: April 9, 2013
AUTHOR: Gaines URGENCY: No
VERSION: As Introduced CONSULTANT: Bill Craven
DUAL REFERRAL: No FISCAL: Yes
SUBJECT: State responsibility areas: fire prevention fees.

BACKGROUND AND EXISTING LAW
1. In 2011, AB X1 29 directed the California Board of Forestry
and Fire Protection (Board) to assess a fee on structures in
state responsibility areas (SRA) for the purpose of helping
defray the enhanced costs of fire suppression in wildland and
watershed areas that, over the years, became increasingly
populated and developed. From 2000-2010, for example, the number
of houses in SRA grew by 16% according to census numbers.

2. State responsibility areas are those areas of the state
designated by the Board of Forestry where the State of
California is financially responsible for the prevention and
suppression of wildfires. SRA does not include lands within city
boundaries or in federal ownership. The Board has on its website
a "viewer" that can identify whether a parcel is or is not
within a state responsibility area. SRA lands have important
watershed values for the entire state. On the other hand,
structural fire suppression is supposedly handled by local
agencies or by reimbursing the California Department of Forestry
and Fire Protection (CDF) for its costs associated with
structural fire suppression. There are numerous agreements and
contractual arrangements that exist among fire agencies across
the state.

3. In a rulemaking procedure, the Board established a rate of
$150 per habitable structure, which is defined as a building
that can be occupied for residential use. Owners of habitable
structures who are also within the boundaries of a local fire
protection agency will receive a reduction of $35 per habitable
structure. The fee will be paid by approximately 800,000
landowners who own structures in state responsibility areas.
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4. According to the findings and declarations in AB X1 29 as
well as the regulations adopted by the Board, this fee will fund
a variety of important fire prevention services within the SRA
including defensible space inspections around structures,
fuelbreaks for staging firefighting equipment, brush clearance
around communities, along roadways and evacuation routes; and
activities to improve forest health to improve resiliency to
wildfires.

5. An appeals process has been established for landowners who
wish to contest the fee. About 87,000 appeals have been filed.

6. CDF has asked the Board of Equalization for a delay in
sending out additional fire fee billing statements while some of
the appeals are resolved. The department has raised $73 million
from the fee and hopes to raise $89 million.

7. Some opponents of the fee contend that the delay was actually
caused by erroneous billings to owners of structures not in SRA,
a claim disputed by the department.

8. The Howard Jarvis Taxpayer Organization has filed suit
against the state alleging that the fire prevention fee is a
tax, not a fee.

PROPOSED LAW
This bill would repeal the statutes adopted pursuant to AB X1
29. It does not address any fiscal issues caused by the proposed
repeal.

ARGUMENTS IN SUPPORT
According to the author, "There are serious questions as to
whether the fee is actually a tax and should have been subject
to the two-thirds vote requirement that applies to new taxes."

San Diego County contends that recent budget cuts to CDF
threaten public safety. However, the county argues that the SRA
fees do not result in greater fire protection for the areas that
paid the fee nor does it backfill the direct loss of revenues
for fire protection programs. It argues that communities with
the SRA that are paying the fee are now paying more money for
less service.

Western Growers and Nevada County Board of Supervisors contend
that the SRA fire fee is a tax, imposes financial hardships on
low income residents, and impinges on the abilities of local
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fire districts to raise funds.

Former Senator George Runner, now a member of the Board of
Equalization, remains opposed to the SRA fee. He calls it an
illegal tax. He is concerned the administration has inflated the
revenues that could be generated, that the number of appeals
demonstrates the fee's unpopularity, and that the state could
end up refunding the fees if the Howard Jarvis organization's
lawsuit is successful.

CalTax considers the implementation of the fee "a disaster"
based on what it considers to be erroneous billings and a high
rate of appeals. It also accuses the department of "hiding"
funds and misusing fee revenues for "lavish conferences and
various high-tech gadgets."

ARGUMENTS IN OPPOSITION
None received

COMMENTS
1. The basic reason Legislative Counsel designated AB X1 29 a
fee, not a tax, was because of the findings in that legislation
that declared: (1) that the presence of structures within SRA
can create an increased risk of fire within these regions that
threaten state watershed values which are the reason for the SRA
designation in the first place; (2) The firefighting techniques
used to suppress structural fires are often different than
techniques used to suppress wildland fires, and often more
expensive. One frequently hears from state fire professionals
that the costs of wildland fire suppression increase
dramatically when state engines and crews literally must be
parked in driveways to protect homes that otherwise have
inadequate local fire protection. That legislation also stated
that those who live in SRA receive greater benefits from the
state's fire suppression activities than citizens generally and
that this greater economic benefit should be partially recouped
from them through this fee. All of these statements are included
in the findings of AB X1 29.

2. It is clear that there is a lack of awareness that a portion
of the fee will be returned to local jurisdictions. This is
easiest to demonstrate in contract counties, which are the six
counties paid by CDF to assume its initial attack obligations
for wildland fires in SRA. These counties are Kern, Los
Angeles, Marin, Orange, Santa Barbara, and Ventura. As examples,
Kern is paid nearly $13 million by California pursuant to its
contract which includes about $570,000 from the new fee. Los
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Angeles County receives a total of $15.1 million of which about
$880,000 is from the SRA fee. Ventura County is paid $7.4
million and $721,000 from the SRA fund. The fee revenues that
are returned to these counties are for the activities authorized
by the legislation, including fire prevention activities,
defensible space inspections, and vegetation management
projects.

3. While there is perhaps general agreement there are increased
fire costs attributable to the increased development in SRA, it
has not been easy to devise the appropriate mechanism to assess
a fee. During the Schwarzenegger administration, a proposal to
add a surcharge to all home insurance premiums was rejected at
least in part because it would have been disproportionately paid
by urban homeowners whose houses are not at risk from wildfires
in SRA.

Before that, a uniform parcel fee was adopted by the Legislature
in 2003 but repealed the following year.

4. The Legislature has wrestled with aspects of this issue for
years. The Legislature has increased the defensible space zone
around structures, and adopted more fire-resistant building
standards. Most recently, in SB 1241 (Kehoe), local governments
were directed to address specific fire safety issues in their
housing elements of their general plans.

5. Another avenue of inquiry that has not generated much
traction has been to ask the Board to exclude from SRA those
rural subdivisions that may not be in incorporated areas but
that are nevertheless sufficiently "urban" that they should no
longer be considered SRA. The Board has the legal responsibility
to update the SRA designations every 5 years. While numerous,
modest changes are made from time to time, the Board has never
seriously proposed excluding larger, low-density developments
from SRA which would superficially shift those structural fire
protection costs to the local governments which permitted those
developments.

However, it is not clear the CDF would save much money given the
intertwined contractual arrangements and interagency agreements
that would require CDF involvement in fires in these districts
in any event.

On the other hand, the Legislature may which to clarify,
prospectively, that local governments must provide for fire
suppression, or contract for fire suppression, for new
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developments and housing in SRA that they approve.

6. What has become clear is the current SRA fee statute is
demonstrating that a fee based on the current boundaries of SRA
does have some administrative shortcomings at least until the
fee becomes more familiar to the public. SRA boundaries are
unknown to most homeowners, some of whom have discovered that
their home is in SRA but their neighbor's house is not. This has
made for some awkward moments in explaining this circumstance to
homeowners. Second, homeowners who believe that fire services
are provided by their familiar local agencies are not convinced
that they are receiving any additional services from CDF that is
traceable to the new SRA fee. This latter issue may fade over
time, but it is still a perception in the first couple years of
implementation. It seems reasonable that these two issues should
be addressed by the department and the board through increased
public education and information efforts assuming the SRA fee
remains in effect. Others have complained that the SRA
boundaries do not take into account varying degrees of fire risk
and that the fee will diminish the abilities of local fire
agencies to raise money.

7. The LAO and others have objected to the use of SRA fee
revenues to collect wildfire-related damages which is a practice
that is proposed to be continued in the Governor's pending
budget proposal. The Department of Finance and the Joint
Legislative Audit Committee are investigating the recent
revelations that the department used SRA fire fees to collect
wildfire-related damages.

8. The fiscal implications of this bill are significant,
although not addressed by the bill and not a policy matter for
this committee to consider. However, the loss of fee revenues to
the department would likely necessitate an increase in general
fund revenues to CDF or some other way to replace the lost fee
revenues. This is clearly a large sum of money that would not go
unnoticed in the Senate Appropriations Committee. Two pending
BCPs by CDF are proposing to spend more than $70 million in
several activities to implement the AB X1 29 and SB 1241
(Kehoe).

9. Senator Gaines has two additional bills related to this bill.
One would exempt certain low-income residents from the SRA fee
and the other would exempt those whose structures are also
paying for local fire services, well over 95% of the parcels in
SRA according to CDF.

10. The Howard Jarvis Taxpayers Association filed suit against
California in October, 2012 alleging that the fee is a tax.
Since the Legislature has already determined for itself that the
fee is a fee, and not a tax, the Committee may determine that
the bill is premature until a final determination is made by a
court that the existing statutory scheme is illegal or not.

SUPPORT
Board of Supervisors County of El Dorado
California Association of Realtors
California State Association of Counties
CalTax
Central Coast Forest Association
George Runner
Howard Jarvis Taxpayers Association
Long Valley Fire Protection District
Nevada County
San Diego County
Western Growers

OPPOSITION
None Received