BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 692
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          SENATE THIRD READING
          SB 692 (Hancock)
          As Amended  April 23, 2013
          Majority vote 

           SENATE VOTE  :37-0  
           
           LOCAL GOVERNMENT    9-0                                         
           
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          |Ayes:|Achadjian, Levine, Alejo, |     |                          |
          |     |Bradford, Gordon,         |     |                          |
          |     |Melendez, Mullin, Rendon, |     |                          |
          |     |Waldron                   |     |                          |
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           SUMMARY  :  Expands powers of local agencies to use the Mello-Roos  
          Community Facilities Act of 1992 and the Marks-Roos Local Bond  
          Pooling Act of 1985.  Specifically,  this bill  :    

          1)Authorizes pursuant to the Mello-Roos Community Facilities Act  
            (Mello-Roos), a community facilities district (CFD) to finance  
            the maintenance and operation of any real property or other  
            tangible property with an estimated useful life of five or  
            more years that is owned by the local agency or by another  
            local agency through an agreement, as specified.

          2)Defines "maintenance" to include "replacement, and the  
            creation and funding of a reserve fund to pay for a  
            replacement."  

          3)Authorizes a joint powers authority (JPA) to lease lands,  
            structures, real or personal property, rights, rights-of way,  
            franchises, easements, and other interests in lands that are  
            located within the state that the JPA determines is necessary  
            or convenient in order to finance a public capital improvement  
            pursuant to the Marks-Roos Local Bond Pooling Act  
            (Marks-Roos).  

          4)Authorizes the local agency by written consent and the  
            unanimous approval of affected parcel owners to eliminate  
            types of facilities and services in a CFD that initially  
            consists solely of territory proposed for annexation to the  
            CFD in the future, as authorized by current law.  States that  








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            no additional hearing or procedures are required.  Requires  
            the unanimous approval to contain specified provisions if the  
            unanimous approval relates to the reduction of a special tax  
            rate and the special tax is being used to retire debt.  

          5)Authorizes a legislative body by ordinance, following the  
            creation of a CFD that includes territory proposed for  
            annexation in the future by unanimous approval as specified,  
            to levy special taxes on parcels that will be annexed to the  
            CFD at the rate to be approved unanimously by parcel owners  
            and for the apportionment and collection of the special taxes  
            in the manner specified in the resolution of formation.  

          6)Authorizes the local agency, in connection with the annexation  
            by unanimous approval to a CFD of a parcel included in  
            territory proposed for annexation in the future to the CFD as  
            specified, to designate parcels as an improvement area within  
            the CFD.  Requires the designation of parcels as an  
            improvement area to be specified and approved with unanimous  
            approval of parcel owners at the time that the parcels are  
            annexed to the CFD.  States that no additional hearings or  
            procedures are required.  Specifies, after the designation of  
            parcels as an improvement area that the following shall only  
            apply to the improvement hearing: 

             a)   All proceedings for approval of the appropriations  
               limit;  

             b)   The rate and method of apportionment and manner of  
               collection of special taxes; and,  

             c)   The authorization to incur bonded indebtedness for the  
               parcel or parcels.  

          7)Provides that a resolution of intention shall not be obligated  
            to specify the conditions under which a special tax obligation  
            may be prepaid and permanently satisfied if the prepayment  
            provision is included in the unanimous approval of the owner  
            of each parcel at the time the parcels are annexed to the CFD.  
             

          8)Provides that provisions in existing law that allow a CFD to  
            finance facilities owned or operated by a public agency other  
            than the agency that created the CFD pursuant to a joint  








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            community facilities agreement or joint exercise of power  
            agreement shall not be construed to limit the ability of a JPA  
            to exercise powers authorized by the Joint Exercise of Powers  
            Act.  

          9)Authorizes a local agency, in connection with the issuance of  
            bonds where a property owner agrees to disclose certain  
            information through the Municipal Securities Rulemaking  
            Board's Electronic Municipal Market Access, to execute and  
            record in the county recorder's office a notice of the owner's  
            disclosure agreement for the purpose of providing a notice to  
            a subsequent transferee.  Requires the owner's written consent  
            to be attached to the notice.  Requires the county recorder's  
            office to accept the notice.  

          10)Provides that a subsequent transferee of the property shall  
            be subject to the disclosure obligation.  Allows the local  
            agency, upon termination of the disclosure obligation, to  
            cause a notice of termination to be recorded with the county  
            recorder's office where the original notice was recorded.   
            Requires the county recorder's office to accept the  
            termination.  

          11)Makes technical and non-substantive changes.  

           FISCAL EFFECT  :   None

           COMMENTS  :  The Mello-Roos Community Facilities Act allows  
          counties, cities, special districts, and school districts to  
          levy special taxes (parcel taxes) to finance a wide variety of  
          public works, including parks, recreation centers, schools,  
          libraries, child care facilities, and utility infrastructure.  A  
          Mello-Roos CFD issues bonds against these special taxes to  
          finance the public works projects.  Mello-Roos is an important  
          feature of the local fiscal landscape, providing local officials  
          with a key tool for accumulating the public capital needed to  
          pay for the public works projects that make new residential  
          development possible.  

          To initiate the formation of a CFD, a local agency's legislative  
          body must adopt a resolution of intention to establish the  
          district, which must do all of the following:  describe the  
          district's boundaries; describe the facilities and services  
          proposed to be financed; state that a special tax, secured by a  








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          lien against real property, will be annually levied; specify, in  
          detail, the rate, method of apportionment, and manner of  
          collections of the special tax; and, fix a time and place for  
          public hearing.  After holding the hearing and considering  
          protests, the legislative body, to establish the CFD, must adopt  
          a resolution of formation containing all of the information  
          provided in the resolution of intention; and, if a special tax  
          is to be levied, include additional information about the tax  
          levy.

          SB 555 (Hancock), Chapter 493, Statutes of 2011, authorized the  
          use of Mello-Roos taxes to help finance renewable energy, water  
          conservation, and energy efficiency improvements on private  
          property.  Supporters of SB 555 sought to simplify the process  
          by which property owners can voluntarily use Mello-Roos  
          financing.  SB 555 authorized a separate procedure for  
          establishing a CFD that initially contains no parcels of land,  
          but consists only of territory from which parcels may  
          subsequently be annexed to the CFD with the unanimous approval  
          of parcel owners.  Under this separate procedure, a resolution  
          of intention to form a CFD does not have to specify the rate or  
          rates of a special tax subject to specified requirements.  

          This bill makes several changes to allow a local agency's  
          legislative body to avoid public hearings or other procedural  
          requirements when using the separate procedure for establishing  
          a CFD with the unanimous approval of parcel owners pursuant to  
          SB 555 (Hancock).  This bill allows facilities and services to  
          be eliminated in a CFD, allows a local agency to designate  
          parcels as an improvement area, and allows a local agency to  
          levy special taxes on parcel that will be annexed to the CFD  
          upon the unanimous approval of affected parcel owners.  This  
          bill is author-sponsored.  

          This bill expands on the types of facilities that a CFD may  
          finance to include the maintenance and operation of any real  
          property or other tangible property with an estimated useful  
          life of five or more years that is owned by the local agency or  
          by another local agency through an agreement, as specified.   
          This bill defines maintenance to also include replacement, and  
          the creation and funding of a reserve fund to pay for a  
          replacement.  Current law authorizes a CFD to issue bonds to  
          provide for the planning, design, purchase, construction,  
          expansion or rehabilitation of any real or other tangible  








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          property with an estimated useful life of at least five years.   
          The Legislature may wish to consider if it is appropriate to add  
          maintenance and operation to the extensive list in current law  
          that a CFD can finance when it may be more appropriate to use  
          existing funds for these purposes.  

          The Marks-Roos Act authorizes two or more public agencies to  
          exercise their common powers by signing joint powers agreements.  
           This agreement can create a JPA which allows local agencies to  
          use JPAs to finance infrastructure.  The Marks-Roos Act  
          authorizes JPAs to issue bonds and loan the capital to local  
          agencies to finance public capital improvements, working  
          capital, liability, insurance needs, or other projects.  Bonds  
          issued under Marks-Roos are secured by a variety of repayment  
          sources, including lease agreements.  For example, a JPA can  
          issue a Marks-Roos bond and loan proceeds under lease  
          agreements.  JPAs may lease the public capital improvements  
          being financed to a local agency, and charge and collect rent as  
          repayment of Marks-Roos bonds.  

          This bill allows JPAs to lease lands, structures, and real or  
          personal property that they deem necessary or convenient for the  
          financing of public capital improvements.  Current law allows  
          JPAs to take title to or sell these types of interests.  The  
          Legislature may wish to ask the author why JPAs need to be  
          granted additional authority to lease land or real property and  
          to provide examples as to why existing powers are not  
          sufficient.  

          The provision in this bill amending the Marks-Roos Act is in  
          conflict with AB 850 (Nazarian) of the current legislative  
          session.  The author may wish to consider chaptering-out  
          amendments to resolve the conflict.  

          Support arguments:  Supporters argue that this bill makes  
          clarifications to existing law that governs the use of CFDs to  
          finance energy efficiency and water conservation projects.  

          Opposition arguments:  Opposition could argue that this measure  
          adds operations and maintenance to the laundry list of services  
          that can be financed by Mello-Roos and that special taxes should  
          not pay for these new services and that funding for regular  
          maintenance programs should come out of existing funds.  









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          Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916)  
          319-3958 


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