BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:   May 13, 2015


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                              Brian Maienschein, Chair


          AB 402  
          (Dodd) - As Amended May 5, 2015


          SUBJECT:  Local agency services:  contracts.


          SUMMARY:  Expands existing law to allow local agency formation  
          commissions (LAFCOs) to authorize a city or district to extend  
          services outside of boundaries for additional purposes beyond  
          responding to a threat to public health or safety.   
          Specifically, this bill:   


          1)Allows LAFCOs to authorize a city or district to provide new  
            or extended services outside its jurisdictional boundaries and  
            outside its sphere of influence, if consistent with adopted  
            policy, to support existing or planned uses involving public  
            or private properties, subject to approval at a noticed public  
            hearing where LAFCO makes all of the following determinations:


             a)   The extension of service or services deficiency was  
               identified and evaluated in a review of municipal services  
               (MSR) prepared, pursuant to existing law;


             b)   The extension of service will not result in adverse  
               impacts on open space or agricultural lands, or have growth  
               inducing impacts; and,








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             c)   A later change of organization involving the subject  
               territory and its affected agency is not feasible under  
               existing law or desirable based on the adopted policies of  
               LAFCO.  


          2)Provides that existing law, which allows LAFCO to authorize a  
            city or district to provide new or extended services outside  
            it jurisdictional boundary and outside its sphere of influence  
            to respond to an existing or impending threat of public health  
            and safety, must be consistent with adopted policy.  


          3)Makes other technical and conforming changes.  


          EXISTING LAW:   


          1)Establishes the Cortese-Knox-Hertzberg Act (Act), which  
            defines the procedures for the organization and reorganization  
            of cities, counties, and special districts.  


          2)Authorizes a city or district to provide new or extended  
            services by contract or agreement outside its jurisdictional  
            boundaries, if it requests and receives written approval from  
            the LAFCO in the affected county.  


          3)Allows a LAFCO to authorize a city or district to provide new  
            or extended services outside its boundaries, but within its  
            sphere of influence in anticipation of a later change of  
            organization.  


          4)Allows a LAFCO to authorize a city or district to provide new  








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            or extended services outside its boundaries and outside its  
            sphere of influence to respond to an existing or impending  
            threat to the public health or safety of the residents of the  
            affected territory, if both of the following requirements are  
            met:


             a)   The entity applying for the contract has provided LAFCO  
               with documentation of a threat to the health and safety of  
               the public or the affected residents; and,


             b)   The LAFCO has notified any alternate service providers,  
               including any water corporation or sewer system corporation  
               that has filed a map and statement of service capabilities  
               with the LAFCO.  


          5)Establishes requirements and a timeframe for an executive  
            officer upon receipt of a request for approval by a city or  
            district of a contract to extend services outside boundaries.   
            Requires, upon receipt of a complete request, the request to  
            be placed on the agenda or a LAFCO meeting, unless the LAFCO  
            has delegated the approval of requests to the executive  
            commissioner.  


          6)Requires the LAFCO or executive officer to approve,  
            disapprove, or approve with conditions the contract for  
            extended services.  Allows an applicant, if a contract is  
            disapproved or approved with conditions, to request  
            reconsideration and cite the reasons why.  


          7)Provides exemptions to the requirement in existing law for the  
            following contracts or agreements:


             a)   Contracts or agreements solely involving two or more  








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               public agencies where the public service is an alternative  
               or substitute for public services already being provided by  
               an existing public services provided, and there the level  
               of service will be consistent with the level of service by  
               the existing provider;


             b)   Contracts for the transfer of nonpotable or nontreated  
               water;


             c)   Contracts or agreements solely involving the provision  
               of surplus water to agricultural lands and facilities, as  
               specified;


             d)   Extended service that a city or district was providing  
               on or before January 1, 2001; and,


             e)   Local publicly owned electric utility, as defined,  
               providing electric services that do not involve the  
               acquisition, construction or installation of electric  
               distribution facilities by the local publicly owned  
               electric utility, outside of the utility's jurisdictional  
               boundaries.  


          FISCAL EFFECT:  None


          COMMENTS:  


          1)Current Law.  The Cortese-Knox-Hertzberg Local Government  
            Reorganization Act (Act) delegates the Legislature's power to  
            control the boundaries of cities and special districts to  
            local agency formation commissions (LAFCOs).  The Legislature  
            created LAFCOs to discourage urban sprawl, preserve open space  








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            and prime agricultural lands, encourage the orderly formation  
            and development of local agencies, and to ensure the efficient  
            provision 


          of government services.  
            The Act requires that cities and districts must get a LAFCO's  
            written approval before they can serve territory outside their  
            boundaries pursuant to AB 1335 (Gotch), Chapter 1307, Statutes  
            of 1993.  This requirement was established because of a  
            concern that some cities and 


            districts might be circumventing LAFCO review by signing  
            contracts to provide services outside their boundaries without  
            annexing the territory.  AB 1335, however, recognized the need  
            to accommodate unexpected local conditions and several  
            exemptions were established.  LAFCO approval is not required  
            for contracts or agreements solely involving two or more  
            public agencies where the public service to be provided is an  
            alternative to, or substitute for, public services already  
            being provided by an existing public service provider and  
            where the level of service to be provided is consistent with  
            the level of service contemplated by the exiting service  
            provider.  In 1999, the Legislature expanded these provisions  
            to allow services outside spheres of influence to correct  
            public health and safety problems, pointing to failing septic  
            tanks and water wells to exemplify the necessity for the  
            change.  
          2)Bill Summary.  This bill further expands the provisions of law  
            which allow service extensions outside sphere of influences  
            and jurisdictional boundaries, beyond health and safety  
            issues.  Under this bill, LAFCOs may authorize, if consistent  
            with their adopted policies, a city or district to extend  
            services to support existing or planned uses involving public  
            or private properties, if the approval is done at a noticed  
            public hearing where LAFCO makes specified determinations.   
            The determinations must include: 1) The extension of service  
            or service deficiency was identified and evaluated in an MSR;  








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            2) The extension of service will not result in adverse impacts  
            on open space or agricultural lands, or have growth inducing  
            impacts; and, 3) A later change of organization involving the  
            subject territory and its affected agency is not feasible, or  
            desirable based on the adopted policies of the LAFCO.    


            This bill is author-sponsored.  


          3)Author's Statement.  According to the author, "There are  
            instances when existing or approved developments lie outside a  
            sphere of influence of a municipal service provider, and that  
            are in need of those municipal services.  For example, the  
            ABAG Regional Housing Needs Allocation (RHNA) process may  
            require the location of affordable housing outside the City of  
            Napa's sphere of influence.  Unfortunately, current law will  
            not permit municipal services to be extended outside the  
            service provider's sphere of influence unless a city or  
            district receives written approval from the LAFCO in the  
            affected county pursuant to a very limited set of special  
            circumstances.  


            "An additional example would be Whetstone winery in Napa. This  
            existing development lies adjacent to a city water line and is  
            outside of the city's sphere of influence in an unincorporated  
            area surrounded by agricultural lands. When the property owner  
            submitted the application for water service to be extended to  
            this property to allow for a fire hydrant to be serviced, the  
            extension was denied because this was not a residential  
            property and the health and safety exemption in [current law]  
            could not be applied. The only means to extend water to this  
            property would be to annex it into the city's sphere of  
            influence. With a city water line running adjacent to the  
            property, allowing Whetstone an exemption to access this city  
            water rather than annexing the property into the city's sphere  
            of influence would be a greater protection to the surrounding  
            agricultural lands than extending the sphere of influence into  








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            the unincorporated area."  


          4)Policy Considerations.  Proposed changes to the laws governing  
            outside service extensions have been debated among LAFCOs for  
            many years and have largely divided practitioners.  On one  
            hand, some LAFCOs can provide examples where outside service  
            extensions seem to 



          be the only option because of local geography, politics, and  
            other circumstances, so more flexibility is appealing.  On the  
            other hand, some LAFCOs feel that an expansion to this  
            provision of law is fundamentally against the core purpose and  
            mission of LAFCOs and could impact agricultural lands or have  
            growth inducing effects.   
             a)   Identified Solution Doesn't Match Identified Problem.   
               In support of the bill, Napa County argues that extending  
               services outside spheres of influence may prevent  
               unnecessary annexation of territory that might lead to  
               unintentional sprawl.  The examples raised in Napa County  
               are unique in the sense that wineries on commercially zoned  
               parcels have service needs for commercial purposes and are  
               largely surrounded by agricultural land.  In these  
               instances annexation of territory has implications not only  
               on the efficiency of services, potential growth and  
               development, but also has financial impacts, due to sales  
               taxes or transient occupancy taxes that may be collected in  
               these territories.  The Committee may wish to consider,  
               given these factors, if it is appropriate to use the issues  
               identified in Napa County to craft statewide policy that  
               may have very different impacts in other counties.   
               Additionally, the Committee may wish to consider asking the  
               author to narrow the scope of the bill to more specifically  
               address some of the examples raised.  


             b)   Growth Inducing?  In opposition to this bill, the  








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               California Farm Bureau Federation argues that this bill  
               will have a severely negative impact on farmland  
               conservation efforts by encouraging leap-frog commercial  
               and residential development.  


             c)   Terminology.  The Committee may wish to ask the author  
               to strike out the term "existing or planned use" to be  
               consistent with the author's intent to address service  
               extensions to existing developments.  


               The Committee may wish to consider whether it would be  
               possible for LAFCO to approve an extension of services for  
               a planned use that would not inherently have growth  
               inducing impacts.  The Committee may wish to consider if  
               this bill may lead to costly litigation for LAFCOs if this  
               bill requires substantive changes in LAFCO policies which  
               will influence growth patterns and affect land use, thus  
               leading to potential impacts to the environment that may be  
               subject to CEQA.  


             d)   Impact on Voters.  The Committee may wish to consider if  
               this bill will result in more cities and districts  
               extending services outside their boundaries instead of  
               annexing territory into their boundaries.  If more services  
               are extended outside of boundaries, instead of annexing  
               territory into a district, then voters within that  
               territory cannot vote in the elections that directly impact  
               the service they are receiving.  


          5)Related Legislation.  This bill is substantially similar to SB  
            1498 (Emmerson) of 2012, which was never heard in the Senate  
            Governance and Finance Committee.  


          6)Arguments in Support.  Napa County argues that this bill seeks  








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            to provide LAFCOs with more flexibility to approve service  
            extensions outside of a sphere of influence without requiring  
            annexation of territories that might lead to unintended  
            sprawl.  


          7)Arguments in Opposition.  The California Farm Bureau  
            Federation argues, "Unfortunately, extending urban services  
            outside of cities' spheres of influence would have a severe  
            negative impact on farmland conservation efforts by  
            encouraging leap-frog commercial and residential development."


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Napa County Board of Supervisors


          San Bernardino Local Agency Formation Commission (if amended)




          Opposition


          California Farm Bureau Federation (unless amended)




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









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