BILL ANALYSIS                                                                                                                                                                                                    

                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

          |Bill No:  |AB 402                           |Hearing    | 6/24/15 |
          |          |                                 |Date:      |         |
          |Author:   |Dodd                             |Tax Levy:  |No       |
          |Version:  |6/16/15                          |Fiscal:    |No       |
          |Consultant|Favorini-Csorba                                       |
          |:         |                                                      |

                           LOCAL AGENCY SERVICES: CONTRACTS

          Establishes a pilot program to allow local agency formation  
          commissions in Napa and San Bernardino counties to authorize  
          extensions of service to areas outside of a local agency's  
          sphere of influence to support existing or planned uses. 

           Background and Existing Law

           The Planning and Zoning Law requires every county and city to  
          adopt a general plan that sets out planned uses for all of the  
          area covered by the plan.  Cities' and counties' major land use  
          decisions-including development permitting-must be consistent  
          with their general plans.  In this way, the general plan is a  
          blueprint for future development.  The general plan must cover  
          all of the area within a city or county's boundaries and can  
          include areas outside of the agency's boundaries that, in the  
          judgment of local planners, relate to the planning effort.  This  
          can include planning development in areas that may become the  
          future boundaries of the agency.  Local agencies may also adopt  
          specific plans that provide for the systematic implementation of  
          a general plan in a particular area.

          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).  Each county has a LAFCO, which  


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          is governed by a board of elected officials-including city  
          council members and county supervisors-and at least one member  
          of the public appointed by the other members.  About half of  
          LAFCO boards have representatives from special districts. 

          Controlling boundaries means LAFCOs control the timing and  
          location of development, because they determine the type of  
          services that are available to support development-and those  
          that aren't.  The Legislature created LAFCOs to discourage urban  
          sprawl, preserve open space and prime agricultural lands,  
          encourage the orderly formation and development of local  
          agencies, and to ensure the efficient provision of government  
          services.  LAFCOs must adopt written policies to further these  

          LAFCOs also implement these goals by determining a "sphere of  
          influence" for each local agency in its county.  A sphere of  
          influence designates an agency's probable future physical  
          boundary and service area.  It is territory that a city or  
          special district will annex in the future. It's also the area  
          where the local government will build facilities and deliver  
          services sometime in the future.  Importantly, an agency's  
          sphere must be contiguous with its current boundaries, and  
          LAFCOs may recommend boundary changes based on spheres of  
          influence.  LAFCOs must consider these factors when determining  
          spheres of influence:
                 Present and planned land uses; 
                 Present and probable need for public facilities and  
                 Present and probable future capacity of public  
               facilities and services; and
                 Existence of any social or economic communities of  
               interest, if relevant.

          Before a commission revises cities and special districts'  
          spheres of influence, a municipal service review (MSR) must be  
          prepared. In conducting an MSR, LAFCOs must review all of the  
          agencies that provide the public services within the study area.  
          LAFCOs must revise the spheres of influence every five years.   
          LAFCOs must also revise the MSRs every five years - some time  
          before revising a sphere of influence.

          The Act also requires cities and districts to get a LAFCO's  
          written approval before they can serve territory outside their  


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          boundaries.  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.  However, the  
          Legislature recognized the need to accommodate unexpected local  
          conditions and several exemptions were established.  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. 

          When a city or special district requests to extend services  
          outside of its boundaries, the LAFCO must follow certain  
          procedures and deadlines to determine whether the application is  
          complete and then approve, disapprove, or conditionally approve  
          the extension of service.

          Some local officials want to expand the range of circumstances  
          under which they can extend services outside of their agencies'  
          spheres of influence.

           Proposed Law

           AB 402 establishes a pilot program that allows the Napa and San  
          Bernardino LAFCOs to authorize a city or special district to  
          extend services outside its sphere of influence to support  
          existing or planned uses, if that extension is consistent with  
          the LAFCOs policies (such as those that encourage orderly  
          development).  The bill defines "planned use" to mean any  
          project that is included in a local agency's specific plan.   
          This pilot program sunsets on January 1, 2021.  

          Under AB 402, in order to approve an extension of service to an  
          area outside of a local agency's sphere of influence, the LAFCO  
          must find that: 
                 A municipal service review has identified and evaluated  
               a services deficiency or the proposed extension of  
                 The extension of service will not result in adverse  
               impacts on open space or agricultural lands or have growth  
               inducing impacts; and
                 A later change of organization involving the subject  
               territory and its affected agency is not feasible under  
               this division or desirable based on the adopted policies of  


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               the commission.

          AB 402 requires the Commission, when reviewing a request to  
          extend services outside of a local agency's sphere of influence,  
          to follow the same process for ensuring completion of the  
          application and deadlines as apply to other requests to extend  

          AB 402 requires the Napa and San Bernardino LAFCOs to submit a  
          report to the Legislature on their participation in the pilot  
          program that includes the number of requests were received under  
          the program and the actions that the LAFCOs took.

          AB 402 also makes technical changes to the existing code  
          sections that govern extension of services.

           State Revenue Impact

           No estimate.


           1.  Purpose of the bill  .  AB 402 provides 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.  Under current law, an agency's  
          sphere must be extended to contiguous territory.  Thus, if an  
          agency wants to serve an area outside its sphere for purposes  
          other than health and safety, its sphere must be extended all  
          the way to that area.  This can lead to illogical and  
          inefficient development patterns if a city wants to serve an  
          existing development. For example,  Whetstone winery in Napa is  
          an existing development that 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, potentially allowing future development in  
          all of the territory between the city's current sphere and the  


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          winery.  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  
          the unincorporated area.

          2.  Sphere of impotence  .  AB 402 cuts two ways when it comes to  
          the intent of the Cortese-Knox-Hertzberg Act to promote orderly  
          development and efficient service delivery.  While allowing  
          extensions of service to existing uses might avoid some sprawl,  
          the inclusion of planned uses  in AB 402 undermines a key tool  
          for LAFCOs-the sphere of influence.  Since spheres of influence  
          are supposed to take into account the planned uses within an  
          area, extending service to an area outside an agency's sphere of  
          influence means that at some previous point, the LAFCO should  
          have considered and rejected an action to include that area in  
          the local agency's sphere.  Thus, allowing extensions of service  
          to areas outside a sphere of influence for a planned use could  
          render the established spheres meaningless.  In addition, some  
          local officials that sit on a LAFCO's board also control updates  
          to the general and specific plans.  This leaves open the  
          potential for a planned use to be designated for a given area,  
          which could then receive a service extension under AB 402.  In  
          this way, AB 402 might enable "leapfrog development" in remote  
          areas that would not otherwise be supported.  In order to  
          protect the intent of the Act, the Committee may wish to  
          consider amending AB 402 to remove "planned use" as a basis for  
          extending service.

          3.  Let's get specific  .  AB 402 does not specify a date by which  
          the report on the pilot program must be completed.  The  
          Committee may wish to consider amending AB 402 to require the  
          report to be submitted by January 1, 2020 to allow the  
          Legislature time to evaluate the effects of the pilot program  
          before considering whether to extend or discontinue it.

          4.  Let's be clear  . Two sections of AB 402 are unclear. The  
          Committee may wish to consider the following amendments to  
          clarify that:
                 The extension of service will not result in either (1)  
               adverse impacts on open space or agricultural lands, or (2)  
               growth inducing impacts.  As written, there is some  
               ambiguity as to whether a LAFCO could find that an  


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               extension of service will not meet one of those conditions  
               while remaining silent on the other.

                 A sphere of influence change involving the territory is  
               not feasible (instead of a later change of organization, as  
               written).  Because changes of organizations must follow a  
               sphere of influence change, under AB 402 a change of  
               organization would never be feasible when an agency  
               requests to extend service outside of its sphere, making  
               the finding redundant.

          5.  Special legislation  . The California Constitution prohibits  
          special legislation when a general law can apply (Article IV,  
          16).  AB 402 contains findings and declarations stating that a  
          general law cannot be made because of the unique circumstances  
          in Napa County and San Bernardino County.  
          6.  Related legislation  . SB 1498 (Emmerson, 2012) would have  
          given LAFCOs in counties statewide authority similar to the  
          authority that AB 402 gives to Napa and San Bernardino counties.  
           It also would have repealed a prohibition on annexations where  
          a disadvantaged, unincorporated community is contiguous to the  
          proposed annexation.  SB 1498 was never heard in the Senate  
          Governance and Finance Committee.  

          Earlier this year, the Senate Governance & Finance Committee  
          voted 5-2 to approve SB 239 (Hertzberg, 2015), which would  
          require a public agency to obtain a LAFCO's approval to provide  
          new or extended services under a fire protection reorganization  
          contract, pursuant to a specified approval process.  Because AB  
          402 and SB 239 amend the same code sections in different ways,  
          if both bills are signed into law the changes made by the bill  
          that is chaptered first will get wiped out by the changes made  
          by the bill that is chaptered last.  To prevent one bill from  
          "chaptering-out" the other, the Committee may wish to consider  
          adopting technical "double-jointing" amendments that allow both  
          bill's provisions to become law regardless of the order in which  
          they are chaptered.

          7.  Technical amendment  . The Committee may wish to consider a  
          technical amendment to correct a cross-reference for the  
          definition of "local publicly owned electric utility."  The bill  
          references Section 9604 of the Public Utilities Code, but  
          Chapter 558, Statutes of 2008 amended the Public Utilities Code  


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          and moved the definition to Section 224.3.  

           Assembly Actions

           Assembly Local Government Committee:              6-3
          Assembly Floor:                                   54-23


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          Support and  
          Opposition   (6/18/15)

           Support  :  Napa County LAFCO; Napa County Board of Supervisors;  
          San Bernardino LAFCO. 
           Oppose Unless Amended:   California Building Industry  
          Association; California Farm Bureau Federation.

           Opposition  :  California Farm Bureau Federation; Napa County Farm  
          Bureau; California Building Industry Association. 

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