Amended in Senate June 30, 2015

Amended in Senate June 17, 2015

Amended in Senate June 15, 2015

Amended in Assembly May 7, 2015

Amended in Assembly April 13, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 851

Introduced by Assembly Member Mayes

(Coauthor: Assembly Member Cooley)

(Coauthors: Senators Beall, Huff, and Moorlach)

February 26, 2015

An act to amend Sections 50077, 56658, 56885.5, 56886, and 57405 of, to add Sections begin insert 56045.5, end insert 56653.1, 56770, 56804, 56813, 56814, 56816, and 57426 to, and to repeal Sections 57401, 57402, 57404, 57409, 57410, 57416, 57423, and 57424 of, the Government Code, and to amend Section 99 of the Revenue and Taxation Code, relating to local government.

LEGISLATIVE COUNSEL’S DIGEST

AB 851, as amended, Mayes. Local government: organization: disincorporations.

(1) Existing law specifies a procedure for the legislative body of a city, county, or district to propose to the voters an ordinance or resolution to adopt a special tax pursuant to constitutional requirements. Existing law authorizes a local agency which is conducting proceedings for the incorporation of a city, formation of a district, change of organization, a reorganization, a change of organization of a city, or a municipal reorganization to propose the adoption of a special tax on behalf of the affected city or district in accordance with this procedure.

This bill would additionally authorize a local agency conducting proceedings for the disincorporation of a city to propose the adoption of a special tax on behalf of an affected city in accordance with the above-described procedure.

(2) Existing law, the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, provides the authority and procedures for the initiation, conduct, and completion of changes of organization and reorganization of cities and districts. The act requires a local agency or school district that initiates proceedings for a change of local government organization or reorganization, by submitting a resolution of application to a local agency formation commission, to also submit a plan for providing services within the affected territory, as specified.

This bill would, in the case of a disincorporation or reorganization that includes a disincorporation, require the plan for services to include specific provisions, including, among others, an enumeration and description of the services currently provided by the city proposed for disincorporation.

(3) The act requires a petitioner or legislative body desiring to initiate proceedings to submit an application to the executive officer of the local agency formation commission, and requires the local agency formation commission, with regard to an application that includes an incorporation, to immediately notify all affected local agencies and any applicable state agency, as specified.

This bill would extend that requirement to an application that includes a disincorporation.

(4) Existing law prohibits the commission from approving or conditionally approving a proposal for an incorporation unless the commission finds, among other things, that the proposal is consistent with the intent of the act, the incorporation is consistent with the spheres of influence of affected local agencies, and the proposed city is expected to receive revenues sufficient to provide public services and facilities and a reasonable reserve during the 3 fiscal years following incorporation.

This bill would additionally prohibit the commission from approving or conditionally approving a proposal that includes a disincorporation unless the commission finds, among other things, that the disincorporation is consistent with the intent of the act, the disincorporation will address necessary changes to spheres of influence of affected agencies, and the service responsibilities of the city proposed for disincorporation have been assigned, as specified.

(5) Existing law requires the executive officer of the commission to prepare a comprehensive fiscal analysis for any proposal that includes an incorporation, as specified.

This bill would additionally require the executive officer to prepare a comprehensive fiscal analysis for any proposal that includes a disincorporation, as specified.

(6) Existing law requires the commission to determine the amount of property tax revenue to be exchanged by the affected local agency for a proposal that includes the incorporation of a city, and sets forth the procedures to be followed in making that determination.

This bill would additionally require the commission to determine the amount of property tax revenue to be exchanged by the affected city and any successor or affected local agency for a proposal that includes a disincorporation of a city, and would set forth the procedures to be followed in making that determination.

The bill would additionally require the commission to determine, where the proposal includes the disincorporation of a city with the assignment of property tax revenues to a successor, the increase of the appropriations limit for a successor, if the successor is an existing entity, or the appropriations limit for a new special district, as specified.

The bill would state the intent of the Legislature that a proposal that includes a disincorporation of a city result in a determination that the debt or contractual obligations and responsibilities of the city being disincorporated be the responsibility of the same territory for repayment. The bill would require the city being disincorporated to provide a written statement prior to issuance of a certificate for filing for a proposal that includes a disincorporation that includes specified information relating to its debts and contractual obligations.

(7) Existing law authorizes the commission, in approving a disincorporation of a city, the dissolution of a district, or the reorganization or consolidation of agencies that result in the dissolution of one or more districts or disincorporation of one or more cities, to make the approval conditional upon the agency being dissolved not approving any increase in compensation or benefits for specified officers of the agency, or appropriating, encumbering, expending, or otherwise obligating any revenue of the agency beyond that provided in the current budget at the time the dissolution is approved by the commission, unless it first finds that an emergency exists.

This bill would modify this provision to authorize the commission to make the approval conditional upon prohibiting the district that is being dissolved or the city that is being disincorporated from approving any increase in compensation or benefits for specified officers of the agency, or appropriating, encumbering, expending, or otherwise obligating any revenue of the agency beyond that provided in the current budget at the time the dissolution is approved by the commission, unless it first finds that an emergency exists.

The act also authorizes the commission to require a single question appearing on the ballot upon issues of annexation and reorganization in any election at which the questions of annexation and district reorganization or incorporation and district reorganization are to be considered at the same time.

This bill would additionally apply these provisions to a disincorporation and district reorganization.

(8) Existing law provides that an organization or reorganization may provide for, or be made subject to, specified terms and conditions, including the levying of assessments, including certain fees, or the approval by the voters of general or special taxes. Under existing law, these terms and conditions may not directly regulate land use, property development, or subdivision requirements, and the imposition of such a fee as a condition of the issuance of a building permit does not constitute a direct regulation of land use, property development, or subdivision requirements.

This bill would expand the scope of terms and conditions that may be provided for or required as a condition of an organization or reorganization to include the levying of fees generally. The bill would also make technical, nonsubstantive changes to this provision.

(9) Existing law requires every public officer of a city being disincorporated, prior to the effective date of the disincorporation, to turn the public property in his or her possession over to the board of supervisors.

This bill would repeal this provision.

(10) The act requires the commission, after ascertaining that the disincorporation has carried, to determine and certify in a written statement to the board of supervisors the indebtedness of the city, the amount of money in its treasury, and the amount of any tax levy or other obligation due the city that is unpaid or has not been collected.

This bill would repeal this provision.

(11) Existing law requires the board of supervisors to make specified determinations if the commission does not provide the board with a statement of those determinations.

This bill would repeal this provision.

(12) Existing law requires the tax collector to collect any tax that has been levied by a disincorporated city that remains uncollected when due and pay it into the county treasury.

This bill would provide that the tax collected and paid into the county treasury is on behalf of the designated successor or county to wind up affairs of the disincorporated city.

(13) Existing law requires the board of supervisors of a county to cause taxes to be levied and collected from within the territory formerly included within a disincorporated city, if there is not sufficient money in the treasury of a disincorporated city to the credit of the special fund to pay any city indebtedness as it becomes due. Existing law provides that any taxes levied pursuant to this provision are to be assessed, levied, and collected in the same manner and at the same time as other county taxes, and are additional taxes upon the property included within the territory of the disincorporated city.

This bill would repeal these provisions.

(14) Existing law requires the board of supervisors to levy a special tax upon all property within the disincorporated city if the revenues from specified public utilities are not sufficient for the administration, conduct, or improvement of the public utility.

This bill would repeal this provision.

(15) Existing law requires the board of supervisors to annually, at the time other county taxes are levied and collected, to levy and collect a special tax on the remainder of the territory of a disincorporated city sufficient to pay the balance of the debt, and pay that sum to the city treasurer. Existing law requires the city treasurer to pay the bonded indebtedness as it becomes due with the proceeds of those taxes.

This bill would repeal these provisions.

(16) Existing law provides that on and after the effective date of a disincorporation, the territory of the disincorporated city, all inhabitants within the territory, and all persons formerly entitled to vote by reason of residing within the territory cease to be subject to the jurisdiction of the disincorporated city and have none of the rights or duties of inhabitants or voters of a city.

This bill would additionally provide that as of the effective date of a disincorporation, the general plan of the disincorporated city that was in effect immediately prior to the effective date of the disincorporation constitutes the community plan of the county for the territory of the disincorporated city, the zoning ordinances of the disincorporated city that were in effect immediately prior to the effective date of the disincorporation constitute the zoning ordinances of the county for that territory, and any conditional use permit or legal nonconforming use that was in place immediately prior to the effective date of the disincorporation remains in force pursuant to the community plan and zoning ordinances. The bill would provide that any use of land that was authorized under the general plan and zoning ordinances immediately prior to the effective date of the disincorporation continues to be authorized for as long a period as may be required by the California Constitution or the United States Constitution.

(17) Existing law requires a county auditor to adjust the allocation of property tax revenues for local agencies whose service area or service responsibility may be altered by specified jurisdictional changes. Existing law establishes procedures for determining the exchange of property tax revenues between a city and a county in the case of a jurisdictional change that consists of a city’s qualified annexation of unincorporated territory, defined to mean an annexation of unincorporated territory for which an application or resolution was filed on or after January 1, 1998, and on or before January 1, 2015.

This bill would include a city disincorporation and dissolved district in those jurisdictional changes. The bill would also expand the above-described definition of a qualified annexation of unincorporated territory to include an annexation for which an application or resolution was filed on or before January 1, 2021.

By increasing the duties of the county auditor, this bill would impose a state-mandated local program.

(18) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 50077 of the Government Code is
amended to read:

50077.  

(a)  Except as provided in Section 7282 of the Revenue
and Taxation Code, the legislative body of any city, county, or
district may, following notice and public hearing, propose by
ordinance or resolution the adoption of a special tax. The ordinance
or resolution shall include the type of tax and rate of tax to be
levied, the method of collection, and the date upon which an
election shall be held to approve the levy of the tax. The
proposition shall be submitted to the voters of the city, county, or
district, or a portion thereof, and, upon the approval of two-thirds
of the votes cast by voters voting upon the proposition, the city,
county, or district may levy the tax.

(b) The legislative body of a city, or district, may provide for
the collection of the special tax in the same manner and subject to
the same penalty as, or with, other charges and taxes fixed and
collected by the city, or district, or, by agreement with the county,
by the county on behalf of the city, or district. If the special taxes
are collected by the county on behalf of the city, or district, the
county may deduct its reasonable costs incurred for the service
before remittal of the balance to the city.

(c) The legislative body of a local agency which is conducting
proceedings for the incorporation of a city, the formation of a
district, a change of organization, a reorganization, a change of
organization of a city, a municipal reorganization, or the
disincorporation of a city may propose by ordinance or resolution
the adoption of a special tax in accordance with the provisions of
subdivision (a) on behalf of an affected city or district.

(d) As used in this section “district” means an agency of the
state, formed pursuant to general law or special act, for the local
performance of governmental or proprietary functions within
limited boundaries.

begin insert

begin insert SEC. 2. end insert   

end insert

begin insert Section 56045.5 is added to the end insert begin insert Government Code end insert begin insert , to
read: end insert

begin insert

begin insert 56045.5. end insert   

“Indirect cost” has the same meaning as used in
paragraph (2) of subdivision (b) of Section 33338 of the Education
Code.

end insert

begin delete SEC. 2. end delete
begin insert SEC. 3. end insert   

Section 56653.1 is added to the Government Code, to
read:

56653.1.  

In the case of a disincorporation or reorganization
that includes a disincorporation, the plan for services required by
subdivision (a) of Section 56653 shall include the following:

(a) An enumeration and description of the services currently
provided by the city proposed for disincorporation and an
identification begin insert , where applicable, end insert of the entity or entities proposed
to assume responsibility for the services following completion of
disincorporation.

(b) An enumeration and description of each service proposed
to be discontinued or transferred, the current financing of the
service or services, and any method of financing proposed by the
successor.

(c) A delineation of any existing financing of services currently
provided to include, but not be limited to, bonds, assessments,
community facility district governance, general taxes, special taxes,
other charges, and joint powers authorities or agreements.

(d) An indication of any current bankruptcy proceeding,
including, but not limited to, status and exit plan.

(e) An indication of any current order relating to services
provided by the city proposed for disincorporation by any agency,
department, office, or other division of the state, including, but
not limited to, a cease and desist order or water prohibition order.

(f) A written statement from each entity identified pursuant to
subdivision (a) that it has received a copy of the plan for services
submitted pursuant to this section.

(g) Any other information that the executive officer may deem
necessary to evaluate the plan for services submitted.

begin delete SEC. 3. end delete
begin insert SEC. 4. end insert   

Section 56658 of the Government Code is amended
to read:

56658.  

(a) Any petitioner or legislative body desiring to initiate
proceedings shall submit an application to the executive officer of
the principal county.

(b) (1) Immediately after receiving an application and before
issuing a certificate of filing, the executive officer shall give mailed
notice that the application has been received to each affected
agency, the county committee on school district organization, and
each school superintendent whose school district overlies the
affected territory. The notice shall generally describe the proposal
and the affected territory. The executive officer shall not be
required to give notice pursuant to this subdivision if a local agency
has already given notice pursuant to subdivision (c) of Section
56654.

(2) It is the intent of the Legislature that a proposal for
incorporation or disincorporation shall be processed in a timely
manner. With regard to an application that includes an
incorporation or disincorporation, the executive officer shall
immediately notify all affected local agencies and any applicable
state agencies by mail and request the affected agencies to submit
the required data to the commission within a reasonable timeframe
established by the executive officer. Each affected agency shall
respond to the executive officer within 15 days acknowledging
receipt of the request. Each affected local agency and the officers
and departments thereof shall submit the required data to the
executive officer within the timelines established by the executive
officer. Each affected state agency and the officers and departments
thereof shall submit the required data to the executive officer within
the timelines agreed upon by the executive officer and the affected
state departments.

(3) If a special district is, or as a result of a proposal will be,
located in more than one county, the executive officer of the
principal county shall immediately give the executive officer of
each other affected county mailed notice that the application has
been received. The notice shall generally describe the proposal
and the affected territory.

(c) Except when a commission is the lead agency pursuant to
Section 21067 of the Public Resources Code, the executive officer
shall determine within 30 days of receiving an application whether
the application is complete and acceptable for filing or whether
the application is incomplete.

(d) The executive officer shall not accept an application for
filing and issue a certificate of filing for at least 20 days after giving
the mailed notice required by subdivision (b). The executive officer
shall not be required to comply with this subdivision in the case
of an application which meets the requirements of Section 56662
or in the case of an application for which a local agency has already
given notice pursuant to subdivision (c) of Section 56654.

(e) If the appropriate fees have been paid, an application shall
be deemed accepted for filing if no determination has been made
by the executive officer within the 30-day period. An executive
officer shall accept for filing, and file, any application submitted
in the form prescribed by the commission and containing all of
the information and data required pursuant to Section 56652.

(f) When an application is accepted for filing, the executive
officer shall immediately issue a certificate of filing to the
applicant. A certificate of filing shall be in the form prescribed by
the executive officer and shall specify the date upon which the
proposal shall be heard by the commission. From the date of
issuance of a certificate of filing, or the date upon which an
application is deemed to have been accepted, whichever is earlier,
an application shall be deemed filed pursuant to this division.

(g) If an application is determined not to be complete, the
executive officer shall immediately transmit that determination to
the applicant specifying those parts of the application which are
incomplete and the manner in which they can be made complete.

(h) Following the issuance of the certificate of filing, the
executive officer shall proceed to set the proposal for hearing and
give published notice thereof as provided in this part. The date of
the hearing shall be not more than 90 days after issuance of the
certificate of filing or after the application is deemed to have been
accepted, whichever is earlier. Notwithstanding Section 56106,
the date for conducting the hearing, as determined pursuant to this
subdivision, is mandatory.

begin delete SEC. 4. end delete
begin insert SEC. 5. end insert   

Section 56770 is added to the Government Code, to
read:

56770.  

The commission shall not approve or conditionally
approve any proposal that includes a disincorporation, unless,
based on the entire record, the commission makes all of the
following determinations:

(a) The proposed disincorporation is consistent with the intent
of this division to provide for a sustainable system for the delivery
of services.

(b) The commission has considered the service reviews of
municipal services and spheres of influence of the affected local
agencies, and the disincorporation will address the necessary
changes to those spheres of influence, if any.

(c) It has reviewed the comprehensive fiscal analysis prepared
pursuant to Section 56804.

(d) It has reviewed the executive officer’s report and
recommendation prepared pursuant to Section 56665, and the oral
or written testimony presented at its public hearing.

(e) The service responsibilities of the city proposed for
disincorporation have been assigned through terms and conditions
authorized by Sections 56885.5, 56886, and 57302, and Chapter
5 (commencing with Section 57400) of Part 5.

begin delete SEC. 5. end delete
begin insert SEC. 6. end insert   

Section 56804 is added to the Government Code, to
read:

56804.  

For any proposal that includes a disincorporation, the
executive officer shall prepare, or cause to be prepared by contract,
a comprehensive fiscal analysis. This analysis shall become part
of the report required pursuant to Section 56665. Data used for the
analysis shall be from the most recent fiscal year for which data
is available, preceding the issuances of the certificate of filing.
When data requested by the executive officer in the notice to
affected agencies, pursuant to paragraph (2) of subdivision (b) of
Section 56658, is unavailable, the analysis shall document the
source and methodology of the data used. The analysis shall review
and document each of the following:

(a) The direct and indirect costs incurred by the city proposed
for disincorporation for providing public services during the three
fiscal years immediately preceding the submittal of the proposal
for disincorporation.

(b) The direct and indirect costs incurred by the city proposed
for disincorporation for current and proposed capital improvements,
facilities, assets, and infrastructure.

(c) The sources of funding, if any, available to the entities
proposed to assume the obligations of the city proposed for begin delete disincorporation and the related costs, including all actual direct
and indirect costs, in the provision of existing services. end delete
begin insert disincorporation. end insert

begin insert

(d) The anticipated costs, including all actual direct and indirect
costs, to the successor in the provision of services to the area
proposed for disincorporation.

end insert begin delete

(d)

end delete

begin insert (e) end insert  When determining costs, the executive officer shall also
include all direct and indirect costs of any public services that are
proposed to be transferred to state agencies for delivery.

begin delete

(e)

end delete

begin insert (f) end insert  The revenues of the city proposed for disincorporation during
the three fiscal years immediately preceding the initiation of the
disincorporation proposal.

begin delete

(f)

end delete

begin insert (g) end insert  Any other information and analysis needed to make the
findings required by Section 56770.

begin delete SEC. 6. end delete
begin insert SEC. 7. end insert   

Section 56813 is added to the Government Code, to
read:

56813.  

(a) If the proposal includes the disincorporation of a
city, as defined in Section 56034, the commission shall determine
the amount of property tax revenue to be exchanged by the affected
city and any successor or affected local agency pursuant to this
section.

(b) The commission shall notify the county auditor of the
proposal, the affected local agencies to be extinguished, and the
services proposed to be transferred to new jurisdictions, and
identify for the auditor the changes to occur.

(c) If the proposal would not transfer all of the service
responsibilities of the disincorporating city to the affected county
or to a single affected agency, the commission and the county
auditor shall do all of the following:

(1) The county auditor shall determine the proportion that the
amount of property tax revenue derived by the city being
disincorporated pursuant to subdivision (b) of Section 93 of the
Revenue and Taxation Code bears to the total amount of revenue
from all sources, available for general purposes, received by the
city being disincorporated in the prior fiscal year and provide begin delete their end delete
begin insert his or her end insert response within 15 days of receiving notification from
the commission pursuant to subdivision (b). For purposes of
making this determination and the determination required by
paragraph (3), “total amount of revenue from all sources available
for general purposes” means the total amount of revenue which
the city being disincorporated may use on a discretionary basis for
any purpose and does not include any of the following:

(A) Revenue that, by statute or ordinance, is required to be used
for a specific purpose.

(B) Revenue from fees, charges, or assessments that are levied
to specifically offset the cost of particular services and that do not
exceed the cost reasonably borne in providing these services.

(C) Revenue received from the federal government that is
required to be used for a specific purpose.

(2) The commission shall determine, based on information
submitted by the city being disincorporated, an amount equal to
the total net cost to that city during the prior fiscal year of providing
those services that an affected agency will assume within the area
subject to the proposal. For purposes of this paragraph, “total net
cost” means the total direct and indirect costs that were funded by
general purpose revenues of the city being disincorporated and
excludes any portion of the total cost that was funded by any
revenues of that agency that are specified in subparagraphs (A),
(B), and (C) of paragraph (1).

(3) For the services to be transferred to each affected local
agency, the commission shall multiply the amount determined
pursuant to paragraph (2) by the proportion determined pursuant
to paragraph (1) to derive the amount of property tax revenue used
to provide services by the city being disincorporated during the
prior fiscal year within the area subject to the proposal. The county
auditor shall adjust the amount so determined by the annual tax
increment pursuant to the procedures set forth in Chapter 6
(commencing with Section 95) of Part 0.5 of Division 1 of the
Revenue and Taxation Code, to the fiscal year in which the affected
agency receives its next allocation of property taxes.

(d) If the proposal for disincorporation would transfer all of the
service responsibilities of the city proposed for disincorporation,
other than those that are proposed to be discontinued, to a single
successor, the commission shall request the auditor to determine
the property tax revenue allocated to the city being disincorporated
by tax rate area, or portion thereof, and transmit that information
to the commission.

(e) The executive officer shall notify the auditor of the amount
determined pursuant to subdivision (c) or (d), as the case may be,
and, where applicable, the period of time within which and the
procedure by which the transfer of property tax revenues will be
effected pursuant to this section, at the time the executive officer
records a certificate of completion pursuant to Section 57203 for
any proposal described in subdivision (a), and the auditor shall
transfer that amount to the affected agency or agencies that will
assume the services as determined by the commission. Any
property tax not transferred to an affected agency pursuant to
subdivision (c) shall be transferred to the affected county.

(f) For purposes of this section, “prior fiscal year” means the
most recent fiscal year preceding the issuance of the certificate of
filing for which data is available on actual direct and indirect costs
and revenues needed to perform the calculations required by this
section.

(g) Any action brought by a city or district to contest any of the
determinations of the county auditor or the commission with regard
to the amount of property tax revenue to be exchanged by the
affected local agencies pursuant to this section shall be commenced
within three years of the effective date of the disincorporation.

begin delete SEC. 7. end delete
begin insert SEC. 8. end insert   

Section 56814 is added to the Government Code, to
read:

56814.  

If the proposal includes the disincorporation of a city,
as defined in Section 56034, with the assignment of property tax
revenues to a successor the commission shall make the following
determinations, as appropriate:

(a) The increase of the appropriations limit for the successor if
the successor is an existing entity.

(b) The appropriations limit for a new special district through
a formation process as defined by Section 56810.

begin delete SEC. 8. end delete
begin insert SEC. 9. end insert   

Section 56816 is added to the Government Code, to
read:

56816.  

(a) It is the intent of the Legislature that any proposal
that includes the disincorporation of a city result in a determination
that the debt or contractual obligations and responsibilities of the
city being disincorporated shall be the responsibility of that same
territory for repayment. To ascertain this information, the city shall
provide a written statement that determines and certifies all of the
following to the commission prior to the issuance of a certificate
of filing for a disincorporation proposal, pursuant to Sections 56651
and 56658:

(1) The indebtedness of the city.

(2) The amount of money in the city’s treasury.

(3) The amount of any tax levy or other obligation due the city
that is unpaid or has not been collected.

(4) The amount of current and future liabilities, both internal
debt owed to other special or restricted funds or enterprise funds
within the agency and external debt owed to other public agencies
or outside lenders or that results from contractual obligations,
which may include contracts for goods or services, retirement
obligations, actuarially determined unfunded pension liability of
all classes in a public retirement system, including any
documentation related to the termination of public retirement
contract provisions, and the liability for other postemployment
benefits. The information required by this paragraph shall include
any associated revenue stream for financing that may be or has
been committed to that liability, including employee contributions.

(b) The city shall provide a written statement identifying the
successor agency to the city’s former redevelopment agency, if
any, pursuant to Section 34173 of the Health and Safety Code.

begin delete SEC. 9. end delete
begin insert SEC. 10. end insert   

Section 56885.5 of the Government Code is amended
to read:

56885.5.  

(a) In any commission order giving approval to any
change of organization or reorganization, the commission may
make that approval conditional upon any of the following factors:

(1) Any of the conditions set forth in Section 56886.

(2) The initiation, conduct, or completion of proceedings for
another change of organization or a reorganization.

(3) The approval or disapproval, with or without election, as
may be provided by this division, of any resolution or ordinance
ordering that change of organization or reorganization.

(4) With respect to any commission determination to approve
the disincorporation of a city, the dissolution of a district, or the
reorganization or consolidation of agencies that results in the
dissolution of one or more districts or the disincorporation of one
or more cities, a condition that prohibits a district that is being
dissolved or a city that is being disincorporated from taking any
of the following actions, unless it first finds that either an
emergency situation exists as defined in Section 54956.5, or the
legislative body of the successor, as designated by the commission
has taken action approving one or more of the following actions:

(A) Approving any increase in compensation or benefits for
members of the governing board, its officers, or the executive
officer of the agency.

(B) Appropriating, encumbering, expending, or otherwise
obligating, any revenue of the agency beyond that provided in the
current budget at the time the commission approves the dissolution
or disincorporation.

(b) If the commission so conditions its approval, the commission
may order that any further action pursuant to this division be
continued and held in abeyance for the period of time designated
by the commission, not to exceed six months from the date of that
conditional approval.

(c) The commission order may also provide that any election
called upon any change of organization or reorganization shall be
called, held, and conducted before, upon the same date as, or after
the date of any election to be called, held, and conducted upon any
other change of organization or reorganization.

(d) The commission order may also provide that in any election
at which the questions of annexation and district reorganization
or, incorporation and district reorganization, or disincorporation
and district reorganization are to be considered at the same time,
there shall be a single question appearing on the ballot upon the
issues of annexation and district reorganization or incorporation
and district reorganization.

begin delete SEC. 10. end delete
begin insert SEC. 11. end insert   

Section 56886 of the Government Code is amended
to read:

56886.  

Any change of organization or reorganization may
provide for, or be made subject to one or more of, the following
terms and conditions. If a change of organization or reorganization
is made subject to one or more of the following terms and
conditions in the commission’s resolution making determinations,
the terms and conditions imposed shall prevail in the event of a
conflict between a specific term and condition authorized pursuant
to this section and any of the general provisions of Part 5
(commencing with Section 57300). However, none of the following
terms and conditions shall directly regulate land use, property
development, or subdivision requirements:

(a) The payment of a fixed or determinable amount of money,
either as a lump sum or in installments, for the acquisition, transfer,
use, or right of use of all or any part of the existing property, real
or personal, of any city, county, or district.

(b) The levying or fixing and the collection of any of the
following, for the purpose of providing for any payment required
pursuant to subdivision (a):

(1) Special, extraordinary, or additional taxes or assessments.

(2) Special, extraordinary, or additional service charges, rentals,
or rates.

(3) Both taxes or assessments and service charges, rentals, or
rates.

(c) The imposition, exemption, transfer, division, or
apportionment, as among any affected cities, affected counties,
affected districts, and affected territory of liability for payment of
all or any part of principal, interest, and any other amounts which
shall become due on account of all or any part of any outstanding
or then authorized but thereafter issued bonds, including revenue
bonds, or other contracts or obligations of any city, county, district,
or any improvement district within a local agency, and the levying
or fixing and the collection of any (1) taxes or assessments, or (2)
service charges, rentals, or rates, or (3) both taxes or assessments
and service charges, rentals, or rates, in the same manner as
provided in the original authorization of the bonds and in the
amount necessary to provide for that payment.

(d) If, as a result of any term or condition made pursuant to
subdivision (c), the liability of any affected city, affected county,
or affected district for payment of the principal of any bonded
indebtedness is increased or decreased, the term and condition
may specify the amount, if any, of that increase or decrease which
shall be included in, or excluded from, the outstanding bonded
indebtedness of that entity for the purpose of the application of
any statute or charter provision imposing a limitation upon the
principal amount of outstanding bonded indebtedness of the entity.

(e) The formation of a new improvement district or districts or
the annexation or detachment of territory to, or from, any existing
improvement district or districts.

(f) The incurring of new indebtedness or liability by, or on behalf
of, all or any part of any local agency, including territory being
annexed to any local agency, or of any existing or proposed new
improvement district within that local agency. The new
indebtedness may be the obligation solely of territory to be annexed
if the local agency has the authority to establish zones for incurring
indebtedness. The indebtedness or liability shall be incurred
substantially in accordance with the laws otherwise applicable to
the local agency.

(g) The issuance and sale of any bonds, including authorized
but unissued bonds of a local agency, either by that local agency
or by a local agency designated as the successor to any local agency
which is extinguished as a result of any change of organization or
reorganization.

(h) The acquisition, improvement, disposition, sale, transfer, or
division of any property, real or personal.

(i) The disposition, transfer, or division of any moneys or funds,
including cash on hand and moneys due but uncollected, and any
other obligations.

(j) The fixing and establishment of priorities of use, or right of
use, of water, or capacity rights in any public improvements or
facilities or any other property, real or personal. However, none
of the terms and conditions ordered pursuant to this subdivision
shall modify priorities of use, or right of use, to water, or capacity
rights in any public improvements or facilities that have been fixed
and established by a court or an order of the State Water Resources
Control Board.

(k) The establishment, continuation, or termination of any office,
department, or board, or the transfer, combining, consolidation,
or separation of any offices, departments, or boards, or any of the
functions of those offices, departments, or boards, if, and to the
extent that, any of those matters is authorized by the principal act.

(l) The employment, transfer, or discharge of employees, the
continuation, modification, or termination of existing employment
contracts, civil service rights, seniority rights, retirement rights,
and other employee benefits and rights.

(m) The designation of a city, county, or district, as the successor
to any local agency that is extinguished as a result of any change
of organization or reorganization, for the purpose of succeeding
to all of the rights, duties, and obligations of the extinguished local
agency with respect to enforcement, performance, or payment of
any outstanding bonds, including revenue bonds, or other contracts
and obligations of the extinguished local agency.

(n) The designation of (1) the method for the selection of
members of the legislative body of a district or (2) the number of
those members, or (3) both, where the proceedings are for a
consolidation, or a reorganization providing for a consolidation or
formation of a new district and the principal act provides for
alternative methods of that selection or for varying numbers of
those members, or both.

(o) The initiation, conduct, or completion of proceedings on a
proposal made under, and pursuant to, this division.

(p) The fixing of the effective date or dates of any change of
organization, subject to the limitations of Section 57202.

(q) Any terms and conditions authorized or required by the
principal act with respect to any change of organization.

(r) The continuation or provision of any service provided at that
time, or previously authorized to be provided by an official act of
the local agency.

(s) The levying of either of the following:

(1) Assessments or fees, including the imposition of a fee
pursuant to Section 50029 or 66484.3. For the purposes of this
section, imposition of a fee as a condition of the issuance of a
building permit does not constitute direct regulation of land use,
property development, or subdivision requirements.

(2) General or special taxes subject to approval by the voters.

(t) The extension or continuation of any previously authorized
charge, fee, assessment, or tax by the local agency or a successor
local agency in the affected territory.

(u) The transfer of authority and responsibility among any
affected cities, affected counties, and affected districts for the
administration of special tax and special assessment districts,
including, but not limited to, the levying and collecting of special
taxes and special assessments, including the determination of the
annual special tax rate within authorized limits; the management
of redemption, reserve, special reserve, and construction funds;
the issuance of bonds which are authorized but not yet issued at
the time of the transfer, including not yet issued portions or phases
of bonds which are authorized; supervision of construction paid
for with bond or special tax or assessment proceeds; administration
of agreements to acquire public facilities and reimburse advances
made to the district; and all other rights and responsibilities with
respect to the levies, bonds, funds, and use of proceeds that would
have applied to the local agency that created the special tax or
special assessment district.

(v) Any other matters necessary or incidental to any of the terms
and conditions specified in this section. If a change of organization,
reorganization, or special reorganization provides for, or is made
subject to one or more of, the terms and conditions specified in
this section, those terms and conditions shall be deemed to be the
exclusive terms and conditions for the change of organization,
reorganization, or special reorganization, and shall control over
any general provisions of Part 5 (commencing with Section 57300).

begin delete SEC. 11. end delete
begin insert SEC. 12. end insert   

Section 57401 of the Government Code is repealed.

begin delete SEC. 12. end delete
begin insert SEC. 13. end insert   

Section 57402 of the Government Code is repealed.

begin delete SEC. 13. end delete
begin insert SEC. 14. end insert   

Section 57404 of the Government Code is repealed.

begin delete SEC. 14. end delete
begin insert SEC. 15. end insert   

Section 57405 of the Government Code is amended
to read:

57405.  

If a tax has been levied by the disincorporated city and
remains uncollected, the county tax collector shall collect it when
due and pay it into the county treasury on behalf of the designated
successor agency or county to wind up the affairs of the
disincorporated city.

begin delete SEC. 15. end delete
begin insert SEC. 16. end insert   

Section 57409 of the Government Code is repealed.

begin delete SEC. 16. end delete
begin insert SEC. 17. end insert   

Section 57410 of the Government Code is repealed.

begin delete SEC. 17. end delete
begin insert SEC. 18. end insert   

Section 57416 of the Government Code is repealed.

begin delete SEC. 18. end delete
begin insert SEC. 19. end insert   

Section 57423 of the Government Code is repealed.

begin delete SEC. 19. end delete
begin insert SEC. 20. end insert   

Section 57424 of the Government Code is repealed.

begin delete SEC. 20. end delete
begin insert SEC. 21. end insert   

Section 57426 is added to the Government Code, to
read:

57426.  

As of the effective date of the disincorporation, all of
the following apply:

(a) The general plan of the disincorporated city that was in effect
immediately prior to the effective date of the disincorporation shall
constitute the community plan of the county for the territory of
the disincorporated city until the county updates the community
plan, adopts a specific plan, or amends its county general plan for
the unincorporated territory.

(b) The zoning ordinances of the disincorporated city that were
in effect immediately prior to the effective date of the
disincorporation shall constitute the zoning ordinances of the
county for that territory, and shall be so identified in any
community plan, specific plan, or general plan amendment adopted
by the county, until the county updates the zoning ordinances
applicable to that territory.

(c) Any conditional use permit or legal nonconforming use that
was in place immediately prior to the effective date of the
disincorporation shall remain in force pursuant to the community
plan and zoning ordinances.

(d) Any use of land that was authorized under the general plan
and zoning ordinances immediately prior to the effective date of
the disincorporation shall continue to be authorized, for as long a
period as may be required by the California Constitution or United
States Constitution.

begin delete SEC. 21. end delete
begin insert SEC. 22. end insert   

Section 99 of the Revenue and Taxation Code is
amended to read:

99.  

(a) For the purposes of the computations required by this
chapter:

(1) In the case of a jurisdictional change, other than a city
incorporation, city disincorporation, or a formation of a district as
defined in Section 2215, the auditor shall adjust the allocation of
property tax revenue determined pursuant to Section 96 or 96.1,
or the annual tax increment determined pursuant to Section 96.5,
for local agencies whose service area or service responsibility
would be altered by the jurisdictional change, as determined
pursuant to subdivision (b) or (c).

(2) In the case of a city incorporation or disincorporation, the
auditor shall assign the allocation of property tax revenues
determined pursuant to Section 56810 of the Government Code
and the adjustments in tax revenues that may occur pursuant to
Section 56815 of the Government Code to the newly formed city
or district and shall make the adjustment as determined by Section
56810 or 56813 in the allocation of property tax revenue
determined pursuant to Section 96 or 96.1 for each local agency
whose service area or service responsibilities would be altered by
the incorporation.

(3) In the case of a formation of a district as defined in Section
2215, the auditor shall assign the allocation of property tax
revenues determined pursuant to Section 56810 of the Government
Code to the district and shall make the adjustment as determined
by Section 56810, or for the disincorporated city or dissolved
district as determined by Section 56813, in the allocation of
property tax revenue determined pursuant to Section 96 or 96.1
for each local agency whose service area or service responsibilities
would be altered by the change of organization.

(b) Upon the filing of an application or a resolution pursuant to
the Cortese-Knox-Hertzberg Local Government Reorganization
Act of 2000 (Division 3 (commencing with Section 56000) of Title
5 of the Government Code), but prior to the issuance of a certificate
of filing, the executive officer shall give notice of the filing to the
assessor and auditor of each county within which the territory
subject to the jurisdictional change is located. This notice shall
specify each local agency whose service area or responsibility will
be altered by the jurisdictional change.

(1) (A) The county assessor shall provide to the county auditor,
within 30 days of the notice of filing, a report which identifies the
assessed valuations for the territory subject to the jurisdictional
change and the tax rate area or areas in which the territory exists.

(B) The auditor shall estimate the amount of property tax
revenue generated within the territory that is the subject of the
jurisdictional change during the current fiscal year.

(2) The auditor shall estimate what proportion of the property
tax revenue determined pursuant to paragraph (1) is attributable
to each local agency pursuant to Sections 96.1 and 96.5.

(3) Within 45 days of notice of the filing of an application or
resolution, the auditor shall notify the governing body of each local
agency whose service area or service responsibility will be altered
by the jurisdictional change of the amount of, and allocation factors
with respect to, property tax revenue estimated pursuant to
paragraph (2) that is subject to a negotiated exchange.

(4) Upon receipt of the estimates pursuant to paragraph (3), the
local agencies shall commence negotiations to determine the
amount of property tax revenues to be exchanged between and
among the local agencies. Except as otherwise provided, this
negotiation period shall not exceed 60 days. If a local agency
involved in these negotiations notifies the other local agencies, the
county auditor, and the local agency formation commission in
writing of its desire to extend the negotiating period, the negotiating
period shall be 90 days.

The exchange may be limited to an exchange of property tax
revenues from the annual tax increment generated in the area
subject to the jurisdictional change and attributable to the local
agencies whose service area or service responsibilities will be
altered by the proposed jurisdictional change. The final exchange
resolution shall specify how the annual tax increment shall be
allocated in future years.

(5) In the event that a jurisdictional change would affect the
service area or service responsibility of one or more special
districts, the board of supervisors of the county or counties in which
the districts are located shall, on behalf of the district or districts,
negotiate any exchange of property tax revenues. Prior to entering
into negotiation on behalf of a district for the exchange of property
tax revenue, the board shall consult with the affected district. The
consultation shall include, at a minimum, notification to each
member and executive officer of the district board of the pending
consultation and provision of adequate opportunity to comment
on the negotiation.

(6) Notwithstanding any other provision of law, the executive
officer shall not issue a certificate of filing pursuant to Section
56658 of the Government Code until the local agencies included
in the property tax revenue exchange negotiation, within the
negotiation period, present resolutions adopted by each such county
and city whereby each county and city agrees to accept the
exchange of property tax revenues.

(7) In the event that the commission modifies the proposal or
its resolution of determination, any local agency whose service
area or service responsibility would be altered by the proposed
jurisdictional change may request, and the executive officer shall
grant, 30 days for the affected agencies, pursuant to paragraph (4),
to renegotiate an exchange of property tax revenues.
Notwithstanding the time period specified in paragraph (4), if the
resolutions required pursuant to paragraph (6) are not presented
to the executive officer within the 30-day period, all proceedings
of the jurisdictional change shall automatically be terminated.

(8) In the case of a jurisdictional change that consists of a city’s
qualified annexation of unincorporated territory, an exchange of
property tax revenues between the city and the county shall be
determined in accordance with subdivision (e) if that exchange of
revenues is not otherwise determined pursuant to either of the
following:

(A) Negotiations completed within the applicable period or
periods as prescribed by this subdivision.

(B) A master property tax exchange agreement among those
local agencies, as described in subdivision (d).

For purposes of this paragraph, a qualified annexation of
unincorporated territory means an annexation, as so described, for
which an application or a resolution was filed on or after January
1, 1998, and on or before January 1, 2021.

(9) No later than the date on which the certificate of completion
of the jurisdictional change is recorded with the county recorder,
the executive officer shall notify the auditor or auditors of the
exchange of property tax revenues and the auditor or auditors shall
make the appropriate adjustments as provided in subdivision (a).

(c) Whenever a jurisdictional change is not required to be
reviewed and approved by a local agency formation commission,
the local agencies whose service area or service responsibilities
would be altered by the proposed change, shall give notice to the
State Board of Equalization and the assessor and auditor of each
county within which the territory subject to the jurisdictional
change is located. This notice shall specify each local agency
whose service area or responsibility will be altered by the
jurisdictional change and request the auditor and assessor to make
the determinations required pursuant to paragraphs (1) and (2) of
subdivision (b). Upon notification by the auditor of the amount
of, and allocation factors with respect to, property tax subject to
exchange, the local agencies, pursuant to the provisions of
paragraphs (4) and (6) of subdivision (b), shall determine the
amount of property tax revenues to be exchanged between and
among the local agencies. Notwithstanding any other provision of
law, no such jurisdictional change shall become effective until
each county and city included in these negotiations agrees, by
resolution, to accept the negotiated exchange of property tax
revenues. The exchange may be limited to an exchange of property
tax revenue from the annual tax increment generated in the area
subject to the jurisdictional change and attributable to the local
agencies whose service area or service responsibilities will be
altered by the proposed jurisdictional change. The final exchange
resolution shall specify how the annual tax increment shall be
allocated in future years. Upon the adoption of the resolutions
required pursuant to this section, the adopting agencies shall notify
the auditor who shall make the appropriate adjustments as provided
in subdivision (a). Adjustments in property tax allocations made
as the result of a city or library district withdrawing from a county
free library system pursuant to Section 19116 of the Education
Code shall be made pursuant to Section 19116 of the Education
Code, and this subdivision shall not apply.

(d) With respect to adjustments in the allocation of property
taxes pursuant to this section, a county and any local agency or
agencies within the county may develop and adopt a master
property tax transfer agreement. The agreement may be revised
from time to time by the parties subject to the agreement.

(e) (1) An exchange of property tax revenues that is required
by paragraph (8) of subdivision (b) to be determined pursuant to
this subdivision shall be determined in accordance with all of the
following:

(A) The city and the county shall mutually select a third-party
consultant to perform a comprehensive, independent fiscal analysis,
funded in equal portions by the city and the county, that specifies
estimates of all tax revenues that will be derived from the annexed
territory and the costs of city and county services with respect to
the annexed territory. The analysis shall be completed within a
period not to exceed 30 days, and shall be based upon the general
plan or adopted plans and policies of the annexing city and the
intended uses for the annexed territory. If, upon the completion of
the analysis period, no exchange of property tax revenues is agreed
upon by the city and the county, subparagraph (B) shall apply.

(B) The city and the county shall mutually select a mediator,
funded in equal portions by those agencies, to perform mediation
for a period not to exceed 30 days. If, upon the completion of the
mediation period, no exchange of property tax revenues is agreed
upon by the city and the county, subparagraph (C) shall apply.

(C) The city and the county shall mutually select an arbitrator,
funded in equal portions by those agencies, to conduct an advisory
arbitration with the city and the county for a period not to exceed
30 days. At the conclusion of this arbitration period, the city and
the county shall each present to the arbitrator its last and best offer
with respect to the exchange of property tax revenues. The
arbitrator shall select one of the offers and recommend that offer
to the governing bodies of the city and the county. If the governing
body of the city or the county rejects the recommended offer, it
shall do so during a public hearing, and shall, at the conclusion of
that hearing, make written findings of fact as to why the
recommended offer was not accepted.

(2) Proceedings under this subdivision shall be concluded no
more than 150 days after the auditor provides the notification
pursuant to paragraph (3) of subdivision (b), unless one of the
periods specified in this subdivision is extended by the mutual
agreement of the city and the county. Notwithstanding any other
provision of law, except for those conditions that are necessary to
implement an exchange of property tax revenues determined
pursuant to this subdivision, the local agency formation
commission shall not impose any fiscal conditions upon a city’s
qualified annexation of unincorporated territory that is subject to
this subdivision.

(f) Except as otherwise provided in subdivision (g), for the
purpose of determining the amount of property tax to be allocated
in the 1979-80 fiscal year and each fiscal year thereafter for those
local agencies that were affected by a jurisdictional change which
was filed with the State Board of Equalization after January 1,
1978, but on or before January 1, 1979. The local agencies shall
determine by resolution the amount of property tax revenues to be
exchanged between and among the affected agencies and notify
the auditor of the determination.

(g) For the purpose of determining the amount of property tax
to be allocated in the 1979-80 fiscal year and each fiscal year
thereafter, for a city incorporation that was filed pursuant to
Sections 54900 to 54904, inclusive, of the Government Code after
January 1, 1978, but on or before January 1, 1979, the amount of
property tax revenue considered to have been received by the
jurisdiction for the 1978-79 fiscal year shall be equal to two-thirds
of the amount of property tax revenue projected in the final local
agency formation commission staff report pertaining to the
incorporation multiplied by the proportion that the total amount
of property tax revenue received by all jurisdictions within the
county for the 1978-79 fiscal year bears to the total amount of
property tax revenue received by all jurisdictions within the county
for the 1977-78 fiscal year. Except, however, in the event that the
final commission report did not specify the amount of property
tax revenue projected for that incorporation, the commission shall
by October 10 determine pursuant to Section 54790.3 of the
Government Code the amount of property tax to be transferred to
the city.

The provisions of this subdivision shall also apply to the
allocation of property taxes for the 1980-81 fiscal year and each
fiscal year thereafter for incorporations approved by the voters in
June 1979.

(h) For the purpose of the computations made pursuant to this
section, in the case of a district formation that was filed pursuant
to Sections 54900 to 54904, inclusive, of the Government Code
after January 1, 1978, but before January 1, 1979, the amount of
property tax to be allocated to the district for the 1979-80 fiscal
year and each fiscal year thereafter shall be determined pursuant
to Section 54790.3 of the Government Code.

(i) For the purposes of the computations required by this chapter,
in the case of a jurisdictional change, other than a change requiring
an adjustment by the auditor pursuant to subdivision (a), the auditor
shall adjust the allocation of property tax revenue determined
pursuant to Section 96 or 96.1 or its predecessor section, or the
annual tax increment determined pursuant to Section 96.5 or its
predecessor section, for each local school district, community
college district, or county superintendent of schools whose service
area or service responsibility would be altered by the jurisdictional
change, as determined as follows:

(1) The governing body of each district, county superintendent
of schools, or county whose service areas or service responsibilities
would be altered by the change shall determine the amount of
property tax revenues to be exchanged between and among the
affected jurisdictions. This determination shall be adopted by each
affected jurisdiction by resolution. For the purpose of negotiation,
the county auditor shall furnish the parties and the county board
of education with an estimate of the property tax revenue subject
to negotiation.

(2) In the event that the affected jurisdictions are unable to agree,
within 60 days after the effective date of the jurisdictional change,
and if all the jurisdictions are wholly within one county, the county
board of education shall, by resolution, determine the amount of
property tax revenue to be exchanged. If the jurisdictions are in
more than one county, the State Board of Education shall, by
resolution, within 60 days after the effective date of the
jurisdictional change, determine the amount of property tax to be
exchanged.

(3) Upon adoption of any resolution pursuant to this subdivision,
the adopting jurisdictions or State Board of Education shall notify
the county auditor who shall make the appropriate adjustments as
provided in subdivision (a).

(j) For purposes of subdivision (i), the annexation by a
community college district of territory within a county not
previously served by a community college district is an alteration
of service area. The community college district and the county
shall negotiate the amount, if any, of property tax revenues to be
exchanged. In these negotiations, there shall be taken into
consideration the amount of revenue received from the timber
yield tax and forest reserve receipts by the community college
district in the area not previously served. In no event shall the
property tax revenue to be exchanged exceed the amount of
property tax revenue collected prior to the annexation for the
purposes of paying tuition expenses of residents enrolled in the
community college district, adjusted each year by the percentage
change in population and the percentage change in the cost of
living, or per capita personal income, whichever is lower, less the
amount of revenue received by the community college district in
the annexed area from the timber yield tax and forest reserve
receipts.

(k) At any time after a jurisdictional change is effective, any of
the local agencies party to the agreement to exchange property tax
revenue may renegotiate the agreement with respect to the current
fiscal year or subsequent fiscal years, subject to approval by all
local agencies affected by the renegotiation.

begin delete SEC. 22. end delete
begin insert SEC. 23. end insert   

If the Commission on State Mandates determines that
this act contains costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.