BILL ANALYSIS Ó
AB 851
Page 1
ASSEMBLY THIRD READING
AB
851 (Mayes)
As Amended May 7, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+---------------------+---------------------|
|Local |9-0 |Maienschein, | |
|Government | |Gonzalez, Alejo, | |
| | |Chiu, Cooley, | |
| | |Gordon, Holden, | |
| | |Linder, Waldron | |
| | | | |
|----------------+------+---------------------+---------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bloom, Bonta, | |
| | |Calderon, Chang, | |
| | |Daly, Eggman, | |
| | |Gallagher, Eduardo | |
| | |Garcia, Holden, | |
| | |Jones, Quirk, | |
| | |Rendon, Wagner, | |
| | |Weber, Wood | |
| | | | |
| | | | |
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AB 851
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SUMMARY: Makes changes to the city disincorporation process in
the Cortese-Knox Hertzberg Act. Specifically, this bill:
1)Declares that it is the intent of the Legislature that any
proposal that includes the disincorporation of a city results in
a determination that the debt or contractual obligation and
responsibilities of the city being disincorporated shall be the
responsibility of that same territory for repayment. Requires
the city to provide a written statement to the local agency
formation commission (LAFCO) prior to filing a proposal to
initiate disincorporation proceedings that determines and
certifies all of the following:
a) The indebtedness of the city;
b) The amount of money in the city's treasury;
c) The amount of any tax levy or other obligation due the
city that is unpaid or has not been collected; and,
d) 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, outside lenders, or contractual
obligations. Liabilities may include, but not be limited to,
contracts, retirement obligations, and unfunded pension
liability.
2)Requires the city to provide a written statement identifying the
successor agency to the city's former redevelopment agency, if
any.
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3) Specifies information that must be included in a plan for
services with a proposal for a disincorporation or
reorganization that includes a disincorporation, as follows:
a) An enumeration and description of the services currently
provided by the city proposed for disincorporation and an
identification of the entity or entities proposed to assume
responsibility for the services following the completion of
disincorporation;
b) An enumeration and description of each service proposed to
be discontinued, 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 may 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 may not be 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 may not be limited to, a cease and desist
order or water prohibition order;
f) A written statement from each affected local agency,
identified pursuant to a), that they received a copy of the
plan for services; and,
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g) Any other information the executive officer may deem
necessary to fully consider the disincorporation proposal.
4)Adds disincorporation to a provision in existing law for
incorporation that requires notification from an executive
officer to affected local agencies and requires local agencies
to provide data to the executive officer in order to process a
proposal in a timely manner.
5)Requires the executive officer to prepare a comprehensive fiscal
analysis for a disincorporation proposal. Requires the fiscal
analysis to become part of the executive officer's report
prepared pursuant to existing law. Requires data used for the
analysis to be from the most recent fiscal year (FY), as
specified.
6)Requires the fiscal analysis to review and document each of the
following:
a) The direct and indirect costs incurred by the city
proposed for disincorporation for providing public services
and facilities during the three FYs immediately preceding the
submittal of the proposal for disincorporation;
b) The sources of funding, if any, available to the entities
proposed to assume the obligation of the city being
disincorporated and the related costs in the provision of
existing services;
c) Requires the executive officer, when determining costs to
include all direct and indirect costs of any public services
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proposed to be transferred to state agencies for delivery;
and,
d) Any other information and analysis needed to allow the
LAFCO to make certain determinations prior to a city
disincorporation, as required by this bill.
7)Prohibits a LAFCO from approving or conditionally approving any
proposal that includes a disincorporation, unless a LAFCO 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 LAFCO 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) The LAFCO has reviewed the comprehensive fiscal analysis,
as required by this bill;
d) The LAFCO has reviewed the executive officer's report and
recommendations prepared pursuant to existing law, and the
oral or written testimony presented at public hearing; and,
e) The service responsibility of the city proposed for
disincorporation has been assigned through the terms and
conditions, as authorized by existing law.
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8)Requires LAFCO to determine the amount of property tax revenue
to be exchanged by the disincorporating city and any successor
or affected local agency pursuant to a specified process that is
substantially similar to the process in existing law for
incorporations.
9)Requires LAFCO to notify the county auditor of the
disincorporation proposal and the services proposed to be
transferred, as specified.
10)Establishes processes for calculating a property tax exchange
depending on, if the disincorporation proposal transfers all of
the service responsibilities of the disincorporating city to the
affected county or a single affected agency.
11)Requires any action brought by a city or district to contest
any of the determinations of the county auditor or LAFCO in
regard to the amount of property tax revenue to be exchanged to
be commenced within three years of the effective date of the
disincorporation.
12)Requires LAFCO, if the proposal to disincorporate a city
includes the assignment of property tax revenues to a successor,
to make the following determinations, as appropriate:
a) The increase of the appropriations limit for the
successor, if the successor is an existing entity; and,
b) The appropriations limit for a new special district
pursuant to the formation process in current law.
13)Adds city disincorporation to provisions of existing law that
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establish the allocation of property tax revenue in the case of
a jurisdictional change, including incorporation.
14)Makes changes to provisions of existing law that specify the
factors a LAFCO can condition the approval of any change of
organization or reorganization upon.
15)Provides, as of the effective date of the disincorporation, all
of the following plans and documents that were in effect
immediately prior to the date of the disincorporation to apply,
as follows:
a) Requires the general plan of the disincorporated city to
constitute as 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) Requires the zoning ordinances of the disincorporated city
to constitute as the zoning ordinance of the county for that
territory of the disincorporated city 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; and,
c) Requires any conditional use permit or legal nonconforming
use to remain in force pursuant to the community plan and
zoning ordinances.
16)Repeals numerous outdated code sections in current law.
17)Provides that, if the Commission on State Mandates determines
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that this bill contains costs mandated by the state,
reimbursement to local agencies and school districts for those
costs shall be made pursuant to current law governing state
mandated local costs.
EXISTING LAW:
1)Establishes the procedures for the organization and
reorganization of cities, counties, and special districts,
including procedures for the disincorporation of a city under
the Cortese-Knox-Hertzberg Act (Act).
2)Defines "disincorporation" to mean "the dissolution,
extinguishment, or termination of the existence of a city and
the cessation of its corporate powers, except for the purpose of
winding up the affairs of the city."
FISCAL EFFECT: According to the Assembly Appropriations
Committee, there are negligible state costs. Local mandate costs
to LAFCOs are non-reimbursable because they charge fees for the
services they provide.
COMMENTS:
1)LAFCOs and Current Law. LAFCOs are responsible for coordinating
logical and timely changes in local governmental boundaries,
conducting special studies that review ways to reorganize,
simplify, and streamline governmental structures, and preparing
a sphere of influence for each city and special district within
each county. The courts refer to LAFCOs as the Legislature's
"watchdog" over local boundary changes. The Act establishes
procedures for local government changes of organization,
including city incorporations, disincorporations, annexations to
a city or special district, and city and special district
consolidations. LAFCOs regulate boundary changes through the
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approval or denial of proposals by other public agencies or
individuals for these procedures.
The Act prescribes a process for disincorporation, which is
similar to most boundary changes that require numerous steps:
a) application to LAFCO, by petition or resolution, for an
environmental review, and property tax exchange agreement; b)
noticed public hearing, testimony, and approval or disapproval
by LAFCO in which they can impose terms and conditions; c)
additional public hearing for protests (if a majority of the
city's voters file protest, the disincorporation stops, and if
not, LAFCO must order an election on the proposed
disincorporation); d) disincorporation election among city
voters, which requires a majority vote approval; and, e) LAFCO
staff files documents to complete the disincorporation.
Upon the effective date of a disincorporation, the county board
of supervisors is responsible for winding up the affairs of the
former city. Residents of the former city no longer have any
rights or duties as inhabitants or voters of a city. Prior to
the effective date, public officers must turn over public
property to the county board of supervisors, and the city
council must turn over all city funds, as certified by the LAFCO
or the county, to the county treasurer. The county tax
collector may collect any levied but uncollected taxes owed to
the disincorporated city, and the county may collect or sue for
all debts owed the city. Other territories within the county
are not responsible and may not be taxed for the debts or
liabilities of the former city.
2)Bill Summary. This bill makes several changes to the statutes
that govern the city disincorporation process. In addition to
repealing several outdated code sections, this bill builds upon
provisions in existing law for incorporations which require
information about services and finances to be provided with the
proposal. For example, current law requires an applicant to
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submit a plan for providing services with a proposal. This bill
specifies what must be included in that plan for services in the
case of a disincorporation, or a reorganization that includes a
disincorporation, to provide LAFCOs with additional information
about the provision of services. This bill also requires the
executive officer of a LAFCO to prepare a comprehensive fiscal
analysis as part of the report current law requires them to
provide to LAFCO in recommendation of approving or disapproving
a proposed change of organization or reorganization. Current
law requires a fiscal analysis to be done for incorporations;
this bill mirrors those provisions in existing law and would
provide LAFCO, successors, and the public with more information
about the financial status and impact of a city
disincorporation. Also, similar to provisions in current law for
incorporations, this bill establishes a process for the exchange
of property tax revenue for disincorporations. Under this bill,
LAFCOs must make specified determinations before approving or
conditionally approving a disincorporation proposal.
This bill does not make any changes to the existing
disincorporation process related to public involvement,
including public notice, hearing, protest, and election
requirements.
This bill is sponsored by the California Association of Local
Agency Formation Commissions.
3)Author's Statement. According to the author, "The statutes
addressing disincorporation have not been updated since the
inception of LAFCOs in 1963. Under existing law, the intended
procedure for dispensing with debt and unfunded liabilities is
not in compliance with Propositions 13 [1978] and 218 [1996].
This could result in the county at large being responsible for
the debts and unfunded liabilities of a city that has
disincorporated. This bill brings the sections of the Act into
full compliance with the mandates of Propositions 13 and 218."
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4)Disincorporation in California. Seventeen cities have
disincorporated in California's history, including the Cities of
Long Beach (1896), Pismo Beach (1940), and Stanton (1924), each
of which later reincorporated. The Legislature disincorporated
several cities by statute, including the following cities:
Columbia (1870), Dutch Flat (1866), Felton (1917), and Hornitos
(1973). Hornitos and Cabazon are the only two cities that have
disincorporated since the creation of LAFCOs in 1963. The City
of Cabazon, located in Riverside County, was disincorporated in
1973, and went through the process contained in LAFCO law. The
Town of Hornitos, located in Mariposa County, was
disincorporated by statute in 1972 ([AB 2374] Chappie, Chapter
650, Statutes of 1972).
More recent discussions surrounding the issue of
disincorporation are in reference to several cities in
California impacted by the redirection of Vehicle License Fee
(VLF) revenues away from newly incorporated cities and
annexations. The realignment shift in 2011 disproportionally
endangered the fiscal viability of cities that rely on VLF
revenues and after several failed legislative attempts to remedy
this issue, cities like Jurupa Valley have continued to discuss
possible disincorporation.
News reports on the possible disincorporation of the City of
Adelanto in San Bernardino County have persisted despite
assurances by city officials that the city has the budget for
one more FY and that they continue to look into long range
revenue generating and saving opportunities. Most recently, a
Santa Barbara grand jury released a report earlier this month
calling for the City of Guadalupe to disincorporate due to
fiscal mismanagement, a declining tax base, and increasing debt
obligations. The Guadalupe City Council has not taken any steps
to suggest they will follow the recommendation of the grand
jury.
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5)Arguments in Support. Supporters argue that this bill is not
intended to promote the use of the disincorporation process, nor
is intended to encourage cities to consider this as an option to
relieve their fiscal emergencies. The ultimate success or
failure of a proposal for disincorporation remains with the
registered voters of the city proposed to be disincorporated.
This bill just clarifies the required process to get to that
point.
6)Arguments in Opposition. None on file.
Analysis Prepared by:
Misa Lennox / L. GOV. / (916) 319-3958 FN:
0000451