BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                           Senator Robert Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |AB 1191                          |Hearing    |7/1/15   |
          |          |                                 |Date:      |         |
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          |Author:   |Nazarian                         |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |6/24/15                          |Fiscal:    |No       |
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          |Consultant|Weinberger                                            |
          |:         |                                                      |
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                                    QUIMBY ACT FEES



          Allows the City of Los Angeles to spend proceeds from accrued  
          interest on fee revenues collected pursuant to the Quimby Act  
          for specified purposes.


           Background and Existing Law

           Because land development in California is a privilege and not a  
          property right, counties and cities can use their general police  
          powers to impose conditions when approving development projects.  
           The Mitigation Fee Act (AB 1600, Cortese, 1987) sets out four  
          criteria that local officials must meet when charging developer  
          impact fees:
                 Identify the fee's purpose.

                 Identify the fee's use.

                 Determine a reasonable relationship between the use of  
               the fee and the type of development project.

                 Determine a reasonable relationship between the need for  
               public facilities and the type of development project.

          The Subdivision Map Act controls how counties and cities review  
          and approve property owners' requests to convert larger parcels  
          into smaller lots.  Local officials commonly attach scores of  







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          conditions when they approve tentative subdivision maps.   
          Mainstream legal thinking holds that counties and cities have  
          three sources of authority to impose conditions on proposed  
          subdivisions:
                 Conditions to make the subdivision consistent with the  
               local general plan.

                 Conditions to mitigate a subdivision's environmental  
               impacts.

                 Conditions that the Map Act specifically authorizes.

          The Quimby Act is the part of the Subdivision Map Act that  
          allows counties and cities to require subdividers to dedicate  
          land, or pay in-lieu fees for parks as a condition of approving  
          a new subdivision.  To impose Quimby Act fees, the county or  
          city must have a general plan or a specific plan that contains  
          policies and standards for park facilities.  Quimby Act fees  
          must "bear a reasonable relationship" to the proposed  
          subdivision.  Counties and cities can use the Quimby Act fees  
          only for developing new parks or rehabilitating parks that serve  
          that subdivision.  However, as an exception, the Quimby Act  
          allows fees to be used for the purpose of developing new or  
          rehabilitating existing park, or recreational facilities in a  
          neighborhood other than the neighborhood in which the  
          subdivision for which fees were paid if specified requirements  
          are met (AB 1359, Hernández, Chapter 412, Statutes of 2013).

          Fees collected by local governments pursuant to the Quimby Act  
          must be committed within five years after the payment of the  
          fees, or the issuance of building permits on one-half of the  
          lots created by the subdivision, whichever occurs later.  If the  
          fees are not committed, they, without any deductions, must be  
          distributed and paid to the then record owners of the  
          subdivision in the same proportion that the size of their lot  
          bears to the total area of all lots within the subdivision.

          For many years, the City of Los Angeles accounted for interest  
          income generated by Quimby Act fees in a manner that now  
          prevents the City from connecting specific amounts of interest  
          income with fees paid for any particular subdivision at any  
          particular time.  Because the language in the Quimby Act does  
          not specifically address the use of interest income generated  
          from fees, city officials worry that their authority to spend  








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          that interest income for park projects is, at best, ambiguous.   
          They want the Legislature to clarify the statutory authority to  
          spend interest income from Quimby Act fees and allow the City of  
          Los Angeles to spend interest proceeds accrued until January 1,  
          2016 for specified park projects.


           Proposed Law

           Assembly Bill 1191 allows a city with a population of at least 3  
          million to commit interest accrued on or before January 1, 2016,  
          on fees charged pursuant to the Quimby Act, without regard to  
          the date the fee was collected or the date of issuance of  
          building permits on one-half of the lots created by the  
          subdivision, outside the subdivision for which the fees were  
          collected if the city:
                 Holds a public hearing before committing the interest,  
               and

                 Uses the interest to develop new, or rehabilitate  
               existing, neighborhood or community parks or recreational  
               facilities within the city.

          AB 1191 directs that the authority for a city to commit interest  
          on Quimby Act fees subject to the conditions described above  
          will remain in effect only until January 1, 2021, on which date  
          that authority will be automatically repealed.

          AB 1191 specifies that, with regard to the expenditure of Quimby  
          Act fees, the term "fee" includes any interest income generated  
          from a fee charged and collected pursuant to the Quimby Act.

          The bill states that its provisions do not constitute a change  
          in, but are declaratory of, existing law and that any locally  
          adopted ordinance or regulation that is consistent with the  
          bill's provisions is valid.


           State Revenue Impact

          No estimate.


           Comments








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           1.  Purpose of the bill  .  According to the City of Los Angeles,  
          ambiguities in state law prevent the city from committing more  
          than $17 million in interest proceeds from Quimby Act fees for  
          park projects.  These interest proceeds which are currently in  
          legal "limbo" were deposited in a way that prevents city  
          officials from being able to account for which specific  
          subdivisions generated the interest or how long specific amounts  
          of interest have been held by the city.  As a result, there is  
          no clear authority in current law under which the city could  
          either return funds to property owners in specific subdivisions,  
          or spend the funds on park projects that directly benefit  
          specific subdivisions associated with the interest proceeds.  AB  
          1191 seeks to prevent interest on Quimby Act fees from being  
          handled separately from the principal amount of the fees by  
          clarifying, that the Quimby Act's restriction on the use of fee  
          revenues also apply to the interest earned on Quimby Act fees.   
          AB 1191 also grants the City of Los Angeles the authority to  
          spend the interest proceeds that it accrues through the end of  
          2015 in a manner that is broadly consistent with the purposes of  
          the Quimby Act, but which is not specifically bound by the Act's  
          time limit on fee expenditures or on the Act's requirements  
          relative to specific subdivisions.  In doing so, AB 1191 will  
          benefit the public by ensuring that the City of Los Angeles can  
          use more than $17 million in Quimby Act interest proceeds for  
          their intended park development and rehabilitation purposes.

          2.   Moral hazard  ?  AB 1191 grants Los Angles officials  
          additional flexibility in how they spend Quimby Act fee interest  
          that has accrued over a number of years.  This could be seen as  
          rewarding the city for handling interest income in a manner that  
          didn't require interest proceeds to remain strictly attached to  
          the principal amount of fee income from which the interest was  
          generated.  As a result, AB 1191 may have the unintended  
          consequence of suggesting that strict accounting for Quimby Act  
          fees is unnecessary, because the Legislature will grant local  
          governments a reprieve in response to similar problems with  
          intermingled interest proceeds in the future.  To foreclose this  
          possibility, the Committee may wish to consider amending AB 1191  
          to clarify that interest proceeds that accrue after January 1,  
          2016 which cannot be attributed to a specific subdivision must  
          be allocated among all persons who paid a Quimby Act fee within  
          a city or county in the preceding fiscal year.









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          3.   Only L.A  ?  AB 1191 is narrowly drafted to apply only to  
          cities with more than 3 million residents, a category which  
          encompasses only the City of Los Angeles.  It is unknown whether  
          other cities have taken similar approaches to accounting for  
          their Quimby Act fees and whether they also have interest  
          proceeds that can neither be spent nor refunded under current  
          law.  The authority to spend Quimby Act fees that AB 1191 grants  
          to L.A. may need to be extended to other jurisdictions that  
          currently face a dilemma similar to the one that confronts L.A. 

          4.  Let's be clear  .  AB 1191 states that the bill's provisions  
          are declaratory of existing law.  However, this statement is  
          meant to apply only to the clarification that the Quimby Act's  
          requirements apply equally to the principal and interest on fees  
          collected by local governments.  The bill's short-term authority  
          for the City of Los Angeles to spend interest proceeds in a  
          specified manner is clearly not declaratory of existing law.   
          The Committee may wish to consider amending AB 1191 to more  
          clearly identify which of AB 1191's provisions are meant to be  
          declaratory of existing law.


           Assembly Actions

           Assembly Local Government Committee:  9-0
          Assembly Floor:                    74-0

           Support and  
          Opposition  (6/25/15)


           Support  :  City of Los Angeles.

           Opposition :  Unknown.



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