BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 1191 |Hearing |7/1/15 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Nazarian |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |6/24/15 |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Weinberger | |: | | ----------------------------------------------------------------- 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 AB 1191 (Nazarian) 6/24/15 Page 2 of ? 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 AB 1191 (Nazarian) 6/24/15 Page 3 of ? 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 AB 1191 (Nazarian) 6/24/15 Page 4 of ? 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. AB 1191 (Nazarian) 6/24/15 Page 5 of ? 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. -- END --