BILL ANALYSIS Ó AB 1429 Page 1 Date of Hearing: April 29, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1429 (Chiu) - As Amended April 20, 2015 ----------------------------------------------------------------- |Policy |Insurance |Vote:|12 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: This bill establishes a grant program for the seismic retrofit of multi-family (five to ten unit) structures with low-income tenants in high-risk earthquake areas. AB 1429 Page 2 FISCAL EFFECT: 1)The creation of the program in statute, by itself, does not have state costs, as the program would only be operational if the Legislature appropriates funds. The California Earthquake Authority (CEA) is privately funded. The current CEA-supported EBB grant program is funded by a portion of CEA investment income. The CEA insures only residential housing with one to four units, and the CEA-supported EBB grant program is further limited to qualifying single-family, detached residential buildings (which may be of one to four dwelling units). 2)Although there are no direct state costs, creation of the program, coupled with legislative findings, imply the availability of state funding for the program. The bill's findings state, "There are many paths to funding a retrofit program, including income tax credits, sales tax rebates, attaching the financing to property taxes, and grants. Therefore, it is the intent of the Legislature to enact legislation that would create and fund a program to assist California homeowners with earthquake mitigation repairs to their homes." State tax credits and/or rebates would result in a reduction in state GF revenues. The Earthquake Brace + Bolt (EBB) program provides homeowners up to $3,000 for qualifying single-family, detached residential buildings (which may be of one to four dwelling units). The size and scope of the hypothetical grant program is unknown, but would need to be in the millions of dollars to make much impact. For example, $7.5 million could fund 1,500 $5,000 grants. But the aggregate cost of retrofitting larger buildings would likely exceed $10,000 per unit. AB 1429 Page 3 COMMENTS: 1)Purpose. California has an existing seismic mitigation incentive program called Earthquake Brace + Bolt (EBB), which is administered by the California Residential Mitigation Program (CRMP), but it is limited to only 650 homes in the Bay Area, Los Angeles County and Napa. The goal of this legislation is to expand on Brace + Bolt and create a statewide earthquake retrofit program to cover the tens of thousands of small multi-family residential structures that need retrofitting. This bill is sponsored by the California Department of Insurance. 2)California Earthquake Authority. The CEA was formed through legislation in 1996 to address an insurance-availability crisis that followed the 1994 Northridge earthquake. The CEA is a privately funded, publicly managed not-for-profit organization that provides catastrophic residential earthquake insurance. The Governor, State Treasurer, and Insurance Commissioner serve as the CEA's governing board voting members. CEA has about 75% of the market for earthquake insurance in California, and is funded through sales of earthquake policies, and investments. 3)Earthquake Brace + Bolt. The EBB program was created by the California Residential Mitigation Program (CRMP), which is a joint powers authority between the CEA and the Office of Emergency Services. The EBB was developed to help homeowners lessen the potential for damage to their houses during an earthquake. A residential seismic retrofit strengthens an existing house by bolting the house to its foundation and adding bracing around the perimeter of the crawl space. CRMP is funded through a portion of CEA's investment income; CEA provided about $2 million in mitigation funding for the EBB AB 1429 Page 4 program in 2014. The bill would require the existing JPA to develop the program requirements for small, multi-family residential structures along the lines of the existing EBB program. 4)Related Legislation. AB 1440 (Nazarian), also on today's agenda, is nearly identical to this bill, but establishes a statutory structure for seismic retrofit grant program for individual homeowners instead of multiunit houses. Analysis Prepared by:Lisa Murawski / APPR. / (916) 319-2081