BILL ANALYSIS                                                                                                                                                                                                    Ó



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

                              
          
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          |Bill No:  |AB 2032                          |Hearing    |6/15/16  |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |Linder                           |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |6/6/16                           |Fiscal:    |Yes      |
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          |Consultant|Favorini-Csorba                                       |
          |:         |                                                      |
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                  Change of organization:  cities:  disincorporation



          Requires additional financial information to be identified  
          during disincorporation.


           Background and Existing Law

           Local Agency Formation Commissions (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  
          Cortese-Knox Hertzberg Local Government Reorganization Act of  
          2000 (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 approval or denial of proposals by  
          other public agencies or individuals for these procedures.  

          Last year, the Legislature significantly amended the process for  
          city disincorporations for the first time since 1963, with the  
          goal of ensuring that the full effects of disincorporation are  
          identified and understood before voters decide to approve or  
          reject it (AB 851, Mayes, 2015).  Among other things, AB 851  







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          requires a plan for providing services following  
          disincorporation that identifies the services currently provided  
          in the city and which "successor agencies" will provide those  
          services in the future.  The LAFCO executive officer must also  
          develop a comprehensive fiscal analysis that reviews and  
          documents information about the financial condition, costs, and  
          revenues of a city proposed for disincorporation, including: 

                 The cost of providing services and the revenues to the  
               city in the past 3 fiscal years,

                 The cost of current and proposed capital improvements,  
               facilities, assets, and infrastructure,

                 The sources of funding available to the entities that  
               take over providing services, and

                 The anticipated costs to the agency designated to take  
               over service provision of providing those services.

          AB 851 also requires the city proposed for disincorporation to  
          provide a written statement that identifies the indebtedness of  
          the city, the amount of money in the city's treasury, the amount  
          of uncollected tax levies or other obligations due to the city,  
          and the amount of current and future liabilities of the city.   
          Once disincorporated, the county tax collector must collect any  
          unpaid taxes owed to the city and provide the revenues to the  
          agency taking over service provision, and the board of  
          supervisors must collect debts due to the city and perform any  
          other acts necessary for winding up the affairs of the city.

          The State Association of County Auditors wants to ensure that  
          all relevant financial information is disclosed during the  
          disincorporation process and that all debts are successfully  
          collected.


           Proposed Law

           Assembly Bill 2032 requires the comprehensive fiscal analysis  
          prepared by the LAFCO's executive officer to include (1) all  
          current and long-term liabilities, including debt obligations,  
          of the city proposed for disincorporation and the funds  
          available to discharge those liabilities; and (2) the potential  








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          financing mechanisms available to meet those obligations.  It  
          also requires the city's written statement of liabilities to  
          include the amount of any assessment due to the city, and  
          requires the tax collector to also collect any assessments due  
          to the disincorporated city.  AB 2032 directs the successor  
          agency's governing body and officers, instead of the board of  
          supervisors and the county officers, to wind up the  
          disincorporated city's affairs. 


           State Revenue Impact

           No estimate.


           Comments

           1.  Purpose of the bill  .  Although AB 851 (Mayes, 2015)  
          comprehensively updated LAFCO statutes relating to city  
          disincorporations, some small errors remain.  AB 2032 makes  
          minor changes to ensure that important financial information,  
          such as current and future liabilities and potential financing  
          mechanisms, are not left out of the LAFCO executive officer's  
          comprehensive fiscal analysis of disincorporation.  It also  
          ensures that county tax collectors can collect unpaid  
          assessments that are owed to the disincorporated city.  Finally,  
          it addresses a technical error that results in inconsistency in  
          the disincorporation process by ensuring that the most  
          appropriate agency, which may or may not be the county, winds up  
          the affairs of the disincorporated city.  These changes will  
          make the disincorporation process run as smoothly as possible if  
          it is needed in the future.

          2.  Mandate.   The California Constitution generally requires the  
          state to reimburse local agencies for their costs when the state  
          imposes new programs or additional duties on them.  According to  
          the Legislative Counsel's Office, AB 2032 creates a new  
          state-mandated local program because county tax collectors will  
          have to collect unpaid assessments, thereby increasing their  
          duties.  AB 2032 says that if the Commission on State Mandates  
          determines that it creates a state-mandated local program, the  
          state must reimburse local agencies by following the existing  
          statutory process for mandate claims.  









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          Assembly Actions

           Assembly Local Government Committee:              9-0
          Assembly Appropriations Committee:                20-0
          Assembly Floor:                                   76-0


           


          Support and  
          Opposition   (6/9/16)


           Support  :  State Association of County Auditors (sponsor);  
          California Association of LAFCOs; Orange County LAFCO.

           Opposition  :  Unknown.


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