BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 2032 |Hearing |6/15/16 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Linder |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |6/6/16 |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Favorini-Csorba | |: | | ----------------------------------------------------------------- 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 AB 2032 (Linder) 6/6/16 Page 2 of ? 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 AB 2032 (Linder) 6/6/16 Page 3 of ? 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. AB 2032 (Linder) 6/6/16 Page 4 of ? 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. -- END --