BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |SB 188 |Hearing |4/8/15 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Hancock |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |2/9/15 |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Lewis | |: | | ----------------------------------------------------------------- Municipal utility districts' delinquent revenues Repeals the sunset date in the statute giving municipal utility districts indefinite authority to impose liens on properties for delinquent water and wastewater services charges. Background and Existing Law Municipal Utility Districts (MUDs) are special districts that provide their customers with a variety of utility services, including electricity, water, sewer, garbage disposal, transportation, and communications. There are five MUDs in California: East Bay, Lassen, Sacramento, South Placer, and Southern San Joaquin. Until 2010, state law prohibited MUDs from using liens to collect delinquent residential water or sewer charges. In 2010, the Legislature authorized MUDs to collect delinquent residential water and sewer service charges through a lien or the local property tax roll (SB 1035, Hancock). MUDs' statutory authority to use liens expires on January 1, 2016. Until then, such liens have the force, effect, and priority of a judgment lien. However, MUDs may not attach a lien to publicly owned property. To collect delinquent charges through a lien or the property tax roll, state law requires a MUD to: Enact a relevant resolution or ordinance. SB 188 (Hancock) 2/9/15 Page 2 of ? Prepare a report. Provide notice. Conduct a public hearing. File a final report with the county auditor; and Record a certificate in the office of the county recorder. State law prohibits public utilities from recovering unpaid charges from a property owner if the charges are for residential utility service provided to a tenant under an account established by the tenant (AB 1770, Brewer, 1996). However, MUDs may collect unpaid fees, charges, and interest from owners of master-metered multi-family residential buildings, in which the utility account is in the landlord's name. Several other local government entities have the power to collect unpaid residential utility charges, penalties, and interest through liens and/or property tax collection: cities, counties, California Water Districts, Community Services Districts, County Water Districts, Irrigation Districts, Municipal Water Districts, Public Utility Districts, and Sanitary Districts. The East Bay Municipal Utility District (EBMUD)-which provides drinking water for 1.3 million customers in Alameda and Contra Costa counties, and wastewater services for 650,000 customers in the East Bay-adopted a lien program in January, 2011, to collect unpaid water and wastewater charges. EBMUD now wants legislators to repeal SB 1035's sunset date to allow EBMUD to continue its lien program indefinitely. Proposed Law Senate Bill 188 repeals the January 1, 2016 sunset date in the statute that allows municipal utility districts to impose liens on properties for delinquent water and wastewater service charges, and to collect delinquent charges through county property tax rolls. SB 188 (Hancock) 2/9/15 Page 3 of ? State Revenue Impact No estimate. Comments 1.Purpose of the bill . Before adopting its lien program, EBMUD had to collect unpaid water and wastewater charges from owners of multi-family residential property by issuing a formal notice, shutting off tenants' water, and suing the landlord for past due balances. The lien authority granted by SB 1035 has given EBMUD an alternative to shutting off tenants' water when their landlords fail to pay the bill. Since EBMUD initiated its lien program, there have been no multi-family residential service terminations for nonpayment, and the collection rate for delinquent accounts has increased significantly. SB 188 would allow EBMUD to continue its lien program, granting MUDs the same statutory lien authority that other special districts have under California law. 2.Property owners' concerns. Since 1996, state law has prohibited MUDs from seeking to recover, from a property owner, unpaid charges or penalties for residential services provided to a tenant under an account established by the tenant (AB 1770, Brewer). Some property owners are concerned that, under a narrow reading of state law, MUDs could at some point use liens and property tax rolls to recover past due water and sewer charges from landlords when tenants fail to pay their utility bills. The Committee may wish to consider amending SB 188 to clarify that the bill is not intended to alter or circumvent the prohibition enacted by the 1996 Brewer bill. Support and Opposition (4/2/15) Support : Alameda County; Association of California Water Agencies; California Special Districts Association; East Bay Municipal Utility District SB 188 (Hancock) 2/9/15 Page 4 of ? Opposition : East Bay Rental Housing Association; Nor Cal Rental Property Association; Apartment Association of Orange County; Apartment Association, California Southern Cities; North Valley Property Owners Association -- END --