BILL ANALYSIS                                                                                                                                                                                                    Ó



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

                              
          
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          |Bill No:  |SB 188                           |Hearing    |4/8/15   |
          |          |                                 |Date:      |         |
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          |Author:   |Hancock                          |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |2/9/15                           |Fiscal:    |Yes      |
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          |Consultant|Lewis                                                 |
          |:         |                                                      |
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                   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.







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           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. 









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           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









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           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 



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