BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 188


                                                                    Page  1





            Date of Hearing:  June 17, 2015


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                              Brian Maienschein, Chair


          SB  
          188 (Hancock) - As Amended April 14, 2015


          SENATE VOTE:  31-4


          SUBJECT:  Municipal utility district: utility charges:  
          delinquencies.


          SUMMARY:  Makes permanent provisions of law that authorize a  
          municipal utility district (MUD) to file a lien on real property  
          for unpaid water and sewer utility charges rendered to a lessee,  
          tenant, or subtenant, which may be collected on the tax roll in  
          the same manner as property taxes.  Specifically, this bill:  


          1)Deletes the January 1, 2016, sunset date that authorizes a  
            MUD's lien authority to include delinquent fees or charges for  
            the furnishing of water or sewer services to a residential  
            property.  


          2)Repeals a code section that requires any MUD that places a  
            lien on a property for water or sewer service on or before  
            December 31, 2014, to submit to the Assembly and Senate  
            Committees on Judiciary and Local Government on or before  
            January 1, 2015, a report containing specified information  
            detailing the number of liens, the total dollar amount of  








                                                                     SB 188


                                                                    Page  2





            those liens, the overall effectiveness of the liens, and any  
            problems associated with the liens.  


          3)States that the Legislature's intent to remove the sunset date  
            in Section 12811.1 of the Public Utilities Code on the  
            authority of a MUD to collect delinquent fees, tolls, rates,  
            rentals, and other charges on the tax roll, and not to change  
            existing law regarding the protection provided to a property  
            owner pursuant to Section 12822.6 of the Public Utilities  
            Code, which prohibits a MUD from collecting delinquent charges  
            or penalties from a property owner accrued by a residential  
            tenant in a nonmaster-metered building.  


          4)Specifies that no reimbursement is required by this bill,  
            pursuant to Section 6 of Article 


          XIII B of the California Constitution, because a local agency  
            for school district has the authority to levy service charges,  
            fees, or assessments sufficient to pay for the program or  
            level of services mandated by this bill, within the meaning of  
            current law.  
          EXISTING LAW:   


          1)Authorizes a MUD, until January 1, 2016, by resolution or  
            ordinance, to collect on the tax roll, delinquent fees, tolls,  
            rates, rentals, or other charges and any interest and  
            penalties thereon, including any delinquencies for services  
            rendered to a lessee, tenant, or subtenant, in the same manner  
            as property taxes, except on properties where the account was  
            established by the tenant.

          2)Requires a MUD seeking to apply delinquent utility charges to  
            the tax roll to:

             a)   Prepare and file an annual report of delinquent charges  








                                                                     SB 188


                                                                    Page  3





               for each affected parcel; 

             b)   Give published and mailed notice of the filing of the  
               report and the time and place for a public hearing;

             c)   Hear and consider objections or protests of the report  
               at the public hearing and potentially revise the report;  
               and, 

             d)   Provide, by August 10 of each year, a final report to  
               the county recorder to be added to the current tax  
               assessment roll.  

          3)Authorizes the MUD to recover any delinquent fees, tolls,  
            rates, rentals, or other charges, together with interest and  
            penalties thereon, including any delinquent fees, tolls,  
            rates, rentals, or other charges for services rendered to a  
            lessee, tenant, or subtenant.

          4)Requires the MUD to file a release of the lien within 30 days  
            of receipt of payment of the delinquent charges.

          5)Prohibits a MUD from recovering on the tax roll any delinquent  
            fees, tolls, rates, rentals, or other charges for services for  
            commercial use to a commercial tenant under an account  
            established by the commercial tenant, from any subsequent  
            tenant or the property owner, due to nonpayment of charges by  
            a previous commercial tenant. 

          6)States that the term "subsequent commercial tenant" shall not  
            include an entity or adult person that was located at the same  
            address during the period the charges or penalties accrued. 

          7)Specifies that the provisions of current law regarding  
            commercial accounts do not apply to master-metered accounts.

          8)Requires the MUD to reimburse the county for the reasonable  
            expenses incurred by the county under this authority.









                                                                     SB 188


                                                                    Page  4





          9)Requires any MUD that places a lien on a property for water or  
            sewer service on or before December 31, 2014, to submit to the  
            Assembly and Senate Committees on Judiciary and to the  
            Assembly and Senate Committees on Local Government, on or  
            before January 1, 2015, a report containing the following  
            information:

             a)   The total number of liens created under this section for  
               water or sewer service and the total dollar amount of those  
               liens; and, 

             b)   The overall effectiveness of the liens and any problems  
               associated with the use of those liens.

          10)Authorizes a MUD providing water or sewer to residential  
            property to utilize the above lien methodology for  
            delinquencies related to water or sewer services, but  
            prohibits this use on electrical services.  

          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, no state fiscal impact.  Any costs incurred by county  
          officials related to the recording of liens and collection of  
          delinquent service charges through the tax roll must be paid by  
          the district, and are not reimbursable from the state.  


          COMMENTS:   


          1)Background.  There are five MUDs statewide:  East Bay, Lassen,  
            Sacramento, South Placer, and Southern San Joaquin.  MUDs can  
            provide various utility services, including electricity,  
            water, sewer, garbage disposal, transportation, and  
            communications.  Currently, only East Bay MUD (EBMUD) and  
            South Placer MUD provide sewer service, and only EBMUD  
            provides water service.  

            Prior to 2010, when water bills were not paid, MUDs, such as  
            EBMUD, were forced to either shut off water service or  








                                                                     SB 188


                                                                    Page  5





            subsidize the cost of continued water service by charging more  
            for water services to other ratepayers.  Unlike a number of  
            other types of special districts in California, MUDs did not  
            have the authority to record a lien on residential property  
            when water bills were unpaid.  EBMUD argued that terminating  
            service to the property unfairly punishes tenants who have  
            paid for and are continuing to pay for utility services as  
            part of their rent, and have no control over whether property  
            owners are paying the utility bills.  


            To remedy this issue SB 1035 (Hancock), Chapter 485, Statutes  
            of 2010, authorized a MUD to record a lien on residential real  
            property for unpaid water and sewer utility charges rendered  
            to a lessee, tenant, or subtenant.  SB 1035 also required MUDS  
            to prepare a report, provide notice, and conduct a public  
            hearing to ensure property owners have notice of and an  
            opportunity to contest proposed liens.  


          2)Bill Summary.  This bill deletes the January 1, 2016, sunset  
            date and extends indefinitely the authority for MUDs to impose  
            a lien on residential property for the nonpayment of charges  
            for services rendered to a lessee, tenant, or subtenant for  
            water or sewer service.   


            This bill does not make changes to any of the notice or  
            hearing requirements that provide a public process for  
            property owners, nor does the bill affect the lien exemption  
            in current law for delinquent fees or changes for electrical  
            service or those accrued by residential tenants in  
            nonmaster-metered buildings.  


            This bill is sponsored by EBMUD.  


          3)Author's Statement.  According to the author, "The [current]  








                                                                     SB 188


                                                                    Page  6





            authority is scheduled to sunset January 1, 2016.  However,  
            none of the other local government authorities with similar  
            authority, including cities, counties and county service  
            areas, county water districts, and public utility districts  
            have a statutory sunset date.  


            "The authority to collect delinquent residential charges via  
            liens and the property tax rolls has provided EBMUD with a  
            viable alternative to terminating service and burdening other  
            ratepayers with subsidizing the cost of these delinquent  
            accounts.  As indicated in the report to the Legislature,  
            since EBMUD has been exercising the SB 1035 authority,  
            collections have increased from about 15% to over 90%.  If  
            this authority sunsets, EBMUD's options for addressing  
            delinquent accounts would be narrowed to terminating service  
            and unfairly burdening other ratepayers to make up the  
            difference for delinquent accounts.


            "[This bill] would also remove the outdated reporting  
            requirement in current law.  The required report was completed  
            and submitted to the legislature prior to the December 31,  
            2014 statutory deadline."  


          4)EBMUD's Report to the Legislature.  In order to comply with  
            the reporting requirements contained in SB 1035, EBMUD  
            submitted a report to the Legislature, on November 25, 2014,  
            regarding its use of liens on properties for delinquent water  
            and wastewater service charges.  


            The reports states, "Collection of delinquent [multi-family  
            residential] charges through the lien program has been an  
            effective alternative to terminating water service.  Since the  
            inception of the lien program, no [multi-family residential]  
            accounts have had service terminated due to delinquent  
            charges.  In addition, collection rates have significantly  








                                                                     SB 188


                                                                    Page  7





            increased.  


            "Prior to the initiation of the Lien Program, [multi-family  
            residential] account delinquencies resulted in termination of  
            service and collection rates were significantly lower.  From  
            2006-2010, an average of 400 [multi-family residential]  
            accounts had service terminated each year due to unpaid  
            delinquent charges.  Over $1,200,000 in unpaid [multi-family  
            residential] charges from 2006-2010 were referred to a third  
            party collection agency for collections.  Approximately  
            $1,000,000 of these delinquent charges remains unrecovered."  


          5)Arguments in Support.  Supporters argue that this bill will  
            allow EBMUD to continue to recover delinquent charges from the  
            responsible property owners through the use of liens, rather  
            than terminating water service to tenants.  Additionally, this  
            bill simply removes the sunset date on EBMUD's existing  
            authority, allowing them to continue this important program.  


          6)Arguments in Opposition.  None on file.


          7)Double-Referral.  This bill is double-referred to the  
            Judiciary Committee.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Alameda County Board of Supervisors [CO-SPONSOR]









                                                                     SB 188


                                                                    Page  8






          East Bay Municipal Utility District [CO-SPONSOR]


          Association of California Water Agencies


          California Special Districts Association




          Opposition


          None on file




          Analysis Prepared by:Misa Lennox / L. GOV. / (916)  
          319-3958