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
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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
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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.
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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
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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]
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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
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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
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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