BILL ANALYSIS Ó
SB 188
Page 1
Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
SB 188
(Hancock) - As Amended April 14, 2015
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Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill would make 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
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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)Deletes the requirement that any MUD that places a lien on a
property for water or sewer service on or before December 31,
2014, to submit to the Legislature on or before January 1,
2015, a report containing specified information detailing the
number of liens, the total dollar amount of those liens, the
overall effectiveness of the liens, and any problems
associated with the liens.
FISCAL EFFECT:
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 utility
district, and are not reimbursable by the state.
COMMENTS:
1)Purpose. According to the author, "The authority to collect
delinquent residential charges via liens and the property tax
rolls has provided East Bay MUD (EBMUD) with a viable
alternative to terminating service and burdening other
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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 reporting requirement in
current law. The required report was completed and submitted
to the legislature prior to the December 31, 2014, statutory
deadline."
2)Background. The Municipal Utilities Act authorizes the
creation of special districts that are authorized to acquire,
construct, own, and operate works providing electrical, heat,
water, sewer, garbage disposal, and various transportation and
communication services. Currently, there are five MUDs in the
state; only two of these provide basic services to residential
users. The Sacramento Municipal Utility District (SMUD)
provides electricity, while EBMUD provides water and sewer
services. Because this bill only applies to residential water
and sewer services, EBMUD, the sponsor, is the only district
which is affected by its provisions.
The original Municipal Utilities Act authorized MUDs to impose
liens against real property to recover delinquent charges, but
MUDs lost that authority in 1996 when they were prohibited
from imposing liens on property owners whose tenants were
delinquent for water or electrical services. In 1998, the
same limitation on lien authority was extended to sewer
services. The rationale for these limitations was that
property owners should not be liable for their tenants'
failure to pay their bills. This approach, however, left the
MUD with only two options when a customer neglected to pay
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water and sewer service bills: shut off water service to the
delinquent customer, or recover its losses by charging more to
other ratepayers. In 2010, SB 1035 (Hancock, Chapter 485,
Statutes of 2010) provided a third, more attractive, option by
authorizing a MUD to record a lien on residential real
property in the amount of any unpaid charges.
To evaluate whether the lien authority should continue after a
sunset date of January 1, 2016, SB 1035 also required any MUD
that used the authority to submit to the Legislature, no later
than January 1, 2015, a report on the number of liens recorded
for water and sewer delinquencies, the dollar amount of those
liens, the overall effectiveness of the liens, and any
problems associated with the use of those liens. EBMUD
submitted the required report on November 25, 2014.
The report showed that prior to 2010, EBMUD terminated service
to about 400 master-metered multi-family residential accounts
each year due to non-payment of bills. Since using the
authority granted under SB 1035, EBMUD has not terminated
service to any master-metered multi-family residential
buildings. Further, there is no evidence that EBMUD has
abused its authority, or that property owners failed to
receive adequate notice and an opportunity to challenge.
This bill removes the sunset provision in existing law,
thereby making permanent EBMUD's authority to record a lien on
real property for delinquent charges for residential water and
sewer services. All existing procedural requirements and
protections remain unchanged.
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1)Prior
Legislation. SB 1035 (Hancock), Chapter 485, Statutes of 2010, authorizes
MUDs to collect delinquent water and sewer charges on the tax
roll after recording a lien on a utility customer's property
for payment of those charges until January 1, 2016.
Analysis Prepared by:Jennifer Swenson / APPR. / (916)
319-2081