BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON NATURAL RESOURCES AND WATER
                               Senator Fran Pavley, Chair
                                  2015 - 2016  Regular 

          Bill No:            SB 198          Hearing Date:    March 24, 2015
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          |Author:    |Morrell                |           |                 |
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          |Version:   |February 10, 2015                                    |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|William Craven                                       |
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               Subject:  State responsibility areas:  fire prevention fees

          BACKGROUND AND EXISTING LAW
          1. In 2011, AB X1 29 directed the California Board of Forestry and  
          Fire Protection (Board) to assess a fee on structures in state  
          responsibility areas (SRA) for the purpose of helping defray the  
          enhanced costs of fire suppression in wildland and watershed areas  
          that, over the years, became increasingly populated and developed.  
          From 2000-2010, for example, the number of houses in SRA grew by 16%  
          according to census numbers.

          2. State responsibility areas are those areas of the state  
          designated by the Board of Forestry where the State of California is  
          financially responsible for the prevention and suppression of  
          wildfires. SRA does not include lands within city boundaries or in  
          federal ownership. 

          3. The Board is required to classify all lands within the state for  
          the purpose of determining areas in which the financial  
          responsibility of preventing and suppressing fires is primarily the  
          responsibility of the state. 

          4. Existing law requires the Board to include within SRA all of the  
          following lands: (a) lands covered wholly or in part by forests or  
          by trees producing or capable of producing forest products; (b)  
          lands covered wholly or in part by timber, brush, undergrowth, or  
          grass, whether of commercial value or not, which protect the soil  
          from excessive erosion, retard runoff of water, or accelerate water  
          percolation, if such lands are sources of water that is available  
          for irrigation or for domestic or industrial use; and (c) lands  
          principally used or useful for range or forage purposes that are  






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          contiguous to the lands described in "(a)" and "(b)."

          5. Existing law prohibits the Board from including within SRA any of  
          the following: (a) lands owned or controlled by the federal  
          government or any agency of the federal government; (b) lands within  
          the exterior boundaries of any city, except a city and county with a  
          population of less than 25,000 if, at the time the city and county  
          government is established, the county contains no municipal  
          corporations; and (c) any other lands within the state that do not  
          come within any of the classes that are described above in "4." 

          6. The Board has on its website a "viewer" that can identify whether  
          a parcel is or is not within a state responsibility area. SRA lands  
          have important watershed values for the entire state. On the other  
          hand, structural fire suppression is supposedly handled by local  
          agencies or through reimbursements (via contracts or other  
          agreements) to the California Department of Forestry and Fire  
          Protection (CDF) for its costs associated with structural fire  
          suppression. There are numerous agreements and contractual  
          arrangements that exist among fire agencies across the state. 

          7. In a rulemaking procedure, the Board established a rate of $150  
          per habitable structure, which is defined as a building that can be  
          occupied for residential use. Owners of habitable structures who are  
          also within the boundaries of a local fire protection agency will  
          receive a reduction of $35 per habitable structure. The fee will be  
          paid by approximately 800,000 landowners who own structures in state  
          responsibility areas. Recent legislation exempted landowners whose  
          homes were destroyed by wildfires. 

          8. According to the findings and declarations in AB X1 29 as well as  
          the regulations adopted by the Board, this fee will fund a variety  
          of important fire prevention services within the SRA including  
          defensible space inspections around structures, fuelbreaks for  
          staging firefighting equipment, public education, brush clearance  
          around communities, along roadways and evacuation routes; and  
          activities to improve forest health to improve resiliency to  
          wildfires. 

          9. An appeals process has been established for landowners who wish  
          to contest the fee. About 19,000 appeals have been filed, far fewer  
          than when the fee was first established when the total number of  
          appeals was nearly 85,000. 

          10. The Howard Jarvis Taxpayer Organization has filed suit against  
          the state alleging that the fire prevention fee is a tax, not a fee.  
          That case is not moving rapidly. 






          SB 198 (Morrell)                                        Page 3 of ?
          
          

          PROPOSED LAW
          This bill would repeal the SRA fire fee in its entirety. 

          ARGUMENTS IN SUPPORT
          The author objects to the SRA fire fee first because it was adopted  
          as a budget trailer bill, and second because he believes that the  
          fee is a tax (not a fee) that should have faced a 2/3 vote in the  
          Legislature. He also objects that the revenues from the fee are used  
          for prevention, not suppression of fires.

          According to the Rural County Representatives of California (RCRC)  
          the fee is inequitable, and hurts the state's mutual aid fire  
          suppression system of interlocking agreements among fire agencies   
          who respond to severe fires. RCRC seems to indicate its preference  
          for a statewide fee that would cover all disasters. 

          The Southwest California Legislative Council and the California Farm  
          Bureau both contend that the SRA fee is a tax. 

          The Farm Bureau is also concerned about the apparent lack of an  
          ongoing commitment that some of the funds be returned to the source  
          from which they were collected and it also argues that the fee  
          adversely affects local fire districts' ability to raise funds. 

          San Diego County does not believe the fee has resulted in greater  
          fire protection. 

          ARGUMENTS IN OPPOSITION
          None received. 

          COMMENTS
          1. There have been perhaps 10 bills since 2011 to repeal the SRA  
          fire fee.  This year, of the five SRA bills that were introduced,  
          two make procedural changes to the fee collection or appeals  
          mechanism, two have not been referred (spot bills), and SB 198 is  
          the only bill thus far that would outright repeal the SRA fee. 

          2. If this bill is enacted, ABX1 29 and its fire prevention fee will  
          be repealed on January 1, 2016. The fee, according to the Governor's  
          Budget, generates $76 million although approximately $10 million is  
          not collectable by the Board of Equalization. For the budget year,  
          the department estimates the fee will generate $65 million for its  
          base fire prevention activities. 

          Once the fee is repealed, and assuming that there is no extra  
          General Fund money to transfer to CDF, there could be major  






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          disruption to the state's fire prevention program that would also  
          place a larger burden on some local firefighting agencies, the cost  
          of which could pass down to property owners by way of increased  
          local assessments. Similarly, without CDF's fire prevention program,  
          many property owners with structures in the SRAs could face higher  
          property insurance premiums because there would be a higher fire  
          risk against which to insure. Lastly, if the state compromises its  
          fire prevention program, the risk of fires will increase and the  
          state, as well as local governments, could be faced with greater  
          firefighting costs.

          3. The basic reason Legislative Counsel designated AB X1 29 a fee,  
          not a tax, was because of the findings in that legislation that  
          declared: (1) that the presence of structures within SRA can create  
          an increased risk of fire within these regions that threaten state  
          watershed values which are the reason for the SRA designation in the  
          first place. (2) The firefighting techniques used to suppress  
          structural fires are often different than techniques used to  
          suppress wildland fires, and often more expensive. One frequently  
          hears from state fire professionals that the costs of wildland fire  
          suppression increase dramatically when state engines and crews  
          literally must be parked in driveways to protect homes that  
          otherwise have inadequate local fire protection. (3) That  
          legislation also stated that those who live in SRA receive greater  
          benefits from the state's fire suppression activities than citizens  
          generally and that this greater economic benefit should be partially  
          recouped from them through this fee. All of these statements are  
          included in the findings of AB X1 29. 

          4. It is clear that there is a lack of awareness that a portion of  
          the fee will be returned to local jurisdictions. This is easiest to  
          demonstrate in contract counties, which are the six counties paid by  
          CDF to assume its initial attack obligations for wildland fires in  
          SRA. These counties are Kern, Los Angeles, Marin, Orange, Santa  
          Barbara, and Ventura. In addition to these contracted amounts, these  
          counties have received approximately $4.8 million in SRA fees.  The  
          fee revenues that are returned to these counties are for the  
          activities authorized by the legislation, including fire prevention  
          activities, defensible space inspections, and vegetation management  
          projects. The breakdown for the contract counties is as follows:

          Los Angeles, $1,055, 465; Kern, $694,505; Marin, $669,499; Orange,  
          $672,897; Santa Barbara, $860, 341; and Ventura, $866,676.

          For other counties, the department last week awarded 83 grants to  
          local jurisdictions in a total amount of $9.5 million. At least one  
          project in every county that applied for grants was awarded a grant.  






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          The Senate Budget Subcommittee on Resources is considering extending  
          the local grants process for the SRA fire fees which was not  
          recommended for continuance by the administration. 

          5. The Legislature has wrestled with aspects of this issue for  
          years. The Legislature has increased the defensible space zone  
          around structures, and adopted more fire-resistant building  
          standards. Most recently, in SB 1241 (Kehoe), local governments were  
          directed to address specific fire safety issues in their housing  
          elements of their general plans.

          6. Another avenue of inquiry that has not generated much traction  
          has been to ask the Board to exclude from SRA those rural  
          subdivisions that may not be in incorporated areas but that are  
          nevertheless sufficiently "urban" that they should no longer be  
          considered SRA. The Board has the legal responsibility to update the  
          SRA designations every 5 years. While numerous, modest changes are  
          made from time to time, the Board has never seriously proposed  
          excluding larger, low-density developments from SRA which would  
          effectively shift those structural fire protection costs to the  
          local governments which permitted those developments. In such  
          circumstances, CDF and other departments would respond to such  
          structural fires pursuant to the state's mutual aid and other  
          existing contractual relationships. 

          However, it may be difficult to quantify any savings to CDF from  
          such a result given the many contractual arrangements and  
          interagency agreements that could sometimes require CDF involvement  
          in fires in these districts in any event. On the other hand, the  
          Legislature may which to clarify, prospectively, that local  
          governments must provide for fire suppression, or contract for fire  
          suppression, for new developments and housing in SRA that they  
          approve.

          7. What has become clear is the current SRA fee statute clearly  
          demonstrates that a fee based on the current boundaries of SRA does  
          have administrative shortcomings at least until the fee becomes more  
          familiar to the public. SRA boundaries are unknown to most  
          homeowners, some of whom have discovered that their home is in SRA  
          but their neighbor's house is not. This has made for some awkward  
          moments in explaining this circumstance to homeowners. In addition,  
          some homeowners who believe that fire services are provided by their  
          familiar local agencies are not convinced that they are receiving  
          any additional services from CDF that is traceable to the new SRA  
          fee. This latter issue may fade over time as the CDF grants to local  
          agencies receive more publicity and the work undertaken pursuant to  
          these grants becomes more well-known. But it is still a perception  






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          in these early years of implementation. 

          8.The fiscal implications of this bill are significant, although not  
          addressed by the bill and not a policy matter for this committee to  
          consider. However, the loss of fee revenues to the department would  
          likely necessitate an increase in general fund revenues to CDF or  
          some other way to replace the lost fee revenues. This is clearly a  
          large sum of money that would not go unnoticed in the Senate  
          Appropriations Committee. 

           Double-referral  The Rules Committee referred this bill to both the  
          Committee on Natural Resources and Water and to the Committee on  
          Governance and Finance.  Therefore, if this bill passes this  
          committee, it will be referred to the Committee on Governance and  
          Finance, which will consider the issues within their jurisdiction.  


          SUPPORT
          California Association of Realtors
          California Farm Bureau
          CalTax 
          Howard Jarvis Taxpayers Association
          Southwest California Legislative Council
          San Diego County Board of Supervisors
          Rural County Representatives of California

          OPPOSITION
          None Received