BILL ANALYSIS                                                                                                                                                                                                    Ó



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

                              
          
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          |Bill No:  |SB 239                           |Hearing    |4/29/15  |
          |          |                                 |Date:      |         |
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          |Author:   |Hertzberg                        |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |4/23/15                          |Fiscal:    |Yes      |
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          |Consultant|Weinberger                                            |
          |:         |                                                      |
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            LOCAL AGENCY FORMATION COMMISSIONS AND FIRE PROTECTION SERVICE  
                                      CONTRACTS



          Requires a LAFCO to review a contract or agreement for new or  
          extended fire service outside of an existing service area.


           Background

           The Cortese-Knox-Hertzberg Local Government Reorganization Act  
          delegates the Legislature's power to control the boundaries of  
          cities and special districts to local agency formation  
          commissions (LAFCOs).  The Act requires that cities and  
          districts must get a LAFCO's written approval before they can  
          serve territory outside their boundaries (AB 1553, Gotch, 1993).  
           However, LAFCO approval is not required for contracts or  
          agreements solely involving two or more public agencies where  
          the public service to be provided is an alternative to, or  
          substitute for, public services already being provided by an  
          existing public service provider and where the level of service  
          to be provided is consistent with the level of service  
          contemplated by the exiting service provider.

          State law allows cities and fire protection districts to  
          contract with a county to provide fire protection services  
          within the local agency's jurisdiction.  Similarly, local  
          governments may contract with the California Department of  
          Forestry and Fire Protection (CAL FIRE) to provide fire  







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          protection services.  CAL FIRE is providing fire protection  
          services within nearly 150 local jurisdictions pursuant to  
          cooperative agreements. 

          Some of these contracts and cooperative agreements result in a  
          local department shifting all responsibility for providing fire  
          protections services to a county or CAL FIRE, while others  
          supplement existing local fire services with additional services  
          provided by a county or CAL FIRE.  However, because these  
          contracts and agreements solely involve public agencies and  
          existing services, they are not subject to LAFCO approval.

          In some communities that recently entered into contracts or  
          agreements that shifted the responsibility for providing fire  
          protection services from one public agency to another, the  
          agreements have generated controversy while failing to produce  
          anticipated cost savings and administrative efficiencies.  As a  
          result, firefighters' labor union officials want the Legislature  
          to require LAFCOs to give fire protection service contracts and  
          agreements more scrutiny than is required under current law.




           Proposed Law

           Senate Bill 239 requires a public agency to obtain a LAFCO's  
          approval to provide new or extended services under a fire  
          protection reorganization contract, pursuant to a specified  
          approval process.  

          SB 239 defines a "fire protection reorganization contract" as a  
          contract or agreement that:
                 Is for the exercise of new or extended fire protection  
               services outside a public agency's current service area;

                 Is executed pursuant to specified statutes allowing  
               local governments and CALFIRE to enter into fire protection  
               service contracts and agreements; and,

                 Does either of the following:

                  o         Transfers responsibility for providing  
                    services in more than 25% of the service area of any  








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                    public agency affected by the contract or agreement.

                  o         Changes the employment status of more than 25%  
                    of the employees of any public agency affected by the  
                    contract or agreement. 

          SB 239 applies the definition of a fire protection  
          reorganization contract to a contract or agreement that, in  
          combination with other contracts or agreements, meets the bill's  
          definition of a fire protection contract.

          SB 239 requires a public agency to initiate a request for  
          commission approval of services provided under a fire protection  
          reorganization contract by adopting a resolution of application  
          as follows:
                 The legislative body of a public agency that is not a  
               state agency must adopt a resolution of application  
               proposing to provide new or extended services outside the  
               public agency's current service area.
                 The director of a state agency must initiate an  
               application, which must be approved by the Governor.

          SB 239 requires that the legislative body of a public agency or  
          the director of a state agency must do all of the following  
          before submitting a resolution of application to the commission:
                 Obtain and submit with the resolution a written  
               agreement validated and executed by each affected public  
               agency and recognized employee organization that represents  
               firefighters of the existing and proposed service providers  
               consenting to the proposed change of organization.

                 Conduct an open and public hearing on the resolution.

          SB 239 requires that a proposal for a change of organization  
          must be submitted with a plan for services prepared pursuant to  
          specified statutory requirements.  The plan for services must  
          include:
                 A total cost estimate for providing new or extended  
               services.

                 The estimated cost of the new or extended services to  
               customers.

                 An identification of existing service providers and the  








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               potential fiscal impact to the customers of those existing  
               providers.

                 A plan for financing the exercise of the new or extended  
               services.

                 Alternatives for the exercise of the new or extended  
               services.

          SB 239 requires a public agency to cause to be prepared by  
          contract an independent comprehensive fiscal analysis that  
          reviews and documents:
                 The costs to the public agency that has proposed to  
               provide new or extended services during the three fiscal  
               years following a public agency entering into a contract to  
               provide new or extended services outside its current  
               service area by contract or agreement, in accordance with  
               the following requirements:

                  o         The analysis must include all direct and  
                    indirect cost impacts to the existing service provider  
                    in the affected territory.

                  o         The analysis must review how the existing  
                    service provider's costs compare to the service costs  
                    in areas with similar populations and of similar  
                    geographic size that provide a similar level and range  
                    of services.  The analysis must make a reasonable  
                    determination of the costs expected to be borne by the  
                    public agency providing new or extended services.

                 The revenues of the public agency that has proposed a  
               new or extended service outside its current service area  
               during the three fiscal years following the effective date  
               of a contract or agreement with another public agency to  
               provide a new or extended service.

                 The effects on the costs and revenues of any affected  
               public agency, including the public agency proposing to  
               provide the new or extended service, during the three  
               fiscal years that the new or extended service will be  
               provided.

                 Any other information and analysis needed to support the  








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               findings that a LAFCO must make to approve services under a  
               fire protection reorganization contract. 

          SB 239 requires the clerk of the legislative body of a public  
          agency or the director of a state agency adopting a resolution  
          of application to file a certified copy of the resolution with  
          the LAFCO executive officer.  The bill specifies how a LAFCO  
          must process resolutions of application submitted to the  
          executive officer. 

          SB 239 requires a LAFCO to review and approve, disapprove, or  
          approve with conditions a fire protection reorganization  
          contract after a public hearing called and held for that  
          purpose.  The bill allows an applicant to request  
          reconsideration if a contract is disapproved or approved with  
          conditions.

          SB 239 generally prohibits a LAFCO from approving an application  
          unless the LAFCO determines that the public agency will have  
          sufficient revenues to carry out the exercise of the new or  
          extended services outside its current area.  However, if the  
          LAFCO has determined that the public agency will not have  
          sufficient revenue to provide the proposed new or different  
          functions or class of services, SB 239 allows a LAFCO to approve  
          an application if the commission conditions its approval on the  
          concurrent approval of sufficient revenue sources pursuant to  
          state law.  In approving an application, the LAFCO must provide  
          that if the revenue sources are not approved, the public  
          agency's authority to provide new or extended services must not  
          be exercised.

          SB 239 prohibits a LAFCO from approving an application for  
          approval of a fire protection reorganization contract unless the  
          LAFCO finds, based on the entire record, all of the following:
                 The proposed exercise of new or extended services  
               outside a public agency's current service area is  
               consistent with the Cortese-Knox-Hertzberg Act.

                 The commission has reviewed the comprehensive fiscal  
               analysis.

                 The commission has reviewed the testimony presented at  
               the public hearing.









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                 The proposed affected territory is expected to receive  
               revenues sufficient to provide public services and  
               facilities and a reasonable reserve during the three fiscal  
               years following the effective date of the contract or  
               agreement between the public agencies to provide a new or  
               extended service.

          SB 239 specifies the manner in which a LAFCO executive officer  
          must provide public notice by mail, in a newspaper, and on the  
          Internet, of a hearing to review an application for approval of  
          a fire protection reorganization contract.  The bill allows a  
          LAFCO to continue a hearing and requires that a LAFCO must hear  
          and consider oral or written testimony presented by any affected  
          local agency, affected county, or any interested person who  
          appears at the hearing.

          SB 239 specifies that a fire protection reorganization contract  
          is exempt from the statute that governs LAFCOs' approval of  
          extraterritorial service contracts.

          The bill makes additional technical and conforming changes to  
          the Cortese-Knox-Hertzberg Act.


           State Revenue Impact

           No estimate.


           Comments

           1.  Purpose of the bill  .  When a contract or agreement between  
          two public agencies makes substantial changes to the  
          administration of fire protection services in a community, it  
          deserves to be scrutinized by LAFCO in a manner that is similar  
          to how a detachment and annexation of fire protection services  
          would be scrutinized under current law.  When the Legislature  
          enacted the 1993 Gotch bill requiring LAFCO review of some  
          extraterritorial service contracts, it did so in response to  
          concerns that local governments were using service contracts to  
          circumvent LAFCO review of major changes to local service  
          delivery.  However, the review requirement for extraterritorial  
          service contracts contained a substantial loophole for contracts  
          that only involved public agencies.  SB 239 will narrow that  








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          loophole.  Some recent fire protection service contracts between  
          public agencies have resulted in costly litigation and generated  
          deep divisions among community members.  Other agreements have  
          been jeopardized by public officials' reliance on financial data  
          that later was determined to be inaccurate.  Problems like these  
          can be avoided by providing more opportunities for the public to  
          review and consider independent analyses of proposed changes to  
          fire service delivery in their communities.  By requiring a  
          public agency to submit a plan for extended services for fire  
          protection to LAFCO for review and approval, SB 239 will ensure  
          that the details of service delivery and costs are thoroughly  
          and independently examined, which will benefit the residents,  
          the public agency and the firefighters in all of the affected  
          areas.  

           2.   Local control  .  Local voters elect county supervisors, city  
          council members, and special district board members to make  
          public policy in response to local needs.  Local elected  
          officials strive to provide their communities' residents with  
          the best services at the most reasonable cost. They have to  
          answer to residents who are displeased with the quality and cost  
          of their services.  As a result, a decision to enter into a  
          contract with another public agency to provide fire protection  
          services is a decision that elected officials make only after  
          considering the fiscal, administrative, and service delivery  
          implications for their communities.  By requiring LAFCO review  
          of fire protection reorganization contracts, SB 239 diminishes  
          local officials' autonomy to contract for fire protection  
          services in the manner that they determine will best serve their  
          constituents.  

           3.   Delegation of powers  . SB 239 prohibits a LAFCO from  
          considering an application for approval of new or extended fire  
          protection service unless the application is accompanied by a  
          written agreement validated and executed by each affected public  
          agency and recognized employee organization that represents  
          firefighters of the existing and proposed service providers.   
          This requirement effectively gives some local officials and  
          private employee organizations authority to decide whether or  
          not a LAFCO can consider an application.  The California  
          Constitution gives the State Legislature complete authority to  
          create local governments and set their boundaries. Because the  
          Legislature has delegated much of its authority over city and  
          special district boundaries to each county's LAFCO, LAFCOs are  








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          exercising a legislative power when they make decisions about  
          changes to local governments' organization.  By empowering local  
          officials and labor organizations to determine whether a  
          proposal for new or extended services can be reviewed by a  
          LAFCO, SB 239 may delegate some legislative powers to those  
          other parties.  As a general doctrine, the power to make laws  
          must be exercised by the Legislature, and may not be delegated.   
          However, courts have frequently upheld the delegation of  
          legislative powers to public boards or officers if the statutes  
          specify definite standards to be used to carry out the delegated  
          legislative purposes.  By contrast, courts have invalidated  
          statutes that delegate uncontrolled discretion to third parties.  
           Granting local officials and employee organizations full  
          discretion to determine which proposed changes of organization a  
          LAFCO can consider may not be consistent with judicial  
          interpretations of the nondelegation doctrine.  

           4.   Next in line  ?  Fire protection services aren't the only kind  
          of public service that local agencies provide outside of their  
          boundaries pursuant to contracts with other public agencies.   
          Local agencies commonly contract for law enforcement services,  
          utility services, and park and recreation services, among  
          others.  Enacting SB 239 may invite requests from other interest  
          groups for LAFCOs to more carefully scrutinize other types of  
          contracts for services provided outside of existing service  
          areas.

          5.   Mandate  .  The Legislative Counsel's Office says that SB 239  
          would impose a state-mandated local program because it requires  
          local government officials to perform additional duties related  
          to the approval of fire protection reorganization contracts.   
          The California Constitution generally requires the state to  
          reimburse the costs of new or expanded state mandated local  
          programs.  However, on June 3, 2014, California voters approved  
          Proposition 42, which amended the California Constitution to  
          require local agencies to comply with the California Public  
          Records Act.  Proposition 42 also requires local agencies to  
          comply with any subsequent statutory enactment amending the  
          Public Records Act that contains specified findings that the  
          newly enacted statute furthers specified constitutional  
          provisions guaranteeing public access to public agency meetings  
          and records.  SB 239 contains legislative findings that the bill  
          furthers the purpose of Section 3 of Article I of the California  
          Constitution by providing for notice in accordance with existing  








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          provisions of open meeting statutes.  As a result, SB 239  
          disclaims the state's responsibility for reimbursing local  
          governments' costs of complying with the bill's requirements.

















































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          Support and  
          Opposition   (4/23/15)


           Support  :  California Professional Firefighters; CALFIRE Local  
          2881; California Labor Federation.

           Opposition  :  Alameda County LAFCO; Apple Valley Fire Protection  
          District; California Association of LAFCOs; California Building  
          Industry Association; California Special Districts Association;  
          California State Association of Counties; Contra Costa County  
          LAFCO; Covelo Fire Protection District; Happy Valley Fire  
          Protection District; Fire Districts Association of California;   
          Hesperia Recreation and Park District; League of California  
          Cities; Los Angeles County LAFCO; Rural County Representatives  
          of California; San Mateo County LAFCO; Saratoga Fire District;  
          Shasta Lake Fire Protection District; Squaw Valley Public  
          Service District.  


                                      -- END --