BILL ANALYSIS Ó
SB 239
Page 1
Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Brian Maienschein, Chair
SB
239 (Hertzberg) - As Amended June 1, 2015
SENATE VOTE: 26-12
SUBJECT: Local services: contracts: fire protection services.
SUMMARY: Requires a public agency to receive approval from a
local agency formation commission (LAFCO) to provide new or
extended fire protections services outside its service area,
pursuant to a fire protection contract. Specifically, this
bill:
1)Requires a public agency to request and receive written
approval from the LAFCO in the affected county before
providing new or extended services, pursuant to a fire
protection contract.
2)Defines a "fire protection contract" to mean a contract or
agreement for the exercise of new or extended fire protection
services outside a public agency's current service area, and
is executed pursuant to existing law which authorizes public
agencies (which includes a city, county, city and county,
special district, joint powers authority, and state agency)
and the California Department of Forestry and Fire Protection
SB 239
Page 2
(CAL FIRE) to enter into fire protection service contracts and
agreements, that does either of the following:
a) Transfers responsibility for providing services in more
than 25% of the service area of any public agency affected
by the contract or agreement; or,
b) Changes the employment status of more than 25% of the
employees of any public agency affected by the contract or
agreement.
3)Requires that a contract or agreement for the exercise of new
or extended fire protection services outside a public agency's
current services area, in combination with other contracts or
agreement that would produce the results in 2), above, be
deemed a fire protection contract, as defined by this bill.
4)Requires a public agency to initiate a request for LAFCO's
approval of new or extended services provided by a fire
protection contract to be made by the adoption of a resolution
of application, as follows:
a) The legislative body of a public agency must initiate
the application by the adoption of a resolution of
application proposing to provide new or extended services
outside the public agency's current service area; and,
b) The director of a state agency must initiate the
application proposing to provide new or extended services
outside their current service area, which must be approved
by the Director of Finance.
SB 239
Page 3
5)Prohibits the legislative body of a public agency or the
director of a state agency from submitting a resolution of
application, unless the public agency or state agency do both
of the following:
a) Conducts an open and public hearing on the resolution,
pursuant to the Ralph M. Brown Act or the Bagley-Keene Open
Meeting Act, as applicable; and,
b) Does either of the following:
i) Obtains and submits 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 fire
protection contract; or,
ii) Provides, at least 30 days prior to the hearing,
held pursuant to a), above, written notice to each
affected public agency and recognized employee
organization that represents firefighters of the existing
and proposed service providers of the proposed fire
protection contract and submits a copy of each written
notice with the resolution of application. Requires the
notice, at minimum, to include a full copy of the
proposed contract.
6)Requires a resolution of application to be submitted with a
plan for services, which must include the following:
SB 239
Page 4
a) A total estimated cost to provide the new or extended
fire protection services in the affected territory;
b) The estimated cost of the new or extended fire
protection services to customers in the affected territory;
c) An identification of existing service providers, if any,
and the potential fiscal impact to the customers in the
affected territory;
d) A plan for financing the exercise of new or extended
fire protection services;
e) Alternatives for the exercise of new or extended
services in the affected territory;
f) An enumeration and description of the new or extended
fire protection services proposed to be extended in the
affected territory;
g) The level and range of new or extended fire protection
services;
h) An indication of when the new or extended fire
protection services can feasibly be extended to the
affected territory; and,
i) An indication of any improvement or upgrades to
SB 239
Page 5
structures, roads, sewer or water facilities, or other
conditions that the public agency would impose or require
within the affected territory if the contract is completed.
7)Requires the applicant to cause to be prepared by contract an
independent comprehensive fiscal analysis to be submitted with
the application. Requires the independent comprehensive
fiscal analysis to review and document all of the following:
a) The costs to the public agency that has proposed to
provide new or extended fire protection 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:
i) Requires the analysis to include all direct and
indirect cost impacts to the existing service provider in
the affected territory; and,
ii) Requires the analysis to review how the costs of the
existing service provider compare to the costs to
services provided in service areas with similar
populations and geographic size that provide a similar
level and range of services, and to make a reasonable
determination of the costs expected to be borne by a
public agency providing new or extended fire protection
services;
SB 239
Page 6
b) 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;
c) 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; and,
d) Any other information and analysis needed to support the
findings that a LAFCO must make to approve services under a
fire protection contract.
8)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's executive officer.
9)Requires an executive officer, within 30 days of receipt, to
determine whether the request is complete and acceptable for
filing. Establishes specified requirements for an executive
officer if the request is incomplete.
10)Requires the LAFCO to approve, disapprove, or approve with
conditions the contract for new or extended fire protection
SB 239
Page 7
services following the LAFCO hearing.
11)Allows the applicant to request reconsideration, as
specified, if the contract is disapproved or approved with
conditions.
12)Prohibits LAFCO from approving an application for approval of
a fire protection contract, unless it determines that the
public agency will have sufficient revenues to carry out the
exercise of the new or extended fire protection services
outside its current area, except as specified in 13), below.
13)Authorizes LAFCO to approve an application for approval of a
fire protection contract where the LAFCO has determined that
the public agency will not have sufficient revenue to provide
the proposed new or different functions or loss of services,
if LAFCO conditions its approval on the concurrent approval of
sufficient revenue sources. Requires LAFCO to provide that if
the revenue sources are not approved, the authority of the
public agency to provide new or extended fire protection
services shall not be exercised.
14)Prohibits LAFCO from approving an application for the
approval of a fire protection contract, unless the LAFCO
finds, based on the entire record, all of the following:
a) The proposed exercise of new or extended fire protection
services outside a public agency's current service area is
consistent with requirements established by this bill and
with the policies and legislative intent established in the
Act;
b) The LAFCO has reviewed the comprehensive fiscal
SB 239
Page 8
analysis;
c) The LAFCO has reviewed any testimony presented at the
public hearing; and,
d) 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 the new or
extended fire protection services.
15)Requires an executive officer, at least 21 days prior to the
date of the hearing, to give mailed notice of the hearing to
each affected local agency or affected county, and to any
interested party who has filed a written request for notice
with the executive officer.
16)Establishes additional Internet and newspaper posting
requirements, as specified.
17)Allows LAFCOs to continue from time to time any hearing
called pursuant to this bill and requires LAFCOs to hear and
consider oral or written testimony presented by an affected
local agency, county, or any interested person who appears at
any hearing called pursuant to the process contained in this
bill.
18)Prohibits this bill from being construed to abrogate a public
agency's obligations under the Meyers-Millias Brown Act.
19)Exempts a fire protection contract, as defined by this bill,
SB 239
Page 9
from the provisions in existing law which govern the process
for outside service extension contracts contained in LAFCO
law.
20)Makes other technical and conforming changes.
21)Makes findings and declarations.
EXISTING LAW:
1)Establishes the Cortese-Knox-Hertzberg Act (Act), which
defines the procedures for the organization and reorganization
of cities, counties, and special districts.
2)Authorizes a city or district to provide new or extended
services by contract or agreement outside its jurisdictional
boundaries, if it requests and receives written approval from
the LAFCO in the affected county.
3)Allows a LAFCO to authorize a city or district to provide new
or extended services outside its boundaries, but within its
sphere of influence in anticipation of a later change of
organization.
4)Allows a LAFCO to authorize a city or district to provide new
or extended services outside its boundaries and outside its
sphere of influence to respond to an existing or impending
threat to the public health or safety of the residents of the
affected territory, if both of the following requirements are
met:
SB 239
Page 10
a) The entity applying for the contract has provided LAFCO
with documentation of a threat to the health and safety of
the public or the affected residents; and,
b) The LAFCO has notified any alternate service providers,
including any water corporation or sewer system corporation
that has filed a map and statement of service capabilities
with the LAFCO.
5)Provides exemptions to the requirement in existing law for the
following contracts or agreements:
a) Contracts or agreements solely involving two or more
public agencies where the public service is an alternative
or substitute for public services already being provided by
an existing public services provided, and there the level
of service will be consistent with the level of service by
the existing provider;
b) Contracts for the transfer of nonpotable or nontreated
water;
c) Contracts or agreements solely involving the provision
of surplus water to agricultural lands and facilities, as
specified;
d) Extended service that a city or district was providing
on or before January 1, 2001; and,
e) Local publicly owned electric utility, as defined,
providing electric services that do not involve the
acquisition, construction or installation of electric
SB 239
Page 11
distribution facilities by the local publicly owned
electric utility, outside of the utility's jurisdictional
boundaries.
6)Establishes requirements and a timeframe for an executive
officer upon receipt of a request for approval by a city or
district of a contract to extend services outside boundaries.
Requires, upon receipt of a complete request, the request to
be placed on the agenda of a LAFCO meeting, unless the LAFCO
has delegated the approval of requests to the executive
commissioner.
7)Requires the LAFCO or executive officer to approve,
disapprove, or approve with conditions the contract for
extended services. Allows an applicant, if a contract is
disapproved or approved with conditions, to request
reconsideration and cite the reasons why.
8)Defines public agency, pursuant to the Act, to mean the state
or any state agency, board, or commission, any city, county,
city and county, special district, or any agency board, or
commission of the city, county, city and county, special
district, joint powers authority, or other political
subdivision.
9)Authorizes cities and fire protection districts to contract
with a county to provide fire protection services within the
local agency's jurisdiction.
10)Requires every contract between a county and a city for the
furnishing of fire protection services by the county to the
city, to be for a term of at least one year.
SB 239
Page 12
11)Authorizes counties to contract with CAL FIRE to provide fire
protection services.
12)Authorizes a legislative body of any local agency, city,
county fire protection district, joint powers authority that
provides fire protection services, to contract with any other
local agency for the furnishing of fire protection to such
other local agency.
FISCAL EFFECT: According to the Senate Appropriations
Committee, unknown increased General Fund costs to CAL FIRE,
likely in the low hundreds of thousands annually, to comply with
specified administrative requirements prior to contracting with
local agencies for fire protection services. CAL FIRE currently
has 115 contracts with local agencies for full fire protection
services, and the contracts typically have a duration of three
years. It is likely that all of those contracts would meet the
criteria in the bill requiring LAFCO approval. For illustrative
purposes, if CAL FIRE incurred additional costs of $10,000 to
extend 38 fire protection contracts in a year through the LAFCO
process, annual administrative costs would be $380,000. It is
likely that CAL FIRE would incur higher costs to assess the
impacts of contracts for larger service areas. Unknown,
potentially significant impact on CAL FIRE fire protection costs
(General Fund). Currently, CAL FIRE provides over $50 million
in contracted reimbursements to counties for fire protection
services in "state responsibility areas," and the state is
provided with over $300 million in contracted reimbursements
from local agencies for CAL FIRE to provide a variety of fire
protection services to cities, counties, and fire protection
districts. These contracts must be mutually beneficial and
cost-effective. To the extent this bill discourages or prevents
contracting for fire services, both CAL FIRE and local agencies
could experience increased costs to provide fire protection.
SB 239
Page 13
COMMENTS:
1)Background. The Act delegates the Legislature's power to
control the boundaries of cities and special districts to
LAFCOs. The Legislature created LAFCOs to discourage urban
sprawl, preserve open space and prime agricultural lands,
encourage the orderly formation and development of local
agencies, and to ensure the efficient provision of government
services.
The Act requires that cities and districts must get a LAFCO's
written approval before they can serve territory outside their
boundaries, pursuant to AB 1335 (Gotch), Chapter 1307,
Statutes of 1993. This requirement was established because of
a concern that some cities and districts might be
circumventing LAFCO review by signing contracts to provide
services outside their boundaries without annexing the
territory. AB 1335, however, recognized the need to
accommodate unexpected local conditions and purposely
established several exemptions. For example, 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.
Due to this exemption in the Act, contracts and cooperative
agreements, permitted under existing law, which allow cities
and fire protection districts to contract with a county or
local government to contract with CAL FIRE to provide fire
protection services are not under LAFCO's purview. While in
practice many LAFCOs are involved in the service provision,
SB 239
Page 14
reorganization, and coordination between entities under their
purview that provide fire protection services, they are not
required to get LAFCO's approval before contracting with one
another to provide service outside of their jurisdictional
boundaries. Some contracts are for full responsibility,
shifting entire services to the county or CAL FIRE, and others
are used to supplement existing services. For CAL FIRE
contracts alone, there are 149 reimbursable cooperative fire
protection agreements in 35 of the state's 58 counties, 25
cities, 31 fire districts, and 34 other special districts and
service areas.
2)Bill Summary. This bill requires a public agency to receive
approval from LAFCO before providing fire protection services,
pursuant to a fire protection contract. Under this bill, a
fire protection contract is defined as a contract or agreement
that is for the exercise of new or extended fire protection
services outside a public agency's (city, city and county,
county, state agency, joint powers authority) current service
area and is executed pursuant to existing law which authorizes
local governments and CALFIRE to enter into fire protection
services contracts and agreements. The fire protection
contract must either transfer the responsibility for providing
services in more than 25% of the service area of any public
agency affected by the contract or agreement or change the
employment status of more than 25% of the employees of any
public agency affected by the contract or agreement.
This bill establishes a separate approval process within LAFCO
law for these fire protection service contracts and determines
the application requirements, notice requirements, hearing
requirements, independent financial review requirements, and
findings that LAFCO must make in order to approve the fire
protection service contracts between public agencies. The
application, hearing, and notice requirements contained in
this bill are substantially similar to the requirements for
changes of organization contained in the Act. For example,
SB 239
Page 15
this bill requires a public agency that is the applicant to
submit a plan for services which requires information
regarding the cost of services and a plan for financing
services similar to a change of organization which includes
annexation, formation, detachment, and consolidation or if a
special district wants to provide new or different function or
class or services within its jurisdictional boundaries under
LAFCO law. However, in addition to the plan for services, the
public agency must also obtain an independent fiscal analysis
that must contain specified information.
This bill does not mirror all its requirements from the Act.
For example, the inclusion of CAL FIRE under LAFCO's purview
for the extension of services and the requirement of an
applicant, before submitting an application to LAFCO, to
either provide notification to each affected public agency and
recognized employee organization that represents firefighters
or obtain sign off from each affected public agency and
recognized employee organization, are not contained in the
Act.
This bill is sponsored by the California Professional
Firefighters.
3)Author's Statement. According to the author, "Current law
establishes specific LAFCO proceedings to consider new or
different functions or services, or for the divestiture of
power, by special districts. However, LAFCO's do not review
and approve contracts or agreements for services between two
public agencies. Moreover, such contracts do not require any
specific information to be submitted or reviewed regarding the
fiscal conditions of the public agency or potential impacts to
service delivery. So when such a contract or agreement is
made exclusively between two public agencies, there is no
process to provide oversight and ensure efficient and
economical delivery for the agencies and all residents in the
SB 239
Page 16
existing and affected territory.
"SB 239 extends LAFCO's jurisdiction to include contracts for
services between public agencies for fire protection.
Specifically, this bill requires that the public agency that
has proposed a contract for new or extended fire protection to
go through a specified LAFCO process. As part of this
process, the agency will submit specified information to LAFCO
regarding the contract and provide notification."
4)Policy Considerations: The Committee may wish to consider the
following:
a) Outside Service Extension. The notification, hearing,
application, independent financial analysis, and required
LAFCO findings contained in this bill are different than
the process in place to have LAFCO review other outside
service extensions. This bill is not simply removing the
exemption in current law to require the existing LAFCO
review for outside service extensions; it is instead
applying the requirements for changes of organization to a
contract between two public agencies to provide fire
protection services. The Committee may wish to consider if
these types of contracts warrant the creation of a new
process under LAFCO law.
b) CAL FIRE. According to the California Association of
Local Agency Formation Commissions, this bill would, for
the first time, require a California state agency to apply
for and request LAFCO approval prior to undertaking an
action that involves the provision of services by means of
a contract with a local agency, which is a great shift in
the Act's applicability.
SB 239
Page 17
c) Independent Fiscal Analysis. To ensure the financial
viability of the services proposed to be extended outside a
public agency's service area, this bill establishes several
requirements for financial analysis in the LAFCO process it
creates. The public agency applicant must produce a plan
for services, contract for an independent fiscal analysis
and rely on a number of findings the LAFCO must be able to
make in order to approve the service extension. In light
of these extensive requirements, the Committee may wish to
consider: 1) why the independent fiscal analysis is
necessary; and, 2) why the independent fiscal analysis
should not be completed by LAFCO, similar to the fiscal
analysis undertaken by LAFCO in incorporations.
Opposition to this bill notes that the comprehensive fiscal
analysis required by this bill is far beyond any other
requirements in LAFCO law associated with extension of
services, and that the requirements would add substantially
to the cost of providing services.
d) Technical Issues. The Committee may wish to consider
the following technical issues:
i) Threshold Determinations. This bill only applies to
fire protection contracts that meet a 25% threshold for
either service area or employee status. The Committee
may wish to note that the bill is silent on who
determines this threshold.
ii) Definitions and Applicability. The term "service
area" is not defined in the Act, therefore, the Committee
may wish to ask the author why "service area" is used
instead of "jurisdictional boundary" which is used
throughout the Act, including the provisions that govern
the extension of services.
SB 239
Page 18
The Committee may wish to encourage the author to
continue to work on the definition used in this bill for
fire protection contracts because it is still unclear
which fire protection contracts must be approved by
LAFCO.
1)Conflicting Legislation. Provisions of this bill conflict
with AB 402 (Dodd), which is currently pending on the Senate
Floor, and may need amendments to address the conflict, should
the bills continue to move through the legislative process.
1)Arguments in Support. Supporters argue that this bill
provides transparency and oversight when a public agency
considers extending fire protection services outside of their
current service area. Supporters of this bill point to
communities that have entered into contracts to shift
responsibility to provide fire protection services from one
public agency to another, which have generated controversy
while failing to produce anticipated cost savings and
administrative efficiencies.
The California Professional Firefighters argue, "Current law
establishes specific LAFCO proceeding to consider new or
different functions or services, or for the divestiture of
power,
by special districts. However, a LAFCO's current ability to
review and approve contracts or agreements for services is
much more restricted and lacks the authority to conduct a
comprehensive review of the contracts, particularly when the
contract or agreement is between two public agencies. While a
LAFCO has the ability to approve contracts that include a
local agency providing new or extended services outside its
SB 239
Page 19
jurisdictional boundaries, that ability only applies very
narrowly to cities and special districts and does not require
any specific information to be submitted or reviewed by the
LAFCO regarding the fiscal conditions of the public agency or
potential impacts to service delivery.
"In addition, under current law, when such a contract or
agreement is made exclusively between two public agencies,
there is no process to provide oversight and ensure that the
public services proposed to be provided via contract will be
efficient and economical for the public agencies involved and
meet the service demands for all residents in the existing and
affected territory. By requiring a public agency to submit
their plan for extended services for fire protection to LAFCO
for review and approval, this bill would ensure that the
details regarding service delivery and costs are appropriately
examined which benefits the residents, the public agency, and
the firefighters in all of the affected areas."
2)Arguments in Opposition. Opposition argues that this bill
creates severe budget implications, hampers the ability of
public agencies to achieve cost-savings, and potentially
disrupts emergency services. Opposition to this bill points
out that in many of the communities that have entered into
contracts to shift responsibility to provide fire protection
services from one public agency to another, which have
generated controversy, have been worked out at the local level
due to accountability to the voters and the election process.
The California Special Districts Association, League of
California Cities, California State Association of Counties,
the California Building Industry Association and the
California Business Properties Association, in a joint letter,
argue, "At a time when many agencies are facing increased
financial pressures, this bill restricts the ability of fire
protection providers to govern in the best interests of the
affected residents and could potentially disrupt service
SB 239
Page 20
entirely. Fire protection providers that negotiate service
agreements are directly accountable to the communities they
serve. LAFCOs are not, and should not be, tasked with making
the day-to-day financial decisions for local agencies.
"This bill presents a significant unfunded mandate on the
public agencies that must pay thousands of taxpayer dollars to
fund each independent fiscal analysis. Similar to any
significant budget decision, and before a public agency
contracts with another public agency, it first conducts a
thorough internal fiscal review in order to determine
feasibility and any needs for increasing staff and equipment.
This bill requires a second independent fiscal analysis that
is duplicative and extremely costly. Estimates for an
independent analysis start at $5,000 and can often cost in the
tens of thousands of dollars based upon complexity. This
ultimately reduces the amount of funds available for fire
protection services."
REGISTERED SUPPORT / OPPOSITION:
Support
California Professional Firefighters [SPONSOR]
CAL FIRE, Local 2881
California Labor Federation
SB 239
Page 21
Opposition
California Building Industry Association
California Business Properties Association
California Special Districts Association
California State Association of Counties
Cities of Calimesa, Coalinga, Colton, Fortuna, Fremont,
Hesperia, Highland, Indio, Lakewood, Montclair, and Rancho
Mirage
Contra Costa County Fire Protection District
League of California Cities
Los Angeles County Board of Supervisors
Los Angeles County Division, League of California Cities
Madera County Board of Supervisors
North Tahoe Fire Protection District
SB 239
Page 22
Rural County Representatives of California
San Bernardino County Local Agency Formation Commission (unless
amended)
San Diego Local Agency Formation Commission
San Luis Obispo Local Agency Formation Commission
Santa Cruz Local Agency Formation Commission
Sonoma Local Agency Formation Commission
Analysis Prepared by:Misa Lennox / L. GOV. / (916)
319-3958