BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 239


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          SENATE THIRD READING


          SB  
          239 (Hertzberg)


          As Amended  September 2, 2015


          Majority vote


          SENATE VOTE:  26-12


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          |Committee       |Votes|Ayes                   |Noes                 |
          |                |     |                       |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |
          |----------------+-----+-----------------------+---------------------|
          |Local           |8-1  |Maienschein, Gonzalez, |Waldron              |
          |Government      |     |Alejo, Chiu, Cooley,   |                     |
          |                |     |Linder, Low, Mullin    |                     |
          |                |     |                       |                     |
          |----------------+-----+-----------------------+---------------------|
          |Appropriations  |12-4 |Gomez, Bloom, Bonta,   |Bigelow, Gallagher,  |
          |                |     |Calderon, Nazarian,    |Jones, Wagner        |
          |                |     |Eggman,                |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |
          |                |     |Eduardo Garcia,        |                     |
          |                |     |Holden, Quirk, Rendon, |                     |
          |                |     |Weber, Wood            |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |
           -------------------------------------------------------------------- 









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          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 jurisdictional  
          boundaries, 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 jurisdictional boundaries,  
            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 (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 area within the jurisdictional boundaries  
               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)Exempts cooperative agreements entered into by CAL FIRE and a  
            city, county, special district, or political subdivision for  
            the purpose of preventing and suppressing fires, pursuant to  








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            the Public Resources Code, from the definition of a "fire  
            protection contract" provided by this bill.  


          4)Requires that a contract or agreement for the exercise of new  
            or extended fire protection services outside a public agency's  
            jurisdictional boundaries, in combination with other contracts  
            or agreements that would produce the results in 2) above, be  
            deemed a fire protection contract, as defined by this bill.  


          5)Requires "jurisdictional boundaries" to include the territory  
            of lands protected pursuant to a fire protection contract  
            entered into on or before December 31, 2015.  Requires an  
            extension of a fire protection contract entered into on or  
            before December 31, 2015, that would produce the results in 2)  
            above, to be deemed a fire protection contract, as defined by  
            this bill.  


          6)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)   For a public agency that is not a state agency, 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;  


             b)   For a public agency that is a state agency, 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; and,









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             c)   For a public agency that is a local agency currently  
               under contract with a state agency and proposing to provide  
               new or extended services by the expansion of an existing  
               contract or agreement, the public agency must initiate the  
               application which must be approved by the Director of  
               Finance.  


          7)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 6)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  








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                 proposed contract.  


          8)Requires a resolution of application to be submitted with a  
            plan for services, which must include the following:


             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  








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               protection services can feasibly be extended to the  
               affected territory;


             i)   An indication of any improvement or upgrades to  
               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;  
               and,  


             j)   A determination, supported by documentation, that the  
               proposed fire protection contract meets the criteria  
               established by this bill.  


          9)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)   A thorough review of the plan for services submitted by  
               the public agency, as specified;  


             b)   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; and,  


             c)   Any other information and analysis needed to support the  
               findings that a LAFCO must make to approve services under a  
               fire protection contract.  









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          10)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.  


          11)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.  


          12)Requires the LAFCO to approve, disapprove, or approve with  
            conditions the contract for new or extended fire protection  
            services following the LAFCO hearing.  


          13)Allows the applicant to request reconsideration, as  
            specified, if the contract is disapproved or approved with  
            conditions.  


          14)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 14) below.  


          15)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.  








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          16)Prohibits LAFCO from approving an application for the  
            approval of a fire protection contract, unless the LAFCO  
            determines, 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  
               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.  


          17)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.  


          18)Establishes additional Internet and newspaper posting  
            requirements, as specified. 








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          19)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. 


          20)Prohibits this bill from being construed to abrogate a public  
            agency's obligations under the Meyers-Milias Brown Act.  


          21)Exempts a fire protection contract, as defined by this bill,  
            from the provisions in existing law which govern the process  
            for outside service extension contracts contained in LAFCO  
            law.  


          22)Finds and declares that this bill is not intended to change,  
            alter, or in any way affect either of the following:


             a)   The existing jurisdiction of a LAFCO over proceedings  
               that involve the provision of prehospital emergency medical  
               services, or, 


             b)   Mutual aid agreements, including mutual aid agreements  
               entered into pursuant to specified existing law.  


          23)Contains chaptering out language to avoid conflicts with AB  
            402 (Dodd) of the current legislative session, currently  
            pending in the Assembly.  


          24)Makes other technical and conforming changes.  








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          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 specified requirements are met.  


          5)Provides exemptions to the requirement in existing law for  
            specified contracts or agreements, including the following:


             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; and, 








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             b)   Extended service that a city or district was providing  
               on or before January 1, 2001.  


          6)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.  


          7)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.  


          8)Authorizes cities and fire protection districts to contract  
            with a county to provide fire protection services within the  
            local agency's jurisdiction.  


          9)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.  


          10)Authorizes counties to contract with CAL FIRE to provide fire  
            protection services.  


          11)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  








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            other local agency.  


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, 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.  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.  


          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  








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            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,  
            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) jurisdictional  
            boundaries 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  








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            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.   
            The definition of fire protection contract does not include  
            mutual aid agreements or Amador plan agreements.  


            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,  
            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.  









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            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  
            existing and affected territory.  This bill extends LAFCO's  
            jurisdiction to include contracts for services between public  
            agencies for fire protection."  


          4)Policy Considerations:  The Legislature 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.  









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             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.  


             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 Legislature may wish  
               to consider:  i) why the independent fiscal analysis is  
               necessary; and, ii) why the independent fiscal analysis  
               should not be completed by LAFCO, similar to the fiscal  
               analysis undertaken by LAFCO in incorporations.  


          6)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, "LAFCO's  
            current ability to review and approve contracts or agreements  
            for services is much more restricted and lacks the authority  








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            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 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."  


          7)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  








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            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  
            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."  




          Analysis Prepared by:                                             
                          Misa Lennox / L. GOV. / (916) 319-3958  FN:  
          0001998














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