BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                                2015 - 2016  Regular 

          SB 250 (Gaines) - State responsibility areas:  fire prevention  
          fees
          
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          |Version: February 18, 2015      |Policy Vote: GOV. & F. 7 - 0    |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: April 20, 2015    |Consultant: Robert Ingenito     |
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          This bill meets the criteria for referral to the Suspense File.


          
          Bill Summary: SB 250 would extend from 30 days to 60 days the  
          period of time that owners of qualified structures have to pay  
          or request redetermination of the fire prevention fee. 

          Fiscal Impact: The Board of Equalization (BOE) estimates the  
          annual revenue loss to be about $383,000 (special funds).  
          Additionally, BOE would incur minor one-time costs for computer  
          programming and revising publications (special funds). 

          Background: The BOE is comprised of five members-four members  
          each elected specifically to the Board on a district basis and  
          the State Controller. The BOE administers the sales and use tax  
          (including all state and local components), oversees the local  
          administration of the property tax, and collects a variety of  
          excise and special taxes (including the gasoline tax, insurance  
          tax, and cigarette and tobacco products taxes) and various fees  
          (including the underground storage tank fee and the e-waste  
          recycling fee). BOE establishes the values of state-assessed  







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          property, including inter-county pipelines, railroads, and  
          regulated telephone, electricity, and gas utilities. BOE also  
          hears taxpayer appeals of (2) taxes and fees that it  
          administers, and (2) Franchise Tax Board (FTB) decisions on  
          personal income and corporation taxes.

          The California Department of Forestry and Fire Protection (CAL  
          FIRE) provides wildland fire protection on non-federal lands in  
          California beyond city boundaries. Toward this end, the State  
          Board of Forestry and Fire Protection designates State  
          Responsibility Areas (SRAs) every five years.  In 2010, the  
          Legislature imposed the fire prevention fee on owners of  
          structures in SRAs to pay for the State's costs of protecting  
          SRAs against fires, and directed the BOE to collect it in  
          accordance with the state's Fee Collection Procedures Law. The  
          fee (adjusted annually for inflation) is $152.33 per structure  
          in 2014-15, though 90 percent of structures located in SRAs are  
          also covered by a local fire protection agency, and consequently  
          receive a $35 reduction in the fee. The fee is due and payable  
          30 days from the date of assessment from BOE (the date printed  
          on the bill). 

          While BOE collects the fee, it does not determine the fee's  
          amount nor which payers it impacts. Instead, CAL FIRE determines  
          both. BOE can neither redetermine the fee, nor accept a claim  
          for refund unless the determination has been set aside by  
          CALFIRE, or a court reviews CAL FIRE's determination.   
          Currently, owners of structures in SRAs can petition for  
          redetermination within 30 days after service of notice of  
          determination; after that, the amount becomes final.  If the  
          owner petitions for redetermination within the 30 day period,  
          CAL FIRE must make a determination in writing, and can eliminate  
          the fee if finds the fee doesn't apply.

          Proposed Law: This bill would extend the time period from 30  
          days to 60 days that property owners have (1) to pay the fire  
          prevention fee from the date of BOE's assessment, (2) request  
          redetermination from CAL FIRE, and (3) pay the fee after CAL  
          FIRE's determination. 

          Related Legislation:
                 AB 203 (Obernolte) is identical to this bill, and is  
               currently pending in the Assembly Appropriations Committee.









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                 AB 1202 (Mayes) would provide a fire prevention fee  
               reduction equal to the amount paid to a local fire district  
               for fire prevention services, and is currently pending in  
               the Assembly Natural Resources Committee.

                 SB 198 (Morrell) and SB 520 (Berryhill) each would  
               repeal the fire prevention fee in its entirety. Both are  
               currently in the Senate Natural Resources and Water  
               Committee. SB 198 failed passage on March 24th (with  
               reconsideration granted), while SB 520 awaits its first  
               hearing.
          
                 SB 1413 (Wyland, 2014) was largely similar to this bill,  
               and was held on the Assembly Appropriations Committee's  
               suspense file.

                 AB 2048 (Dahle, Chapter 895, Statutes of 2014) made  
               various modifications to improve the fire prevention fee's  
               administration.
          
                
          Staff Comments: The administrative activities associated with  
          BOE's collecting the SRA fee include registering accounts,  
          annual issuances of notices of determination, collection of past  
          due fees, and processing refunds. In addition, the agency notes  
          that there would be additional fee payer assistance measures,  
          increased mail inquiries, cashiering and key entry, account  
          maintenance, and reconciliation, and ongoing IT costs given the  
          volume of the new fee base. Technology appears to be a  
          continuing issue based on the complexity of BOE's legacy  
          systems.

          Generally, taxpayers have 30 days to pay or petition for  
          determination to BOE under its more than 30 tax and fee  
          programs.  Consequently, this bill would depart from all other  
          BOE-administered programs, though it would (1) conform with  
          deadlines to respond to FTB Notices of Proposed Assessment, and  
          (2) reflect the difficulty BOE has had contacting rural  
          landowners as part of the SRA fee collection process.

          BOE data indicate that, for the first three years of the fee's  
          existence (2011-12 through 2013-14), roughly 70 percent of  
          owners of structures are paying timely, with the figure trending  
          upwards very slightly over the period. Meanwhile, roughly 11  








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          percent of owners are not remitting payment each year. In  
          between, therefore, penalties and interest paid for the first  
          three billing periods has been stable as well, and has averaged  
          roughly $500,000 for each of the three years. However, embedded  
          in that total was a 20 percent penalty that was reduced to 10  
          percent with the implementation of AB 2048, suggesting that  
          extending the payment period to 60 days would lessen the amount  
          of foregone penalties and interest in future years.

          Moreover, with over 700,000 accounts, the fire prevention fee  
          program is the second largest one that BOE administers (trailing  
          only the sales and use tax). BOE has never had a relationship  
          with the vast majority of the owners living in SRAs (who are  
          thus required to pay the fee). With this in mind, continued  
          education and outreach efforts would likely further reduce the  
          amount of lost interest and penalty revenue resulting from the  
          bill, to closer to $400,000 annually.