BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular SB 250 (Gaines) - State responsibility areas: fire prevention fees ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: February 18, 2015 |Policy Vote: GOV. & F. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: April 20, 2015 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- 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 SB 250 (Gaines) Page 1 of ? 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. SB 250 (Gaines) Page 2 of ? 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 SB 250 (Gaines) Page 3 of ? 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.