Amended in Assembly June 17, 2015

Senate Bill No. 602

Introduced by Senator Monning

February 27, 2015

An act to amend Section 10089.38 of the Insurance Code, and to amend Sections begin delete 5899, 8503, 10003, 10100.2, and 10104 end delete begin insert 5899 and 8503 end insert of the Streets and Highways Code, relating to seismic safety, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

SB 602, as amended, Monning. Seismic safety: California Earthquake Authority.

Existing law establishes the California Earthquake Authority, which is authorized to transact insurance in the state as necessary to sell policies of basic residential earthquake insurance, as provided. Existing law provides that a public purpose will be served by a voluntary contractual assessment program that provides the legislative body of a public agency with the authority to finance the installation of seismic strengthening improvements that are permanently fixed to residential, commercial, industrial, agricultural, or other real property. For purposes of financing the installation of seismic strengthening improvements, “public agency” means a city, county, or city and county.

This bill would include the California Earthquake Authority as part of the definition of “public agency” for this purpose.

The Improvement Bond Act of 1915, provides authority for the legislative body of any city to determine that bonds may be issued to pay for specified works of improvement. begin delete The Municipal Improvement Act of 1913 authorizes the legislative body of a municipality to pay or make funds available to enable the owners of lots or parcels of real property to pay for work deemed necessary to bring real property or buildings into compliance with seismic safety standards or regulations, as provided. end delete

This bill would include the California Earthquake Authority as part of the definition of “city” or “municipality” for purposes of begin delete these acts. end delete begin insert this act. end insert

Existing law authorizes the Earthquake Loss Mitigation Fund, a continuously appropriated fund, to be applied to supply grants and loans or loan guarantees to dwelling owners who wish to retrofit their homes to protect against earthquake damage.

This bill would also authorize the money in the fund to be used to fund seismic strengthening improvements permanently fixed to residential, commercial, industrial, agricultural, or other real property, and to acquire debt obligations issued to fund these improvements, thereby making an appropriation. begin insert The bill would also (1) revise or waive certain notice and reporting requirements generally applicable to contractual assessments for contractual assessments that finance seismic strengthening improvements, (2) absent specified conditions, presume statewide scope of any California Earthquake Authority programs of contractual assessments for seismic strengthening improvements, and (3) provide for payment of assessments pursuant to the contractual payment schedule for any California Earthquake Authority program, notwithstanding any bonds secured by those assessments. end insert

Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 10089.38 of the Insurance Code is
amended to read:

10089.38.  

(a) Upon the development and implementation of
an economical system satisfactory to the board and the
commissioner to prevent misapplication of mitigation funds, begin insert money
in end insert the Earthquake Loss Mitigation Fund may be applied begin delete to supply
grants and loans or loan guarantees to dwelling owners who wish
to retrofit their homes to protect against earthquake damage. end delete begin insert to all
of the following: end insert

begin insert

(1) To supply grants and loans or loan guarantees to dwelling
owners who wish to retrofit their homes to protect against
earthquake damage.

end insert begin insert

(2) To fund seismic strengthening improvements authorized by
Section 5899 of the Streets and Highways Code.

end insert begin insert

(3) To acquire debt obligations issued to fund seismic
strengthening improvements funded pursuant to paragraph (2).

end insert begin delete

(b) Money in the Earthquake Loss Mitigation Fund may also
be used for either of the following purposes:

(1) To fund seismic strengthening improvements authorized
pursuant to Section 5899 of the Streets and Highways Code.

(2) To acquire debt obligations issued to fund improvements
described in paragraph (1).

end delete

SEC. 2.  

Section 5899 of the Streets and Highways Code is
amended to read:

5899.  

(a) The Legislature finds and declares all of the
following:

(1) It is the intent of the Legislature to address seismic safety
needs throughout this state by permitting voluntary individual
efforts to improve the seismic safety of homes and buildings. The
Legislature further intends that this chapter should be used to
finance the installation of seismic strengthening improvements
that are permanently fixed to residential, commercial, industrial,
agricultural, or other real property, including, but not limited to,
the seismic strengthening of cripple walls and sill plate anchorage
of light, wood-framed buildings.

(2) The upfront cost of making residential, commercial,
industrial, agricultural, or other real property more seismically
safe prevents many property owners from making those
improvements. To make those improvements more affordable and
to promote the installation of those strengthening improvements,
it is necessary to authorize an alternative procedure for authorizing
assessments to finance the cost of seismic strengthening
improvements.

(3) A public purpose will be served by a voluntary contractual
assessment program that provides the legislative body of any public
agency with the authority to finance the installation of seismic
strengthening improvements that are permanently fixed to
residential, commercial, industrial, agricultural, or other real
property.

(b) For purposes of this section, the following terms shall have
the following meanings:

(1) For the purpose of financing the installation of seismic
strengthening improvements, “public agency” means a city, county,
or city and county, or the California Earthquake Authority. The
definition of “city” in Section 5005 shall not apply to this
paragraph.

(2) “Seismic strengthening improvements” means permanent
seismic safety improvements fixed to residential, commercial,
industrial, agricultural, or other real property.

(c) The legislative begin insert or governing end insert body of a public agency may
designate an area, in the manner provided pursuant to Section
5898.20, within which authorized public agency officials and
property owners may enter into voluntary contractual assessments
to finance the installation of seismic strengthening improvements
that are permanently fixed to real property pursuant to this chapter.

(d) For purposes of establishing a voluntary contractual
assessment program relating to seismic strengthening
improvements, the legislative body shall make the determinations
required pursuant to Section 5898.20 by adopting a resolution
indicating its intention to do so. The resolution of intention shall
identify the kinds of seismic strengthening improvements that may
be financed and shall include all of the information that is required
pursuant to subdivision (b) of Section 5898.20, including, but not
limited to, directing an appropriate public agency official to prepare
a report pursuant to Section 5898.22.

(e) For purposes of the report required pursuant to Section
5898.22, relating to a voluntary contractual assessment program
for seismic strengthening improvements, the designated public
agency official shall satisfy the requirements of paragraph (1) of
subdivision (c) of Section 5898.22 by identifying the types of
seismic strengthening improvements that may be financed through
the use of contractual assessments.

(f) Notwithstanding any other provision of this chapter, upon
the written consent of an authorized public agency official, the
proposed arrangements for financing the program pertaining to
the installation of seismic strengthening improvements that are
permanently fixed to real property may authorize the property
owner to purchase directly the related equipment and materials for
the installation of seismic strengthening improvements and to
contract directly for the installation of seismic strengthening
improvements that are permanently fixed to the property owner’s
residential, commercial, industrial, agricultural, or other real
property.

(g)  begin delete Subdivisions (c) and (d) do not apply to the California
Earthquake Authority. end delete begin insert Notwithstanding any other provision of this
chapter, and unless otherwise specified in the resolution of
intention adopted pursuant to subdivision (d) and the report
required by Section 5898.22, the area within which the California
Earthquake Authority and property owners may enter into
voluntary contractual assessments pursuant to this chapter to
finance the installation of seismic strengthening improvements
that are permanently fixed to real property shall include the entire
state. The California Earthquake Authority shall not be required
to designate, describe, or provide a map of that area in the
resolution of intention adopted pursuant to subdivision (d), the
report required by Section 5898.22, or otherwise, unless that area
covers an area smaller than the entire state. end insert

begin insert

(h) Notwithstanding any other provision of this chapter or any
other law, with regard to the establishment of a voluntary
contractual assessment program pursuant to this chapter to finance
the installation of seismic strengthening improvements that are
permanently fixed to real property, the California Earthquake
Authority shall be required to publish the notice required by
subdivision (a) of Section 5898.24 solely in a newspaper of general
circulation within the County of Sacramento.

end insert begin insert

(i) Subdivision (b) of Section 5898.24 shall not apply to a
voluntary contractual assessment program established pursuant
to this chapter solely to finance the installation of seismic
strengthening improvements that are permanently fixed to real
property.

end insert begin insert

(j) Notwithstanding any other provision of this chapter, the
Improvement Bond Act of 1915 (Division 10 (commencing with
Section 8500)), or any other law, any voluntary contractual
assessment entered into with respect to a program established by
the California Earthquake Authority under this chapter shall be
made under the payment schedule set forth in the contract
providing for that voluntary contractual assessment, whether or
not any bonds secured by that voluntary contractual assessment
have been issued.

end insert

SEC. 3.  

Section 8503 of the Streets and Highways Code is
amended to read:

8503.  

“City” includes counties, cities and counties and public
corporations, districts and agencies, and the California Earthquake
Authority.

begin delete

SEC. 4.  

Section 10003 of the Streets and Highways Code is
amended to read:

10003.  

“Municipality” and “city” include every city, city and
county, or county, or other entity, public corporation, or agency
authorized to operate under this division, including any joint
powers entity created pursuant to Chapter 5 (commencing with
Section 6500) of Division 7 of Title 1 of the Government Code
and any special district organized for the purpose of aiding in the
development or improvement of navigation or commerce to, or
within, the district, and the California Earthquake Authority.

SEC. 5.  

Section 10100.2 of the Streets and Highways Code is
amended to read:

10100.2.  

(a) (1) When the public interest or convenience
requires, the legislative body may use the powers of this division
to pay, or make funds available to enable the owners of lots or
parcels of real property within the district to pay, for either of the
following:

(A) (i) Work deemed necessary to bring real property or
buildings, including privately owned real property or buildings,
into compliance with seismic safety standards or regulations. The
legislative body shall declare that public loans or funds provided
to owners of private buildings for seismic strengthening of
unreinforced buildings or other buildings, or real property, pursuant
to this section constitute a public purpose resulting in a public
benefit. Only work certified as necessary to comply with seismic
safety standards or regulations by local building officials may be
financed. No project involving the dismantling of an existing
building and its replacement by a new building or the construction
of a new or substantially new building may be financed pursuant
to this section, except as otherwise provided in subparagraph (B).
Work on qualified historical buildings or structures shall be done
in accordance with the State Historical Building Code (Part 2.7
(commencing with Section 18950) of Division 13 of the Health
and Safety Code). Any financing for seismic strengthening of a
residential structure containing units rented by households specified
in Section 50079.5 of the Health and Safety Code before
strengthening shall be subject to a regulatory agreement that will
ensure that the number of those units in the structure will not be
reduced and will remain available at affordable rents pursuant to
Section 50053 of the Health and Safety Code as long as any
assessments levied pursuant to this section on the parcel on which
the structure is located remain unpaid.

(ii) A lot, parcel, or building shall not be included in the district
without the owner’s consent.

(B) Within an area that has been designated by the Governor
as a disaster area or for which the Governor has proclaimed the
existence of a state of emergency because of earthquake damage,
work deemed necessary to repair any damage to real property
directly or indirectly caused by the occurrence of an earthquake
cited in the Governor’s designation or proclamation, or by
aftershocks associated with that earthquake, including work to
reconstruct, repair, shore up, or replace any real property or
building damaged or destroyed by the earthquake or by its
aftershocks. Work may be financed pursuant to this subparagraph
only on real property or buildings identified in a resolution of
intention to establish a district adopted within seven years of the
date that the Governor designates the area as a disaster area or
proclaims a state of emergency in the area.

(2) A district created to finance seismic safety work on privately
owned buildings, including repair, reconstruction, or replacement
of privately owned buildings pursuant to this section, shall consist
only of lots or parcels on which the legislative body finds that the
buildings to be worked on, repaired, reconstructed, or replaced
pursuant to this section, are located or were located before being
damaged or destroyed by the earthquake that is the subject of the
Governor’s designation or proclamation pursuant to subparagraph
(B) of paragraph (1), or by the aftershocks of that earthquake.
Notwithstanding Division 7 (commencing with Section 5000) or
this division, this paragraph shall not apply to any district created
by the California Earthquake Authority.

(3) The Legislature hereby declares that the use of public funds
pursuant to this section for seismic strengthening, repair, or
reconstruction of privately owned real property or buildings
constitutes a public purpose resulting in a public benefit. The use
of funds pursuant to this section shall not be construed to be gifts
of public funds in violation of Section 6 of Article XVI of the
California Constitution.

(4) A loan or expenditure of funds made by a district pursuant
to this section and secured by a tax assessment or a lien, or both
that assessment and lien, on private property shall not, when
combined with existing liens on the property, exceed 80 percent
of the current appraised value of the property, as determined by
an independent, certified appraiser, unless existing lienholders
consent in writing to a higher loan-to-value ratio. Notice of the
creation of a district or the authorization for the loan or expenditure
of funds for the purposes set forth in this section shall be given to
lienholders of record on the property included in the district at
least 30 days prior to any vote of the governing body authorizing
the creation of the district or the loan or expenditure of funds that
could create a lien on the property.

(b) A district created to finance seismic safety or repair work
pursuant to this section may include areas of territory that are not
contiguous.

(c) At any time after the passage of the resolution provided for
in subdivision (a) of Section 10312, the legislative body may make
changes in or modify the improvements or reduce the assessment
with respect to a particular lot or parcel within an assessment
district created for the purposes of this section with the written
consent of the owner of that lot or parcel.

(d)  Any changes made within an assessment district created
for the purposes of this section shall be made after notice and
hearing, as provided in this division, except that changes may be
made under any of the following circumstances:

(1) At the hearing on the report, changes that do any of the
following:

(A) Eliminate a portion of the assessment district without
increasing the amount of any assessment or substantially affecting
the distribution of benefits from the improvements.

(B) Exclude territory that will not be benefited by the remaining
improvements without increasing the amount of any assessment.

(C) Modify the improvements or the assessment with respect
to a particular lot or parcel within the assessment district with the
written consent of the owner and without increasing the
assessments on any other real property.

(2) At any time after the improvements are ordered and during
the pendency of the proceedings to establish the assessment district.

(3) At any time after the adoption of the resolution provided for
in subdivision (a) of Section 10312, to modify the improvements
or reduce the assessment with respect to a particular lot or parcel
within the assessment district with the written consent of the owner.

(e) An action to determine the validity of any assessments,
bonds, bond anticipation notes, contracts, or improvements for the
purposes of this section may be brought by the legislative body,
or by any person designated by the legislative body, pursuant to
Chapter 9 (commencing with Section 860) of Title 10 of the Code
of Civil Procedure. For this purpose, an improvement shall be
deemed to be in existence upon its authorization and an assessment
upon its confirmation.

(f) It is the intent of the Legislature that the powers conferred
by this section shall be in addition and supplemental to, and not
exclusive of, the powers conferred by any other law.

SEC. 6.  

Section 10104 of the Streets and Highways Code is
amended to read:

10104.  

(a) When a proceeding is initiated under this division
by a legislative body other than that of a city or county, and before
the resolution of intention is adopted, the proposed resolution,
together with a plat or map which shall indicate by a boundary
line the extent of territory included in the proposed district, shall
be submitted for approval of the legislative body of the city, where
the land to be assessed lies within the corporate limits of any city,
or of the county, where the land to be assessed lies within an
unincorporated territory. When the approval has been secured, the
resolution of intention may be adopted and the legislative body
initiating the proceeding may thereafter take each and every step
required for or suitable for the consummation of the work and the
levying, collecting and enforcement of the assessments to cover
the expenses thereof and the issuance and enforcement of bonds
to represent unpaid assessments.

(b) Notwithstanding Division 7 (commencing with Section
5000) or this division, this section shall not apply to any district
created by the California Earthquake Authority.

end delete