Amended in Assembly August 18, 2015

Amended in Assembly June 17, 2015

Senate BillNo. 602


Introduced by Senator Monning

February 27, 2015


An act to amend Section 10089.38 of the Insurance Code, and to amend Sections 5899 and 8503 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 ofbegin delete 1915,end deletebegin insert 1915end insert provides authority for the legislative body of any city to determine that bonds may be issued to pay for specified works of improvement.

This bill would include the California Earthquake Authority as part of the definition of “city” or “municipality” for purposes of this act.

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 realbegin delete property,end deletebegin insert propertyend insert andbegin insert anend insertbegin insert account for related loan losses, andend insert to acquire debt obligations issued to fund thesebegin insert seismic strengtheningend insert improvements, thereby making an appropriation. The bill wouldbegin delete alsoend deletebegin insert require the California Earthquake Authority to establish a loan loss reserve account in the fund for the deposit of moneys to be expended for loan losses incurred in connection with financing seismic strengthening improvements.end insert

begin insertThis bill wouldend insert (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.begin insert The bill would require the California Earthquake Authority, prior to entering into a voluntary contractual assessment with a property owner to finance seismic strengthening improvements, to disclose the terms and conditions of the voluntary contractual assessment, and to notify the property owner, in writing, that he or she may be required to pay the remaining principal balance of the voluntary contractual assessment when he or she refinances or sells the property. The bill would specify that the California Earthquake Authority shall require each property owner to sign a document acknowledging his or her receipt of this written disclosure. The bill would also require that seismic strengthening improvements that are permanently fixed to real property and that are financed pursuant to the program comply with all applicable state and local building standards.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:

P3    1

SECTION 1.  

Section 10089.38 of the Insurance Code is
2amended to read:

3

10089.38.  

begin delete(a)end deletebegin deleteend deleteUpon the development and implementation of
4an economical system satisfactory to the board and the
5commissioner to prevent misapplication of mitigation funds, money
6in the Earthquake Loss Mitigation Fund may be applied to all of
7the following:

begin delete

8(1)

end delete

9begin insert(a)end insert To supply grants and loans or loan guarantees to dwelling
10owners who wish to retrofit their homes to protect against
11earthquake damage.

begin delete

12(2)

end delete

13begin insert(b)end insert To fund seismic strengthening improvementsbegin insert and a loan
14loss reserve account asend insert
authorized by Section 5899 of the Streets
15and Highways Code.

begin delete

16(3)

end delete

17begin insert(c)end insert To acquire debt obligations issued to fund seismic
18strengthening improvements funded pursuant tobegin delete paragraph (2)end delete
19begin insert subdivision (b)end insert.

20

SEC. 2.  

Section 5899 of the Streets and Highways Code is
21amended to read:

22

5899.  

(a) The Legislature finds and declares all of the
23following:

24(1) It is the intent of the Legislature to address seismic safety
25needs throughout this state by permitting voluntary individual
26efforts to improve the seismic safety of homes and buildings. The
27Legislature further intends that this chapter should be used to
28finance the installation of seismic strengthening improvements
29that are permanently fixed to residential, commercial, industrial,
30agricultural, or other real property, including, but not limited to,
31the seismic strengthening of cripple walls and sill plate anchorage
32of light, wood-framed buildings.

33(2) The upfront cost of making residential, commercial,
34industrial, agricultural, or other real property more seismically
35safe prevents many property owners from making those
36improvements. To make those improvements more affordable and
37to promote the installation of those strengthening improvements,
38it is necessary to authorize an alternative procedure for authorizing
P4    1assessments to finance the cost of seismic strengthening
2improvements.

3(3) A public purpose will be served by a voluntary contractual
4assessment program that provides the legislative body of any public
5agency with the authority to finance the installation of seismic
6strengthening improvements that are permanently fixed to
7residential, commercial, industrial, agricultural, or other real
8property.

9(b) For purposes of this section, the following terms shall have
10the following meanings:

11(1) For the purpose of financing the installation of seismic
12 strengthening improvements, “public agency” means a city, county,
13or city and county, or the California Earthquake Authority. The
14definition of “city” in Section 5005 shall not apply to this
15paragraph.

16(2) “Seismic strengthening improvements” means permanent
17seismic safety improvements fixed to residential, commercial,
18industrial, agricultural, or other real property.

19(c) The legislative or governing body of a public agency may
20designate an area, in the manner provided pursuant to Section
215898.20, within which authorized public agency officials and
22property owners may enter into voluntary contractual assessments
23to finance the installation of seismic strengthening improvements
24that are permanently fixed to real property pursuant to this chapter.

25(d) For purposes of establishing a voluntary contractual
26assessment program relating to seismic strengthening
27improvements, the legislativebegin insert or governingend insert body shall make the
28determinations required pursuant to Section 5898.20 by adopting
29a resolution indicating its intention to do so. The resolution of
30intention shall identify the kinds of seismic strengthening
31improvements that may be financed and shall include all of the
32information that is required pursuant to subdivision (b) of Section
335898.20, including, but not limited to, directing an appropriate
34public agency official to prepare a report pursuant to Section
355898.22.

36(e) For purposes of the report required pursuant to Section
375898.22, relating to a voluntary contractual assessment program
38for seismic strengthening improvements, the designated public
39agency official shall satisfy the requirements of paragraph (1) of
40subdivision (c) of Section 5898.22 by identifying the types of
P5    1seismic strengthening improvements that may be financed through
2the use of contractual assessments.

3(f) Notwithstanding any other provision of this chapter, upon
4the written consent of an authorized public agency official, the
5proposed arrangements for financing the program pertaining to
6the installation of seismic strengthening improvements that are
7permanently fixed to real property may authorize the property
8owner to purchase directly the related equipment and materials for
9the installation of seismic strengthening improvements and to
10contract directly for the installation of seismic strengthening
11 improvements that are permanently fixed to the property owner’s
12residential, commercial, industrial, agricultural, or other real
13property.

14(g) Notwithstanding any other provision of this chapter, and
15unless otherwise specified in the resolution of intention adopted
16pursuant to subdivision (d) and the report required by Section
175898.22, the area within which the California Earthquake Authority
18and property owners may enter into voluntary contractual
19assessments pursuant to this chapter to finance the installation of
20seismic strengthening improvements that are permanently fixed
21to real property shall include the entire state. The California
22Earthquake Authority shall not be required to designate, describe,
23or provide a map of that area in the resolution of intention adopted
24pursuant to subdivision (d), the report required by Section 5898.22,
25or otherwise, unless that area covers an area smaller than the entire
26state.

27(h) Notwithstanding any other provision of this chapter or any
28other law, with regard to the establishment of a voluntary
29contractual assessment program pursuant to this chapter to finance
30the installation of seismic strengthening improvements that are
31permanently fixed to real property, the California Earthquake
32Authority shall be required to publish the notice required by
33subdivision (a) of Section 5898.24 solely in a newspaper of general
34circulation within the County of Sacramento.

begin insert

35(i) The California Earthquake Authority shall establish a loan
36loss reserve account in the Earthquake Loss Mitigation Fund,
37established pursuant to Section 10089.37 of the Insurance Code,
38for the deposit of moneys to be expended for loan losses incurred
39in connection with financing seismic strengthening improvements
40authorized by this section. The California Earthquake Authority
P6    1shall develop guidelines and a methodology for determining
2adequate funding levels for the account sufficient to cover loan
3losses related to the implementation of the voluntary contractual
4assessment program pursuant to this section.

end insert
begin insert

5(j) Prior to entering into a voluntary contractual assessment
6with a property owner to finance seismic strengthening
7improvements under this section, the California Earthquake
8Authority shall disclose the terms and conditions of the voluntary
9contractual assessment and notify the property owner, in writing,
10that he or she may be required to pay the remaining principal
11balance of the voluntary contractual assessment when he or she
12refinances or sells the property. The California Earthquake
13Authority shall require each property owner to sign a document
14acknowledging his or her receipt of this written disclosure.

end insert
begin insert

15(k) The installation of seismic strengthening improvements that
16are permanently fixed to real property and that are financed
17pursuant to this chapter shall comply with all applicable state and
18local building standards.

end insert
begin delete

19(i) 

end delete

20begin insert(l)end insertbegin insertend insert Subdivision (b) of Section 5898.24 shall not apply to a
21voluntary contractual assessment program established pursuant to
22this chapter solely to finance the installation of seismic
23strengthening improvements that are permanently fixed to real
24property.

begin delete

25(j)

end delete

26begin insert(end insertbegin insertm)end insert Notwithstanding any other provision of this chapter, the
27Improvement Bond Act of 1915 (Division 10 (commencing with
28Section 8500)), or any other law, any voluntary contractual
29assessment entered into with respect to a program established by
30the California Earthquake Authority under this chapter shall be
31made under the payment schedule set forth in the contract providing
32for that voluntary contractual assessment, whether or not any bonds
33secured by that voluntary contractual assessment have been issued.

34

SEC. 3.  

Section 8503 of the Streets and Highways Code is
35amended to read:

36

8503.  

“City” includes counties, cities and counties and public
37corporations, districts and agencies, and the California Earthquake
38Authority.



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