BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 602 |Hearing |4/29/15 |
| | |Date: | |
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|Author: |Monning |Tax Levy: |No |
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|Version: |2/27/15 Click here to enter |Fiscal: |Yes |
| |text. | | |
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|Consultant|Lewis |
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SEISMIC SAFETY: CALIFORNIA EARTHQUAKE AUTHORITY
Authorizes the California Earthquake Authority to establish a
statewide contractual assessment program to fund residential
seismic retrofits.
Background and Existing Law
The California Earthquake Authority (CEA) is a privately-funded,
publicly-managed entity tasked with reducing the risk of
earthquake damage and loss through education, mitigation and
insurance. The CEA is governed by a five-member board,
comprised of the Governor, the Insurance Commissioner and the
State Treasurer; the Speaker of the Assembly and the President
pro Tempore of the Senate serve as non-voting members.
The Legislature formed the CEA in 1996, after the disastrous
1994 Northridge Earthquake, at a time when many homeowners had
difficulty obtaining homeowners insurance, as insurers sought to
minimize their exposure to earthquake risk. The CEA closed this
insurance gap and is now California's largest earthquake
insurance provider. The CEA also offers seismic retrofit
incentives to homeowners through the Earthquake Loss Mitigation
Fund (ELMF) in the form of grants, loans, and loan guarantees
for homeowners to protect their homes against earthquake damage.
Existing law permits local governments to use benefit
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assessments-involuntary charges to property owners for public
improvements, that benefit an owner's property-to finance public
projects like flood control, street improvement and public
landscaping. As an alternative to benefit assessments, cities
and counties can use "contractual assessments" to finance
specific improvements on individual parcels of private property.
Contractual assessments may be levied only with the consent of
the affected property owner, who pays the assessment through the
property tax roll. The assessment constitutes a lien against the
affected property. Several cities use voluntary contractual
benefit assessment programs, to incentivize residential energy
efficiency upgrades under California's Property Assessed Clean
Energy (PACE) program (AB 811, Levine, 2008). The cities of San
Francisco and Berkeley are in the process of creating PACE-like
contractual assessment programs for seismic improvements,
focused on commercial structures and multi-family residential
buildings.
Current law also permits public agencies to finance seismic
safety work on private property with a property owner's consent
(AB 1700, Farr, 1992), and the Legislature has declared that
contractual benefit assessments for seismic retrofits would
serve a public purpose.
Up-front installation costs can deter property owners from
making seismic safety improvements, and current law only
authorizes "cities," "municipalities," and "public agencies" to
establish voluntary assessment programs to finance seismic
mitigation. Furthermore, homeowners in cities without
earthquake mitigation assessment programs lack access to
financing tools that would allow them to make seismic retrofits
to their homes.
The CEA wants to be added to the list of public entities
authorized to use property assessment districts, impose liens
and issue bonds in order to create a statewide, voluntary
earthquake mitigation assessment program, called the Property
Secured Mitigation Program (PSMP).
Proposed Law
Senate Bill 602 adds the California Earthquake Authority to the
list of public entities authorized to issue bonds and impose
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liens, in order to create a statewide voluntary property
assessment program to incentivize seismic mitigation
improvements.
SB 602 authorizes the CEA to use money in its Earthquake Loss
Mitigation to:
Fund seismic strengthening improvements through a
contractual assessment program.
Acquire debt obligations to fund seismic strengthening
improvements financed with contractual assessments.
The bill makes additional conforming changes to state law.
State Revenue Impact
No estimate.
Comment
1. Purpose of the bill. The CEA estimates that approximately
90% of California homeowners lack any form of earthquake
insurance, even though scientists estimate that California faces
a near-certain likelihood of being hit by Northridge-size
earthquake in the next 30 years. Earthquake mitigation can
greatly reduce homeowners' exposure to earthquake damage at a
relatively low cost, and homeowners who take advantage of
seismic retrofits, would benefit from discounts on earthquake
insurance premiums as a result of the lower risk of damage to
their homes. The Property Secured Mitigation Program (PSMP)
would allow the CEA to provide 100% financing for residential
mitigation projects that meet certain engineering guidelines.
Support and
Opposition (4/23/15)
Support : Association of Bay Area Governments; California
Department of Insurance; California Earthquake Authority;
Personal Insurance Federation of California.
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Opposition : Unknown.
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