BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session SB 602 (Monning) - Seismic safety: California Earthquake Authority ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: February 27, 2015 |Policy Vote: INS. 7 - 0, GOV. & | | | F. 6 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 26, 2015 |Consultant: Maureen Ortiz | | | | ----------------------------------------------------------------- This bill does not meet the criteria for referral to the Suspense File. Bill Summary: SB 602 adds the California Earthquake Authority (CEA) to the definition of "public agency" for the purpose of authorizing the CEA to finance the installation of seismic strengthening improvements as specified. Fiscal Impact: Minor, absorbable one-time costs to the Department of Insurance (Special Fund) The Department of Insurance indicates one-time costs of less than $5,000 to review and evaluate the proposed financing programs. All costs for the retrofitting program are paid from non-state sources through the California Earthquake Authority. SB 602 (Monning) Page 1 of ? Background:1. Current law authorizes a city, county, or city and county, by the adoption of a resolution, to enter into a voluntary contractual assessment program that provides the 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. The Earthquake Loss Mitigation Fund (ELMF) within the CEA provides grants or loans to dwelling owners who wish to retrofit their homes. The ELMF is funded by an allocation of five percent of CEA's investment income, or $5 million, whichever is less, annually. Current law allows cities and counties to create property assessment districts for local public purposes, including seismic mitigation. San Francisco, Berkeley and Oakland are in the process of setting up districts for the purpose of financing earthquake mitigation, largely focusing on commercial soft-story and multiple family buildings. In August 2011, the California Residential Mitigation Program (CRMP) was established as a joint-exercise-of-powers entity by the CEA and the Governor's Office of Emergency Services, (Cal OES) to carry out mitigation programs to assist California homeowners who wish to seismically retrofit their houses. CRMP's goal is to provide grants and other types of assistance and incentives for these mitigation efforts. The CRMP's first program, launched in 2013, is the "Earthquake Brace and Bolt" (EBB) program. It provides grants of up to $3,000 for homeowners who have qualifying homes and meet specified building code requirements. According to the CEA, 16 homes have qualified and completed retrofits under the program, and 650 retrofits are planned in 2015. CEA estimates that there are approximately 1.6 million owner-occupied houses in California that have meet the criteria of the EBB-1.2 million of those are in higher-hazard areas. Those numbers do not include other, non-EBB types of homes that would benefit from seismic retrofits. Proposed Law: SB 602 does the following: 1) Adds the California Earthquake Authority to the SB 602 (Monning) Page 2 of ? definition of "public agency" for the purpose of authoring the CEA to finance the installation of seismic strengthening improvements that are permanently fixed to residential, commercial, industrial, agricultural, or other real property. 2) Authorizes money in the Earthquake Loss Mitigation Fund to be used to fund seismic strengthening improvements, and to acquire debt obligations issued to fund these improvements. 3) Exempts the CEA from specified requirements in the statute applying to actions of the legislative bodies of a city or county, as specified. Staff Comments: SB 602 is intended to provide homeowners with access to funds that will enable them to complete seismic retrofitting and to repay the loans through an assessment on their property tax bills. According to the CEA, the average cost of Earthquake Brace and Bolt retrofits is between $3,000 and $6,000 for single family dwellings, but can cost $10,000 to $20,000 to retrofit soft first-story homes. Current programs are insufficient to accommodate the estimated 1.6 million homes that are in need of seismic retrofitting. The bill allows the CEA to create a new voluntary financing tool for homeowners to mitigate and retrofit their homes. The Property Secured Mitigation Program (PSMP) would allow the CEA to provide 100% financing for residential mitigation projects that meet approved engineering guidelines. The loan would become a lien on the property and allow homeowners to pay for the costs in installments in the form of debt service payments collected through existing property tax collection mechanisms. -- END -- SB 602 (Monning) Page 3 of ?