BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 602 (Monning) - Seismic safety:  California Earthquake  
          Authority
          
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          |Version: February 27, 2015      |Policy Vote: INS. 7 - 0, GOV. & |
          |                                |          F. 6 - 0              |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 26, 2015      |Consultant: Maureen Ortiz       |
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          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.







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       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  








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               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. 




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