BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
           ------------------------------------------------------------------ 
          |Bill No:  |SB 677                           |Hearing    |4/22/15  |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |Mendoza                          |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |4/6/15                           |Fiscal:    |Yes      |
           ------------------------------------------------------------------ 
           ----------------------------------------------------------------- 
          |Consultant|Weinberger                                            |
          |:         |                                                      |
           ----------------------------------------------------------------- 

                             FIREWORKS SALES AND DISPOSAL



          Makes numerous amendments to the state laws governing fireworks  
          sales and disposals.


           Background

           The State Fireworks Law establishes comprehensive rules  
          governing the use, manufacture, import, export, and sale of  
          fireworks.  The law defines "dangerous fireworks" and "exempt  
          fireworks." "Safe and sane" fireworks are any fireworks which do  
          not come within the definition of "dangerous fireworks" or  
          "exempt fireworks."

          State law requires various entities, including the State Fire  
          Marshal (SFM), to seize certain prohibited fireworks and  
          requires an authority that seizes fireworks to notify the SFM of  
          the seizure and provide specified information.  The law requires  
          the SFM to dispose of fireworks and specifies procedures for  
          disposing of dangerous fireworks. The law authorizes the SFM to  
          license retailers to sell certified "safe and sane" fireworks  
          from June 28 to July 6 each year, unless otherwise prohibited by  
          local ordinance.  Currently, about 290 California communities  
          permit the sale and use of state-approved fireworks each 4th of  
          July.

          In anticipation of the millennial celebration, the Legislature  







          SB  677 (Mendoza) 4/6/15                                Page 2  
          of ?
          
          
          authorized the SFM to issue a one-time retail license to permit  
          the sale of certified fireworks from 9:00am on December 26,  
          1999, until midnight of January 1, 2000 (AB 2090, Miller, 1998).  
           The State Fireworks Law authorizes the State Fire Marshal to  
          issue a wholesaler's license to allow the sale and  
          transportation of all types of fireworks to licensed retailers,  
          or retailers operating under a permit, licensed public display  
          operators, and other licensed wholesalers in California.

          The State Fire Marshal must establish and collect original and  
          annual renewal fees for fireworks licenses. The fees cannot  
          exceed the amount necessary to cover the SFM's administrative  
          and enforcement costs.

          In recent years, stakeholders have participated in working group  
          meetings to discuss the full spectrum of issues associated with  
          fireworks sales, use, and disposal.  The working groups  
          discussed topics that include environmental concerns related to  
          fireworks disposal, funding options, data collection, and  
          enforcement issues. Through this comprehensive review,  
          stakeholders reached consensus on a number of proposed reforms.


          Proposed Law

           Senate Bill 677 amends state laws governing fireworks to:
                 Create a fireworks sell-back program administered by the  
               SFM.
                 Authorize the state to issue licenses for retail sales  
               of fireworks during the week before New Year's Day.
                 Allow local governments to impose permit fees on  
               fireworks retailers.
                 Require the State Fire Marshal to collect data related  
               to fireworks.
                 Exempt people transporting fireworks pursuant to a valid  
               permit or license from specified sanctions.
                 Require the SFM to regulate tracking of shipping  
               containers that transport dangerous fireworks.
                 Enact fireworks-related program evaluation and  
               performance measurement requirements. 
           
           Sell-back program  .  Notwithstanding specified statutes, SB 677  
          allows a local authority or the State Fire Marshal (SFM) to  
          repurpose or dispose of seized safe and sane fireworks.  The  








          SB  677 (Mendoza) 4/6/15                                Page 3  
          of ?
          
          
          bill allows a local authority or the SFM transfer any safe and  
          sane and federally approved fireworks to an entity possessing a  
          valid importer's and exporter's license or a wholesaler's  
          license. Any fireworks transferred pursuant to this authority  
          must:
                 Remain under the ownership of the seizing local  
               authority.
                 Be deemed "hazardous material" until the SFM, the  
               Department of Toxic Substance Control, and a recognized  
               third party testing entity make a determination regarding  
               the fireworks' commercial viability.

          SB 677 allows the SFM to permit a recognized third party testing  
          entity to determine, with the SFM and the DTSC; whether any  
          seized fireworks are either commercially viable or hazardous  
          waste. Any firework deemed commercially viable may be repackaged  
          by the SFM, the authority seizing any fireworks, or the  
          authority's designee, including:
                 A state licensed fireworks importer or exporter, 
                 A wholesaler purchasing the product pursuant to state  
               law,
                 The recognized third-party testing authority, or 
                 A licensed hazardous materials or hazardous waste  
               hauler.

          Within 72 hours of any fireworks being deemed not commercially  
          viable, the SFM, or the SFM's designee, must dispose of the  
          product in accordance with state and federal laws. 

          SB 677 requires the SFM to authorize a state licensed fireworks  
          importer and exporter to purchase fireworks deemed to be  
          commercially viable from the SFM or the local authority seizing  
          the fireworks. Revenue received from the sale belongs to the  
          seizing local authority.  The bill allows the SFM to enter into  
          an agreement with a local authority for purposes of sharing  
          revenue from the sale of fireworks. The agreement must allocate  
          no less than 65% of the revenues to that local authority with  
          the balance going to the state.

          SB 677 defines "recognized third party testing entity" as an  
          independent testing entity recognized by the Federal Consumer  
          Product Safety Commission as an acceptable testing entity for  
          consumer fireworks.









          SB  677 (Mendoza) 4/6/15                                Page 4  
          of ?
          
          
          SB 677 requires that a state-licensed fireworks importer and  
          exporter or wholesaler, upon the purchase of fireworks pursuant  
          to the bill's provisions, must accept full liability for any  
          damage done by the fireworks and indemnify the State of  
          California and the seizing local authority. 

          SB 677 requires the SFM and the DTSC to train local fire and law  
          enforcement personnel on the bill's requirements and to provide  
          guidance and training to local agencies that seize, collect,  
          transport, store, and treat seized fireworks.

          SB 677 requires the DTSC to develop and publish guidelines for  
          the implementation of this chapter that include:
                 Standards for the proper handling, transport, and  
               storage of fireworks that are hazardous materials.
                 Standards for the proper handling, transport, and  
               disposal of fireworks that are hazardous waste.
                 A definition of "commercially viable" that ensures that  
               fireworks that should be disposed of as waste are not  
               resold.

           Retail licenses  .  SB 677 requires the SFM, after January 1,  
          2017, to issue separate one-time retail licenses authorizing the  
          retail sale of safe and sane fireworks within California from 9  
          a.m. on December 26 to midnight of January 1 of the following  
          year.  A retail license issued for the December 26 through  
          January 1 period is valid for only one seven-day period and then  
          expires.  The bill requires all fireworks sold pursuant to the  
          license to have been certified as safe and sane by the SFM as of  
          June 15 of the year in which the license becomes valid.  The  
          bill prohibits other licenses issued pursuant to specified  
          statutes from authorizing the sale of fireworks during the  
          December 26 through January 1 period.

          SB 677 prohibits the State Fire Marshal from issuing a retail  
          license for the December 26 through January 1 license period  
          unless:
                 The charter city, city, county, fire protection  
               district, or city and county having juris-diction over the  
               fixed location where the fireworks would be sold adopts an  
               ordinance or resolution allowing that sale, and 
                 The application for that license is received by the  
               State Fire Marshal on or before December 15 of the year in  
               which the validity of the license is to commence. 








          SB  677 (Mendoza) 4/6/15                                Page 5  
          of ?
          
          

          SB 677 allows the ordinance or resolution authorizing the sale  
          of fireworks to limit the period during which the fireworks can  
          be used to specified days and hours within the period during  
          which fireworks can be sold.

           Local permit fees  .  SB 677 allows the governing body of a  
          charter city, city, county, fire protection district, or city  
          and county that adopts an ordinance or resolution authorizing  
          fireworks sales to adopt an ordinance or resolution requiring  
          each applicant receiving a permit to pay a fee to the charter  
          city, city, county, fire district, or city and county.  The  
          amount of the fee is a pro rata portion of the costs the local  
          government incurs on or before January 1, 2017 related to:
                 Processing and issuing permits.
                 Inspecting fireworks stands.
                 Public education and awareness campaigns regarding the  
               safe and responsible use of safe and sane fireworks, and  
               the dangers and risks posed by the use of illegal  
               fireworks.
                 Enforcing local code provisions related to the sale and  
               use of safe and sane fireworks, including extra personnel  
               time, and cleanup of the fireworks trash and debris.  The  
               bill defines "extra personnel time" as employee or  
               contracted employee time that the local government would  
               not otherwise incur but for the sale and use of safe and  
               sane fireworks.
                 Fire operation and suppression efforts that are directly  
               related to safe and sane fireworks.

          SB 677 requires that the pro rata share of the costs must be  
          determined using gross sales as shown on each permittee's sales  
          and use tax return for the applicable period.  The bill  
          prohibits the pro rata share of costs from exceeding 7% of the  
          gross sales of the fireworks sold in the charter city, city,  
          county, fire district, or city and county during the applicable  
          period.  A cost recovery ordinance or resolution in effect on or  
          before January 1, 2015, may supersede these requirements.

           Data collection  .  SB 677 requires the SFM, on or before January  
          1, 2017, to collect and analyze data relating to fires, damages,  
          seizures, arrests, administrative citations, and fireworks  
          disposal issues caused by the sale and use of both dangerous  
          illegal fireworks and safe and sane fireworks.  The SFM must  








          SB  677 (Mendoza) 4/6/15                                Page 6  
          of ?
          
          
          collect data pursuant to a methodology developed in consultation  
          with the State Fire Marshal's General Fireworks Advisory  
          Committee.

           Tracking dangerous fireworks containers  .  SB 677 requires the  
          SFM, on or before January, 1 2018, to identify and evaluate  
          methods to track all containers containing dangerous fireworks  
          coming into California ports that will be transported in the  
          state or trans-shipped out of those ports via container on a  
          motor vehicle for shipment to a destination outside of  
          California so as to ensure that the dangerous fireworks reach  
          their final destination and are not drop shipped or otherwise  
          offloaded at a location within the State of California.  These  
          tracking methods shall include a cost analysis related to  
          capturing and reporting the tracking data concerning these  
          containers.  In developing these tracking methods the SFM must  
          consult with relevant federal, state, and local public agencies,  
          the fireworks industry, and other relevant stakeholders,  
          including port authorities for harbors and points of  
          trans-Pacific importation of any dangerous fireworks.

          SB 677 requires the SFM, on or before January 1, 2019, to adopt  
          regulations relating to the tracking of the dangerous fireworks  
          containers, which may include provisions relating to tracking  
          devices installed on each container, voluntarily funded by the  
          industry, as may be necessary for the protection of life and  
          property within the state.  The regulations must provide for an  
          annual charge imposed on all holders of an importer's and  
          exporter's license who import dangerous fireworks into the  
          state.  The annual charge must be determined based on the volume  
          of product and number of containers imported into the state by  
          the licensees, and payment of this charge shall be a condition  
          of licensure pursuant to state law.

          SB 677 requires import and export licensees, on and after  
          January 1, 2019, to verify their compliance with statutory  
          requirements and regulations relating to the tracking of  
          dangerous fireworks containers.

           Transporting fireworks  .  SB 677 specifies that laws requiring  
          the Department of Motor Vehicles to suspend the commercial  
          license of a person transporting dangerous fireworks do not  
          apply to a person with a specified, valid license or permit  
          issued pursuant to the State Fireworks Law. 








          SB  677 (Mendoza) 4/6/15                                Page 7  
          of ?
          
          

           Program evaluation and performance measurement  ; To monitor the  
          budgets of the Department of Forestry and Fire Protection  
          (CALFIRE) and the DTSC, as those budgets relate to programs  
          regarding fireworks, SB 677 requires the Director of the  
          Department of Finance, in collaboration with the Directors of  
          CALFIRE and DTSC, to create a plan for modifying the budget  
          process to increase efficiency and focus on accomplishing  
          fireworks-related program goals.  The plan must include:
                 A strategy to incorporate program evaluation methods  
               into the budget process for selected activities and  
               programs.  The methods must include zero-based budgeting,  
               performance measures, strategic planning, audits,  
               cost-benefit analyses, and program reviews.
                 Ways to ensure transparency about program goals,  
               outcomes, and funding.
                 A process for collaborating with the Legislature,  
               particularly in establishing program goals and measuring  
               program outcomes.
                 A structure to work with local governments to develop  
               methods to measure and evaluate performance of  
               state-funded, locally administered pro-grams.
                 An implementation timeline beginning with the release of  
               the 2016-2017 Governor's Budget.

           State Revenue Impact

           No estimate.


           Comments

           1.  Purpose of the bill  .  Fireworks sales are a vital source of  
          revenue for thousands of community-based, non-profit  
          organizations throughout California.  Allowing the licensed sale  
          of safe and sane fireworks during the week leading up to New  
          Year's Day will provide struggling non-profit organizations with  
          a much-needed fundraising tool.  Local governments' seizures of  
          illegal fireworks raise a number of policy questions regarding  
          safe transport, storage, handling, and disposal of the seized  
          materials.  SB 677 enacts numerous changes to the state's  
          fireworks laws to both expand the sales of "safe and sane"  
          fireworks while addressing enforcement and safety concerns.  The  
          bill maintains local control by allowing local government  








          SB  677 (Mendoza) 4/6/15                                Page 8  
          of ?
          
          
          officials to "opt-in" to the New Year's fire-works sales, and  
          allows local governments to impose permit fees that will pay for  
          local enforcement, education, fire operation, suppression, and  
          training activities.  The bill also creates new revenue streams  
          from the resale program and wholesale license fees to pay for  
          reliable data gathering, disposal, and enforcement.  SB 677 will  
          help raise funds for non-profit organizations while improving  
          state and local efforts to enforce fireworks safety laws. 

          2.   Fees vs. taxes  .  In November 2010, voters approved  
          Proposition 26, which amended the California Constitution to  
          expand the definitions of local taxes and tax increases that  
          require voter approval.  Prop. 26 defined any levy, charge, or  
          exaction of any kind imposed by a local government as a tax,  
          requiring voter approval, unless that levy, charge, or exaction  
          is covered by one of seven exceptions specified by Prop. 26.  SB  
          677 allows local government to use license fee revenues for a  
          variety of specified purposes.  Some of those purposes, like the  
          paying for the costs of issuing permits and conducting  
          inspections, likely fall within the exceptions defined by Prop.  
          26.  It is unclear whether other purposes, like paying for  
          education programs or the cleanup of fireworks debris, are  
          allowed under Prop. 26's exceptions.  If the fee revenues are  
          used for purposes that Prop. 26 does not allow, then the  
          so-called fees are actually taxes that would require 2/3 voter  
          approval.  To avoid any misinterpretation, the Committee may  
          wish to amend SB 677 to clarify that local permit fee revenues  
          must only be used for purposes allowed pursuant to subdivision  
          (e) of Section 1 of Article XIIIC of the California  
          Constitution.

          3.   Timing is everything  .   SB 677 directs that seized safe and  
          sane and federally approved fireworks that are not deemed to be  
          commercially viable become "hazardous waste" and must be  
          transported and disposed of pursuant to extensive state and  
          federal laws governing hazardous waste.  However, the bill  
          allows a local agency or the SFM to transport those same  
          fireworks to a collection center without having to comply with  
          any other provisions of law and doesn't require them to be  
          treated as hazardous waste at the collection center until after  
          they are deemed to be not commercially viable.  As a result,  
          some fireworks that are hazardous waste will not be treated like  
          hazardous waste during the time that they are being transported  
          to, and inspected at, the regional collection centers.  The  








          SB  677 (Mendoza) 4/6/15                                Page 9  
          of ?
          
          
          bill's proponents say that state and federal regulators will not  
          allow seized fireworks to be immediately deemed to be hazardous  
          waste and then later redefined as commercially viable products.   
          SB 677 seeks to mitigate this timing problem by requiring the  
          SFM to provide local agencies that seize and handle fireworks  
          with training and education regarding proper recognition,  
          transportation, storage, and safe handling of fireworks.  The  
          Committee may wish to consider whether this training and  
          education is a sufficient response to concerns that the bill  
          allows some seized fireworks to be transported and handled  
          without regard for state and federal laws governing hazardous  
          waste.

          4.   Mandate  .  By creating a new crime, SB 677 also creates a new  
          state-mandated program.  But the bill disclaims the state's  
          responsibility for reimbursing local governments for enforcing  
          these new crimes.  That's consistent with the California  
          Constitution, which says that the state does not have to  
          reimburse local governments for the costs of new crimes (Article  
          XIIIB, 6[a] [2]).

          5.   Similar legislation  .  SB 677 is not the first legislative  
          proposal to authorize licensed fireworks sales during the week  
          before New Year's Day.
                 SB 777 (Calderon, 2013), which would have created a  
               fireworks sell-back program administered by the State Fire  
               Marshal and authorized the state to issue licenses for  
               retail sales of fireworks during the week before New Year's  
               Day.

                 SB 1468 (Calderon, 2012) which would have allowed New  
               Year's fireworks sales each year from 2013 through 2017,  
               died in the Assembly.

                 AB 1295 (Bermudez, 2005), which would have allowed New  
               Year's fireworks sales and used fee revenues to pay for  
               disposal costs associated with seized fireworks, died in  
               the Assembly Appropriations Committee.

                 AB 1371 (V. Manuel Perez, 2011), which would have  
               allowed New Year's fireworks sales and authorized local  
               governments to impose permit fees, died in the Assembly  
               Governmental Organization Committee.









          SB  677 (Mendoza) 4/6/15                                Page 10  
          of ?
          
          
          6.   Double-referral  .  Because SB 677's provisions fall within  
          the policy jurisdictions of more than one Senate committee,  
          Senate Rules Committee ordered a double-referral, first to the  
          Senate Governance & Finance Committee and then to the Senate  
          Governmental Organization Committee.


           Support and  
          Opposition   (4/17/15)


           Support  :  American Promotional Events, Inc.


           Opposition  :  California Fire Chiefs Association; California  
          Taxpayers Association, Public Policy Advocate



                                      -- END --