Amended in Assembly June 13, 2016

Senate BillNo. 1298


Introduced by Senator Hertzberg

February 19, 2016


begin deleteAn act to amend Section 846 of the Public Utilities Code, relating to electricity. end deletebegin insertAn act to amend Sections 53750 and 53755 of, and to add Section 53756.5 to, the Government Code, relating to local government finance. end insert

LEGISLATIVE COUNSEL’S DIGEST

SB 1298, as amended, Hertzberg. begin deleteElectrical restructuring: financing orders. end deletebegin insertLocal government: fees and charges.end insert

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Articles XIII C and XIII D of the California Constitution generally require that assessments, fees, and charges be submitted to property owners for approval or rejection after the provision of written notice and the holding of a public hearing. Existing law, the Proposition 218 Omnibus Implementation Act, prescribes specific procedures and parameters for local jurisdictions to comply with Articles XIII C and XIII D of the California Constitution and defines terms for these purposes.

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Existing statutory law establishes notice, protest, and hearing procedures for the levying of new or increased fees or charges by local government agencies pursuant to Article XIII D of the California Constitution.

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This bill would define the terms “proportional cost of the service attributable to the parcel” and “sewer service,” and would recast the definition of “water” to mean “water service,” for these purposes. The bill would additionally specify that one vote per parcel may be counted in determining whether a proposed fee or charge is approved by a majority vote, as specified.

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The bill would additionally authorize an agency to impose a conservation and efficiency fee or charge for water service, in addition to any property-related fee or charge imposed for water service, to achieve specified conservation and efficiency purposes. The bill would provide that a conservation and efficiency fee or charge may raise revenue as an incident to its regulatory purpose and would require the agency to use any revenue to pay the cost of providing the service or for lowering the rate or rate structure of the associated property-related fee or charge. The bill would require a conservation and efficiency fee or charge to bear a fair or reasonable relationship to the burdens imposed on the local agency or the benefits received from the water service based on the amount of water used by each customer or class of customers, as specified.

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Under existing law, the Public Utilities Commission has regulatory authority over public utilities, including electrical corporations. Existing law relative to restructuring of the electrical industry authorizes an electrical corporation to apply to the commission for a determination that certain transition costs, as defined, may be recovered through fixed transition amounts, which would constitute transition property, as defined, and provides, until December 31, 2016, for the issuance of financing orders and provides for the issuance of rate reduction bonds to be paid out of rates.

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This bill would extend the authorization for the issuance of financing orders from December 31, 2016, to December 31, 2017.

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Vote: majority. Appropriation: no. Fiscal committee: begin deleteyes end deletebegin insertnoend insert. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1begin insert

begin insertSECTION 1.end insert  

end insert
begin insert

The Legislature finds and declares all of the
2following:

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3
(a) The ongoing, historic drought has made clear that California
4must invest in a 21st-century water management system capable
5of effectively meeting the economic, social, and environmental
6needs of the state.

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7
(b) Sufficient and reliable funding to pay for local water projects
8is necessary to improve the state’s water infrastructure.

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P3    1
(c) Proposition 218, approved in 1996, was meant to improve
2transparency and accountability of local government fees. Some
3court interpretations of the law have constrained three important
4tools that local governments need to manage water supplies and
5address water pollution: stormwater management, rates to
6encourage water conservation, and assistance for low-income
7Californians.

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begin insert

8
(d) Stormwater is a key source of local water supply, and careful
9management is necessary to reduce pollution. But a court decision
10has required stormwater and flood control programs to meet a
11higher standard than other water-related services to raise capital,
12preventing many important projects from being built.

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13
(e) One important way to encourage water conservation is to
14charge higher rates to customers using excessive amounts of water.
15This is a common practice throughout the world and a requirement
16for California’s private water agencies. Unfortunately, a recent
17court decision has made it difficult and confusing for local agencies
18to implement this necessary tool.

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19
(f) The United States Environmental Protection Agency has
20found that water rates exceeding 2 percent of monthly income are
21unaffordable, which is the case for millions of Californians. Private
22water and energy utilities are required to offer programs to make
23rates affordable to low-income households. Local governments in
24California, however, are concerned that recent court decisions
25regarding Proposition 218 could prohibit them from providing
26the same service.

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27
(g) This act is intended to provide guidance to local agencies
28and courts on the implementation of Articles XIII C and XIII D of
29the California Constitution and shall not be construed to amend
30those articles.

end insert
31begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 53750 of the end insertbegin insertGovernment Codeend insertbegin insert is amended to
32read:end insert

33

53750.  

For purposes of Article XIII C and Article XIII D of
34the California Constitution and this article:

35(a) “Agency” means any local government as defined in
36subdivision (b) of Section 1 of Article XIII C of the California
37Constitution.

38(b) “Assessment” means any levy or charge by an agency upon
39real property that is based upon the special benefit conferred upon
40the real property by a public improvement or service, that is
P4    1imposed to pay the capital cost of the public improvement, the
2maintenance and operation expenses of the public improvement,
3or the cost of the service being provided. “Assessment” includes,
4but is not limited to, “special assessment,” “benefit assessment,”
5“maintenance assessment,” and “special assessment tax.”

6(c) “District” means an area that is determined by an agency to
7contain all of the parcels that will receive a special benefit from a
8proposed public improvement or service.

9(d) “Drainage system” means any system of public
10improvements that is intended to provide for erosion control, for
11landslide abatement, or for other types of water drainage.

12(e) “Extended,” when applied to an existing tax or fee or charge,
13means a decision by an agency to extend the stated effective period
14for the tax or fee or charge, including, but not limited to,
15amendment or removal of a sunset provision or expiration date.

16(f) “Flood control” means any system of public improvements
17that is intended to protect property from overflow by water.

18(g) “Identified parcel” means a parcel of real property that an
19agency has identified as having a special benefit conferred upon
20it and upon which a proposed assessment is to be imposed, or a
21parcel of real property upon which a proposed property-related
22fee or charge is proposed to be imposed.

23(h) (1) “Increased,” when applied to a tax, assessment, or
24property-related fee or charge, means a decision by an agency that
25does either of the following:

26(A) Increases any applicable rate used to calculate the tax,
27assessment, fee, or charge.

28(B) Revises the methodology by which the tax, assessment, fee,
29or charge is calculated, if that revision results in an increased
30amount being levied on any person or parcel.

31(2) A tax, fee, or charge is not deemed to be “increased” by an
32agency action that does either or both of the following:

33(A) Adjusts the amount of a tax, fee, or charge in accordance
34with a schedule of adjustments, including a clearly defined formula
35for inflation adjustment that was adopted by the agency prior to
36November 6, 1996.

37(B) Implements or collects a previously approved tax, fee, or
38charge, so long as the rate is not increased beyond the level
39previously approved by the agency, and the methodology
P5    1previously approved by the agency is not revised so as to result in
2an increase in the amount being levied on any person or parcel.

3(3) A tax, assessment, fee, or charge is not deemed to be
4“increased” in the case in which the actual payments from a person
5or property are higher than would have resulted when the agency
6approved the tax, assessment, fee, or charge, if those higher
7payments are attributable to events other than an increased rate or
8revised methodology, such as a change in the density, intensity,
9or nature of the use of land.

10(i) “Notice by mail” means any notice required by Article XIII C
11or XIII D of the California Constitution that is accomplished
12through a mailing, postage prepaid, deposited in the United States
13Postal Service and is deemed given when so deposited. Notice by
14mail may be included in any other mailing to the record owner
15that otherwise complies with Article XIII C or XIII D of the
16California Constitution and this article, including, but not limited
17to, the mailing of a bill for the collection of an assessment or a
18property-related fee or charge.

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19
(j) “Proportional cost of the service attributable to the parcel,”
20when applied to a fee or charge for water or sewer service, means
21the share of the total cost of providing water or sewer service to
22water or sewer users within the service area reasonably
23attributable to the parcel. The total cost of providing water or
24sewer service includes all costs of acquiring water and water
25rights, costs of collecting, conveying, treating, and managing water
26and wastewater, costs of satisfying all regulatory requirements
27lawfully imposed on water and sewer service providers, and costs
28of providing communitywide water service in an equitable manner,
29including the cost of lifeline water rates.

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30(j)

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31begin insert(k)end insert “Record owner” means the owner of a parcel whose name
32and address appears on the last equalized secured property tax
33assessment roll, or in the case of any public entity, the State of
34California, or the United States, means the representative of that
35public entity at the address of that entity known to the agency.

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36
(l) “Sewer service” means services provided by all real estate,
37fixtures, and personal property owned, controlled, operated, or
38managed in connection with or to facilitate sewage collection,
39treatment, or disposition for sanitary or drainage purposes,
40including lateral and connecting sewers, interceptors, trunk and
P6    1outfall lines, sanitary sewage treatment or disposal plants or works,
2drains, conduits, outlets for surface or storm waters, and any and
3all other works, property, or structures necessary or convenient
4for the collection or disposal of sewage, industrial waste, or surface
5or storm waters. “Sewer system” shall not include a sewer system
6that merely collects sewage on the property of a single owner.

end insert
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7(k)

end delete

8begin insert(m)end insert “Registered professional engineer” means an engineer
9registered pursuant to the Professional Engineers Act (Chapter 7
10(commencing with Section 6700) of Division 3 of the Business
11and Professions Code).

begin delete

12(l)

end delete

13begin insert(n)end insert “Vector control” means any system of public improvements
14or services that is intended to provide for the surveillance,
15prevention, abatement, and control of vectors as defined in
16subdivision (k) of Section 2002 of the Health and Safety Code and
17a pest as defined in Section 5006 of the Food and Agricultural
18Code.

begin delete

19(m) “Water”

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20begin insert(o)end insertbegin insertend insertbegin insert“Water service”end insert meansbegin insert services provided byend insert any system of
21public improvements intended to provide for the production,
22storage, supply, treatment, or distribution of water from any source.

23begin insert

begin insertSEC. 3.end insert  

end insert

begin insertSection 53755 of the end insertbegin insertGovernment Codeend insertbegin insert is amended to
24read:end insert

25

53755.  

(a) (1) The notice required by paragraph (1) of
26subdivision (a) of Section 6 of Article XIII D of the California
27Constitution of a proposed increase of an existing fee or charge
28for a property-related service being provided to a parcel may be
29given by including it in the agency’s regular billing statement for
30the fee or charge or by any other mailing by the agency to the
31address to which the agency customarily mails the billing statement
32for the fee or charge.

33(2) The notice required by paragraph (1) of subdivision (a) of
34Section 6 of Article XIII D of the California Constitution of a
35proposed new fee or charge may be given in the manner authorized
36for notice of an increase of a fee or charge if the agency is currently
37providing an existing property-related service to the address.

38(3) If the agency desires to preserve any authority it may have
39to record or enforce a lien on the parcel to which service is
40provided, the agency shall also mail notice to the recordowner’s
P7    1address shown on the last equalized assessment roll if that address
2is different than the billing or service address.

3(b) One written protest per parcel, filed by an owner or tenant
4of the parcel, shall be counted in calculating a majority protest to
5a proposed new or increased fee or charge subject to the
6requirements of Section 6 of Article XIII D of the California
7Constitution.

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8
(c) One vote per parcel, filed by an owner or tenant of the
9parcel, shall be counted in determining whether a proposed fee
10or charge is approved by a majority vote pursuant to subdivision
11(c) of Section 6 of Article XIII D of the California Constitution.

end insert
begin delete

12(c)

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13begin insert(d)end insert Any agency that bills, collects, and remits a fee or charge
14on behalf of another agency may provide the notice required by
15Section 6 of Article XIII D of the California Constitution on behalf
16of the other agency.

17begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 53756.5 is added to the end insertbegin insertGovernment Codeend insertbegin insert, to
18read:end insert

begin insert
19

begin insert53756.5.end insert  

(a) The Legislature finds and declares all of the
20following:

21
(1) Water service may be used for purposes that are
22indispensable to the use of the property, including, but not limited
23to, cooking, sanitation, and reasonable irrigation.

24
(2) Water service may also be used for purposes that are not
25indispensable to the use of property, including, but not limited to,
26excessive indoor use, unabated leakage, excessive irrigation, and
27other activities that constitute an inefficient use of the water.

28
(3) The amount of water that is indispensable to the use of a
29property may vary depending on the use to which the property is
30put, local conditions, water shortages, environmental factors, and
31other factors affecting water demand and supply availability.

32
(4) Local agencies should have the authority to determine the
33amount of water that is indispensable for property use, given the
34above conditions.

35
(5) Charges for water that is not indispensable for property use
36are not imposed as an incident of property ownership and therefore
37are not property-related charges as defined by Article XIII D of
38the California Constitution.

P8    1
(6) Charges for water that is not indispensable for property use
2may be either specific benefits or specific government services
3under Article XIII C of the California Constitution.

4
(7) Article XIII C of the California Constitution does not identify
5the costs that may be associated with water service, define “a fair
6or reasonable relationship” between the costs of the service and
7the burdens or benefits associated with the service, or prescribe
8a particular method for allocating the costs of providing
9nonproperty-related water services or benefits.

10
(b) An agency may, in addition to any property-related fee or
11charge imposed pursuant to Article XIII D of the California
12Constitution and this article for water service, impose or increase
13a separate and distinct conservation and efficiency fee or charge
14for the same service to create price signals to encourage
15conservation and increased efficiency in the use of water. A
16conservation and efficiency fee or charge imposed pursuant to this
17section may be imposed on water that is not indispensable for
18property use. A conservation and efficiency fee or charge imposed
19pursuant to this section may be imposed for purposes including,
20but not limited to:

21
(1) Deterrence of excess consumption of water, as determined
22by the local agency.

23
(2) Encouragement of the adoption of technologies that support
24more efficient use of water.

25
(3) To encourage compliance with the goals of avoiding waste
26and unreasonable use of water pursuant to Section 2 of Article X
27of the California Constitution.

28
(c) (1) A conservation and efficiency fee or charge may raise
29revenue as an incident to its intended purpose. Any revenue
30produced shall only be used to pay the costs of providing water
31service, to lower the rate or rate structure of the associated
32property-related fee or charge for water service, or to provide
33lower rates or rebates for disadvantaged households. The total
34amount collected from the property-related fee or charge for water
35service and the conservation and efficiency fee or charge shall not
36exceed the reasonable costs incurred by the agency to provide the
37water service.

38
(2) The rate of a conservation and efficiency fee or charge shall
39bear a fair or reasonable relationship to the burden imposed on
40the local agency or the benefits received from the water service
P9    1based on the amount of water used by each customer or class of
2customers. The agency may determine that the burden on, or the
3benefits derived from, the provision of water service per unit of
4water used is greater for customers who use relatively large
5amounts of water for their type and size of real property. The
6agency may establish a rate structure for a conservation and
7efficiency fee or charge intended to encourage conservation and
8increased efficiency of water use in order to bring the burdens of
9providing water service to customers or classes of customers into
10reasonable balance. The charges may be structured in a tiered,
11ascending, or other incremental manner. In addition, the agency
12may determine that the fairness of the rate structure is enhanced
13if it provides for lower rates for disadvantaged households, also
14known as lifeline rates.

15
(d) Consideration and imposition or increase of a conservation
16and efficiency fee or charge shall comply with the notice, hearing,
17protest, and election requirements, if any, required by Article
18XIII D of the California Constitution. However, the requirements
19of paragraph (3) of subdivision (b) of Section 6 of Article XIII D
20shall not apply to any conservation and efficiency fee or charge
21levied pursuant to this section.

22
(e) (1) For the purposes of this section, “reasonable costs” of
23the specific benefit or specific government service shall include,
24but are not limited to, costs that will, directly or indirectly, enable
25an agency to meet water demands, reduce water demands, conserve
26potable water supplies, procure water supplies to provide water
27that is not indispensable to the use of property, and provide
28communitywide water service in an equitable manner, including
29lifeline water rates. The determination of reasonable costs may
30consider the relative income of the payer of the fee or charge.

31
(2) For the purposes of this section and Article XIII C of the
32California Constitution, “fair or reasonable relationship” may
33include a relationship consistent with principles of equity that hold
34that more affluent individuals benefit more from public services,
35including water service, than less affluent individuals receiving
36the same service.

end insert
37begin insert

begin insertSEC. 5.end insert  

end insert
begin insert

The provisions of this act are severable. If any
38provision of this act or its application is held invalid, that invalidity
39shall not affect other provisions or applications that can be given
40effect without the invalid provision or application.

end insert
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P10   1

SECTION 1.  

Section 846 of the Public Utilities Code is
2amended to read:

3

846.  

The authority of the commission to issue financing orders
4pursuant to Section 841 shall expire on December 31, 2017. The
5expiration of the authority shall have no effect upon financing
6orders adopted by the commission pursuant to this article or any
7transition property arising therefrom, or upon the charges
8authorized to be levied thereunder, or the rights, interests, and
9obligations of the electrical corporation or a financing entity or
10holders of transition bonds pursuant to the financing order, or the
11authority of the commission to monitor, supervise, or take further
12action with respect to the order in accordance with the terms of
13this article and of the order.

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