BILL ANALYSIS                                                                                                                                                                                                    Ó



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

                              
          
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          |Bill No:  |SB 1318                          |Hearing    |4/6/16   |
          |          |                                 |Date:      |         |
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          |Author:   |Wolk                             |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |3/28/16                          |Fiscal:    |Yes      |
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          |Consultant|Favorini-Csorba                                       |
          |:         |                                                      |
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            Local government:  drinking water infrastructure or services:   
                        wastewater infrastructure or services



          Prohibits a LAFCO from updating the sphere of influence of, or  
          authorizing the extension of services by, a city or qualified  
          special district if nearby disadvantaged unincorporated  
          communities lack safe drinking water or adequate wastewater  
          services.


           Background 

           The Cortese-Knox-Hertzberg Act creates a local agency formation  
          commission (LAFCO) in each county to control the boundaries of  
          cities, county service areas, and most special districts.  The  
          courts repeatedly refer to LAFCOs as the Legislature's watchdog  
          over boundary changes.  To plan for the future boundaries and  
          service areas of the cities and special districts, a LAFCO must  
          adopt a policy document for each city and district called a  
          sphere of influence.  The LAFCOs' boundary decisions must be  
          consistent with the spheres of influence of the affected cities  
          or districts.  Spheres must be updated at least every five  
          years.

          In order to determine spheres of influence, LAFCOs must  
          periodically conduct a "municipal service review" (MSR) to  
          inform their decisions about spheres of influence.  MSRs must  
          analyze and make determinations about seven topics:







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                 Growth and population projections;

                 Present and planned capacity of public facilities and  
               adequacy of public services, including infrastructure needs  
               or deficiencies, including the water, sewer, and fire  
               protection needs of disadvantaged unincorporated  
               communities;

                 Agencies' financial abilities to provide services;

                 Opportunities for sharing facilities;

                 Accountability for community service needs;

                 The location and characteristics of any disadvantaged  
               unincorporated communities; and

                 Other matters relating to effective or efficient  
               services.

          Local governments can only exercise their powers and provide  
          services where LAFCO allows them to: within their boundaries  
          (which are set by LAFCO), within their spheres of influence but  
          outside their boundaries (with authorization by LAFCO), and  
          outside their spheres to address a major threat to public health  
          if the extension is consistent with LAFCO's policies.  In 2015,  
          the Legislature approved AB 402 (Dodd), which established a  
          pilot program in Napa County and San Bernardino County that  
          allowed the extension of services outside a local agency's  
          sphere of influence to support existing or planned uses, so long  
          as (1) a MSR has identified a service deficiency, (2) the  
          extension of service will not result in growth inducing impacts  
          or harm to agricultural lands, and (3) a sphere of influence  
          change is not feasible. 

          LAFCOs, along with the planning agencies of cities and counties,  
          are supposed to ensure that services are effectively and  
          efficiently delivered to all communities throughout the state.   
          Nevertheless, some communities continue to lack adequate public  
          services, including safe drinking water and functioning  
          wastewater systems.  These communities are often poor and are  
          located in the unincorporated area of a county.  In some cases  
          these "disadvantaged unincorporated communities" (DUCs) are  








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          remote and far from other communities with better public  
          services; in others, a city may share a border with a DUC that  
          has been excluded from its boundaries.

          In recent years, the Legislature has taken several steps to try  
          to address some of the service problems experienced by DUCs. SB  
          244 (Wolk, 2011) aimed to prevent cities from carving out DUCs  
          by prohibiting annexations to a city of territory greater than  
          10 acres if a DUC is contiguous with the territory proposed for  
          annexation, unless there is an application with the commission  
          to annex the unincorporated area or if the residents of the  
          affected territory oppose annexation.  SB 244 also required  
          LAFCOs to include in the MSR a description of the location and  
          characteristics of any DUCs within or contiguous to the sphere  
          of influence and to consider the water, sewer, or fire  
          protection needs of DUCs within the sphere when considering  
          updates.  When conducting an MSR, LAFCOs can also assess options  
          for governmental reorganizations or consolidations that improve  
          the efficiency and affordability of service delivery and can  
          review whether water systems in the area are in compliance with  
          the Safe Drinking Water Act. Finally, SB 244 required cities and  
          counties to review the water and fire service needs of DUCs in  
          their general plans.

          SB 244 made it easier for LAFCOs to identify boundary changes  
          and governmental reorganizations necessary to fix water service  
          problems faced by DUCs. Subsequent legislation-SB 88 (Committee  
          on Budget and Fiscal Review, 2015)-took this effort a step  
          further by authorizing the State Water Resources Control Board  
          (SWRCB) to order a consolidation of neighboring water systems  
          where it is economically feasible in order to address public  
          health threats.  To date, SWRCB has begun the consolidation  
          process with two water systems in communities that border the  
          city of Tulare.

          Some advocates for disadvantaged unincorporated communities want  
          to provide additional incentives for local governments to serve  
          DUCs that lack safe drinking water or adequate wastewater  
          service.


           Proposed Law

           Senate Bill 1318 restricts the cases where a LAFCO can update a  








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          sphere of influence or authorize an extension of service.   
          Specifically, the bill prohibits a LAFCO from updating the  
          sphere of influence for a city or a special district, if the  
          district has over 500 connections and provides either drinking  
          water or wastewater services, until the city or special district  
          has entered into an enforceable agreement to extend those  
          services to all disadvantaged unincorporated communities within  
          its sphere of influence or adjacent to its jurisdictional  
          boundaries, if they lack safe drinking water or adequate  
          wastewater services.  The services must be extended to the  
          disadvantaged communities within five years of the approval of  
          the sphere of influence update, or sooner if feasible.  However,  
          LAFCO may authorize the service extension if the LAFCO finds,  
          based on written evidence, that a majority of the residents of  
          the relevant disadvantaged communities are opposed to receiving  
          those services. If the LAFCO finds that the residents are  
          opposed, those findings cannot interfere with the SWRCB's  
          authority under SB 88 or other efforts to expand services.

          SB 1318 also prohibits a LAFCO from authorizing a city or a  
          special district, regardless of size, to extend drinking water  
          or wastewater services as provided in the Cortese-Knox-Hertzberg  
          Act until the city or special district has entered into an  
          enforceable agreement to extend those services to all  
          disadvantaged communities-whether incorporated or  
          unincorporated-within its sphere of influence or adjacent to its  
          jurisdictional boundaries that lack safe drinking water or  
          adequate wastewater services.  The services must be extended to  
          the disadvantaged communities within five years, or sooner if  
          feasible.  However, LAFCO may authorize the service extension if  
          any of the following conditions apply:

                 The LAFCO finds, based on written evidence, that a  
               majority of the residents of the relevant disadvantaged  
               communities are opposed to receiving those services.  If  
               the LAFCO finds that the residents are opposed, those  
               findings cannot interfere with the SWRCB's authority under  
               SB 88 or other efforts to expand services;

                 The extension of services is authorized to respond to an  
               existing or impending threat to the health or safety of the  
               public; or

                 The extension of services is to a disadvantaged  








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               community.

          A similar prohibition and exceptions apply to extensions of  
          services authorized under the pilot program in Napa County and  
          San Bernardino County.

          SB 1318 further prohibits annexations of territory greater than  
          10 acres to city or a special district, if the district provides  
          water or wastewater services to more than 500 connections, where  
          there exists either (1) a DUC contiguous to the territory  
          proposed for annexation, or (2) a DUC within the city or  
          district's sphere of influence or adjacent to its boundaries  
          that lacks safe drinking water or adequate wastewater services,  
          with the same exceptions as provided elsewhere in the bill for  
          prohibitions on extensions of services.  It also prohibits  
          LAFCOs from removing a disadvantaged community from the sphere  
          of a city or special district unless it finds that the removal  
          would improve service delivery to the community.

          SB 1318 places additional responsibilities on LAFCOs as they  
          review and update spheres of influence.  Specifically, the bill  
          requires the periodic review of the spheres of influence of any  
          city or special district that provides water, wastewater, or  
          structural fire protection services to consider the need for  
          those services of DUCs adjacent to its sphere.  It also makes  
          mandatory several currently optional LAFCO processes and  
          studies, including to:

                 Review government reorganizations for potential  
               improvements to service delivery;

                 Recommend reorganization where feasible;

                 Review alternatives for improving the efficiency and  
               affordability of service delivery within or contiguous with  
               the sphere being reviewed if there is a DUC that lacks  
               adequate drinking water and waste water services; and 

                 Review water systems in the area for compliance with the  
               Safe Drinking Water Act, if the information is available.












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           State Revenue Impact

           No estimate.


           Comments

           1.  Purpose of the bill.  Many communities in California continue  
          to suffer from third-world level drinking water and wastewater  
          services.  In many cases, these communities' border cities or  
          special districts with more than enough capacity to serve them,  
          but their boundaries have been drawn to specifically exclude  
          them.  Despite recent legislative efforts, some cities continue  
          to look to serve new development outside of their current  
          boundaries before helping neighboring communities.  While SB 244  
          helped highlight the disparity in services for DUCs, stronger  
          measures are needed to ensure that LAFCOs and local governments  
          faithfully carry out their responsibilities.  SB 1318 is simply  
          the next step.  It incentivizes cities and special districts  
          that want to serve new development to help meet the needs of  
          existing communities with drinking water and wastewater  
          problems, and codifies best practices that conscientious LAFCOs  
          already follow.  SB 1318 won't solve all of the problems of  
          DUCs, but it provides an important tool to get the state closer  
          to its goal of ensuring that all Californians have access to  
          safe, affordable drinking water.

          2.  An offer they can't refuse  . A viable development needs  
          certain services, including drinking water and wastewater, but a  
          local government can only provide those services where LAFCO  
          lets them.  By restricting the ability of LAFCO to approve  
          service extensions or sphere of influence updates, SB 1318  
          essentially conditions new development on the provision of  
          services to other unrelated communities, regardless of whether  
          there is any causal link or nexus between a proposed sphere  
          change or extension of services and the DUC that lacks drinking  
          water or wastewater.  Courts have found that there may be an  
          unconstitutional taking when government requires development  
          fees or exactions that don't bear a reasonable relationship to  
          the conditions created by the new development.  In addition,  
          anti-development forces may abuse the provisions of SB 1318 to  
          stop new housing or other facilities that they don't like.   
          Instead of providing third parties with leverage to try to force  
          cities and special districts to serve DUCs, it may be more  








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          appropriate to directly require cities and counties, through the  
          general planning process, to ensure that these communities have  
          access to sustainable services.

          3.  Different strokes  .  California is a diverse state, with many  
          unique communities and considerations.  Many of the communities  
          that lack safe drinking water are located in rural areas of  
          sparsely populated counties.  But the bill would apply  
          statewide.  There may be unintended consequences-such as a  
          freezing of spheres of influence and jurisdictional  
          boundaries-in densely populated urban counties such as Los  
          Angeles or the San Francisco Bay Area where DUCs are surrounded  
          by multiple cities and special districts.  The very purpose of  
          LAFCOs is to take into account local conditions in determining  
          what services are provided where.  The Committee may wish to  
          consider amending SB 1318 to apply only to parts of the state  
          where DUCs with water or wastewater inadequacies are known and  
          there are technically and economically feasible consolidations  
          that have been blocked for more parochial reasons.

          4.  Burden on LAFCOs  . SB 1318 imposes a number of burdens on  
          LAFCOs that they may not have the resources to pursue, including  
          potential elections or polling to perform sphere updates,  
          mandatory studies of territory outside of an agency's sphere,  
          and mandatory assessments of alternatives for communities that  
          lack adequate drinking water or wastewater.  Cities, counties,  
          and special districts fund LAFCO operations, but many of those  
          agencies are still recovering from the recession.  Is now the  
          right time to impose additional financial responsibilities on  
          local agencies that are just getting to their feet?

          5.  Mandate  . The California Constitution generally requires the  
          state to reimburse local agencies for their costs when the state  
          imposes new programs or additional duties on them.  According to  
          the Legislative Counsel's Office, SB 1318 creates a new  
          state-mandated local program.  SB 1318 provides that if the  
          Commission on State Mandates determines that the bill contains  
          state-mandated costs, reimbursement to local agencies must be  
          made according to an existing process in state law.

          6.  Double-referred  .  The Senate Rules Committee has ordered a  
          double-referral of SB 1318-first to the Senate Governance &  
          Finance Committee, which has jurisdiction over bills relating to  
          LAFCOs and local government services, and then to the Senate  








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          Environmental Quality Committee, which has jurisdiction over  
          bills relating to drinking water and wastewater.

          7.  Let's be clear  . The Committee may wish to consider two  
          clarifying amendments that correct errors to further the intent  
          of the bill:

                 Standardize references to "disadvantaged unincorporated  
               communities" throughout the bill. Some provisions of the  
               bill refer instead to disadvantaged communities, which  
               could include incorporated areas that are already within  
               the sphere of a city or special district.

                 Ensure that 56133(h) does not prevent cities which do  
               not provide water or wastewater services from updating  
               their spheres of influence.  Some cities receive services  
               by contract, and thus could be prevented from changing  
               their spheres even though they are not able to remedy  
               nearby water problems.  Similarly, one reference to  
               "district" in the same section is missing the modifier  
               "qualifying," which is necessary to restrict the bill's  
               applicability to districts that provide water or wastewater  
               services.


           Support and  
          Opposition   (3/31/2016)


           Support  :  Leadership Counsel for Justice and Accountability  
          (co-sponsor); California Food Policy Advocates; California  
          League of Conservation Voters; California Rural Legal Assistance  
          Foundation; Central California Asthma Collaborative; Clean Water  
          Action; Community Water Center; Environmental Justice Coalition;  
          Environmental Working Group; Natural Resources Defense Council;  
          Policy Link; Pueblo Unido Community Development Coalition; Rural  
          Communities Assistance Foundation; San Joaquin Valley  
          Sustainable Agriculture Collaborative; Sequoia Riverlands Trust;  
          Sierra Club California.

           Opposition  :  California Apartment Association; California  
          Association of Local Agency Formation Commissions; California  
          Association of Realtors; California Building Industries  
          Association; California Business Properties Association;  








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          California Chamber of Commerce; California Manufacturers and  
          Technology Association; California Municipal Utilities  
          Association; California Special Districts Association; Contra  
          Costa LAFCO; El Dorado LAFCO; League of California Cities;  
          Nevada County LAFCO; Riverside LAFCO; San Bernardino County  
          LAFCO; San Diego LAFCO; San Luis Obispo LAFCO; San Mateo LAFCO;  
          Sonoma LAFCO.


                                      -- END --