BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2951|
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THIRD READING
Bill No: AB 2951
Author: Goldberg (D)
Amended: 8/25/06 in Senate
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 5-0, 6/28/06
AYES: Kehoe, Cox, Harman, Machado, Torlakson
SENATE APPROPRIATIONS COMMITTEE : 12-1, 8/17/06
AYES: Murray, Aanestad, Alarcon, Alquist, Ashburn, Battin,
Dutton, Escutia, Ortiz, Poochigian, Romero, Torlakson
NOES: Florez
ASSEMBLY FLOOR : 50-22, 5/31/06 - See last page for vote
SUBJECT : Capital facilities fees
SOURCE : Association of California Water Agencies
California Association of Sanitation Districts
California Association of Special Districts
California Municipal Utility Association
City of Los Angeles
East Bay Municipal Utility District
Los Angeles Department of Water and Power
San Francisco Public Utilities Commission
DIGEST : This bill authorizes public agencies that
provide public utility services to impose rates, charges,
surcharges, or fees to a public agency, except for "capital
facilities fees," which a public agency utility must
CONTINUED
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negotiate with schools, public higher education, and state
agencies.
Senate Floor Amendments of 8/25/06 extend the requirement
for public agencies to give public notice from 45 days to
60 days before setting fees. They also note that local
agencies can pay for these mandated studies with local
fees.
ANALYSIS :
Existing law:
1. Prohibits the imposition of property taxes on state and
local agencies except where expressly authorized by the
Legislature.
2. Defines a "fee" or "charge" as any levy other than an ad
valorem tax, a special tax, or an assessment, imposed by
an agency upon a parcel or upon a person as an incident
of property ownership, including a user fee or charge
for a property related service.
3. Establishes procedures that an agency must follow when
imposing or increasing any fee or charge.
4. Requires that public agencies authorized to impose a
capital facilities fee on other public agencies shall be
subject to specified definitions and limitations.
This bill:
1. Authorization to charge . Authorizes a public agency
that provides public utility service to impose a fee,
rate charge or surcharge for any product, commodity or
service provided to a public agency. The fee for public
utility service, except for electricity or gas, shall
not be extended, imposed, or increased unless it meets
the following two requirements:
A. Revenues derived from the fee shall not exceed the
reasonable cost of providing the public utility
service.
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B. The fee shall be determined on the basis of the
same objective criteria and methodology applicable to
comparable nonpublic users, based on customer classes
established in consideration of service
characteristics, demand patterns, and other relevant
factors.
A public agency providing public utility service shall
complete a cost of service study at least once every 10
years that addresses the cost of providing public
utility service to public schools. Local agencies can
pay for these mandated studies with local fees.
2. Public notice . Some public agencies that provide
utility services set their utility rates by holding
public hearings and adopting formal ordinances, while
others set rates by resolution or motion at public
hearings. Because the Brown Act applies to all local
agencies, local officials must post their agendas at
least 72 hours before their regular meetings. All
public agencies must follow the Public Records Act and
disclose documents, except for materials that are
specifically exempt.
When a public agency that provides public utility
service holds a public meeting to establish or increase
rates, charges, surcharges, or fees, this bill requires
the agency to give public notice at least 60 days before
the meeting to any agency that asked for notice. At the
request of a public agency at least 30 days before this
public meeting, this bill requires the providing agency
to provide the affected agency with the data and
proposed methodology for establishing or increasing the
rate, charge, surcharge, or fee. The data and proposed
methodology can be provided at a meeting of the
agencies' staff or other representatives.
3. Statute of limitations . Current law declares that a
capital facilities fee is imposed on the date that the
bill goes out, but does not specify a statute of
limitations for lawsuits over contested capital
facilities fees. The California Supreme Court's 2001
Utility Cost Management decision explained that the
deadline for these lawsuits is 120 days from the
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enactment of the fees (not the mailing of the charge).
For lawsuits challenging local publicly owned electric
utilities' capital facilities fees, current law contains
a 120-day statute of limitations, starting on the
effective date of the action raising the charge.
This bill sets a 120-day deadline for filing a suit by a
public agency seeking a refund of a fee, rate, charge,
or surcharge, or any increase in these costs, or
challenging the validity of these charges on or after
January 1, 2007. This deadline begins on the effective
date of a charge. This bill repeals the current
declaration that a capital facilities fee is imposed on
the date that the bill goes to the public agency
consumer. These provisions automatically sunset on
January 1, 2010.
4. Validating suits . Current law allows a public agency to
file a validation suit, asking a court to review the
validity of a decision. If the agency does not file its
own validation suit, any interested party can file a
validation suit within 60 days of a public agency's
decision.
This bill prohibits a public agency that imposes or
increases a public utility fee, rate, charge, or
surcharge from filing a validation suit any earlier than
120 days after the effective date of the fee's
imposition or increase. This provision automatically
sunsets on January 1, 2010.
5. Burden of proof . In civil suits, the plaintiff usually
has the burden of proof. When school districts,
community college districts, the California State
University, the University of California, or state
agencies sue public agency utilities over their capital
facilities fees, current law assigns the burden of proof
to the public agency that imposes the capital facilities
fee. The public agency utility must produce evidence to
establish that the capital facilities fee is
nondiscriminatory and the fee does not exceed the amount
needed to provide the capital facilities.
This bill declares that the public agency that imposes
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or increases a fee, rate, charge, or surcharge has the
burden of showing that the charge was established
pursuant to the statutory procedures. This provision
automatically sunsets on January 1, 2010.
6. Effect on litigation . This bill declares that these
changes are not intended to affect litigation involving
public utility services provided before January 1, 2007,
brought before or after that date. This bill provides
that nothing in the legislative history should be
construed as any indication of the law's meaning before
the bill's amendments and additions.
7. Definitions . This bill affects statutory terms'
definitions to:
A. Separately define a "capacity charge" as a
one-time charge to recover the costs of needed public
utility facilities.
B. Separately define a "capital facilities fee" as a
nondiscriminatory connection fee, nondiscriminatory
capacity charge, or both, but not a rate, charge,
surcharge, or their capital components.
C. Revise the definition of "nondiscriminatory" to
mean that the fee does not exceed the amount based on
the same objective criteria and methodology applied
to comparable nonpublic users, and that the fee is
not in excess of the proportionate share of the use
of those facilities.
D. Define a "connection fee" as a fee to cover the
costs of the physical facilities needed to directly
connect a public agency facility to a public utility
service (including meters, meter boxes, and
pipelines) and the actual cost of the installation's
labor and materials.
E. Clarify the definition of "public agency" by
explicitly listing the California State University, a
county office of education, a city, a school
district, and a community college district.
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F. Redefine "public utility service" to include:
water, light, heat, communications, power, or
garbage, or flood control, drainage or sanitary
purposes, or sewage collection, treatment, or
disposal.
Background
In its 1986 San Marcos decision, the California Supreme
Court ruled that public agencies that provide public
utility services cannot charge capacity fees to other
public agencies without statutory permission.
The Legislature responded by authorizing public agencies
that provide utility services to continue charging capital
facilities fees, and authorizing public agencies that
receive utility services to pay those fees. A capital
facilities fee or capacity charge is a nondiscriminatory
charge that pays a public utility facility's capital cost.
Nondiscriminatory means that the capital facilities fee
doesn't exceed an amount based on the same objective
criteria and methodology that apply to nonpublic users, and
doesn't exceed the proportionate share of the public
utility facilities' costs. However, public agency
utilities must negotiate their capital facilities fees with
school districts, community college districts, the
California State University, the University of California,
and state agencies (AB 1350, Cortese, 1988).
Legislation in 2000 affected the ability of local publicly
owned electric utilities (cities, special districts, joint
powers agencies) to charge capital facilities fees to
school districts, community college districts, the
California State University, the University of California,
and state agencies. To impose a new capital facilities fee
for electrical utility service, a local publicly owned
electric utility must show that the fee is
nondiscriminatory and does not exceed the amount needed to
provide the capital facilities for which the fee is charged
(AB 1674, Assembly Utilities and Commerce Committee,
Chapter 146, Statutes of 2000).
Some public agencies say that the public agencies that
provide utilities improperly include capital costs in their
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service rates. They contend that the only way a public
agency utility can recover the capital costs of a public
utility facility is through designated capital facilities
fees or capacity charges. The sharp differences between
the public agency utilities and their public agency
consumers over what the agencies can charge has resulted in
lawsuits.
Public agency utilities counter that it is an established
practice to include the costs of facility repair,
replacement, rehabilitation, and debt service in the rates
they charge for utility service. While the Cortese bill
required them to follow new procedures when they charge
connection fees and capacity charges, they say that the
1988 legislation did not affect their practice of charging
fees to maintain a utility system's facilities. Besides,
it is infeasible to segregate these system-wide costs and
assign them to specific consumers.
In 2003, Governor Davis vetoed a bill that allowed public
agencies to charge other public agencies nondiscriminatory
utility service rates (AB 1051, Goldberg, 2003). The
Governor's veto message stressed his concern for the bill's
"potentially significant fiscal impacts on public entities
and state agencies, specifically, educational
institutions." He called upon public agency utilities to
provide more information about how they allocate their
capital costs, by rate class.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
Unknown with latest amendments
SUPPORT : (Verified 8/25/06)
Association of California Water Agencies (co-source)
California Association of Sanitation Districts (co-source)
California Association of Special Districts (co-source)
California Municipal Utility Association (co-source)
City of Los Angeles (co-source)
East Bay Municipal Utility District (co-source)
Los Angeles Department of Water and Power (co-source)
San Francisco Public Utilities Commission (co-source)
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Anaheim Chamber of Commerce
Bella Vista Water District
Bighorn-Desert View Water Agency
Calaveras County Water District
California Business Properties Association
California Chamber of Commerce
California Farm Bureau
California Hotel and Lodging Association
California Manufacturers and Technology Association
Calleguas Municipal Water District
City of Anaheim
City of Burbank
City of Pasadena
City of Riverside
Coachella Valley Water District
Contra Costa Water District
Cucamonga Valley Water District
Del Paso Manor Water District
Desert Water Agency
El Dorado Irrigation District
El Toro Water District
Elsinore Valley Municipal Water District
Foothill Municipal Water District
Friant Water Authority
Fulton-El Camino Recreation and Park District
Helix Water District
Humboldt Bay Municipal Water District
Integrated Resource Management, Inc.
International Federation of Professional and Technical
Engineers, Local 21
Irvine Ranch Water District
Joshua Basin Water District
Laguna Beach County Water District
League of California Cities
Marina Coast Water District
Municipal Water District of Orange County
Newhall County Water District
North Marin Water District
Olivenhain Municipal Water District
Orange County Business Council
Orange County Water District
Reclamation District No. 2068
Rincon del Diablo Municipal Water District
Sacramento Black Chamber of Commerce
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San Diego County Water Authority
San Juan Water District
San Luis Canal Company
San Luis Water District
Santa Clara Valley Water District
Scotts Valley Water District
Southern California Public Power Authority
Southern California Water Committee
Stockton East Water District
The Aleshire Farm
Three Valleys Municipal Water District
Tuolumne Utilities District
United Water Conservation District
Vallecitos Water District
Valley Center Municipal Water District
Valley Industry and Commerce Association
Vista Irrigation District
Walnut Valley Water District
Western Municipal Water District
OPPOSITION : (Verified 8/25/06)
Allan Hancock College
California Association of School Business Officials
California School Boards Association
California School Employees Association
California State University
Coast Community College District
College of the Canyons
College of the Desert
Community College League
Cooper Mountain College
Los Angeles Community College
Los Angeles Unified School District
Los Angeles Valley College
Los Rios College District
Merced College
Mt. San Jacinto Community College District
Rancho Santiago Community College District
San Jose Evergreen Community College District
Santa Monica College
Shasta College
Stockton Community College
University of California
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ASSEMBLY FLOOR :
AYES: Aghazarian, Arambula, Benoit, Bermudez, Bogh,
Calderon, Chan, Chavez, Chu, Cogdill, Cohn, Coto, De La
Torre, DeVore, Dymally, Emmerson, Evans, Frommer,
Goldberg, Hancock, Houston, Jones, Keene, Klehs, Koretz,
La Malfa, Leno, Leslie, Levine, Matthews, Maze, Mountjoy,
Mullin, Nakanishi, Nation, Niello, Oropeza, Parra,
Plescia, Richman, Ridley-Thomas, Saldana, Salinas,
Strickland, Tran, Vargas, Villines, Wyland, Yee, Nunez
NOES: Baca, Blakeslee, Canciamilla, Daucher, Garcia,
Harman, Haynes, Jerome Horton, Shirley Horton, Huff, La
Suer, Laird, Liu, McCarthy, Montanez, Nava, Sharon
Runner, Spitzer, Torrico, Umberg, Walters, Wolk
NO VOTE RECORDED: Bass, Berg, Karnette, Lieber, Lieu,
Negrete McLeod, Pavley, Ruskin
AGB:mel 8/25/06 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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