BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Kevin Murray, Chairman
551 (Lowenthal)
Hearing Date: 1/17/06 Amended: 1/9/06
Consultant: Nora Lynn Policy Vote: T&H 9-4; BP&ED 4-1
_________________________________________________________________
____
BILL SUMMARY: SB 551 creates, until Jan. 1, 2011, the Office of
the Common Interest Development Ombudsperson within the
Department of Consumer Affairs (DCA) to provide education to
homeowners and homeowners associations' officers.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2006-07 2007-08 2008-09 Fund
Fee revenues ($6,000)** ($12,000)**
($12,000)**Special*
Ombudsperson admin $163 $337 $337 Special*
Education, miscellaneous $348 $860
$860Special*
Printing, training materials*** $7,520***
$7,520*** Special*
_____
* Fee Account of the Common Interest Development Ombudsperson
Fund (continuously appropriated fund created in the bill; see
staff comments)
** Based on 2.4 million separate interests being assessed $10
biennially; see comments
*** SB 551 authorizes the recouping of costs for these
materials; see comments
_________________________________________________________________
____
STAFF COMMENTS:
Common interest developments (CIDs) are groups of homeowners
who, in addition to owning their own homes, also jointly own
common interest in a property - for example, condominiums,
housing cooperatives and planned unit developments. Current law
regulates CIDs and their home owners' associations (HOAs),
requiring among other things that they register with the
Secretary of State every two years.
SB 551 creates a nonregulatory ombudsperson's office for HOAs
and CIDs. The office would be required to offer training and
educational materials to CID directors and homeowners on the
operation of a CID and its rights and responsibilities; to
maintain a website and toll-free telephone number to provide
information; and places requirements on homeowners' association
directors and agents. The ombudsperson's office would
additionally prepare two types of reports to the Legislature -
an annual report and a report of recommendations pertaining to
the ombudsperson's role in enforcement, overseeing association
elections, and whether the office's scope and powers should be
broadened or narrowed.
Ombudsperson activities would be funded by the proceeds of a
biennial fee assessed on HOAs based on their number of "separate
interests," or owners of separately-owned properties within a
CID. SB 551 sets the initial per-separate-interest biennial fee
at $10 and authorizes the ombudsperson to increase or decrease
the fee every two years as needed to generate only sufficient
revenues to offset operating costs. In no case may
-1-
Page 2
SB 551 (Lowenthal)
the biennial fee exceed $20. These funds are to be deposited
into the Fee Account of the Common Interest Development
Ombudsperson Fund, created in the bill, which is continuously
appropriated.
The number of "separate interests" in California is unknown,
though the Public Policy Institute of California estimates there
are more than 36,000 CIDs in the state and that CIDs make up
more than 3 million total housing units, representing
approximately one-quarter of the state's homes. It is also
unknown how many of these HOAs are unincorporated and, as a
result, not required to register with the state.
Assuming there are 3 million separate interests in California
and that 80 percent of them live in incorporated HOAs, requiring
them to register and pay mandated fees, SB 551 will generate $12
million annually in fee revenues for the office. DCA estimates
administering the program, adopting needed regulations,
reimbursing the advisory committee's per diem and expenses,
preparing the required reports, creating and maintaining a CID
tracking system and website, staffing a toll-free telephone
line, producing training materials and general office expenses
will require 12 PYs and $8.7 million annually.
STAFF NOTES the fund created in SB 551 is continuously
appropriated. STAFF RECOMMENDS the bill be amended to delete its
continuous appropriation in order to maintain legislative
oversight.
STAFF NOTES that the ombudsperson is authorized to seek
reimbursement for costs associated with printed and training
materials, which are projected to amount to more than $7 million
annually. These costs make up the lion's share of expenses
associated with the measure and, if recouped as authorized and
when coupled with anticipated fee revenues, could leave a
substantial funding surplus for the program. The ombudsperson is
also authorized to increase or decrease the biennial fee after
two years to "provide only the revenue that it estimates will be
necessary for its operation during the next two-year period"
(page 7, lines 15-17). THE COMMITTEE MAY WISH TO CONSIDER
reducing the initial biennial fee below $10 and permitting the
ombudsperson to adjust it after one year of operation as needed.
STAFF NOTES that the term "separate interest," although defined
elsewhere in the Civil Code, is not referenced in SB 551. STAFF
RECOMMENDS, given the bill's funding mechanism is based on
assessments of separate interests and that SB 551's definition
of "owner" uses the term "special interest," that SB 551 be
amended to include a cross-reference to the existing definition.
STAFF NOTES that SB 551 mandates members of any advisory
committee convened by the ombudsperson receive per diem and
reimbursement for expenses (page 6, line 6). STAFF RECOMMENDS
the reimbursement language be made permissive in order to permit
advisory committee members to serve in a voluntary capacity.
STAFF NOTES that SB 551 is similar to AB 770 (Mullin), which is
currently pending in the Assembly Appropriations Committee.