BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
711 (Calderon)
Hearing Date: 04/19/10 Amended: 04/15/10
Consultant: Mark McKenzie Policy Vote: not relevant
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BILL SUMMARY: AB 711, an urgency measure, would appropriate
$45,000 from the California Main Street Program Fund to the Los
Angeles County Local Agency Formation Commission (LA LAFCO) for
a loan to the East Los Angeles Residents Association, as
specified.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Appropriation $45 Special*
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* California Main Street Program Fund
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STAFF COMMENTS:
Existing law, the Cortese-Knox-Hertzberg Local Government
Reorganization Act of 2000 (Act), establishes procedures for
local government changes of organization, including city
incorporations, annexations, and city and special district
consolidations. The LAFCO in each county is responsible for
implementation of the Act and administers proceedings related to
incorporation applications. LAFCOs can require an applicant to
deposit any necessary fees or charges associated with the costs
of processing the application and undertaking any LAFCO
proceedings before any action is taken and within the time
period designated by LAFCO. For incorporation proceedings that
have been initiated by the filing of sufficient voter
signatures, LAFCO is authorized to request a General Fund loan
to cover the costs of necessary proceedings when incorporation
proponents certify that they are unable to raise sufficient
funds to reimburse LAFCO for the proceedings, and the
Legislature appropriates funds for this purpose. Repayment of
the loan is a condition of approval of a successful
incorporation, and the city must repay the loan within two years
of the incorporation date. If the incorporation proposal is
denied by LAFCO or defeated at an election, the loan is
forgiven.
The community of East Los Angeles is a part of the
unincorporated area in Los Angeles County. The East Los Angeles
Residents Association (ELARA) has submitted an application with
sufficient local voter signatures to LA LAFCO to incorporate an
area of 7.4 square miles and containing 140,000 residents. AB
711 is intended to provide ELARA with some of the funding
necessary to pay for a comprehensive fiscal analysis that is
required to demonstrate the city would receive sufficient
revenues to provide public services and facilities during the
three years following incorporation. LA LAFCO has identified a
consultant to perform the study at a cost of $134,700, and ELARA
indicates that it has raised approximately $90,000 for purposes
of the study. LA LAFCO has established a deadline of April 29,
2010 for ELARA to provide the full amount to fund the study.
Page 2
AB 711 (Calderon)
AB 711 would appropriate $45,000 from the California Main Street
Program Fund to LA LAFCO for a loan to ELARA to pay for the
comprehensive fiscal analysis required as part of incorporation
proceedings. Existing law specifies that this loan would be
repaid by the City of East Los Angeles within two years of the
date of a successful incorporation. If the incorporation
proposal is denied by LAFCO or defeated at an election, however,
the loan would be forgiven.
Apart from costs associated with the comprehensive fiscal
analysis, ELARA will be responsible for any additional costs
associated with the incorporation proceedings. These could
include any potential litigation costs if any element of the
proposal is challenged in court, any costs associated with
environmental documentation associated with the proposal, any
costs associated with validating voter signatures on the
application, as well as any costs associated with bringing the
proposal to the voters in an election. Given the inability of
ELARA to raise the funds necessary to pay for the comprehensive
fiscal analysis over the past 16 months, it is unclear whether
the group will be able to provide additional funding necessary
to carry the proposal to an election. This may jeopardize the
ultimate success of the incorporation and the repayment of the
loan provided in this bill.
Staff notes that the Legislature has only appropriated funds
related to an incorporation application one other time; a Budget
Act appropriation provided a loan for incorporation proceedings
for the community of San Fernando Valley. That loan was
ultimately forgiven when the incorporation proposal failed in a
2002 election.
Staff notes that this bill was recently amended to change the
appropriation from the General Fund to the California Main
Street Program Fund due to the scarcity of General Funds. The
California Main Street Program Fund currently has a balance of
$175,000.
Staff notes that this version of AB 711 has not been heard by
any other legislative committee. The previous version of this
bill dealt with the administration of the sales and use tax.
The bill was amended after passage by the Senate Revenue and
Taxation Committee to delete those provisions and instead
provide an appropriation to LA LAFCO. Once amended, the Senate
Rules Committee determined that the bill should only be referred
to the Appropriations Committee.
Staff notes that SB 1232 (Romero), which is scheduled for a
hearing in the Senate Local Government Committee on April 21,
would extend the April 29 deadline by six months for ELARA to
provide necessary funds to LA LAFCO for costs associated with
the comprehensive fiscal analysis. SB 1232 would also deem the
signatures submitted with the incorporation application to be
valid through October 29, 2010, or longer if the petition
continues.