BILL ANALYSIS
AB 853
Page 1
Date of Hearing: May 13, 2009
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Anna Marie Caballero, Chair
AB 853 (Arambula) - As Amended: May 5, 2009
SUBJECT : Local government: organization.
SUMMARY : Establishes a process for how unincorporated fringe or
island communities shall be annexed into a city. Specifically,
this bill :
1)Defines "unincorporated fringe community" to mean any
inhabited, unincorporated area that is within 1.5 miles of a
city or within or adjacent to a city's sphere of influence.
2)Provides that a board of supervisors (board) shall petition
the Local Agency Formation Commission (LAFCO) in the board's
county to approve the annexation to a city of any island or
fringe community after notice and hearing if all of the
following conditions exist:
a) 25% of the registered voters or landowners in the
unincorporated territory file a petition with the board to
initiate an annexation of that community to a municipality.
b) The territory contained in the annexation petition
constitutes an island or constitutes an unincorporated
fringe community that lacks wastewater, drinking water
services, storm drainage, paved streets, sidewalks, or
streetlights, or there exists a serious
infrastructure-related health hazard.
c) The territory that is the subject of the annexation
petition constitutes a disadvantaged community, meaning a
community with an annual median household income that is
less than 80% of the statewide annual median household
income.
3)Provides that within 180 days of the board mailing the
petition, a separate property tax transfer agreement shall be
agreed to between the annexing city and the county pursuant to
Section 99 of the Revenue & Taxation Code.
4)Provides, if a property tax transfer agreement is not reached
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within 180 days, the agreement shall be determined pursuant to
an alternative means as provided [see #s 10-17].
5)Specifies that a property tax transfer agreement shall not
affect any existing master tax sharing agreement between the
city and county.
6)Provides that LAFCO shall approve, after notice and hearing,
the annexation, and as needed, the change of organization or
reorganization of a city, unless the commission finds, based
on the preponderance of evidence, that the change of
reorganization will not result in a net benefit to the public
health of the affected communities.
7)Specifies that the financial impact of the annexation shall
not be a factor in the determination of the net benefit.
8)Specifies that subject to LAFCO's approval of an annexation,
no affected special district shall have the authority to
terminate the annexation.
9)Specifies that subject to LAFCO's approval of an annexation,
the city shall amend its general plan to ensure that the
annexation conforms with the municipality's general plan.
10)Specifies that LAFCO shall determine a revenue neutrality
agreement, including the amount of property tax revenue to be
exchanged by the affected local agency.
11)Provides that LAFCO shall notify the county auditor of the
proposal and the services that the annexing city will assume
within the territory to be annexed and identify for the
auditor the existing service providers with the area subject
to the proposal.
12)Provides for a method of calculation if the proposal would
not transfer all of an affected agency's service
responsibilities to the proposed city; the method of
calculation involves the county auditor's determination of the
proportion that the amount of property tax derives bears to
the total amount of revenue from all sources available for
general purposes.
13)Defines "total amount of revenue from all sources available
for general purposes" as the total amount of revenue which an
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affected local agency may use on a discretionary bases for any
purpose, and does not include revenue that is required to be
used for a specific purpose, revenue from fees, charges, or
assessments which are levied to specifically offset the cost
of particular services, or revenue that is received from the
federal government for a specific purpose.
14)Provides that LAFCO shall determine, based on information
submitted by each affected local agency, an amount equal to
the total net cost to each affected local agency during the
prior fiscal year of providing those services that the
annexing city will assume within the area subject to the
proposal, including the cost of connecting residents to
wastewater or drinking water services.
15)Defines "total net cost" to mean the total direct and
indirect costs that were funded by general purpose revenues of
the affected local agency and excludes any portion of the
total cost that was funded by any revenues of that agency that
are listed in 13) above.
16)Provides for calculations on how to derive the amount of
property tax revenue used to provide services by each affected
local agency during the prior fiscal year within the area
subject to the proposal, and provides for the county auditor
to adjust this amount.
17)Provides that a LAFCO may transfer to the annexing city an
amount of property taxes if a separate fund or funds were
established consisting of revenues derived from the
unincorporated area of the county and from which fund or fund
services rendered in the unincorporated area have been paid;
and provides for a timeline and considerations on how the
timeline will be applied.
18)Specifies that an action brought by a city or district to
contest any determinations of the county auditor or LAFCO with
regard to the amount of property tax revenue to be exchanged
by the affected local agency pursuant to this section, shall
be commenced within three years of the effective date of the
annexation.
EXISTING LAW :
1)Establishes the procedures for the organization and
reorganization of cities, counties, and special districts
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under the Cortese-Knox-Hertzberg Local Reorganization Act of
2000.
2)Provides for the adjustment of the allocation of property
taxes for jurisdictional changes, and provides a process for
the determination of a property tax transfer agreement.
3)Provides that in the event that a jurisdictional change would
affect the service area or service responsibility of one or
more special districts, the board of supervisors of the county
or counties in which the districts are located shall, on
behalf of the district or districts, negotiate any exchange of
property tax revenues; and provides that the board consult
with the affected district prior to entering into negotiation
on behalf of a district for the exchange of property tax
revenue.
4)Establishes requirements for a revenue neutrality agreement
for incorporations.
FISCAL EFFECT : None
COMMENTS :
1)AB 853 provides for a process for a city to annex an
unincorporated fringe or island community, if 25% of the
registered voters or landowners in the unincorporated
territory file a petition with the board to initiate an
annexation, and the unincorporated territory:
a) Meets the definition of an island or an unincorporated
fringe community that lacks wastewater, drinking water
services, storm drainage, paved streets, sidewalks or
streetlights, or there exists a serious
infrastructure-related health hazard; and,
b) Constitutes a disadvantaged community.
If the conditions are met, then the board must file a petition
with LAFCO to approve the annexation of an island or fringe
community. Within 180 days of the petition, a separate
property tax transfer agreement must be agreed to between the
annexing city and the county pursuant to existing law. If an
agreement cannot be reached, this bill provides for an
alternative method of determining a revenue neutrality
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agreement. LAFCO must then approve, after notice and hearing,
the annexation, unless the commission finds that the change in
reorganization will not result in a net benefit to the public
health of the affected community. LAFCO then determines a
revenue neutrality agreement and will notify the county
auditor of the proposal and the services that the annexing
city will assume within the territory.
2)The author notes that AB 853 identifies communities that are
inhabited, close to or adjacent to a city, poor, and lacking
in a critical infrastructure or service, and for those
communities, establishes a process to be annexed into the
nearby city. If annexation would not provide a health benefit
to the community, LAFCO has the authority to reject the
annexation. The bill specifies a process for the city and
county to reach a revenue agreement, without allowing for
indefinite delays that have marked such local reorganizations.
By pushing forward these annexations, disadvantaged
communities will begin to have the level of municipal service
that equals adjacent neighborhoods.
According to the author, AB 853 is intended to improve the
quality of life for people currently living in communities
that have no sidewalks, no streetlights, no proper storm
drainage, no proper sewer service, or no adequate drinking
water. As some cities have expanded, they ignored the
priorities in state law and bypassed communities, leaving
entire working neighborhoods without the most basic amenities.
3)PolicyLink, a national research and action institute advancing
economic and social equity, notes that "residents of these
areas often live without the most basic features of a safe and
healthy environments - services like clean water, sewage
lines, storm drains, streetlights, sidewalks, and safe
housing." PolicyLink believes that "annexation to a
neighboring city can provide numerous benefits to these
communities, their county and the neighboring city."
4)SB 194 (Florez), the Community Equity Investment Act of 2009,
is the companion measure to AB 853. That bill also deals with
disadvantaged unincorporated communities, but focuses on local
planning for these communities, and incentivizes the
addressing of the infrastructure problems in disadvantaged
unincorporated communities with a tie to different pots of
state funding. SB 194 passed out of the Senate Local
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Government Committee, and at the time of print, is pending in
the Senate Rules Committee.
5)AB 853 allows 25% of the registered land owners or voters in
an unincorporated area that fits the specific provisions of
the bill to petition the board, on their behalf, to initiate
an annexation. The bill does include a reference to
Government Code Section 57080 which contains very limited
protest requirements. The California Special Districts
Association (CSDA) notes that "it is highly possible that a
majority of registered voters do not want the annexation to
take place, but there is no way for them to halt the
proceedings or even protest hearings for stakeholders to voice
their opinions in a public forum." If the author's intent is
to allow for the standard protest hearing process, the correct
code section of 57000 needs to be added to this section of the
bill.
6)The California Association of Local Agency Formation
Commissions (CALAFCO) notes that under the provisions of this
bill, it is unclear what would happen to special districts
that may be currently providing services that would then be
provided in the future by the city, after annexation. Under
the current bill language there is no opportunity for LAFCO to
deny any application if the city does not have the capacity to
provide water, sewer or other municipal services. CALAFCO
believes that a LAFCO should retain the discretion to deny an
annexation if a plan for services has not been prepared that
adequately assesses and addresses the ability of all affected
local agencies to continue to provide efficient municipal
services.
CSDA has similar concerns, and notes that Section 56375.6 (e)
of the bill says that "no affected special district shall have
the authority to terminate the annexation" which would result
in the special district being stripped of the services it
provides to the community. The special district would
consequently lose the property tax revenue and other taxes and
fees it may be receiving from that area, all without
consultation with the district.
7)The League of California Cities (League), in their opposition
letter, says that "while [the League] can appreciate the
absolute importance of assuring that residents of an
unincorporated fringe community receive the most basic of
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services, we must generally oppose a bill that imposes a
process that would require cities to pick up the cost of such
infrastructure that could have been provided by the county."
The League is concerned that the provisions of the bill that
require the county auditor to take into account the cost of
providing sufficient infrastructure to unincorporated fringe
communities in the determination of "revenue neutrality" will
not take into account the full cost of providing
infrastructure and services, and will result in a significant
cost shift to cities.
AB 853 operates on the premise that the annexation to a city
will solve the service deficiencies in the unincorporated
fringe community. The League notes this may or may not be
true because services may be provided by a special district,
or there may be insufficient water or sanitary sewer treatment
capacity to serve the area. The Committee may wish to add in
a requirement that LAFCO confirm that the city has the
capacity to provide the services before the annexation is
approved.
8)AB 853 requires a LAFCO to approve the annexation unless it
finds, based on a preponderance of evidence that the change of
reorganization will not result in a net benefit to the public
health of the community. The provisions of AB 853
specifically exclude the financial impact of the annexation as
one of LAFCO's considerations. The Committee may wish to
strike this section of the bill and reference an existing code
section that details what LAFCO must consider in evaluating an
annexation proposal (Government Code 56668).
9)AB 853, in Section 1 of the bill, requires that within 180
days of the Board filing a petition on behalf of an
unincorporated fringe community, a separate property tax
transfer agreement shall be agreed to between the annexing
city and county, pursuant to Section 99 of the Revenue &
Taxation Code. This code section specifies protections for
special districts when a jurisdictional change would affect
the service area or service responsibility of a special
district, and requires the board to consult with the affected
district on financial matters.
Section 2 of the bill designates an alternative means of
completing a property tax transfer agreement, if a property
tax transfer agreement pursuant to Section 99 could not be
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reached. Section 2 is modeled after the revenue neutrality
agreement as used in the process for new city incorporations
contained in Government Code 56810. Section 2 of this bill
does not specify any protections for special districts. The
Committee may wish to add the protections for special
districts to the bill, and remove the language that exempts
special districts from the authority to terminate the
annexation.
10)An annexation under the provisions of AB 853 would be
considered a project under the California Environmental
Quality Act (CEQA), and as such, the Committee may wish to ask
the author the following questions:
a) Who would be the lead agency?
b) Who will pay for the cost of environmental review,
public outreach, and climate change inducing impacts?
c) Who will bear the mitigation costs?
11)AB 853 takes into account the cost of providing existing
services, but does not consider what the cost will be for the
city to update existing infrastructure or put in new
infrastructure. The Committee may wish to consider whether
some sort of infrastructure financing district should be used
to help finance the improvements that the city would need to
do under the provisions of this bill, given the poor economic
situation that local governments currently face.
12)Based on the bill's requirements for an unincorporated fringe
community to meet the disadvantaged community threshold of 80%
of the statewide median income, an assumption can be made that
the residents in these areas are generally of lower income.
The Committee may wish to consider if these residents will be
able to pay for the costs of sewer and water once the
unincorporated area is annexed under the provisions of this
bill.
13)TECHNICAL AMENDMENTS :
a) TECHNICAL CORRECTION: On Page 2 line 36, strike 36375.7
and insert 56375.7.
b) In order to be consistent with to the definitions in SB
194 (Florez), the following amendments should be taken:
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i) Strike the definition of "unincorporated fringe
community" in the bill and replace with:
An "unincorporated fringe community" means any inhabited
unincorporated territory that is within a city's sphere of
influence.
ii) Insert the definition of "island community" into the
bill:
An "island community" means any inhabited unincorporated
territory that is surrounded or substantially surrounded by
one or more cities or by one or more cities and a county
boundary or the Pacific Ocean.
c) To address issues of ambiguity about what a "territory"
is in one part of the bill, the following clarifying
amendment should be taken:
i) On page 2, line 17, strike "territory" and insert:
fringe or island community
REGISTERED SUPPORT / OPPOSITION :
Support
CA Rural Legal Assistance Foundation [CO-SPONSOR]
PolicyLink [CO-SPONSOR]
Concerns
CA Association of Local Agency Formation Commissions
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Opposition
CA Special Districts Association
League of CA Cities
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958