BILL ANALYSIS
AB 853
Page 1
ASSEMBLY THIRD READING
AB 853 (Arambula)
As Amended May 18, 2009
Majority vote
LOCAL GOVERNMENT 5-2
-----------------------------------------------------------------
|Ayes:|Caballero, Arambula, | | |
| |Davis, Krekorian, Skinner | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Knight, Duvall | | |
| | | | |
-----------------------------------------------------------------
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 territory that is within a city's
sphere of influence.
2)Defines "unincorporated island community" to mean 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.
3)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 island or fringe community 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
AB 853
Page 2
streetlights, or there exists a serious
infrastructure-related health hazard; and,
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.
4)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
Revenue and Taxation Code Section 99.
5)Provides, if a property tax transfer agreement is not reached
within 180 days, the agreement shall be determined pursuant to
an alternative means as provided [see 11-18 below].
6)Specifies that a property tax transfer agreement shall not
affect any existing master tax sharing agreement between the
city and county.
7)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.
8)Specifies that the financial impact of the annexation shall
not be a factor in the determination of the net benefit.
9)Specifies that subject to LAFCO's approval of an annexation,
no affected special district shall have the authority to
terminate the annexation.
10)Specifies that subject to LAFCO's approval of an annexation,
the city shall amend its general plan to ensure that the
annexation conforms to the municipality's general plan.
11)Specifies that LAFCO shall determine a revenue neutrality
agreement, including the amount of property tax revenue to be
exchanged by the affected local agency.
AB 853
Page 3
12)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.
13)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.
14)Defines "total amount of revenue from all sources available
for general purposes" as the total amount of revenue which an
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.
15)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.
16)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 14) above.
17)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.
18)Provides that a LAFCO may transfer to the annexing city an
AB 853
Page 4
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.
19)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
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 : This bill provides for a process for a city to annex
an unincorporated fringe or island community, if 25% of the
registered voters or landowners in that fringe or island
community file a petition with the board to initiate an
AB 853
Page 5
annexation, and the community meets other specified conditions.
According to the author, this bill 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.
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."
This bill 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 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 in Part 4 (commencing with
Section 57000) of Division 3 of Title 5 of the Government Code
needs to be added to this section of the bill.
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.
AB 853
Page 6
CSDA has similar concerns, and notes that Government Code
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.
This bill 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 this bill
specifically exclude the financial impact of the annexation as
one of LAFCO's considerations. The Legislature may wish to
strike this section of the bill and reference a section of
existing law that details what LAFCO must consider in evaluating
an annexation proposal (Government Code 56668).
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
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 an unincorporated fringe
community in LAFCO's 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.
This bill 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 already be provided by a special district, or there
may be insufficient water or sanitary sewer treatment capacity
to serve the area. The Legislature 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.
AB 853
Page 7
An annexation under the provisions of this bill would be
considered a project under the California Environmental Quality
Act (CEQA), and as such, the Legislature may wish to ask the
following questions: 1) Who would be the lead agency? 2) Who
would pay for the cost of environmental review, public outreach,
and climate change inducing impacts? 3) Who would bear the
mitigation costs?
This bill 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 Legislature may wish to consider whether
some sort of infrastructure financing district or other
financing mechanism should be used to help pay for the
improvements that the city would need to make under the
provisions of this bill, given the poor economic situation that
local governments currently face.
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
Legislature 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.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0000786