BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1955|
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THIRD READING
Bill No: AB 1955
Author: De La Torre (D), et al
Amended: 8/20/10 in Senate
Vote: 27 - Urgency
SENATE LOCAL GOVERNMENT COMMITTEE : 3-1, 08/12/10
AYES: Kehoe, DeSaulnier, Price
NOES: Aanestad
NO VOTE RECORDED: Vacancy
ASSEMBLY FLOOR : Not relevant
SUBJECT : Local government: compensation
SOURCE : Author
DIGEST : This bill creates consequences to cities,
including charter cities that pay higher salaries to their
council members than general law cities are allowed. City
council members must pay a fifty percent personal income
tax rate on their excess compensation and redevelopment
officials in an excess compensation city cannot use, create
new, or expand existing redevelopment projects, cannot
create new redevelopment debt, and cannot spend
redevelopment money except to meet obligations.
ANALYSIS : Existing law authorizes a city council to
enact an ordinance providing that each member of the city
council shall receive a salary.
CONTINUED
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General law cities may pay salaries to their council
members, using a statutory schedule based on population:
? Up to and including 35,000 residents$300 a month
? Over 35,000 and up to and including 50,000$400 a
month
? Over 50,000 and up to and including 75,000$500 a
month
? Over 75,000 and up to and including 150,000$600 a
month
? Over 150,000 and up to and including 250,000$800 a
month
? Over 250,000 residents 1,000 a
month
By ordinance, a city council can increase its salaries
beyond these statutory amounts, but a raise can't exceed
five percent a year since the last increase. State law
prohibits automatic salary increases. With majority-voter
approval, city council members can receive higher or lower
salaries than the statute prescribes.
Unless specifically authorized by state law, general law
cities can't provide higher compensation for their council
members' service on other commissions, committees, boards,
or authorities. Some state laws limit the compensation
that city council members can receive when they serve on
other bodies. For example, if a city council in a city
with less than 200,000 residents appoints itself as the
community redevelopment agency, state law limits the
council members' compensation to $30 a meeting for a
maximum of four meetings a month. However, if another
statute allows compensation, but does not set an amount,
state law limits the maximum amount to $150 a month.
These statutory limits on general law cities do not apply
to what a city can provide its council members for
retirement, health and welfare, and federal social security
benefits, if the city pays the same benefits for its
employees. These statutory limits do not apply to the
reimbursement of council members' actual and necessary
expenses (AB 11, De La Torre, Chapter 178, Statutes of
2005).
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General law cities, like all local agencies, except school
districts, must adopt written policies that control their
reimbursements for expenses. In addition, if a local
agency compensates its governing body or key staff, those
local officials must receive ethics training every two
years (AB 1234, Salinas, Chapter 700, Statutes of 2005).
The California Constitution allows cities to adopt local
charters with majority-voter approval. The Constitution
allows charter cities to control their own municipal
affairs. Relying on the municipal affairs doctrine, the
119 charter cities can set their city council members'
compensation.
This bill:
I. Excess compensation cities . General law cities must
follow the compensation limits set by state law, but
charter cities can use their constitutional authority to
control municipal affairs to set their own compensation.
This bill defines an "excess compensation city" as any
city, including a charter city, that compensates any city
council member in excess of the amounts set by state law,
but excludes charter cities with a population over 285,000.
If a city's mayor is independently elected, a city can
show that the mayor's additional compensation is provided
by ordinance or charter.
If, based upon a review of public records or salary
information reported, the Controller reasonably determines
that a city is an "excess compensation city," this bill
requires the Controller notify the city and Attorney
General (AG) of that determination in writing. Within 10
days of receiving the notice from the Controller, the
identified city may request a hearing. Upon receiving a
request for a hearing, the Controller must, within 10 days,
conduct a hearing for purposes of determining if the city
is an excess compensation city.
At the hearing, the city can demonstrate that it is not an
"excess compensation city" by showing:
Evidence of the approval by the city council of an
ordinance or an amendment to an ordinance that
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increases the council members' salaries.
Evidence of the approval by the city's electors of
a question that increases the council members'
salaries.
Any other evidence of compliance
If, after the hearing, the Controller determines that the
city is an "excess compensation city," this bill requires
the Controller to notify the AG and provide the AG with any
evidence presented at the hearing for review. If the AG
concurs with the Controller, the Controller shall notify,
in writing, the Franchise Tax Board and the city's
redevelopment agency of the city's status as an "excess
compensation city."
If a city later complies with the statutory compensation
limits, it may ask the Controller to be relieved of its
status as an "excess compensation city." If the Attorney
General agrees, this bill requires the Controller to notify
the city, the Franchise Tax Board, and the city's
redevelopment agency of this change in status.
When notified by the Controller that its city is an "excess
compensation city," this bill prohibits a redevelopment
agency from:
? Adopting new or amending existing redevelopment
plans.
? Issuing bonds, notes, interim certificates,
debentures, or other obligations.
? Encumbering funds or spending money, except for
seven specified types of existing obligations and
debts.
This bill imposes an additional 50 percent tax on the gross
income of city council members in an "excess surplus city"
for income that exceeds the compensation amounts set by
state law. The state personal income tax provisions
relating to credits, filing status and recomputation of
income tax brackets, and joint returns do not apply to this
additional tax.
II. Open meetings . Current law requires the governing
bodies of all local agencies, including school districts,
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to ratify their executive employees' contracts of
employment in open session and reflect those decisions in
their minutes. This requirement applies to
superintendents, deputy superintendents, assistant
superintendents, associate superintendents, community
college presidents, community college vice presidents,
community college deputy vice presidents, general managers,
city managers, county administrators, or similar chief
administrative or executive officers. Copies of these
employment contracts and settlement agreements must be
publicly available (SB 1996, Hart, 1992).
The Ralph M. Brown Act requires local agencies' meetings to
be "open and public," with specific exceptions. For
example, a local agency's legislative body may meet in
closed session to consider the appointment, employment,
evaluation, discipline, or dismissal of an employee unless
the employee requests a public session. However, the Brown
Act prohibits local officials from taking final action in a
closed session on an unrepresented employee's compensation.
This bill declares that all individual contracts of
employment, or amendment to a contract of employment, with
an employee who is or will be employed by and report
directly to the local agency's legislative body must be
ratified in open session of the legislative body. At least
five days before ratification, the legislative body must
disclose contract information, including the employee's
name, the position, the total amount of salary, benefits,
retirement, and any other compensation. This bill requires
the local agency to disclose this information in a publicly
accessible location and on the agency's Internet Web site,
if it maintains one. Consistent with these requirements,
this bill declares that final actions on the compensation
of unrepresented employees who are or will be employed by
and report directly to the local agency's legislative body
must occur in open session.
III. Legislative declarations . In addition to its
substantive provisions, Assembly Bill 1955 declares that
the disclosure of officers and employees' compensation is
an issue of statewide concern and not a municipal affair;
its provisions apply to charter cities.
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Comments
This summer's controversy over the compensation that the
City of Bell paid to its council members and employees
caused many legislators to ask how the 480 cities set their
salaries, determine benefits, and reimburse costs. Bell's
adoption of a city charter in 2005 gave it constitutional
control over its municipal affairs, including the
compensation paid to the council members. When it was a
general law city, Bell had to comply with the statutes that
restrict council members' compensation, but as a charter
city it can avoid those statewide limits. AB 1955 does not
stop Bell, or any other charter city, from compensating its
city council with whatever amounts are warranted by local
conditions and circumstances. However, charter cities that
pay more than what state law allows for general law cities
trigger this bill's two consequences. City council members
must pay a higher personal income tax rate on their excess
compensation. Redevelopment officials in an excess
compensation city can't use create new or expand existing
redevelopment projects, can't create new redevelopment
debt, and can't spend redevelopment money except to meet
obligations. While the Legislature can't stop charter
cities from making unwise compensation decisions, this bill
creates consequences that may deter them.
The statutory schedule for compensating general law city
councils hasn't budged since 1984, the last time that
legislators adjusted the amounts for inflation. But many
general law cities pay their council members more than the
amounts listed in state law. That's possible because the
statute gives general law cities two ways to pay more than
the statutory schedule. First, a city council can adopt an
ordinance that increases its salary, provided that the
raise doesn't exceed five percent a year since the last pay
hike. Like all city ordinances, an ordinance raising city
council salaries is referendable. Second, a city's voters
can raise (or lower) their city council members' salaries.
Like general law cities, some charter cities may pay their
council members more than the statutory schedule appears to
allow. To avoid an "excess compensation city" designation
under AB 1955, a charter city with higher salaries will
need to produce a paper trail showing how its compensation
fits within the adjustments that state law already permits
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for general law cities.
The Legislature passed the 2005 reforms for general law
cities after learning how the Huntington Park City Council
appointed itself to several highly compensated boards and
commissions. Although the council members received modest
salaries for their city council service, they used
statutory loopholes to pay themselves large stipends and
salaries for serving on the other boards and commissions.
For example, Huntington Park's community development
commission's monthly salaries were 16 times the maximum
amount of what the statute allowed for a redevelopment
agency's stipends. The 2005 legislation put an end to
those practices, but Bell has apparently used its charter
city status to avoid the statewide limits.
Background
Adopted in November 2005, the City of Bell's charter limits
council members' compensation for service as council
members to the amounts that general law cities of similar
populations can receive under state law. With an estimated
38,867 city residents in 2010, Bell's council members could
receive $400 a month under the statutory schedule which
applies to cities that have more than 35,000 residents and
up to and including 50,000 residents.
Newspaper articles report that Bell's city council members
receive salaries that total $1,800 annually for their
council service. At $150 a month, those salaries are below
the statutory schedule for similarly sized cities.
However, these same reports say that most of Bell's city
council members also received annually:
? $18,895 for serving on the Public Financing
Authority.
? $18,895 for serving on the Surplus Property
Authority.
? $18,895 for serving on the City Housing Authority.
? $18,895 for serving on the Planning Commission.
? $720 for serving on the Community Redevelopment
Agency.
Because Bell is a charter city, its city council does not
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have to follow the limits set by the 2005 De La Torre bill.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
AGB:JA:nl 8/27/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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