BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Dave Cox, Chair
BILL NO: SB 1035 HEARING: 4/7/10
AUTHOR: Hancock FISCAL: Yes
VERSION: 2/12/10 CONSULTANT:
Weinberger
MUNCICPAL UTILITY DISTRICTS' DELINQUENT REVENUES
Background and Existing Law
There are five Municipal Utility District (MUDs): East Bay,
Lassen, Sacramento, South Placer, and Southern San Joaquin.
MUDs can provide many utility services: electricity,
water, sewer, garbage disposal, transportation, and
communications.
A MUD may attach a lien to a property to collect delinquent
fees, tolls, rates, rentals, and other charges, together
with associated penalties and interest, for services
provided to that property, including fees, tolls, rates,
rentals, or other charges for services rendered to a
lessee, tenant, or subtenant (SB 1660, Stiern, 1986). The
lien has the force, effect, and priority of a judgment
lien. A MUD cannot attach a lien to publicly owned
property.
The lien attaches when the MUD records a certificate in the
county recorder's office, specifying:
The amount of the delinquent fees, tolls, rates, rentals,
or other charges, together with interest and penalties.
The name of the owner of record of the property to which
services were rendered by the district.
The legal description of the property.
Within 30 days after receiving payment of all amounts due,
the MUD must record a release of the lien.
Except in master-metered apartment buildings, MUDs
providing residential service to a tenant under an account
established by the tenant may not seek to recover unpaid
charges or penalties for residential service from the
property owner or any subsequent tenant, as specified (AB
1770, Brewer, 1996).
The statutory authority for a MUD to attach a lien property
SB 1035 -- 2/12/10 -- Page 2
does not apply to delinquent fees or charges for furnishing
water or sewer service to residential property or
electrical service. The East Bay MUD is the only MUD that
provides water service to residential property. East Bay
MUD and the South Placer MUD are the only MUDs that provide
sewer service to residential property.
State law authorizes numerous other special districts
including Sanitary Districts, Municipal Water Districts,
California Water Districts, County Water Districts, and
Community Services Districts, to attach liens to property
for the amount of delinquent residential water or sewer
service charges, plus penalties and interest. East Bay MUD
wants to have the same lien authority that other water and
sewer utility districts have.
Proposed Law
Senate Bill 1035 deletes the prohibition against a
Municipal Utility District's (MUD's) attaching a lien to
property for delinquent fees, tools, rates, rentals, and
other charges, together with associated penalties and
interest, for the furnishing of water or sewer service to
residential property.
SB 1035 authorizes a MUD, by resolution or ordinance, to
collect delinquent fees, tolls, rates, rentals, or other
charges, together with interest and penalties, including
any delinquent fees, tolls, rates, rentals, or other
charges for services rendered to a lessee, tenant, or
subtenant, on the tax roll. To do so, a MUD must:
Prepare a report.
Provide notice.
Conduct a public hearing.
File a final report with the county auditor.
Record a certificate in the office of the county
recorder.
Report . SB 1035 requires a MUD's general manager to
prepare and file a report with the district's board of
directors. The report must describe each affected parcel
of real property and the amount of the delinquent fees,
tolls, rates, rentals, or other charges, together with
interest and penalties thereon, including any delinquent
fees, tolls, rates, rentals, or other charges for services
rendered to a lessee, tenant, or subtenant for each
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affected parcel for the year.
Notice . SB 1035 requires a MUD's general manager to give
notice of the filing of the report and of the time and
place for a public hearing by publishing the notice, as
specified in statute, in a newspaper of general
circulation, and by mailing the notice to the owner of each
affected parcel.
Hearing . SB 1035 requires a MUD's board of directors to
hear and consider any objections or protests to the report
at a public hearing. At the conclusion of the public
hearing, the board may adopt or revise the delinquent fees,
tolls, rates, rentals, or other charges, together with
interest and penalties thereon, including any delinquent
fees, tolls, rates, rentals, or other charges for services
rendered to a lessee, tenant, or subtenant. The board must
make its determination on each affected parcel. The
board's determinations are final.
Final Report . SB 1035 requires a MUD's general manager, on
or before August 10 of each year following the district
board's determinations, to file with the county auditor a
copy of the final report adopted by the board of directors.
The county auditor must enter the amount of the delinquent
fees, tolls, rates, rentals, or other charges, together
with interest and penalties thereon, including any
delinquent fees, tolls, rates, rentals, or other charges
for services rendered to a lessee, tenant, or subtenant,
against each of the affected parcels of real property as
they appear on the current assessment roll. The county tax
collector must include these amounts on the tax bills for
each affected parcel of real property and collect the
amounts due in the same manner as property taxes.
Recordation . SB 1035 authorizes a MUD to recover any
delinquent fees, tolls, rates, rentals, or other charges,
together with interest and penalties thereon, including any
delinquent fees, tolls, rates, rentals, or other charges
for services rendered to a lessee, tenant, or subtenant, by
recording in the office of the county recorder of the
county where the affected parcel is located, a certificate
declaring:
The amount of the delinquent fees, tolls, rates, rentals,
or charges, together with interest and penalties thereon,
including any delinquent fees, tolls, rates, rentals, or
other charges for services rendered to a lessee, tenant,
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or subtenant, due.
The name and last known address of the person liable
therefore.
From the time of recordation of the certificate, the amount
of the delinquent fees, tolls, rates, rentals, or charges,
together with interest and penalties thereon, including any
delinquent fees, tolls, rates, rentals, or other charges
for services rendered to a lessee, tenant, or subtenant,
constitutes a lien against the affected real property of
the delinquent property owner in that county. This lien
has the force, effect, and priority of a judgment lien.
Within 30 days of receipt of payment of all amounts due,
including recordation fees paid by the district, the
district shall file for recordation a release of the lien.
SB 1035 requires a MUD to reimburse the county for its
reasonable expenses.
SB 1035 states that specified remedies for payment of
delinquent charges are cumulative and the bill authorizes a
MUD to pursue remedies alternatively or consecutively.
Comments
1. Improved bill collection, decreased blight . Because
MUDs cannot impose a lien on residential property when
water or sewer bills are delinquent, they must either cut
off services to the property or unfairly ask other
ratepayers to subsidize the cost of service to delinquent
account holders. Within the territory served by the East
Bay MUD, the problems associated with neglected and
abandoned properties are becoming a growing problem as a
result of the turmoil in the real estate market. Cutting
off water service to properties accelerates neighborhood
blight by preventing the proper irrigation and maintenance
of landscaping. By giving MUDs alternative ways to collect
delinquencies, SB 1035 will help to slow the spread of
blight.
2. As clear as mud . Ambiguous language in the current law
makes it unclear whether the statutory changes proposed by
SB 1035 could have unintended consequences. SB 1035 grants
new authority to MUDs, in some circumstances, to require a
property owner to pay for delinquent residential water or
sewer service charges incurred by a tenant, lessee, or
subtenant. For example, a MUD would have new authority to
SB 1035 -- 2/12/10 -- Page 5
compel payment for such delinquent charges from an owner of
a master-metered apartment building. The Committee may
wish to consider amending SB 1035 to clarify that the bill
is not intended to alter or circumvent the prohibition
enacted by the 1996 Brewer bill against a MUD's seeking to
recover, from a property owner, unpaid charges or penalties
for residential services provided to a tenant under an
account established by the tenant.
3. Legislative history . SB 1035's authorization for MUDs
to impose judgment liens for delinquent fees or charges for
residential water or sewer service also appeared in AB 1333
(Hancock, 2008), which Governor Schwarzenegger vetoed. The
Governor's veto message expressed his concern that allowing
utility liens for water and sewer services could increase
costs associated with foreclosed property and allow
utilities to benefit at a time of financial hardship for
many property owners.
4. Mandate . The California Constitution requires the
state to reimburse local governments for the costs of new
or expanded state mandated local programs. Because SB 1035
imposes new duties on county auditors and recorders,
Legislative Counsel says that it imposes a new state
mandate. SB 1035 disclaims the state's responsibility for
providing reimbursement by citing local agencies' authority
to levy charges, fees, or assessments to cover their costs.
5. Double-referral . Because SB 1035 expands MUDs'
authority to impose judgment liens on property, the Senate
Rules Committee ordered a double-referral of the bill --
first to the Senate Local Government Committee and then to
the Senate Judiciary Committee, which will hear the bill at
its April 13 hearing.
Support and Opposition (4/1/10)
Support : East Bay Municipal Utility District, Alameda
County, California Special Districts Association.
Opposition : Unknown.
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