BILL ANALYSIS
SB 1035
Page 1
Date of Hearing: June 16, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 1035 (Hancock) - As Amended: June 10, 2010
SENATE VOTE : 22-6
SUBJECT : Municipal utility district: utility charges:
delinquencies.
SUMMARY : Authorizes a municipal utility district (MUD) to
collect delinquent fees incurred by a commercial or residential
lessee, tenant, or subtenant by charging the delinquent fees to
the property owner's tax roll, as specified, and deletes a
provision of existing law which exempts water and sewer service
to residential property from the lien remedy. Specifically,
this bill :
1)Authorizes a MUD, by resolution or ordinance, to collect on
the tax roll, delinquent fees, tolls, rates, rentals, or other
charges and any interest and penalties thereon, including any
delinquencies for services rendered to a lessee, tenant, or
subtenant, in the same manner as property taxes, except on
properties where the account was established by the tenant.
2)Requires a MUD seeking to apply delinquent utility charges to
the tax roll to:
a) Prepare and file an annual report of delinquent charges
for each affected parcel;
b) Give published and mailed notice of the filing of the
report and the time and place for a public hearing;
c) Hear and consider objections or protests of the report
at the public hearing and potentially revise the report;
and,
d) Provide, by August 10 of each year, a final report to
the county recorder to be added to the current tax
assessment roll.
3)Authorizes the MUD to recover any delinquent fees, tolls,
rates, rentals, or other charges, together with interest and
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penalties thereon, including any delinquent fees, tolls,
rates, rentals, or other charges for services rendered to a
lessee, tenant, or subtenant.
4)Requires the MUD to file a release of the lien within 30 days
of receipt of payment of the delinquent charges.
5)Prohibits a MUD from recovering on the tax roll any delinquent
fees, tolls, rates, rentals, or other charges for services for
commercial use to a commercial tenant under an account
established by the commercial tenant, from any subsequent
tenant or the property owner, due to nonpayment of charges by
a previous commercial tenant.
6)States that the term "subsequent commercial tenant" shall not
include an entity or adult person that was located at the same
address during the period the charges or penalties accrued.
7)Specifies that the provisions of the bill regarding commercial
accounts do not apply to master-metered accounts.
8)Requires the MUD to reimburse the county for the reasonable
expenses incurred by the county under this bill.
9)Provides that the remedies in this bill are cumulative, and
the district may pursue the remedies alternatively or
consecutively.
10)Requires any MUD that places a lien on a property for water
or sewer service pursuant to this measure on or before
December 31, 2014, to submit to the Assembly and Senate
Committees on Judiciary and to the Assembly and Senate
Committees on Local Government, on or before January 1, 2015,
a report containing the following information:
a) The total number of liens created under this section for
water or sewer service and the total dollar amount of those
liens; and,
b) The overall effectiveness of the liens and any problems
associated with the use of those liens.
11)Authorizes a MUD providing water or sewer to residential
property to utilize the above lien methodology for
delinquencies related to water or sewer services, but
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prohibits this use on electrical services.
12)Contains a sunset clause of January 1, 2016.
EXISTING LAW :
1)Authorizes a MUD, by resolution or ordinance, to require the
owner of record of real property within the MUD to pay the
fees, tolls, rates, rentals, or other charges for services
rendered to a lessee, tenant, or subtenant, and those fees,
tolls, rates, rentals, and other charges that have become
delinquent, together with interest and penalties thereon, are
a lien on the property when a certificate is filed in the
office of the county recorder and the lien has the force,
effect, and priority of a judgment lien. No lien may be
created under this section on any publicly owned property.
2)Provides that a lien attaches when the MUD files for
recordation in the office of the county recorder a certificate
specifying the amount of the delinquent fees, tolls, rates,
rentals, or other charges together with interest and penalties
thereon; the name of the owner of record
of the property to which services were rendered by the district;
and, the legal description of the property.
3)Provides that within 30 days of receipt of payment of all
amounts due, including recordation fees paid by the MUD, the
MUD shall file for recordation a release of the lien.
4)Provides the lien remedy to MUDs (other than water, sewer, and
electric) in addition to any other remedy provided by law.
5)Prohibits a MUD owning or operating a public utility
furnishing services for residential use to a tenant under an
account established by the tenant from seeking to recover any
charges or penalties for the furnishing of services to, or for
the tenant's residential use from, any subsequent tenant or
the property owner due to nonpayment of charges by a previous
tenant.
FISCAL EFFECT : Unknown
COMMENTS :
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1)There are five MUDs statewide: East Bay, Lassen, Sacramento,
South Placer, and Southern San Joaquin. MUDs can provide
various utility services, including electricity, water, sewer,
garbage disposal, transportation, and communications.
Currently, only East Bay MUD (EBMUD) and South Placer MUD
provide sewer service, and (only) EBMUD also provides water
service.
2)According to the co- sponsor, Alameda County (County), it is
experiencing a sharp increase in the occurrences of blight in
the County. According to the County, "blighted property can
lower the values of nearby properties, decrease safety and
impact area businesses. The decay of an abandoned property not
only affects the property itself, but can also affect the
livability of the entire community. One of the best ways to
avoid crippling blight and the associated economic impacts on
businesses and the community is to prevent vacant buildings
from ever appearing abandoned. This can be as simple as
maintaining the exterior."
Continuing water service is necessary to keep exteriors
vibrant. When water bills are not paid, MUDs, such as EBMUD,
are forced to either shut off water service or subsidize the
cost of continued water service by charging more for water
services to other ratepayers. Under existing law, EBMUD, who
serves Alameda County, and other MUDs do not have the
authority to record a lien on property when water bills are
not paid. Many other water and sewer agencies throughout the
state are already afforded that remedy. SB 1035 seeks to
align the lien authority for MUDs with that of other water and
sewer agencies.
According to the co-sponsor, EBMUD, in 2009, there were over
7,000 delinquent accounts totaling nearly $3 million in unpaid
charges. While the number of delinquent accounts has been
relatively steady in recent years, the amount of the
delinquencies has risen sharply and has more than doubled
since 2006.
3)Similar legislation : AB 1333 (Hancock, 2008), required legal
owners of residential rental property to pay utility charges
when they acquire the property after foreclosure and the
property is subject to a rental agreement under which the
tenant pays the landlord for utilities. AB 1333 would have
also deleted the exemption of a MUD providing water or sewer
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services to residential property and allowed this type of MUD
to place a lien on a property for delinquent fees or charges.
The bill was vetoed. The Governor's veto message expressed
his concern that allowing utility liens against property
owners for water and sewer services could increase costs
associated with foreclosed property and allow utility
companies to benefit at a time of financial hardship for many
property owners. AB 1035 is more narrow in scope than AB
1333.
4)Support Arguments : According to the County, "a change in law
is needed to provide EBMUD with same authority already vested
with other water utilities in the state to record
a lien for nonpayment. A lien places the obligation for payment
on the responsible party without unduly penalizing other
ratepayers."
Opposition Arguments : Opposition could argue that allowing
utility liens against property owners for water and sewer
services could increase costs associated with foreclosed
property and allow utility companies to benefit at a time of
financial hardship for many property owners.
5)This bill is double referred to the Committee on Judiciary.
REGISTERED SUPPORT / OPPOSITION :
Support
County of Alameda [CO- SPONSOR]
East Bay Municipal Utility District [CO- SPONSOR]
Berkeley Chamber of Commerce
Coalition of CA Utility Employees
East Bay Economic Development Alliance
Oakland Metropolitan Chamber of Commerce
Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958