BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1801 HEARING: 6/13/12
AUTHOR: Campos FISCAL: No
VERSION: 4/23/12 TAX LEVY: No
CONSULTANT: Phan
SOLAR ENERGY SYSTEM FEES
Prohibits cities and counties from charging solar energy
system permit fees based on the valuation method.
Background and Existing Law
California historically has promoted solar energy projects.
In 1978, the Legislature enacted the Solar Rights Act to
make it easier for people to install solar energy systems
(AB 3250, Levine, 1978). To further promote solar
installations, AB 1407 (Wolk, 2003) prohibits
state-sponsored solar energy grants or loans to public
entities that restrict solar energy installations, and AB
2473 (Wolk, 2004) declares that the implementation of
statewide standards for solar energy systems is not a
municipal affair but a matter of statewide concern.
"A solar energy system" is any solar collector, solar
energy device, or structural design feature of a building
whose primary purpose is to collect, store, or distribute
solar energy for heating, cooling, electric generation, or
water heating. Although exact procedures vary by location,
the approval procedure for a solar permit is similar to the
procedure for approving a building permit. Typically, the
solar installation company or customer submits an
electrical diagram and roof layout plan to the city or
county planning department. The installer or customer pays
a permit fee to get the plan approved in order to start the
installation project.
When a local agency charges fees for building permits,
those fees may not exceed the estimated reasonable cost of
providing the service for which the fee is charged. Fees
charged in excess of the estimated reasonable cost of
providing the services are taxes and must be approved by a
2/3-vote of the electors. Building permit fees generally
AB 1801 -- 4/23/12 -- Page 2
pay for the cost of the project plan examination and
on-site inspection.
Most building permit fees are based on the "valuation
method" created by the International Conference of Building
Officials (ICBO). The ICBO periodically publishes
industry-wide building standards and valuation tables for
different kinds of projects. The construction valuation
measures the complexity of the project and suggests a
reasonable permit fee. The other permit fee method, called
a "fixed method," calculates fees independent of the
project's valuation. It typically charges fees based on
the cost of the labor required to issue the permit and
inspect the project, and flat fees for certain
administrative processes, such as record storage or
planning department reviews.
Currently, each local authority that has jurisdiction over
solar installations determines its fee structure. Fees
vary widely by location, with the City of Lawndale charging
the highest fee at $1,471 for a 3kW system, while 31 cities
have no permit fees at all. The average solar permit fee
across all cities and counties is $343. In 2009, the
Sierra Club, Angeles Chapter, surveyed 250 Southern
Californian cities and counties and found that 83% of
jurisdictions that used a valuation method charged above
the maximum reasonable recovery fee, while only 8% of
jurisdictions that used a fixed method charged above the
maximum reasonable recovery fee.
Proposed Law
Assembly Bill 1801 prohibits cities and counties from using
the valuation method to calculate their fees, such as
charging fees based on the solar energy system's valuation,
the value of the property, materials, labor, or any other
factor not directly associated with the cost to review and
inspect the installation of the solar energy system. AB
1801 also requires cities and counties to separately
identify each application fee assessed on the invoice
provided to the installer. Last, AB 1801 restates current
law, which prohibits cities and counties from charging fees
to install solar energy systems that exceed the cost of
providing the service for which the fees are charged.
AB 1801 -- 4/23/12 -- Page 3
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Excessive fees discourage the
installation of renewable energy systems by increasing
costs. The Sierra Club's report indicates that
jurisdictions that use a valuation method tend to charge
higher fees than jurisdictions that use a fixed method.
The valuation method has no nexus with the labor cost to
issue the permit and tends to generate higher fees than the
actual costs incurred to issue the permit. Since the
Sierra Club's report in 2009, many jurisdictions have
switched from the valuation method to the fixed method and
decreased their fees substantially. Some jurisdictions,
like the City of Roseville, continue to use the traditional
valuation method. AB 1801 furthers the state's goal of
promoting solar system installation by prohibiting cities
and counties from using the valuation method to calculate
permit fees. It will also make the fee structure more
understandable by requiring cities and counties to itemize
the different components and costs of the fee. More solar
energy consumption will reduce consumption of electricity
from traditional, environmentally harmful sources and
reduce consumers' electricity bill. AB 1801 helps
California realize its ambitious solar energy goals by
making fee structures more transparent, consistent, and
certain for solar installers.
2. Necessary ? The California Constitution and statutes
clearly prohibit local governments from charging a fee that
exceeds the reasonable cost of providing the service for
which the fee is charged. If local governments aren't
limiting their fees for solar permits to comply with state
law, prohibiting them from using the valuation method may
reduce fees, but local governments could still overcharge
with the fixed system. The practice of overcharging for
permits may be a regulatory problem, not a legislative
problem. Additionally, many jurisdictions that used the
valuation method in the past no longer use it for solar
installations. The Committee may wish to consider whether
amendments that will help fee payers dispute fees they
AB 1801 -- 4/23/12 -- Page 4
consider too high may be more effective in achieving its
goals.
3. Special treatment . The solar industry has already
received numerous subsidies and special programs from the
state government. AB 1801 is another effort to help the
solar industry. Some critics argue the benefits have not
outweighed the costs to the state, especially since solar
energy has not reached price parity with grid electricity.
Further, almost all other building permits are issued based
on the project's valuation. Does the issue of excessive
fees exist for building permits other than solar? The
Committee may wish to consider whether solar rooftop
installation permits merit a different treatment than other
building permits, and whether regulating the permitting
system for solar necessitates regulating the permitting
system for other kinds of building permits as well.
4. State-mandated fees based on valuation . In addition to
charging local fees to issue a solar permit, local
governments are required to charge some state fees that use
the valuation method. The Strong Motion Instrument Program
(SMIP) (AB 1747, Committee on Budget, 2003) charges either
a $10 or $21 fee for each $100,000 of the project's
valuation, depending on the building type. The Building
Standards Administration Special Revolving Fund, known
locally as the Green Building Standards Fee (SB 1373,
Calderon, 2008), imposes a $4 fee for each $100,000 of the
project's valuation. Prohibiting cities and counties from
using the valuation method to calculate all fees may create
confusion about how to calculate state fees that are based
on the valuation method. The Committee may wish to
consider clarifying that cities and counties may use the
valuation method to calculate state fees but not local
fees.
5. Related legislation . SB 1222 (Leno, 2011) tries to
ease the solar permitting process by placing a cap on
permit fees that cities and counties can charge for
residential and commercial solar rooftop installations. It
passed out of the Senate Governance and Finance Committee
on a 6-2 vote. It will next be heard in the Assembly Local
Government Committee.
6. Technical amendment . To clarify AB 1801's language,
the Committee may wish to consider amending the bill:
AB 1801 -- 4/23/12 -- Page 5
On page 2, lines 3-4, strikeout "Oversight of local
agency fees is a matter of statewide interest and
concern. Therefore, the" and insert:
The
Assembly Actions
Assembly Local Government 8-0
Assembly Floor 74-0
Support and Opposition (6/7/12)
Support : Solar Energy Industries Association; Renewable
Energy Accountability Project.
Opposition : Unknown.