BILL ANALYSIS �
SB 692
Page 1
Date of Hearing: June 12, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
SB 692 (Hancock) - As Amended: April 23, 2013
SENATE VOTE : 37-0
SUBJECT : Local government: community facilities districts.
SUMMARY : Expands powers of local agencies to use the Mello-Roos
Community Facilities Act of 1992 and the Marks-Roos Local Bond
Pooling Act of 1985. Specifically, this bill :
1)Authorizes pursuant to the Mello-Roos Community Facilities Act
(Mello-Roos), a community facilities district (CFD) to finance
the maintenance and operation of any real property or other
tangible property with an estimated useful life of five or
more years that is owned by the local agency or by another
local agency through an agreement, as specified.
2)Defines "maintenance" to include "replacement, and the
creation and funding of a reserve fund to pay for a
replacement."
3)Authorizes a joint powers authority (JPA) to lease lands,
structures, real or personal property, rights, rights-of way,
franchises, easements, and other interests in lands that are
located within the state that the JPA determines is necessary
or convenient in order to finance a public capital improvement
pursuant to the Marks-Roos Local Bond Pooling Act
(Marks-Roos).
4)Authorizes the local agency by written consent and the
unanimous approval of affected parcel owners to eliminate
types of facilities and services in a CFD that initially
consists solely of territory proposed for annexation to the
CFD in the future, as authorized by current law. States that
no additional hearing or procedures are required. Requires
the unanimous approval to contain specified provisions if the
unanimous approval relates to the reduction of a special tax
rate and the special tax is being used to retire debt.
5)Authorizes a legislative body by ordinance, following the
creation of a CFD that includes territory proposed for
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annexation in the future by unanimous approval as specified,
to levy special taxes on parcels that will be annexed to the
CFD at the rate to be approved unanimously by parcel owners
and for the apportionment and collection of the special taxes
in the manner specified in the resolution of formation.
6)Authorizes the local agency, in connection with the annexation
by unanimous approval to a CFD of a parcel included in
territory proposed for annexation in the future to the CFD as
specified, to designate parcels as an improvement area within
the CFD. Requires the designation of parcels as an
improvement area to be specified and approved with unanimous
approval of parcel owners at the time that the parcels are
annexed to the CFD. States that no additional hearings or
procedures are required. Specifies, after the designation of
parcels as an improvement area that the following shall only
apply to the improvement hearing:
a) All proceedings for approval of the appropriations
limit;
b) The rate and method of apportionment and manner of
collection of special taxes; and,
c) The authorization to incur bonded indebtedness for the
parcel or parcels.
7)Provides that a resolution of intention shall not be obligated
to specify the conditions under which a special tax obligation
may be prepaid and permanently satisfied if the prepayment
provision is included in the unanimous approval of the owner
of each parcel at the time the parcels are annexed to the CFD.
8)Provides that provisions in existing law that allow a CFD to
finance facilities owned or operated by a public agency other
than the agency that created the CFD pursuant to a joint
community facilities agreement or joint exercise of power
agreement shall not be construed to limit the ability of a JPA
to exercise powers authorized by the Joint Exercise of Powers
Act.
9)Authorizes a local agency, in connection with the issuance of
bonds where a property owner agrees to disclose certain
information through the Municipal Securities Rulemaking
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Board's Electronic Municipal Market Access, to execute and
record in the county recorder's office a notice of the owner's
disclosure agreement for the purpose of providing a notice to
a subsequent transferee. Requires the owner's written consent
to be attached to the notice. Requires the county recorder's
office to accept the notice.
10)Provides that a subsequent transferee of the property shall
be subject to the disclosure obligation. Allows the local
agency, upon termination of the disclosure obligation, to
cause a notice of termination to be recorded with the county
recorder's office where the original notice was recorded.
Requires the county recorder's office to accept the
termination.
11)Makes technical and non-substantive changes.
EXISTING LAW :
1)Authorizes, under the Mello-Roos Community Facilities Act of
1992, a local agency to establish a CFD to finance public
facilities and certain public services through the imposition
of special taxes and the issuance of bonds.
2)Authorizes a CFD to finance the purchase, construction,
expansion, improvement, or rehabilitation of certain
facilities, including, among others, child care facilities,
undergrounding of water transmission and distribution
facilities, and the cleanup of hazardous materials.
3)Specifies the requirements for the establishment of a CFD,
including, among other things, a petition, a hearing,
establishment of the boundaries of the CFD, and an election on
the question of establishment.
4)Authorizes, under the Marks-Roos Local Bond Pooling Act of
1985, a joint exercise of powers authority to issue or
purchase bonds to assist local agencies in financing public
capital improvements, working capital, liability, or other
insurance needs, or projects whenever there are significant
public benefits for taking that action.
FISCAL EFFECT : None
COMMENTS :
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1)The Mello-Roos Community Facilities Act allows counties,
cities, special districts, and school districts to levy
special taxes (parcel taxes) to finance a wide variety of
public works, including parks, recreation centers, schools,
libraries, child care facilities, and utility infrastructure.
A Mello-Roos CFD issues bonds against these special taxes to
finance the public works projects.
Mello-Roos is an important feature of the local fiscal
landscape, providing local officials with a key tool for
accumulating the public capital needed to pay for the public
works projects that make new residential development possible.
In addition to financing public works such as park, school,
and library facilities, CFDs can pay for improvements on
privately owned buildings or real property. For example, CFDs
may pay for work deemed necessary to bring buildings or real
property, whether privately or publicly owned, into compliance
with seismic safety standard and regulations.
To initiate the formation of a CFD, a local agency's
legislative body must adopt a resolution of intention to
establish the district, which must do all of the following:
describe the district's boundaries; describe the facilities
and services proposed to be financed; state that a special
tax, secured by a lien against real property, will be annually
levied; specify, in detail, the rate, method of apportionment,
and manner of collections of the special tax; and, fix a time
and place for public hearing.
After holding the hearing and considering protests, the
legislative body, to establish the CFD, must adopt a
resolution of formation containing all of the information
provided in the resolution of intention; and, if a special tax
is to be levied, include additional information about the tax
levy.
2)SB 555 (Hancock), Chapter 493, Statutes of 2011, authorized
the use of Mello-Roos taxes to help finance renewable energy,
water conservation, and energy efficiency improvements on
private property. Supporters of SB 555 sought to simplify the
process by which property owners can voluntarily use
Mello-Roos financing, to create a CFD that initially contains
no parcels of land, but consists only of territory from which
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parcels may subsequently be annexed to the CFD with the
unanimous approval of parcel owners.
SB 555 (Hancock) authorized a separate procedure for
establishing a CFD where the district initially consists
solely of territory proposed for annexation to the community
facilities district in the future, as specified, and provides
an alternate procedure for incurring bonded indebtedness for
community facility districts established in this manner.
Under this separate procedure, a resolution of intention to
form a CFD does not have to specify the rate or rates of a
special tax subject to specified requirements.
3)According to the author, following the passage of SB 555
(Hancock), "A question has arisen about whether eligible
projects include maintenance operations. Additionally, some
have wondered about the wisdom of requiring that a public
hearing be held in order to make certain changes to CFD
parameters, even if there is unanimous approval of the
affected property owners."
4)This bill makes several changes to allow a local agency's
legislative body to avoid public hearings or other procedural
requirements when using the separate procedure for
establishing a CFD with the unanimous approval of parcel
owners pursuant to SB 555 (Hancock). This bill allows
facilities and services to be eliminated in a CFD, allows a
local agency to designate parcels as an improvement area, and
allows a local agency to levy special taxes on parcel that
will be annexed to the CFD upon the unanimous approval of
affected parcel owners. This bill also provides that a
resolution of intention does not need to specify the
conditions when a special tax obligation can be prepaid or
permanently satisfied if the prepayment provisions are
included in the unanimous approval by parcel owners when they
annex the CFD. This bill is author-sponsored.
This bill expands on the types of facilities that a CFD may
finance to include the maintenance and operation of any real
property or other tangible property with an estimated useful
life of five or more years that is owned by the local agency
or by another local agency through an agreement, as specified.
This bill defines maintenance to also include replacement,
and the creation and funding of a reserve fund to pay for a
replacement. Current law authorizes a CFD to issue bonds to
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provide for the planning, design, purchase, construction,
expansion or rehabilitation of any real or other tangible
property with an estimated useful life of at least five years.
The Committee may wish to consider if it is appropriate to
add maintenance and operation to the extensive list in current
law that a CFD can finance when it may be more appropriate to
use existing funds for these purposes.
5)The Marks-Roos Act authorizes two or more public agencies to
exercise their common powers by signing joint powers
agreements. This agreement can create a JPA which allows
local agencies to use JPAs to finance infrastructure. The
Marks-Roos Act authorizes JPAs to issue bonds and loan the
capital to local agencies to finance public capital
improvements, working capital, liability, insurance needs, or
other projects. Bonds issued under Marks-Roos are secured by
a variety of repayment sources, including lease agreements.
For example, a JPA can issue a Marks-Roos bond and loan
proceeds under lease agreements. Additionally, JPAs may lease
the public capital improvements being financed to a local
agency, and charge and collect rent as repayment of Marks-Roos
bonds.
This bill allows JPAs to lease lands, structures, and real or
personal property that they deem necessary or convenient for
the financing of public capital improvements. Current law
allows JPAs to take title to or sell these types of interests.
The Committee may wish to ask the author to discuss why JPAs
need to be granted additional authority to lease land or real
property and to provide examples as to why existing powers are
not sufficient.
6)The provision in this bill amending the Marks-Roos Act is in
conflict with AB 850 (Nazarian). The author may wish to
consider chaptering-out amendments to resolve the conflict.
7)Support arguments : Supporters argue that this bill makes
clarifications to existing law that governs the use of CFDs to
finance energy efficiency and water conservation projects.
Opposition arguments : Opposition could argue that this
measure adds operations and maintenance to the laundry list of
services that can be financed by Mello-Roos and that special
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taxes should not pay for these new services and that funding
for regular maintenance programs should come out of existing
funds.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958