Item 11.1 - Status Report on Pending Legislation A~GENDA REPORT SU1V[MARy.
TO: Honorable Mayor and Members of the City Council
FROM: James L. Bowersox, City Mana
INI~TED BY: John D..Fitch, Assistant City Managert~._~%
Penny R~ley, Senior Management Analys~
DATE: May 9, 1995
SUBJECT: Status Report on Pending Legislation
ABSTRACT
The League of California Cities has informed the City of the following measures which
are pending in the State Legislature: AB 1436 {Burton) First Responder Reimbursement;
ACA 13 (Johnson) Taxes, Assessments and Fees; SB 1X (O'Connell) Disaster Assistance;
SB 149 {Johannessen} Vehicle License Fees; SB 1225 (Johannessen) Privatization of
Public Works Projects; SB 238 (Haynes) Deferred Compensation Plans; SB 1167 (Craven)
Property Tax Growth; AB 915 {Cunneen) Property Tax Exemption; SB 610 (Leonard) Cable
Television; SB 936 (Campbell) Housing Element; AB 771 (Aguiar) Subdivisions; SB 657
(Maddy) Property Tax Omnibus Reform Bill; AB 1907 (Sher) Environmental Quality, CEQA;
AB 318 {Katz} Water and Power Municipal Utilities; and AB 349 (Escutia) Hazardous
Liquid Pipelines.
On April 18, 1995, City Council reviewed legislation related to Small Businesses and
Environmental Regulations SB 1122 {Mountjoy). Staff recommended that City Council
oppose the legislation as it would be overly burdensome for cities. An expanded
discussion is included in this report.
ENVIRONMENTAL REVIEW
Environmental review is not required for this item under CEQA.
FISCAL IMPACT
There is no fiscal impact associated with this informational report.
ADDITIQNAL pLTBLIC NOTIFICATION AND CORRESPONDENCE
Assemblyman Jan Goldsmith; Senator David Kelley; Bob Wilson, the City's Lobbyist; and
the League of California Cities will be mailed a copy of this staff report.
RECOMMENDATION
It is recommended that the City Council oppose SB 1122; support AB 1436; oppose ACA 13;
support SB 1X: oppose SB 149; support SB 1225l oppose SB 238; support SB 1167; oppose
AB 915; oppose SB 610; support SB 936; oppose AB 771; oppose SB 657; support AB 1907;
oppose AB 318; and support AB 349.
ACTION
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1 of z6 gAY 9 1995 fi'EM
CITY OF Pow.AY
AGENDA REPORT
TO: Honorable Mayor and Member~k~k~e City Council
FROM: James L. Bowersox, City Ma~p'~
INITIATED BY: John D. Fitch, Assistant City Manager~
Penny Riley, Senior Management Analysl
DATE: May g, 1995
SUBJECT: Status Report on Pending Legislation
)ACKGROUND
The League of California Cities has informed the City of the following measures
which are pending in the State Legislature: AB 1436 (Burton} First Responder
Reimbursement; ACA 13 (Johnson) Taxes, Assessments and Fees; SB 1X (O'Connell)
Disaster Assistance; SB 149 (Johannessen) Vehicle License Fees; SB 1225
{Johannessen) Privatization of Public Works Projects; SB 238 {Haynes) Deferred
Compensation Plans; SB 1167 (Craven) Property Tax Growth; AB 915 (Cunneen)
Property Tax Exemption; SB 610 (Leonard} Cable Television; SB 936 (Campbell)
Housing Element; AB 771 {Aguiar) Subdivision; SB 657 (Maddy} Property Tax Omnibus
Reform Bill; AB 1907 {Sher) Environmental Quality, CEQA; AB 318 (Katz) Water and
Power Municipal Utilities; and AB 349 (Escutia) Hazardous Liquid Pipelines.
On April 18, 1995, City Council reviewed legislation related to Small Businesses
and Environmental Regulations SB 1122 (Mountjoy). Staff recommended that City
Council oppose the legislation as it would be overly burdensome for cities. An
expanded discussion is included in this report.
FINDINGS
SB 1122 {Mount.io¥) Small Businesses: Environmental Requlation..
Senator Mountjoy introduced SB 1122 on February 24, 1995, which would require any
public entity to comply with a series of requirements in adopting environmental
regulations or ordinances (Attachment A). These include making the regulations
or ordinances not so burdensome on small business so as not to impede their
ability to remain in business, and to take into account current activities by the
businesses to reduce adverse environmental impacts. It would limit how and when
fines for non-compliance of ordinances are imposed and would not permit the fines
to be returned to the regulatory entity that imposed the fines. Finally, SB 1122
would require all public entities to review existing ordinances or regulations
imposed by it to determine compliance with the provisions of the bill, and, no
2 of 26 NAY 9 1995 ITEM 11.1
Agenda Report - Pendin. _egislation
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Page 2
later than January 1, 1997, to revise or adopt changes to existing requirements
to comply with the provisions of SB 1122. After that date, no public entity
could enforce any requirement that does not comply with the bill's provisions.
While the League is concerned about the impacts of government regulation on the
business community, it is believed that the provisions of SB 1122 will increase
the regulatory and administrative burdens on local governments and subject them
to potential challenges by businesses who wish to claim that the local
government, not a recession or a bad business decision, is the cause of its
business downturn.
Attachment B is a League of California Cities analysis of SB 1122. The primary
comments on the legislation relate to the need for clarification of terms and
phrases, the effects on regulated industry and regulatory bodies, and public
health concerns.
Opponents argue that this bill is unnecessary because: 1) existing law already
requires regulatory bodies to consider the impact on environmental regulations on
small business; 2) environmental regulations can be nullified if their
environmental or public health purpose cannot be substantiated with evidence.
Opponents, such as the California League of Cities, argue that the bill places a
significant regulatory burden on local governments because they would be forced
to promulgate separate environmental regulations for all individual small
businesses. Opponents argue that the measure would establish a procedure to be
followed at the local level which could subject local governments to endless
legal challenges by businesses who claim that an ordinance has materially impeded
it from remaining in business at its current level of production and employment.
Environmental and public health opponents assert that many small businesses
severely impact public health. They state that small businesses which would
qualify for exemption from state and local regulation under this bill include
metal platers, lead-acid battery facilities, furniture manufacturers, auto
finishing facilities, dry cleaners, and other businesses emitting toxic air
contaminants such as: gylcol ethers, lead, 1,1,1-trichloroethane, toluene,
benzene, perchloroethylene, formaldehyde. They state that many of these
chemicals are carcinogenic, and that these types of facilities are frequently
located within or adjacent to residential communities already heavily impacted by
poor air quality.
For these reasons, the demands on cities to implement the requirements of SB 1122
will be costly, burdensome and potentially counterproductive. It is recommended
that the City Council join the League of California Cities, California
Association of Sanitation Agencies, and Sierra Club in opposing SB ]122.
AB 1436 (Burton) First Responder Reimbursement
Assemblymember Burton introduced AB 1436 on February 24, 1995, which will provide
reimbursement for first responder medical treatment. AB 1436 will, for the first
time, recognize a previously uncompensated component of health care. The
legislation would require all new and amended health insurance plans to cover
3 of 26 MAY 9 1995 ITEM
Agenda Report - Pendi)_ Legislation
May g, 1995
Page 3
first responder costs under their policies. Ambulance transport is currently
covered while city fire department provided medical care at the scene is not. AB
1436 will greatly benefit cities with respect to recouping these uncompensated
costs.
The City of Poway, as a provider of emergency medical services, bills $161,000
annually for services; approximately 28% of the total is unrecoverable. It is
recommended that the City Council support AB 1436.
ACA 13 (Johnson) Vote Requirements for Imposinq Taxes. Assessments and Fee~
The California Constitution requires a local agency to impose a special tax with
the approval of two-thirds of the voters voting on that tax at an election. A
special tax has been defined by the courts to mean a tax "collected and earmarked
for a special purpose." Proposition 62, a statutory initiative, provided that a
general tax required a majority vote of the voters, but these provisions have
been held unconstitutional by the courts and cities can levy general taxes by a
vote of the city council.
Assemblymember Johnson introduced ACA 13, which requires a majority vote of the
people to impose a general tax. In addition, it limits parcel taxes to those
specifically authorized by the Legislature. ACA 13 is identical to SCA 13
(Hurtt) and SCA 15 (Haynes).
ACA 13 would provide that direct assessments can be levied without a vote but
contains majority protest provisions. A direct assessment is defined as an
"assessment imposed to finance capital costs or maintenance and operational
expenses for sidewalks, streets, sewers, water, or a flood control or drainage
system, or an assessment imposed for vector control."
Indirect assessments would require a two-thirds vote of the people. Indirect
assessments are assessments to finance capital costs or maintenance and
operational expenses for public improvements or for property-related services.
This constitutional amendment would also require public hearing and notice on
imposition or increases in fees. The fees would be subject to majority protest.
It is recommended that City Council oppose ACA 13 as an intrusion on the right of
local governments' ability to recover costs through levying general taxes or
fees.
SB 1X (O'Connell) Disaster Assistanc~
Senator O'Connell introduced SB 1X, which would serve as fiscal relief
legislation for those areas hard-hit by recent flooding. The League has
supported legislation that would continue to recognize the urgent and
extraordinary fiscal burdens natural disasters can be to isolated communities.
SB 107 and SB 1X are identical bills which would require the state to pick up the
local uncovered portion of the cleanup costs of repairing and responding to the
recent flood. The Federal Emergency Management Agency (FEMA) regulations require
the state and local governments to pay for 25 percent of the costs of a natural
disaster. Of this 25 percent, the state is responsible for three-quarters, or
18.75 percent, with the local share being the remaining one-quarter, or 6.25
4 of 26 9 1995 [[EM 11. I
Agenda Report - Pending Legislation
May 9, 1995
Page 4
percent. SB 107 and SB 1X would relieve the impacted cities from contributing
the 6.25 percent of these costs. The state passed similar legislation to relieve
the local share for the Northridge and Loma Prieta quakes and the firestorms
north and south.
Importantly, the measure only applies to locally owned infrastructure such as
streets and roads. It is currently estimated that this legislation will save
$18.4 million for affected local governments. It is recommended that the City
Council support SB 107 and SB 1X.
SB 149 (Johannessen) Vehicle License Fees: Newly Incorporated Cities
Current law allows cities that incorporated after January 1, 1987, but prior to
1991, to use a calculation of three times the number of registered voters in that
city as of the date of incorporation or their regular population for purposes of
determining Vehicle License Fee {VLF) allocations for eight years after
incorporation. Cities that incorporated after January 1, 1991 can only use the
option of three times registered voters for five years after incorporation.
SB 149 would allow cities incorporated on or after January 1, 1987 to use the
number of registered voters in that city as of the date of incorporation
multiplied by a factor of three for purposes of VLF allocations indefinitely.
Twenty-seven cities have incorporated since January 1, 1987. To the extent this
formula allocates more revenues to these newly incorporated cities, all other
cities receive less revenue. It is recommended that the City Council oppose
SB 149, as it would serve to further dilute already scarce VLF revenues.
SB 1225 (Johannessen) Privatization of Public Works Projects
Senator Johannessen introduced SB 1225 on February 24, 1995, which will allow
local governments to use and consider private financing and operation of public
facilities. Importantly, SB 1225 will not mandate cities to change their current
practices. SB 1225 simply allows cities the option of using private financing
for public projects where this strategy makes sense. It is recommended that the
City Council support SB 1225 as a mechanism to add flexibility to finance
necessary public facilities.
SB 238 {Haynes) Deferred Compensation Plans
This bill requires any public or private employer that offers its employees a
deferred compensation plan to provide, prior to an employee's enrollment in the
plan, written notice of the reasonably foreseeable financial risks accompanying
participation in the plan and historical information as to the performance of the
investments or funds available under the plan.
The bill also requires the employer, within 30 days after the end of each quarter
of the calendar year, to provide to each enrolled employee a written report
summarizing the financial performance of the investments or funds available under
the plan and describing the actual performance of the employee's funds that are
invested in the plan. The bill permits the employer to designate a plan manager
for the purpose of meeting these requirements.
5 of 26 MAY 9 1995 ITEM 11 · I
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The League Employees Relations Committee recommended opposition to this
legislation because of the inappropriate obligation that it places on an
employer. Most of the deferred compensation plans offered by local government
employers have this information provided by the investment advisor or
administrator, not the employer. The League is asking that the bill be amended
to provide that if this type of information is already provided by the
administrator/investment advisor that the employer is not required to provide the
information. It is recommended that the City Council oppose SB 238 unless the
requested amendment is incorporated into the bill text.
SB 1167 ~Craven) Property Tax Revenu~
To implement the 1992-93 and 1993-94 state budget, the state shifted nearly $4
billion in property tax revenues from cities, counties, and special districts.
Last year, the City of Poway shifted $384,000 in property tax revenue to ERAF.
State statute requires county auditors to put the revenue derived from the
property tax shift into an Educational Revenue Augmentation Fund (ERAF) in each
county and then allocate the funds to school entities. Growth in the shifted
property taxes in future fiscal years is also allocated to ERAF.
SB 1167 would allocate the growth in these property taxes back to the local
agency that contributed the property tax to ERAF. This would allocate the new
property tax due to new construction and change in ownership in the same manner
as all property tax was allocated prior to 1992-93. The statewide share of this
growth for cities in the first year would be about $20 million. Assuming
continued depressed property values, this amount would increase to $40 million in
the second year and $60 million in the third year. If property values were to
escalate, the bill would bring in considerably more revenue to cities. It is
recommended that the City Council support SB ]167.
AB 915 (Cunneen) Property Tax Exemption
Assemblymember Cunneen introduced AB 915 on February 22, 1995, which would exempt
new property constructed, acquired or installed to meet or exceed environmental
regulations from the property tax. Environmental regulations include laws, rules
or regulations administered by any environmental protection agency of the federal
government, the state or a political subdivision of this state for the
prevention, monitoring, control or reduction of air, water or land pollution.
This bill would apply to all property that would otherwise be taxable for the
first time on or after March 1, 1996.
The League of California Cities opposes AB 915 as another attempt to raid the
cities' property tax revenues. All new projects must comply with the California
Environmental Quality Act and would, therefore, be exempt from property taxes.
It is recommended that the City Council oppose AB 9]5.
SB 610 (Leonard) Cable Television
Senator Leonard introduced SB 610 on February 22, ]995, which will preempt local
governments' ability to regulate late fees charged by cable companies to
customers. SB 6]0 will deem automatically valid any late fee of $5.00 if it
meets some very simple criteria. The Federal Communication Commission has
6 of 26 ~AY 9 1995 ITEM 11.1
Agenda Report - Pendin~ .egislation
May 9, 1995
Page 6
recently clarified that late fee charges are the purview of local government
under local customer service standards.
The League of California Cities opposes SB 610 because it will preempt the
regulatory ability of local agencies in an area that is clearly related to local
customer service standards. It is recommended that the City Council oppose
SB 610.
SB 936 (Campbell) Housinq Elements
SB 936 makes important changes to housing element requirements. First, it allows
cities to meet their housing obligations in the most cost-effective manner.
SB g36 allows cities to subsidize or rehabilitate housing units to meet their
regional needs. Second, the bill creates an independent review of regional needs
allocations. Cities would no longer be limited to raising challenges to the very
body {the Council of Governments or the Department of Housing} which gave them
the disputed numbers to begin with. The League believes that Senator Campbell
recognizes the problems with housing element law and the gridlock that this issue
has produced. It is recommended that the City Council support SB 936 as a much
needed housing reform measure.
AB 771 (Aquiar) Subdivisions
Assemblymember Aguiar introduced AB 771 on February 22, 1995, which would extend
the initial life of a tentative map from two years to five years. The bill also
grants extensions of 24 months for a tentative map and 36 months for a final map.
AB 771 creates a lO-year commitment, where currently a map approval is limited to
24 months.
There are a number of sound policy reasons to maintain the current limitations.
Chief among them is the need to retain local land use flexibility. A five or ten
year restriction on land use changes constrains cities which need to retain the
ability to alter general plan and zoning designations without limitations imposed
by an extended map. Additionally, cities also need increased flexibility in
funding long-term facilities and services.
The League has asked that the bill be amended in two important ways. First, the
extension should not apply where the underlying general plan designation or
zoning has changed. This would allow cities to respond to changing community
circumstances and prevent a speculator from stymieing community change. Second,
any lengthening of the tentative map life must allow for adjustment of conditions
to reflect changed infrastructure and service circumstances. This would allow
cities to fine-tune conditions as infrastructure strategies and plans become more
definite.
In its current form, AB 771 could result in the loss of substantial
infrastructure revenue for cities. It is recommended that the City Council
oppose AB 771.
7 of 26 ~AY 9 1995 ITEM 11 · 1
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May g, lg95
Page 7
SB 657 (Maddy) Property Tax Omnibus Reform Bill
Senator Maddy introduced SB 657 on February 22, 1995, which is a major reform
bill that would exempt various properties from the property tax. This bill would
apply to all property that would otherwise be taxable for the first time on or
after March 1, 1996.
The State constitution sets the framework for taxation of property in California
and the legislature is not granted any statutory authority to exempt property by
statute.
This legislation would impact sorely-needed property tax revenues. It is
recommended that the City Council oppose SB 657.
AB 1907 {Sher) Environmental Quality)
Assemblymember Sher introduced AB 1907 on February 24, 1995, which seeks to
correct a recent change in the California Environmental Quality Act that enacted
a provision hidden among many CEQA amendments. The amendment required cities to
contract for CEQA consultants within 45 days from the decision that an
Environmental Impact Report is required. This provision has caused consternation
among local planning departments because previously contracting for CEQA
consultants was left to the discretion of local agencies. The League of
California Cities has commended Assemblymember Sher for recognizing that
micromanagement of local planning departments by the State legislature is
unnecessary. It is recommended that the City Council support AB 1907.
AB 318 (Katz) Water and Municipal Utilities
Assemblymember Katz introduced AB 318 on February 8, 1995, which would prohibit
municipal water and/or power agencies from contributing funds to its municipal
general fund. Such agencies would be prohibited from using any funds generated
by the imposition of water or power rates for purposes not directly related to
the powers and purposes of that agency. Many jurisdictions view revenues from
such agencies as payments in lieu of property and franchise taxes, and as offsets
for charges for water and electricity used by city departments. The League
opposes AB 318 because it is an intrusion into traditional rate setting authority
of cities. In addition, loss of the "in lieu" fees transferred to the general
fund would have a significant impact on city budgets.
At the request of Assemblymember Jan Goldsmith, staff reviewed the assumptions on
which AB 318 was founded. At the May 2, 1995 City Council meeting, the City
Manager provided an overview of the flawed supporting analysis for AB 318
performed by a senior policy analyst {Attachment C}.
The Assembly Local Government Committee held a hearing on AB 318 on May 3, 1995.
The measure failed passage but the committee granted a motion for
reconsideration.
It is recommended that the City Council oppose AB 318.
8 of 26 ~AY 9 1995 ITEM 11.1
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Page 8
AB 349 (Escutia) Hazardous Liouid Pioelines
Assemblymember Escutia introduced AB 349 on February 10, ]995, which requires an
operator of a pipeline used for the transportation of hazardous liquid substances
to conform the pipeline with specified federal regulations adopted pursuant to
the federal Hazardous Liquid Pipeline Safety Act.
While the City of Poway does not have any hazardous liquid pipeline transmission
facilities in our city, many other communities have aging pipelines placed under
their streets, homes and public meeting places.
The State Fire Marshal's Hazardous Liquid Pipeline Risk Assessment report found
that the leading cause of hazardous liquid pipeline leak incidents between
January 1981 and December 1990 was external corrosion. The report also found a
significant correlation between aging pipelines and the occurrence of external
corrosion and leaks.
Assembly Bill 349 also requires the State Fire Marshal, in coordination with
specified state agencies, to begin assessing the possibility of consolidating
pipeline age and location information in a single interactive database.
Currently, safety information on regulated pipelines is scattered among hundreds
of local agencies and departments. It is recommended that the City Council
support AB 349 as a statewide public safety measure.
- ENVIRONHENTAL REVIEW
Environmental review is not required for this item under California Environmental
Quality Act guidelines.
FISCAL IHPACT
There is no fiscal impact associated with this informational report.
ADDITIONAL PUBLIC NOTIFICATION AND CORRESPONDENCE
Assemblyman Jan Goldsmith; Senator David Kelley; Bob Wilson, the City's Lobbyist;
and the League of California Cities will be mailed a copy of this staff report.
RECOHHENDATION
It is recommended that the City Council take the following actions:
1. Oppose SB 1122 and direct staff to notify the Senate Committee of Natural
Resources of the City's opposition to the measure.
2. Support AB 1436 and direct staff to notify the Assembly Appropriations
Committee of the City's support for the measure.
3. Oppose ACA 13 and direct staff to notify the Assembly Committee on Revenue
and Taxation of the City's opposition to the measure.
9 of 26 MAY 9 1995 ITEM 1 1.1
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4. Support SB 1X and direct staff to notify the local Assembly delegation of
the City's support for the measure.
$. Oppose SB 149 and direct staff to notify the local Senate delegation of the
City's opposition to the measure.
6. Support SB 1225 and direct staff to notify the Senate Governmental
Organization Committee of the City's support for the measure.
7. Oppose SB 238 and direct staff to notify the Senate Appropriations
Committee of the City's opposition to the measure.
8. Support SB 1167 and direct staff to notify the Senate Appropriations
Committee of the City's support for the measure.
g. Oppose AB 915 and direct staff to notify the Assembly Revenue and Taxation
Committee of the City's opposition to the measure.
10. Oppose SB 610 and direct staff to notify the local Senate delegation of the
City's opposition to the measure.
11. Support SB 936 and direct staff to notify the Senate Appropriations
Committee of the City's support for the measure.
12. Oppose AB 771 and direct staff to notify the Assembly Appropriations
Committee of the City's opposition to the measure.
13. Oppose SB 657 and direct staff to notify the Senate Revenue and Taxation
Committee of the City's opposition to the measure.
14. Support AB 1907 and direct staff to notify the Assembly Natural Resource
Committee of the City's support for the measure.
15. Oppose AB 318 and direct staff to notify the Assembly Local Government
Committee of the City's opposition to the measure.
16. Support AB 349 and direct staff to notify the Assembly Revenue and Taxation
Committee of the City's support for the measure.
Attachments:
A - Text of SB 1122 (Mountjoy)
B - Senate Natural Resources and Wildlife Committee Analysis of SB 1122
C - Letter from J. L. Bowersox regarding AB 318
eb: \rpts\pnLeg. 509
10 of 26 ) IAY 9 1995 ITEM 1 1.1
- California 1995-96 Regular Session
1995 CA SB 1122
Amended
AMENDED IN SENATE MARCH 30, 1995
SENATE BILL No. 1122
INTRODUCED BY ID> Senators Mountjoy, Haynes and Hurtt <DJ IA> Senator
Mountjoy <Al
IA> (Coauthors: Senators Haynes, Hurtt, Johannessen, and Monteith) <Al
(Coauthors: Assembly Members Alby, Baldwin, Boland, Bordonaro,
Bowler, Conroy, and Harvey}
FEBRUARY 24, 1995
An act to add Division 35 (commencing with Section 72000) to the
Public Resources Code, relating to business regulation.
LEGISLATIVE COUNSEL'S DIGEST
SB 1122, as amended, Mountjoy. Small businesses: environmental
regulations.
Existing law imposes various requirements relating to air and water
pollution and hazardous waste. Existing law also provides for the
creation of a certified unified program to coordinate requirements of
state and local law relating to these subjects. Existing law also
provides for the designation of a consolidated permit agency where more
than one state or local agency requires a permit to engage in an
activity.
Existing law requires state agencies, in adopting regulations, to
assess impact on businesses, and makes regulations adopted after January
1, 1993, that require a report inapplicable to small businesses unless
the agency finds the regulation necessary for the health, safety, or
welfare of the people of the state.
This bill would provide that no requirement may be adopted by any
public entity unless it complies with specified requirements. The bill
- would apply to regulations, ordinances, and rules adopted or enforced by
a public entity for the purpose of alleviating, mitigating, limiting, or
eliminating any environmental or hazardous substance impact of a small
Attachment A ~AY 9 1995 IT~ 11 · 1
11 of 26
business.
The bill would require that the application of the requirement to
any small business shall not be so burdensome as to materially impede
the small business from remaining tn business at its current level of
production and employment. It would require flexible application to
individual small businesses and the development of an economically
feasible compliance plan, as specified. The bill would provide that
requirements shall take into account current efforts by businesses to
reduce adverse environmental impacts. It would provide that
requirements must be coordinated with other requirements of the same
public entity, and with those of other public entities.
The bill would prohibit requirements that require the use of
technology that has not been proven to work in a setting other than in a
laboratory setting. It would provide that all fines for noncompliance
with a requirement shall be in a reasonable amount. A fine may be
imposed only in the event of significant noncompliance with a
requirement, and then only if the business has received a warning and an
offer of assistance with compliance with a requirement. It would
provide that no fine shall be used to finance the regulatory program of
the public entity that imposes the fine.
The bill would require each public entity to review any existing
requirements imposed by it to determine compliance with these
provisions, and, no later than January 1, 1997, to revise or adopt
changes to existing requirements so as to comply with these provisions.
It would provide that, on and after January 1, 1997, no public entity
may enforce any requirement imposed by it that does not comply with
these provisions, as specified.
The bill would impose a state-mandated local program by imposing new
requirements on local agencies.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the state.
Statutory provisions establish procedures for making that reimbursement,
including the creation of a State Mandates Claims Fund to pay the costs
of mandates that do not exceed $1,000,000 statewide and other procedures
for claims whose statewide costs exceed $1,000,000.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these statutory
provisions.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Division 35 {commencing with Section 72000} is added to
the Public Resources Code, to read:
DIVISION 35. BUSINESS REGULATION
AY9 1995 ITE. , 11. 1
12 of 26
SENATE NATURAL RESOURCES AND WILDLIFE BILL NO.: SB 1122
Senator Tom Hayden, Chair AUTHOR: MOUNTJOY
VERSION:
(original) : 2/24/95
(Amended) : 3/30/95
FISCAL: yes
URGENCY: no
CONSULTANT: Lisa Hoyos
HEARING DATE: 4/5/95
SUBJECT:
Small business: environmental regulations
ISSUE:
Should small business be exempt from local and state environmental
regulations which materially impede its production or employment? Should
environmental requirements be individually tailored and flexibly applied
to the needs of each small business?
SUMMARY
Provides that state or local environmental regulations may not be applied to
- small business if they materially impede the businesses, current level of
production or employment. Stipulates that regulations applied to small
business must tailor to the individual needs of each small business. States
that fines for pollution violations be applied only in the event of
"significant noncompliance" and only if the non- complying business has
received both a prior warning and an offer of assistance with compliance from
a regulatory agency.
BACKGROUND AND EXISTING LAW:
Existing law requires sources of air pollution, water pollution and hazardous
waste to adhere to environmental regulations. Existing law also provides for
the creation of a certified unified program to coordinate requirements of
state and local law relating to these subjects.
In 1991 AB 2061 was enacted. This law requires state agencies proposing to
adopt or amend any regulation which would affect small business to conduct an
assessment of adverse economic impact that could result from the compliance,
record keeping or reporting requirements of the regulation. If the agency
assesses that there is no adverse impact, it is required to make a
declaration to that effect, and support it with evidentiary findings.
Existing law states that environmental regulations on small business can be
declared invalid if the agency determines that the regulation's necessity is
not supported by substantial evidence. Regulations can also be deemed invalid
if the agency declares it is necessary but cannot support its declaration
with substantial evidence.
16 of 26 Attachment B
~AY 9 1995 ITEM 11.
Currently, air districts with over 500,000 people are required to perform a
socioeconomic impact assessment before adopting, amending, or repealing any
air quality regulation. In air districts with under 500,000 people, the
districts were required by June 1, 1992 to contract with independent firms
which would analyze districts methodology for assessing socioeconomic impact
of regulations. These analyses were due to the legislature in October of
1992.
For the purpose of this bill, small business is defined as any corporation,
limited liability company, partnership, or person engaged in business in
California that does not have securities listed or approved for listing on a
national securities exchange, and that has a net worth of less than five
million dollars. The five million dollar figure shall be adjusted on January
1, 1997, and annually thereafter, by the percentage in the All Commodities
Producers Price Index of the Bureau of Labor Standards.
PROPOSED LAW:
Prohibits public entities from applying to small businesses any requirements
(ordinances, regulations, or rules) which have the purpose of limiting or
eliminating any environmental or hazardous substance impact unless the
requirements meet all of the following criteria:
a) May not materially impede the small business from remaining in
business at its current level of production and employment.
b) Requirements or regulations must be tailored to the individual
needs of each small business, and be flexible in their application.
Shall provide for the development of an economically feasible
compliance plan.
c) Fines may only be applied if the business fails to comply with its
individually tailored, flexible compliance plan, as outlined in
subdivision (b) . Furthermore, fines can only be applied only in the
event of "significant noncompliance" with a requirement, and only if
the business has received a prior warning and an offer of assistance.
d) Requirements must not be implemented in a manner which requires all
businesses to reduce their environmental impact by a percentage amount
of their current impact.
e) Requirements must be coordinated such that a regulated business has
to deal with only one public entity in coordinating reporting and
permit authorization requirements. If no single public entity can be
determined under statutory provisions, the small business may choose
the lead agency it wants to deal with.
f) Regulations can require only the use of technology which has been
proven to work in a setting other than a laboratory setting.
g) All fees applied in connection with a regulation shall be
reasonable, and not exceed the amount necessary to administer the
requirement.
17 of 26 9 1995 ITEM
This bill does not apply to regulations or requirements necessary to prevent
immediate danger to human life which might result from a hazardous emission
of a specific business. Nor does it apply to regulations or requirements
necessary to prevent immediate danger to animal life, or a significant
biological ecosystem which might result from a hazardous emission of a
specific business.
lhis bill requires all public entities to review and modify all existing
environmental regulations on small business in order to comply with this
division no later than January 1, lg97. If the regulations are required by
statute, public entities must report all statutory changes necessary to
comply with this division. On or after January 1, 1997, no public entity may
enforce any existing environmental regulation that does not comply with the
provisions of this bill.
COMMENTS:
1) Need for clarification of terms and phrases.
This bill allows only for environmental regulations which do not "materially
impede the small business from remaining in business at its current level of
production and employment." Who defines what constitutes a material
impediment to production and/or employment?
Who determines what is a reasonable' fee? What constitutes s~gn~ficant
noncompliance,? What would be classified an economically feasible compliance
plan" and who defines "economically feasible'? Does "technology to reduce
adverse impacts" refer to a specific category of technology, such as "best
available control technology" or 'best available retrofit control
technology"?
What is considered and who determines what constitutes "immediate danger to
human life, animal life, or a significant biological ecosystem"?
Is it the intention of the author to solely exclude from the division
"requirements necessary to prevent immediate ~anger to.human ~!f? .~-
which-might result from a hazardous air emss~on'? Woulo ~mmeo~a[e oangers
posed,by contaminated water or hazardous waste be considered? Accordingly,
does the exclusion apply only if the immediate danger is caused by a
"specific business'? Should immediate dangers to human, animal, and ecosystem
health caused by the combined impact of several businesses be considered?
2) Effects on regulated industry and regulatory bodies
Supporters argue that SB 1122 is an important step in assisting small
businesses to comply with regulations. The California Chamber of Commerce
especially supports the provisions which allow for flexible compliance and
the development of an economically feasible compliance plan, and the
coordination of reporting and compliance requirements.
Supporters say that, while environmental regulations are necessary, they
should not be implemented at the expense of small business, which they state
is the core and backbone of the economy.
~Y 9 1995 ITEM 11. 1
18 of 26
Opponents argue that this bill is unnecessary because: 1) existing law
already requires regulatory bodies to consider the impact on environmental
regulations on small business, 2) environmental regulations can be nullified
if their environmental or public health purpose cannot be substantiated with
evidence.
Opponents, such as the California League of Cities, argue that the bill
places a significant regulatory burden on local governments because they
would be forced to promulgate separate environmental regulations for all
individual small businesses. Opponents argue that the measure would
establish a procedure to be followed at the local level which could subject
local governments to endless legal challenges by businesses who claim that an
ordinance has materially impeded it from remaining in business at its current
level of production and employment.
Public health concerns
Environmental and public health opponents assert that many small businesses
severely impact public health. They state that small businesses which would
qualify for exemption from state and local regulation under this bill include
metal platers, lead-acid battery facilities, furniture manufacturers auto
finishing facilities, dry cleaners and other businesses emitting toxic air
contaminants such as: glycol ethers, lead, 1,1,1-trichloroethane, toluene,
benzene, perchloroethylene, formaldehyde. They state that many of these
chemicals are carcinogenic, and that these types of facilities are frequently
located within or adjacent to residential communities already heavily
impacted by poor air quality.
SUPPORT:
La Mesa Chamber of Commerce
California Chamber of Commerce
Workman Enterprises, Inc.
OPPOSITION:
California League of Cities
California Association of Sanitation Agencies
City of Norco
Citizens for a Better Environment
Sierra Club
19 of 26
gAY 9 1995 ITEM 11.1
May 2, 1995
Jan Goldsmith, Assemblyman
75th District
2002 Capitol Building
Sacramento, CA 95814
Dear Jan:
Thank you for your call regarding AB 318 (Katz). I have analyzed the findings in
the letter dated May 1, 1995 from Dennis O'Connor, Senior Policy Analyst,
California Research Bureau of the California State Library. My analysis included a
review of the Financial Transactions Concernino Cities for 1992-93 and a
telephone conversation with Mr. O'Connor. The following is a summaw of my
analysis regarding Mr. O'Connor's letter and suggestions for amendments if
AB 318 is going to pass committee.
1. Mr. O'Connor used a five-year average (FY 88/89 to 92/93) of the net
expenditure for water public utilities as shown in the [=inancial Transactions
~_C~. For reference purposes, I have circled the 92/93 numbers
(total expenditures, functional revenues, end net expenditure) for Poway on
the enclosed pages 308 and 309. For FY 92/93, our 'net expenditure" was
-$2,192,181, which was considered a "profit" by Mr. O'Connor. In reality,
this "profit" was not a profit at all. $1.1 million was expended for debt
service on General Obligation Bonds and Assessment District 79-1. The
remaining funds, $1.1 million, went into reserve funds for operations and
replacement of capital improvements. As you may recall, the Poway
Municipal Water District did not set aside any funds for system replacement.
At this time, we are setting aside about $400,000 per year towards major
capital replacement.
In 1994/95, we are using over $3.0 million in capital replacement funds to
upgrade the water treatment plant to meet mandated Clean Water Act
standards. The balance of the $9.0 million project is being funded by the
Redevelopment Agency and proceeds of a revenue bond to be issued this
summer.
9 1 95 ITF..M
20 of 26 City Hall Lo Ai~TAC~i~liNT C Jic Center Drive
........ o ...... ss: P.O. Box 789, Po~ 74-0789 · (619) 748-6600, 695'1400
72000. As used in this division:
(a) "Public entity" has the meaning set forth in Section 811.2 of
the Government Code.
(b) "Requirement" means any ordinance, regulation, or rule adopted
by a public entity for the purpose of alleviating, mitigating, limiting,
or eliminating any environmental or hazardous substance impact of a
small business.
{c) "Environmental or hazardous substance impact" means the impact
of a small business caused by using, storing, generating, emitting,
disposing of, or releasing any substance that may cause harm to the
environment or to persons coming in contact with the substance. It
includes impact caused by air pollution, water pollution, groundwater
contamination, waste disposal, and toxic and hazardous material
handling.
(d) "Small business" means any person, partnership, limited
liability company, or corporation engaged in business in California that
does not have securities listed or approved for listing on a national
securities exchange or designated or approved for designation as a
national market system security on an interdealer quotation system by
the National Association of Securities Dealers, if the exchange or
system has been approved by the Commissioner of Corporations under
Section 25100 of the Corporations Code IA> that has a net worth of less
than five million dollars ($5,000,000). However, the five million dollar
figure shall be adjusted on January 1, 1997, and annually on January 1,
thereafter, by the percentage change in the All Commodities Producers
Price Index of the Bureau of Labor Standards <A]
72001. No requirement may be adopted by any public entity unless it
complies with all of the following requirements:
(a) The application of the requirement to any small business shall
not be so burdensome as to materially impede the small business from
remaining in business at its current level of production and employment.
(b} The requirement shall provide for flexible application to
individual small businesses tailored to the needs of each small
business. The requirement shall provide for the development of an
economically feasible compliance plan with the assistance of the public
entity.
(c) Requirements shall take into account current efforts by
businesses to reduce adverse environmental impacts and shall not
penalize those businesses that currently use technology to reduce
adverse impacts. Accordingly, requirements shall not be implemented in a
manner to require all businesses to reduce environmental impacts by a
percentage amount of their current impact, but shall take into account,
and give credit for, current efforts of the business to use
manufacturing and other methods to eliminate impacts on the environment.
(d} Requirements shall be coordinated with other requirements of the
13 of 26 I~AY 9 1995 ITE J 11. 1
- same public entity, and with those of other public entities. Where
multiple requirements are interrelated, so that reporting and compliance
requirements could be coordinated by a single public entity,
coordination shall be provided through a certified uniform program
agency designated pursuant to Chapter 6.11 (commencing with Section
25404) of Division 20 of the Health and Safety Code, or a consolidated
permit agency designated pursuant to Division 34 (commencing with
Section 71000). If no single public entity may be designated under
those or other statutory provisions, the small business may designate a
single public entity as the lead agency to coordinate any reporting and
permit authorization requirements.
{e) No requirements shall require the use of technology unless that
technology has been proven to work in a setting other than a laboratory
setting.
(f) All fines for noncompliance with a requirement shall be in a
reasonable amount and may be imposed only if the business fails to
comply with the plan approved under subdivision (b). A fine may be
imposed only in the event of significant noncompliance with a
requirement, and then only if the business has received a warning and an
offer of assistance with compliance with a requirement. No fine shall
be used to finance the regulatory program of the public entity that
imposes the fine.
(g) All fees imposed in connection with a requirement shall be
reasonable and shall not exceed the amount necessary to administer the
requirement.
72002. Every public entity shall review any existing requirements
adopted by it to determine compliance with this division. No later than
January 1, 1997, the public entity shall revise or adopt changes to
existing requirements adopted by it so as to comply with this division,
and, in the case of requirements imposed by statute, the public entity
shall report to the Legislature as to statutory changes necessary to
comply with this division. On and after January 1, 1997, no public
entity may enforce any requirement adopted by it that does not comply
with this division.
72003. This division does not apply to any of the following:
(a) Any requirement necessary to prevent immediate danger to human
life, animal life, or a significant biological ecosystem than might
result from a hazardous emission of a specific business.
(b) Any requirement that is mandated by federal law, provided,
however, that in any case where a federally mandated requirement would
be in violation of this division, the public entity shall take all
feasible steps to permit the small business to comply with the federal
mandate without unnecessary adverse impact on the business's economic
viability.
SEC. 2. Notwithstanding Section 17610 of the Government Code, if
the Commission on State Mandates determines that this act contains costs
MAY 9 1995 ITEM 11.1
14 of 26
mandated by the state, reimbursement to local agencies and school
districts for those costs shall be made pursuant to Part 7 {commencing
with Section 17500) of Division 4 of Title 2 of the Government Code.
the statewide cost of the claim for reimbursement does not exceed one
million dollars ($1,000,000), reimbursement shall be made from the State
Mandates Claims Fund.
Notwithstanding Section 17580 of the Government Code, unless
otherwise specified, the provisions of this act shall become operative
on the same date that the act takes effect pursuant to the California
Constitution.
END OF REPORT
15 of 26 MAY 9 1995
Assemblyman Jan Goldsmith
May 2, 1995
Page 2
As you can see from the above, Poway is not making a profit. I believe that
if the other 169 cities reviewed this report, most would come to the same
conclusion. I am quite concerned that those who receive Mr. O'Connor's
report will not read his disclaimer on Page 2 of his letter. To use this report
as evidence for enactment of legislation would be · travesty.
2. If this legislation is moving forward, these are my suggested amendments:
a. I would suggest that proposed Water Code Section 114(b)(1) be
amended to add "repayment of debt, and operating reserves"
following the ..."costs of administration" provision. This would
clearly address the circumstance of a $1.1 million expenditure for debt
service being included as a profit for Poway es well as having
operating reserve funds available to meet unforeseen needs.
b. Proposed Water Code Section 114 (b)(2) be amended by inserting
"multi-year" in front of "capital outlay programs." This would address
- our circumstance with respect to setting aside funds each year
towards replacement of part of the system.
If I can provide additional information or clarification, please let me know.
Sincerely,
\
~Jar~es L. Bowersox
City~ Manager
Attachments
21 of 26 9 1995 I'I'EE 11. 1
California Research Bureau
P.O. Box 942837
Sacramento, California 94237-0001
(916) 653-78~.3 FAX (916) 65~-6353
May 1, 1995
The Honorable Rich&rd Kat. z
California State Capita, Room 3146
Sacramento, CA 95814
De.-u Assembly Member Katz:
You have introduced A~sembly Bill 318. This bill, among other things, adds Section 113
to the Wa,er Code. In your bill, as amended April 26, 1995, $~tion 113 paragraph (d)
reads:
(d) Municipal ~atcr and pOwer agencies .~toultl not terve as ~urrogt:te t~ collectors
Y~r exampi¢, the £o.~ Angeles Department of Water and power tron~rert an re.rage qf
oac 6undred million dollars (~JO0. O00. O00) ~nnually to the CiO~ off.,os Angeles for
nou~,h 'it~ related services undertaken by that a~ty. ~'hese tran~rers are not t~rot~er and
constitute a hidden t~x an the rotepay'er$ oft:ny rtrunicipal water a~dpower agency
You asked u~ if there was any ex6dence that other municipal water and power agencies are
being opermed "a~ a profit". I'he short answer is: Yes. There i~ strong evidence that as
ma.%, ~ s 170 cities, consistently operate their water or power u-ill,ties ax a significant profit.
These dina ~e sho'~m in the attached table.
Our initial review raises a number of questions. For ~xampl¢, Proposition 13 draws a
distiactit, n between fees and special taxes. Fees mu~t reasonably reflect the cost of
providing a service, ffthc charge exceeds the reasonable co~, th~n the charge is a special
tax At firs~ glance, many of these municipal water and power agencic~ ~eem to be
chazgLn,~; more than the reasonable co~t of providing utility .~ervices. If so, are the charges
in violation oYProposition 139
A rela~ed set of questions regards the appropriation~ (Germ) lLmJt. 'l'he appropr/ations
limit restricts cities' ability to spend the proceeds of taxes. Fees are not the proceeds of
:~-xes. --nd therefore are not subject to limitation. If the utility charg~ are ind~,x:l special
taxe~, how were they treated when these citi,s established their initial appropriations limit,
and how does this affe~ these cities' current appropriations limit?
Z4 of ~6 ,.~I9~6 01 HIIWSCI~OO N~£ N~A~SWBSS~ WO~t~ ~S:~0 S66I-z_¢-~tk
......... 9 19S5 ITEM 11.1
- The Honorable Richard Katz
I~4~_~ l, 1995
PaBe 2
Another issue that arose dealt with the distinction between chan~ and seneral law
General law cities derive their powers from acts of the Legislature. Accordingly, the
LegisI~ure can ch~n§e the powers that general law citie~ can ~ercise. Charter cities
de,bye their powers .from their adopted chartar. The Constitution of the State of California
~u~antees to these cities a large measure of"home rule". This means charter cities can
operate larf, eiy independent of acts o£ the LeBislature. However, charter cities mu~ still
comply witl' the State Constitution. The charters for some citi~ might contain provisions
that mJlo~v their utLlities to run a surplus. We cannot say, at this time, exactly which
charter cities do or do not have such provision-, in thei~ che.n~rs. Nor cmn we say precisely
how the existence of such provisions would affect the LeBidature's ability to restrict th,at
city £orm operttkng its utilities for a
These findings presented in the attached tab)e should be considered prelimina, ry, Our
~n~lysis draws primarily on our review of the California State Controller's annual ~
_]'raa_sa__~ion~s ~. The Controller's data, though f~irly detailed, ere still
a~rcgated Consequently, we cannot state with complete certainty that our analy.~is
included orJy rclcvanI data)
We hope }'au find this information useful. Our initial analyds reveeled a number of
potentially interesting issues We would bc happy to pursue this issue with you furt.hcr.
Sincerely,
Denms O' Con.nor
Senior Policy A-n~tyst
,Attachment
1 ~or example, the Con~oller's published da~a do not ~Uow us
_ fl~ci~ ~ent~. such ~ ~nd ~eSm ~C Controller'S ~-publiih~ ~. how~I.
~ch d~ls.
~AY 9 1995 ITEM 11. i
Cities ~;hose Utility Revenues Exceed Expenditures
(Continued)
Ci,- Counv,.' Class Servl,'," Profit Percent
Los Bane. Mcrced C, en~-a] Law Water $'/0.131 7%
Marlex a Madera General Law Water S200.225 16%
Manleea San Je. aquin Cn:ncral l_nw Water S213.617 11%
Menlo Park San Mat*o C~neral Law Water $910,567 $0%
Memed Merced Char~rM Wattn' $651,682 16%
M/llbrae San Marco C,¢neral Law Water $299,0~9 20%
Mode~o Stanislaus Chartere. tl Water S6,026,452 100%
Moru't~-.'~a Los Angeles G-~neral Laxn. Water S739.126 29%
Montebdlo los Angeles C~ncra! Law Water $315,64.6
Monterey- Pa, k Lo, Ang-les C-~neml Law Water $358,773 10g;
Morgan 1til1 Sax, ta Claxa General La,.,. Water $742.449 19%
Mm.mt.m~ \5~, Sane Clara Chartered Water $1.746.396 25%
Mt Shast i Siskiyou C.~neral Lay,' Water S102.575
Nape Nape Chartered Water S868~554 9%
Needles San Bemaxdino G-~neral Law El~:tric $278.411
Newrt~.n Stamslau., General Law Wat*r $112.133 27%
Ney, pea Brach Orange CMrtarcd Water $1.286.$84
O~kd.!lc Srardsla~ General 1~,.. Wa~r S$0.632 13°,/o
Ck:can~idc San Diego General La~ W'a~r Sl.783.407
Ontario San Bra-aardine General Law Water $1.921.290 15%
Oxnard Venture General La~, Wa~r $688.921 6%
?ale .~ho Santa Clara Cha.ner~l El~tri¢ S 18,909.76-/ 39%
Pale .-Mto Santa Clara Chartered Cms $2.859.670 19%
Pale A]w . 'c,~m:~ Clara Chattered Water $3,580.597 51%
Patlier Yresno C,~neral Law Water $21.117
Pcm,~ l~vcr.~idc Ocacti ~r Water S84.788 '7%
Pice l~ve. ra Los 3mgeles O~neral Law Wa~r $512,194
Yq)'mou~ A.mador General Law Water $20,$09 10%
Yo~.x San Diego General Law Water S2.065,304 29%
Re~ ~i,;ff Tel;ama General Law Water $68.819
Reddin{, SMgta General Law Water $563.513 11%
Keadle>. Fresno General Law Water $158,209 26%
l~a!tc San Bema.rdino General Law Water Sl,976.357 53",/0
Kio Dell Humboldt General Law Water $28.004 11%
]~.io Vi~a Sola,no General Law Water $189,705 80%
~6 of Z6 ,6~9~C, Ol HilWSO]09 N~£ N~WAqSWBSS~ WO~
gAY ITEh 11.1