Policy Analyst. SUBJECT: Legislative Report - March 2018

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1 Local Agency Formation Commission Orange County CHAIR Derek J. McGregor Representative of General Public VICE CHAIR Cheryl Brothers Councilmember City of Fountain Valley March 14, 2017 TO: FROM: Local Agency Formation Commission Executive Officer Policy Analyst SUBJECT: Legislative Report - March a Lisa Bartlett Supervisor 5 th District DR. Allan Bernstein Councilmember City of Tustin Todd Spitzer Supervisor 3 rd District Charley Wilson Director Santa Margarita Water District John Withers Director Irvine Ranch Water District Wendy Bucknum Councilmember City of Mission Viejo James Fisler Director Mesa Water District Lou Penrose Representative of General Public Michelle Steel Supervisor 2 nd District Carolyn Emery Executive Officer BACKGROUND Since the Legislature reconvened from winter recess on January 3, 2018, several bills have been introduced to address and propose solutions to important statewide issues of LAFCO interest. Currently, many of the proposed bills were submitted as spot bills or placeholders and are expected to experience future amendments that will further define their purpose and focus. Proposed legislation involves the following: Making non-controversial and technical improvements or revisions to the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (CKH). California Association of LAFCOs (CALAFCO) sponsorship of a bill seeking one-time grant funding for LAFCO studies, as recommended by the Little Hoover Commission. Authorizing the State Water Resource Control Board to consolidate small water systems serving disadvantaged communities that consistently fail to provide adequate water services. Amending current LAFCO law related to the factors of consideration considered in the review process of a proposed organization or reorganization. Amending current law to restore the revenue resources for future city incorporations or inhabited annexations. Through participation as a member of the CALAFCO Legislative Committee, and in collaboration with the Southern region LAFCOs, staff has reviewed these proposed bills of LAFCO interest. As they are still being modified by the respective authors, staff is recommending a watch position on the bills included in this report. Summaries for each of the bills are provided in the next section of this report North Main Street, Suite 1050, Santa Ana, CA (714) FAX (714)

2 Page 2 of 7 The next legislative report is scheduled for June 13, Should any items requiring Commission review or action prior to the next scheduled update occur, staff will provide an interim report to the Commission. PROPOSED BILLS OF LAFCO INTEREST ASSEMBLY BILLS Committee on Local Government-Local Government Omnibus Bill (Pending Bill Number) The Omnibus Bill is an annual bill used by CALAFCO to introduce technical and nonsubstantive changes to the Cortese-Knox-Hertzberg Reorganization Act of The modifications assist in clarifying and providing consistency in how the Act is applied throughout the State. The following are the proposed amendments: Special Districts Selection Process: Modify the Special Districts Selection Committee process to improve efficiency in the administration of LAFCOs statutory duties related to the Independent Special District Selection Committee with the following changes: Provide an option of issuing a call for nominations prior to the selection committee s meeting date and allow the immediate appointment of a candidate if only one nomination has been submitted. This is consistent with the current process prescribed for proceedings conducted by mail. Designate the district clerk as the point of contact and responsible party for coordinating the completion of ballot materials by the presiding officer and ensuring their return to LAFCO. LAFCO would also be able to send materials to the districts via , similar to the process of providing a notice of a public hearing. Allow nominations and ballots to be returned by electronic mail, if the Special District Selection Committee conducts the election process by mail. Declare that the candidate who receives the most votes at the end of a 60-day extension period shall be elected, regardless whether a quorum of the Special District Selection Committee was reached.

3 Page 3 of 7 Define Affected Territory : Current law defines the term Affected Territory as any territory for which a change of organization or reorganization, or sphere of influence change is proposed or ordered. The proposed amendment would add or any territory to which services are proposed to be extended pursuant to sections 56133, , or to include territories that would be affected by the extension of services from a change of organization, a reorganization, or sphere of influence change. Define Uninhabited Territory : Currently Government Code Section defines inhabited territory, but there is no stand-alone definition for uninhabited territory in CKH. To eliminate confusion, the definition for uninhabited territory would be added to CKH as section Clarify Protest Period Notice Process: The Act is currently unclear about the process of noticing for a protest period. The proposed amendment to Government Code Section will clarify that protest hearing notices have to be sent only to the voters and landowners within the boundary of the affected territory of a proposed reorganization or organization. Clarify Seating of Commissioners Process: Re-organizing of the government code sections related to seating of Commissioners to eliminate any confusion and allow for these sections of the Act to be clearer. Clarify Valuation Factor: Government Code Section specifies the factors to be considered in a review of a proposal for an organization or change of reorganization. One of the factors to consider is a per-capita valuation. The proposed amendment would modify the factor to the assessed value of the territory. Modify Property Tax Revenue Exchanges Processing Provisions: Currently the Act does not identify that the Commission has the power and authority to address the transfer of property tax revenues during the disincorporation process as defined in Government Code Section The proposed amendment would amend this section of the law to include disincorporation and clarify the Commission s authority to determine the property tax revenue to be exchanged by the agencies. RECOMMENDED OC LAFCO POSITION: Adopt watch position for proposed Omnibus Bill.

4 Page 4 of 7 Support: CALAFCO BILL LOCATION/STATUS: Assembly. AB 2258 (Caballero)-Grant Funding Following the recommendations of the Little Hoover Commission in its report entitled Special Districts: Improving Oversight and Transparency, the CALAFCO Board approved sponsoring a bill focused on securing one-time grant funding for LAFCO studies. Assembly Member Caballero agreed to be the author of the bill, and a spot bill has been introduced to the Legislature. In addition, the Board approved a one-time contract with a lobbyist to assist CALAFCO with its efforts on this bill. The contract with the lobbyist is for limited hours to protect CALAFCO s non-profit designation. Currently, the Legislative Committee formed a subcommittee that is working on developing the language that will be included as part of the bill. The bill is expected to be finalized in March. RECOMMENDED OC LAFCO POSITION: Adopt watch position for AB Support: CALAFCO BILL LOCATION/STATUS: Assembly. AB 2050 (Caballero)-Small System Water Authority The California State Drinking Water Act, provides the State Water Resources Control Board with specific responsibilities for overseeing the operations of small public water agencies. The Act delegates to the State Board the power to order consolidations when a small public water agency that serves a disadvantaged unincorporated community consistently fails to adequately provide water services. If it is determined that a consolidation is not feasible, the State Board may contract with an administrator to provide managerial and administrative services to the public water system. This proposed bill would create the Small Water Authority Act of 2018, which would allow the State Board to create small system water authorities with powers to absorb, improve, and operate noncompliant public water systems. The State Board would be required to: Provide notice to the small public water agency that it is consistently providing contaminated drinking water;

5 Page 5 of 7 Require the agency to develop a plan to stop serving contaminated water to its customers; Require the small water agency to file the plan to the State Board by July 1, If the small water agency is unable to provide a plan, then it will be subject to consolidation through the LAFCO process. The new small water authority will be subject to oversight under the local LAFCO process and the State Board s Division of Drinking Water. The bill is currently under review and several modifications by the author are expected. RECOMMENDED OC LAFCO POSITION: Adopt watch position for AB Support: None on file BILL LOCATION/STATUS: Assembly. AB 2238 (Aguiar-Curry)-Local Agency Formation Commission The Cortese-Knox-Hertzberg Act provides the authority and defines the procedures for LAFCOs to initiate, conduct, and complete changes of organization and reorganization of cities and special districts. The Act further identifies the factors that LAFCOs need to consider in reviewing a proposed organization and reorganization. One of those factors is the consistency of the proposed change with the County s or City s general plan. This bill would amend current law by requiring LAFCOs to consider any relevant mitigation plan or safety element included in a general plan, and to analyze the impact of the proposed organization or reorganization on any land identified as a very-high fire hazard severity zone. RECOMMENDED OC LAFCO POSITION: Adopt watch position for AB Support: None on file BILL LOCATION/STATUS: Assembly Local Government.

6 Page 6 of 7 Fiscal Incentives for City Incorporations and Annexations In January 2011, the vehicle license fee (VLF) was eliminated, through the passage of SB 89, as a revenue for recent and future city incorporations and annexations of inhabited territory. The elimination of these VLF revenues impacted four cities that incorporated between January 1, 2004 and January 1, 2012 in Riverside County: Wildomar, Menifee, Eastvale, and Jurupa Valley. In 2017, a breakthrough on this issue occurred with the passage of SB 130 that restored funding and stabilized the resources for these four cities. For the current session, the League of California Cities is leading the effort of introducing proposed legislation to establish similar funding for future city incorporations and annexations of inhabited territory. The League recognizes the importance of a reliable revenue stream as a key factor for proposed incorporations and annexations of inhabited territory. To that end, the League has introduced the following bills: AB 2268 (Reyes)-Local Government Finance This bill would restore financial funding for future annexations of inhabited areas that was removed by SB 89 in The financial funding is expected to be generated in the same form as currently provided to cities. AB 2491 (Reyes)-Local Government Finance This bill would restore financial funding for city incorporations after January 1, 2012 that was removed by SB 89 in The financial funding is expected to be generated in the same form as currently provided to cities. RECOMMENDED OC LAFCO POSITION: Adopt watch position for AB 2268 and AB Support: League of California Cities Oppose: None Received BILL LOCATION/STATUS: Assembly Local Government.

7 Page 7 of 7 RECOMMENDATIONS Staff recommends that the Commission: 1. Receive and file the Legislative Quarterly Report. 2. Adopt recommended positions on the following bills: Omnibus Bill (Watch) AB 2258 (Watch) AB 2050 (Watch) AB 2238 (Watch) AB 2268 (Watch) AB 2461 (Watch) Respectfully Submitted, CAROLYN EMERY LUIS TAPIA