Bankruptcy

AB 506 (Wieckowski) – Request for Comment
As Amended on March 31, 2011

AB 506, by Assembly Member Bob Wieckowski, was amended yesterday to require mandatory mediation prior to filing for Chapter 9 bankruptcy protection. Counties will recall that CSAC was actively involved in discussions on municipal bankruptcy filing during the 2009-10 legislative session. 

Essentially, a local entity could not seek bankruptcy protection unless approved by a specially qualified mediator. The mediator is tasked with bringing interested parties together to develop a settlement agreement or work-out plan. The mediator must provide a good faith certification to the local public entity prior to its petition to the bankruptcy court. The local entity must also meet one of the following outcomes:

• The local entity has reached an out-of-court settlement with all interested parties on a work-out plan.
• The local entity and interested parties were unable to reach an agreement and parties have negotiated in good faith.
• The local entity initiated the mediation and interested parties failed to participate.

A local entity may not seek Chapter 9 bankruptcy protection if the mediator determines that the agency can achieve solvency through settlement with all interested parties and that a settlement can be reached through further mediation. It is also precluded from seeking bankruptcy protection if the mediator determines that the local entity has failed to participate in good faith mediation.

CSAC is interested in hearing from counties their experiences with mediation and their thoughts on mandatory mediation as a means of avoiding Chapter 9. Please direct your comments to Jean Kinney Hurst.

Local Audits

AB 229 (Lara) – Request for Comment
As Amended on March 30, 2011

AB 229, by Assembly Member Ricardo Lara, would give the State Controller greater oversight of local agencies’ audits and auditors.

The recent amendments alleviated at least one of counties’ concerns with the bill. AB 229 previously would have prohibited local agencies from using the same audit firm for more than five consecutive years unless the State Controller waived the prohibition with a finding that “no qualified auditor is otherwise available.” The bill as amended now prohibits public accounting firms from auditing an agency if the audit partner having primary responsibility for the audit or for reviewing the audit has performed audit services for the agency the previous six consecutive years. Again, the Controller can waive the prohibition with a finding that no otherwise eligible auditor is available.

CSAC is interested in hearing from counties whether this amendment is sufficient. Please direct your comments to Geoffrey Neill.

Local VLF

SB 223 (Leno) – Support
As Introduced on February 9, 2011

SB 223, by Senator Mark Leno, would authorize each county to place a measure before voters to impose an assessment on vehicles owned by that county’s residents.

SB 223 would allow communities that are willing to pay more money for local services to do so, without forcing the same of residents in other areas. CSAC supports local control; counties believe that each community should be able to decide for itself what level of services its government provides and the appropriate method of funding them.

Counties currently have little useful revenue authority despite being the level of government primarily responsible for the general health and well-being of California residents. As the cost of providing government services continues to rise and counties’ major revenue sources – sales tax, property tax, and state funding – continue to flag, counties seek new revenue options. Authorizing counties to put a measure before their voters to assess vehicles owned by county residents is one appropriate option.

The two percent vehicle license fee rate, which would be the maximum aggregate rate allowed under SB 223, is the rate Californians were accustomed to paying for decades. SB 223 goes beyond the current constitutional vote requirements by requiring a 2/3 vote of the Board of Supervisors to place such a measure before voters. These requirements will ensure that the assessment is implemented only if the community strongly supports it.

The Senate Transportation and Housing Committee passed SB 223 at its meeting on Tuesday, March 29, on a party-line vote. The bill now moves to the Senate Governance and Finance Committee.

Tax Exemptions for Solar Construction

AB 865 (Nestande) – Oppose Unless Amended
As Introduced on February 17, 2011

AB 865, by Assembly Member Brian Nestande, would extend by 17 years the property tax exemption for newly constructed active solar energy systems. Under current law, the exemption would end after the 2015-16 fiscal year.

Counties have no quarrel with the Legislature exempting these projects, which can add significant value to nearly valueless land, from property taxes. However, the bill exempts the exemption from the statutory requirement to reimburse local agencies for the resulting revenue loss. Unilaterally using county money to favor these projects during times of such fiscal stress seems ill-considered at best.

If favoring these projects is an issue of statewide concern, as passing this bill would indicate, then the state should be willing to use statewide revenues to reimburse counties for their losses, as has long been provided by statute.

The Assembly Revenue and Taxation Committee will consider AB 865 at its hearing on Monday, April 11.

AB 1376 (Nestande) – Oppose Unless Amended
As Introduced on February 18, 2011

AB 1376, by Assembly Member Brian Nestande, would exempt from sales and use taxes purchases of anything used for the construction of a renewable energy generation facility.

As with AB 865 above, counties do not have an issue with the policy of granting this sweeping tax exemption, which would apply to all purchases, however tangential or marginal, for products used in the construction of facilities that use solar, biomass, wind, and geothermal energy to generate at least 10 megawatts of electricity. Counties do have an issue with the state using local revenue to pay for this exemption. If the Legislature wants to implement this exemption, the Legislature should pay for it. If the Legislature doesn’t have the funds to pay for it, then maybe it’s not the best time to implement the policy.

The Assembly Revenue and Taxation Committee will consider AB 865 at its hearing on Monday, April 11.

Universal Service

SB 3 (Padilla) – Support
As Amended on March 29, 2011

SB 3, by Senator Alex Padilla, would extend by one year, to 2014, authority for the CPUC to use the California High-Cost Fund-B to support telephone and broadband services in high-cost service areas, primarily rural. It would also explicitly require contributions to the fund from users of Voice over Internet Protocol (VoIP).

The high-cost funds, A and B, subsidize the cost of providing telecommunication services to rural and hard-to-reach parts of the state. They are funded with surcharges on all telephone bills and help ensure that access to telecommunication is universal.

The Senate Energy, Utilities, and Communications Committee will consider SB 3 at its hearing on Tuesday, April 5.