BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Patricia Wiggins, Chair
BILL NO: SB 279 HEARING: 4/15/09
AUTHOR: Hancock FISCAL: No
VERSION: 4/13/09 CONSULTANT:
Weinberger
MELLO-ROOS ACT FOR RENEWABLE ENERGY AND ENERGY EFFICIENCY
Background and Existing Law
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 Community Facilities District
(CFD) issues bonds against these special taxes to finance
the public works projects. Like all special taxes,
Mello-Roos Act special taxes require 2/3-voter approval.
If there are fewer than 12 registered voters, the affected
landowners vote.
In addition to financing public or governmental capital
facilities, Mello-Roos Act special taxes can fund a limited
list of public services: police services, fire protection,
recreation programs, library services, museum operations,
park maintenance, flood protection, hazardous waste
cleanup, street and road maintenance, lighting of parks,
parkways, streets, roads, and open space, plowing and
removal of snow, and graffiti management and removal.
The Mello-Roos Act 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. Since 1985, CFDs have issued over $18 billion in
long-term bonds, mostly for capital improvements. Without
access to Mello-Roos bond funding, many builders would have
to pay higher development impact fees and raise housing
prices.
Local officials want to be able to use Mello-Roos taxes to
help finance renewable energy and energy efficiency
improvements on private property. To simplify the process
by which property owners can voluntarily use Mello-Roos
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financing, local officials want to be able to create CFDs
that initially contain no parcels of land, but consist only
of territory from which parcels may subsequently be annexed
to the CFD with the unanimous approval of parcel owners.
Proposed Law
I. Facilities . In addition to financing public works such
as park, school, and library facilities, CFDs can pay for
the following improvements on privately owned buildings or
real property:
Work deemed necessary to bring buildings or real
property into compliance with seismic safety standards
and regulations.
The repair and abatement of damage to buildings
caused by soil deterioration.
The removal or remediation of any hazardous
substance on real or other tangible property.
Senate Bill 279 adds the acquisition, installation, and
improvement of energy efficiency and renewable energy
improvements to the types of facilities that a CFD may
finance, or refinance, regardless of whether the buildings
or property are privately or publicly owned. SB 279
requires that energy efficiency and renewable energy
improvements financed by a CFD must be affixed to or on
real property.
SB 279 permits energy efficiency and renewable energy
improvements financed by a district to be installed on a
privately owned building and on privately owned real
property only with the prior written consent of the owner
or owners of the building or real property.
CFDs can use tax revenues to make lease or debt-service
payments on any lease, lease-purchase contract, or
certificate of participation used to finance authorized
district facilities. SB 279 authorizes the use of tax
revenues to make lease or debt-service payments on any
lease, lease-purchase contract, or certificate of
participation used to finance "facilities authorized to be
financed by the district."
SB 279 declares that any improvement on private property
SB 279 -- 4/13/09 -- Page 3
authorized to be financed by a CFD constitutes a "public
facility" for purposes of the Mello-Roos Act, and a "public
improvement" for purposes of specified statutes, whether
the improvement is owned by a private entity, if the
legislative body has determined that the improvement
provides a public benefit, or the improvement is owned by a
public agency.
II. CFD formation and annexation . 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:
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 collection of the special
tax.
Fix a time and place for a public hearing.
After holding the hearing and considering protests, if the
legislative body determines to establish the CFD, it 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, some additional information
about the tax levy.
Senate Bill 279 authorizes an alternate procedure for
forming a CFD that initially consists solely of territory
proposed for annexation to the CFD in the future, with the
condition that a parcel or parcels within that territory
may be annexed to the CFD and subjected to the special tax
only with the unanimous approval of the parcel owner or
owners at the time of annexation.
Under this alternate CFD formation procedure, the
resolution of intention or the resolution of formation need
not specify the rate or rates of special tax, provided that
the rate of special tax applicable to a parcel or parcels
will be specified in the unanimous approval provided by
parcel owners when they annex to the CFD.
A majority protest to a proposed CFD halts formation
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proceedings for one year from the date of the protest
decision. A majority protest occurs if 50% or more of the
registered voters, or six registered voters, whichever is
more, residing within the territory proposed to be included
in the district, or if the owners of one-half or more of
the area of the land in the territory proposed to be
included in the district and not exempt from the special
tax, file written protests against the establishment of the
district. SB 279 provides that this definition of majority
protest does not apply to the alternative CFD formation
process. Instead, under this alternative CFD formation
process, a majority protest occurs if 50% or more of the
registered voters, or six registered voters, whichever is
more, residing within the territory proposed to be annexed
to the CFD in the future, or the owners of one-half or more
of the area of the land proposed to be annexed in the
future and not exempt from the special tax, file written
protests against the establishment of the district.
After the adoption of the resolution of formation, voters
must approve the special tax levy, authorize indebtedness,
and establish the CFD's appropriations limit. Under the
alternate procedure established by SB 279, the
appropriations limit for the CFD, the applicable rate of
the special tax and the method of apportionment and manner
of collection of that tax, and the authorization to incur
bonded indebtedness must be specified and be approved by
the unanimous approval of the owner or owners of each
parcel or parcels at the time that the parcel or parcels
annex the CFD. The bill states that no additional hearings
or procedures are required, and the unanimous approval
shall be deemed to constitute a unanimous vote in favor of
the appropriations limit for the CFD, the authorization to
levy the special tax on the parcel or parcels, and the
authorization to incur bonded indebtedness.
SB 279 prohibits a local legislative body from recording a
notice of tax lien against any parcel or parcels within a
CFD formed using the alternative process until the parcel
owner or owners have given unanimous approval of the parcel
or parcels' annexation to the CFD, at which time the
special tax lien shall be recorded.
SB 279 states that, for CFDs created to finance energy
efficiency and renewable energy improvements, the refusal
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of a person to undertake acts, including:
the formation of, or annexation to, a community
facilities district,
voting to levy a special tax, or,
authorizing another to vote to levy a special tax.
shall not be a factor when considering the approval of
specified legislative or adjudicative acts, or both.
III. Special taxes . A resolution of intention to form a
CFD must specify the rate, method of apportionment, and
manner of collection of the special tax that is to be
levied in sufficient detail to allow each landowner or
resident within the proposed district to estimate the
maximum amount that he or she will have to pay. After a
CFD has been created and authorized to levy special taxes,
the legislative body may approve an ordinance to levy the
special taxes at the rate, and in the manner, described in
the resolution of intention.
Under the alternative CFD formation process authorized by
Senate Bill 279, a legislative body adopts an ordinance
providing for the levy of the special taxes on parcels that
will annex to the CFD at the rate or rates to be approved
unanimously by the parcel owner or owners. The ordinance
providing for the levy of special taxes must also provide
for the apportionment and collection of special taxes in
the manner specified in the resolution of formation. SB
279 specifies that no further ordinance shall be required
even though no parcels may have annexed to the CFD.
A lawsuit to test the validity of a CFD's special taxes
must be filed within 30 days after voters approve the
special tax. SB 279 requires a validation lawsuit
regarding the special taxes levied against a parcel by a
CFD formed under the alternative process to be filed within
15 days after the notice of special tax lien is recorded
against the parcel. SB 279 also authorizes the local
agency to file a validation lawsuit to determine the
validity of any CFD special taxes created through the
alternative CFD formation process.
IV. Bonds . For a CFD to issue bonds, the local
legislative body must adopt a resolution proposing to incur
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bonded indebtedness, hold a hearing on the proposed debt
authorization, and submit the proposition to voters. A 2/3
vote is required to approve the issuance of bonds by a CFD.
Under the alternative CFD formation process authorized by
Senate Bill 279, the parcel owners approve the proposition
to authorize bonded indebtedness when their parcels annex
to the CFD. SB 279 provides that no additional hearings or
procedures are needed, and unanimous approval constitutes a
unanimous vote in favor of the proposition to authorize
bonded indebtedness.
A lawsuit to test the validity of a CFD's bonds must be
filed within 30 days after voters approve the bonds. SB
279 requires that a validation lawsuit over bonds issued by
a CFD formed under the alternative process must be filed
within 30 days after the effective date of the local
legislative body's resolution to approve bonded
indebtedness. SB 279 also authorizes the local agency to
file a lawsuit to determine the validity of any CFD bonds.
Comments
1. Local assistance for energy improvements . In response
to rising energy costs and concerns about climate change,
local governments want to promote energy efficiency and
renewable energy generation. The initial installation
costs can deter property owners from installing solar
panels, or making energy efficiency improvements. Using
Mello-Roos taxes, counties and cities can help to finance
these investments at low interest rates. Property owners
who voluntarily agree to pay Mello-Ross special taxes to
finance energy improvements will realize immediate savings
on their utility bills while paying off their costs over
time on their property tax bills. By lowering energy
costs, reducing energy demand, and expanding generation
from renewable energy sources, the voluntary Mello-Roos
taxes authorized by SB 279 will benefit residents
throughout California.
2. It's not your business . Local governments should not
be in the business of providing public financing for the
purchase of solar panels or efficient heating or air
SB 279 -- 4/13/09 -- Page 7
conditioning systems that are to be installed on private
property. If private property owners want to finance the
large up-front costs of energy projects, they ought to rely
on private sector lenders, just as they would finance other
types of property improvements. Providing tax-exempt
financing, backed by a priority government lien, to pay for
energy projects that primarily benefit private citizens and
businesses, is inconsistent with the fundamental purpose of
issuing government debt.
3. Related bill . SB 279 is similar to AB 811 (Levine,
2008), which let local governments use contractual benefit
assessments to provide public financing for the
installation of renewable energy and energy efficiency
improvements on private property. Last year's Levine bill
relied on special assessments; this year's Hancock bill
uses special taxes. The Senate Local Government Committee
passed AB 811 on a 4-1 vote. After the Legislature passed
the bill, Governor Schwarzenegger signed AB 811 into law.
4. Try again . SB 279 replicates AB 1709 (Hancock, 2008),
which the Senate Local Government Committee passed
unanimously. Governor Schwarzenegger vetoed the bill,
citing his concerns about the use of Mello-Roos taxes to
finance energy efficiency improvements.
5. Technical amendments . Committee staff and the author
have identified the following four technical and clarifying
amendments to improve the language of the bill:
On page 6, line 13, after "affixed" insert ", as
specified in Section 660 of the Civil Code,"
On page 6, line 20, strike out "or"
On page 9, line 40, strike out "13A and 13C." and
insert "XIIIA and XIIIC."
On page 10, line 19, strike out "chapter." and
insert "chapter and authorized pursuant to the
procedures set forth in this section."
Support and Opposition (4/9/09)
Support : Cities of Berkeley, Davis, Morgan Hill, Saratoga,
and Solana Beach, Association of Bay Area Governments,
American Federation of State, County, and Municipal
Employees, Akeena Solar, Ecology Action, and Sungevity.
SB 279 -- 4/13/09 -- Page 8
Opposition : Unknown.