BILL ANALYSIS
Appropriations Committee Fiscal Summary
28 (Sher)
Hearing Date: 3/12/01 Amended: 3/12/01
Consultant: Lisa Matocq Policy Vote: E, U & C
9-0
EQ 7-0
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BILL SUMMARY: SB 28x, an urgency bill, (1) contains
numerous provisions intended to facilitate the construction
and operation of power plants, (2) allocates all of the
property tax from a new power plant to the city or county
in which the plant is located and backfills other
government agencies for the foregone revenue, and (3)
appropriates at least $53 million from the General Fund to
the California Energy Commission (CEC) for allocation as
follows:
$50 million to increase rebates for clean, renewable,
grid-connected distributed energy systems, including fuel
cells, smaller than 10 kw,
$3 million for local assistance to cities and counties to
expedite the application review process for electrical
generating facilities, as specified,
an unspecified amount to conduct a study, and mitigate
the effects, of water contamination along the Huntington
Beach shoreline.
Fiscal Impact (in thousands)
Major Provisions 2000-01 2001-02
2002-03 Fund
CEC appropriation At least $53,000* --
-- General
Property tax allocation Annual cost of up to $35,000-45,000 when
General
fully implemented
Property tax admin. Reimbursable mandate cost of $50-100
General
Air Resources Board $ 59 $ 235
$ 235 General
*Appropriated in the bill, without regard to fiscal year.
STAFF COMMENTS: This bill, among other things:
requires the CEC to, until January 1, 2004, establish an
expedited review process for applications of repowering
of thermal power plants and related facilities, as
specified,
in some cases, shortens the time period within which
local jurisdictions must submit comments to CEC on siting
applications,
requires the Air Resources Board (ARB) to implement a
program for the expedited retrofit of electrical
generating facilities,
requires the ARB to implement an expedited program to
identify and bank emission reduction credits for
electrical generating, and natural gas transmission,
facilities. Under certain circumstances, a mitigation
fee may be paid to the local air district in lieu of
obtaining actual offsets. The mitigation fee may include
an additional amount of up to 3% to cover administrative
costs. Mitigation fee revenues are to be expended for
specified purposes such as obtaining emission reductions
from comparable stationary sources. Additionally, the
applicant of a thermal power plant may post a bond or
letter of credit in an amount sufficient to cover the
cost of required offsets. If, by a specified date, the
applicant is unable to secure the offsets, all or a
portion of the bond shall be forfeited,
requires local air districts to adopt an expedited
program for permitting of standby electrical generation
facilities, distributed generation facilities, and
natural gas transmission facilities,
expands and extends the application of the four-month
siting process for temporary "peaker" power plants.
The CEC estimates minor, absorbable increased costs. The
ARB estimates increased staff costs of
$285,000 annually for three years. There are unknown
mandated costs for local agencies. However, some local
jurisdictions, such as air districts and sanitation
districts, have the authority to charge and increase fees
in an amount sufficient to cover the costs of providing
service. STAFF NOTES that to the extent that local
jurisidictions currently have fee authority, appropriating
General Fund monies to cover their costs has the effect of
providing a subsidy to regulated businesses.
During the last two years Huntington Beaches (both state
and city) have been closed due to the presence of bacteria
in the surf zone. AB 1584 (Machado), Ch. 725, St. of 1999,
among other things, provided the City of Huntington Beach
with $4 million to fund multiagency studies to establish
recommendations to address coastal nonpoint source
pollution in tidal marshes and coastal waters, and to
implement those recommendations. Some have suggested
(though this has not been proven) that there is a link
between the sewage discharge of the Orange County
Sanitation District and the intake/discharge of hot water
of a power plant in Huntington Beach and elevated surf zone
levels of indicator bacteria. The Orange County Sanitation
District has initiated a $2.6 million study of water
quality and the district's discharge. In addition, the
power plant has applied to CEC for a permit to expand and
CEC staff has recommended to the commission that as a
condition of certification, the project owner be required
to have a study conducted of this possible link, and to pay
for that study as well as any subsequent mitigation
efforts. STAFF NOTES that (1) a previous version of the
bill allocated $1 million for a study, and (2) given the
above, it is unclear how the monies allocated in this bill
are to be used (e.g. to provide financial assistance to a
regulated utility or a sanitation district, to initiate a
new study, etc.)
Property Tax Provisions: Current law requires that the
property tax be allocated to the county, city, and
redevelopment in which the property is located as well as
to the school(s), community college, and special
district(s) which serve the property area. On average,
cities receive about 11% of the property tax, counties 20%,
redevelopment agencies 8%, special districts 8%, community
colleges 5%, and K-12 (including ERAF) 48%. Any reductions
in property taxes to K-12 schools are offset by increased
state General Fund support.
SB 28x establishes a different system of allocating the
property tax revenues from new electrical generation
property approved after the bill's effective date. The
county auditor would be required to allocate to the city in
which a power plant is sited - or the county, if the plant
is sited in an unincorporated area - 100% of the property
tax revenues generated from the plant. The county auditor
would then reimburse other local agencies - e.g. the
county, special districts, community colleges, -- for their
property tax losses by allocating equivalent amounts of
property tax from ERAF to the agencies. As under current
law, any shortfalls in the schools' share of property tax,
including ERAF, would be made up by the state General Fund.
In effect, the General Fund would backfill the schools and
local agencies for any property tax loss caused by this
allocation change. This new allocation process would not
apply to power plants sited in redevelopment areas due to
constitutional restrictions.
STAFF NOTES that basing property tax allocations on
property types sets a precedent for other types of property
to be allocated differently - e.g., to create an incentive
for cities to locate low-income housing or manufacturing
facilities in their communities.
The cost shown above assumes 10 new power plants will be
constructed at an average cost of $500 million each and
that the General Fund will need to backfill 70-90% of the
property tax attributable to the construction of these
power plants. There will be additional costs for other
electrical generation property - e.g., cogeneration
facilities or "peaker" plants. In addition, the State will
be required to pay the costs of auditors' revising their
property tax allocation methods.
STAFF RECOMMENDS that the bill be amended to:
(1) limit the property tax allocation method to
electrical generation property which requires Energy
Commission approval to site,
(2) clarify that the property tax backfill is
made from ERAF,
(3) specify the amount of the allocation for the
Huntington Beach study, and ensure that this provision
falls within the subject matter of the special session.
The committee may wish to consider whether the State
Water Resources Control Board, or some other entity
should conduct the study,
(4) provide that the $3 million allocation for
local assistance not be used to supplant existing fee
authority of local jurisdictions,
(5) clarify that the bond referred to in Sec.
42314.3 of the bill may only be issued by an admitted
surety, for the benefit of, and held by, the local air
district. The committee may wish to consider deleting
the letter of credit option as it may raise concerns
about collateral sufficiency,
(6) require that any local assistance or rebate
funds unused by a specified date revert to the General
Fund.
A number of the Governor's Executive Orders contain
provisions similar to this bill. SB 30x (Brulte), awaiting
action in the Senate Revenue and Taxation Committee,
contains tax provisions similar to this bill.