September 15, 2011

Taxation and Government Finance Committee
Land Use and Environmental Committee
Legislative Committee

The following is for study only and has NOT been approved by the Taxation and Government Finance Committee, Legislative or Executive Committees or the Board of Directors.

Issue:
Should the new State Responsibility Area (SRA) Fire Prevention Benefit Fee ("the Fee") be eliminated, modified, or retained?

Action:
Optional

Options:
1. Support legislation eliminating the Fee
2. Support legislation that would modify the Fee so that all owners of land within the State Responsibility Areas are required to pay the Fee
3. Do nothing; thus, retaining the Fee in its current form
4. Other

Status/Summary:
The SRAs contain approximately 31 million acres - primarily privately owned timberlands, rangelands and watershed areas.  There are an estimated 860,000 homes in the SRAs.  In 2010-11, it's estimated that state fire protection expenditures reached $750 million.  In an attempt to recover some of these costs, the Legislature passed and the Governor-approved emergency legislation this summer that imposed an annual fire prevention fee not to exceed $150 on structures located in the SRAs to pay for fire prevention activities in the SRAs.  The promulgation of the regulations imposing the Fee was met with loud opposition, including the introduction of a measure to eliminate the Fee in its entirety.  In addition, the Brown Administration has had clean-up legislation introduced (but not approved) that would require all property owners within the SRAs to pay the Fee since they arguably all benefit from CalFire's fire protection services.  The legislation provides for a fee of $1 per acre for the first 100 contiguous acres, 50 cents per acre for the next 900 contiguous acres, 25 cents per acre for each additional contiguous acre not to exceed $3,000 for 10,000 acres or more.  In addition, the legislation requires a Fee of not less than $175 for the first structure on the parcel and $25 for each additional structure.

Discussion
Last year, Governor Schwarzenegger proposed an Emergency Response Initiative to fund emergency response preparedness via a 4.8 percent surcharge on all commercial and residential property insurance policies.  The revenues were to be used to augment program expenditures in three state departments with emergency response responsibilities and to support a grant program for local agency emergency first responders.  Senator Christine Kehoe introduced Governor Schwarzenegger’s proposal as Senate Bill 1258 believing that state and local governments lack the financial resources to adequately fund mutual aid responsibilities that serve all Californians.

According to the Legislative Analyst’s Office (LAO), the Governor's proposal did "not tie the proposed surcharge to the direct beneficiaries of these services" and, as a result, the surcharge was a tax.  The LAO believes the primary beneficiaries of such a surcharge are those property owners who reside in the State Responsibility Areas (SRAs) - wildland areas that are the sole responsibility of CalFire.  Consequently, the LAO recommended that a fee be assessed on the direct beneficiaries of the state's fire protection services - in other words, the property owners in the SRAs.

At its June, 2010, meeting in Sacramento, an issue briefing paper on SB 1258 was considered.  The general tenor of the deliberations was that the proposed surcharge was an unfair tax as the surcharge was to be assessed on all property owners statewide while the only beneficiaries of the surcharge were those property owners residing in the SRAs.  As a result, the following motion was advanced by the Taxation and Government Finance Committee and approved by the Board of Directors:

That C.A.R. "OPPOSE" legislation that imposes a property insurance surcharge to fund emergency preparedness.

Ultimately, SB 1258 died on the Senate Appropriations Committee suspense file.

The SRAs contain approximately 31 million acres - primarily privately owned timberlands, rangelands and watershed areas.  There are an estimated 860,000 homes in the SRAs.  While CalFire's original mission was to prevent and suppress wildland fires, the department now expends considerable resources protecting homes in the SRAs from wildfires, as well as acting as first responder for medical emergencies and other non-wildfire matters.  In 2010-11, it's estimated that fire protection expenditures reached $750 million.

In an attempt to recover some of these costs, the Legislature passed and the Governor approved emergency legislation this summer that imposed an annual fire prevention fee not to exceed $150 on structures located in the SRAs to pay for fire prevention activities in the SRAs.  Shortly thereafter, the state Board of Forestry promulgated regulations for the SRA Fire Prevention Benefit Fee ("the Fee").  The regulations provide that the Fee be imposed on all property owners with permanent habitable structures in the SRAs.  The base fee is $70 per year, an additional $20 if the structure is located in a High or Very High Fire Hazard Severity Zone and, finally, an additional $25 for each dwelling unit if the parcel contains more than two dwellings.

The regulations provide several exemptions that serve to reduce the total amount of the fee: (1) $10 if the property is located in a county that has adopted fire safety regulations and a safety element certified by the Board of Forestry, (2) $45 if the property owner is already required to pay a local fire protection fee, (3) $10 if the habitable structures on the parcel have been inspected by the Department of Forestry and Fire Protection and received a notice of compliance.  In other words, a property owner who would otherwise pay the $70 base Fee could have the Fee reduced to just $5 per year.

The release of the regulations was met with loud opposition, including the introduction of a measure by Assembly Member Kevin Jeffries - who deemed the Fee "unworkable" - to eliminate the Fee in its entirety.  The primary rationale for the opposition appears to be simply that the property owners in the SRAs believe that it is unfair for them to be required to pay the Fee.  There is also a criticism that the Fee is a tax that caught the attention of the Brown Administration which responded with clean-up legislation that was not approved prior to the Legislature adjourning for the fall.

To make the Fee more compliant with Proposition 26 (which clarified the distinction between a "fee" and a "tax," and ensures that the latter be approved by a two-thirds vote), the clean-up legislation would require all property owners within the SRAs to pay the Fee since they all benefit from CalFire's fire protection services.  (Recall that in its current form, the Fee is paid only by property owners who have permanent habitable structures on the parcel.)  The legislation provides for a fee of $1 per acre for the first 100 contiguous acres, 50 cents per acre for the next 900 contiguous acres, 25 cents per acre for each additional contiguous acre not to exceed $3,000 for 10,000 acres or more.  In addition, the legislation requires a fee of not less than $175 for the first structure on the parcel and $25 for each additional structure.  Finally, the legislation authorizes a $25 reduction for property owners located within a fire protection district to avoid the implication of "double taxation."