Existing law authorizes the legislative body of a local agency, as defined, to make, by ordinance, a violation of an ordinance subject to an administrative fine or penalty, as specified. Existing law requires the local agency to set forth by ordinance the administrative procedures that govern the imposition, enforcement, collection, and administrative review by the local agency of those administrative fines or penalties. Existing law authorizes a person contesting a final administrative order or decision to seek review by filing an appeal to be heard by the superior court, as specified.

This bill would authorize a local agency to establish, by ordinance, a procedure to collect those administrative fines or penalties by lien upon the parcel of land on which the violation occurred, as specified.

This For specified administrative fines or penalties, this bill would authorize a local agency, after the exhaustion of the administrative and appeal procedures referenced above, to file with the clerk of the superior court of any county a certified copy of a final administrative order or decision of the local agency that directs the payment of an administrative fine or penalty and, if applicable, a copy of an order of the superior court rendered on an appeal from the local agencys decision. The bill would require the clerk to enter the judgment immediately and prohibit the clerk from charging fees related to that requirement.

This bill would make the remedies and penalties provided by the above-described provisions governing the imposition, enforcement, collection, administrative review, and appeal of administrative fines and penalties cumulative to the remedies or penalties available under other law.

The Sales and Use Tax Law, administered and enforced by the California Department of Tax and Fee Administration, requires the department to perform annually a systematic identification of areas of recurrent taxpayer noncompliance and to report these findings in its specified annual report to the Governor. Existing law requires the department, in order to prepare the report, to conduct an annual hearing where taxpayers are allowed to present their proposals on changes to the Sales and Use Tax Law.

This bill would require the department to ensure participation in the annual hearing may be virtual or remote.

SENATE COMMITTEE ON LOCAL GOVERNMENT

Senator María Elena Durazo, Chair

2023 - 2024 Regular

Local government: fines and penalties

Makes several changes to a local agency’s ability to collect administrative fines or penalties, including changes that apply to all administrative fines and penalties, as well as changes that are specific to violations of cannabis-related ordinances.

Background

The United States and California Constitutions prohibit governments from impairing property rights without due process of law. The California Constitution also allows counties and cities to adopt and enforce ordinances that regulate local health, safety, peace, and welfare. Specifically, a city or county may make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws. This “police power” provides the right to adopt and enforce zoning and other regulations for the welfare of their citizens, as long as they do not conflict with state laws.

Local penalties for ordinance violations. As an alternative to civil and criminal enforcement mechanisms, a local agency’s legislative body can make any violation of any of its ordinances subject to an administrative fine or penalty (SB 814, Alquist, 1995). The local agency must adopt an ordinance specifying the administrative procedures that govern the imposition, enforcement, collection, and administrative review of the fines or penalties. The administrative procedures must grant a reasonable time to remedy a continuing violation before the imposition of administrative fines or penalties, when the violation pertains to building, plumbing, electrical, or other similar structural and zoning issues that do not create an immediate danger to health or safety.

When a local agency imposes an administrative fine or penalty, the person must exhaust all available administrative remedies first before taking the matter to superior court. How the administrative appeals process operates varies by local government. Some may have a zoning administrator hear appeals, while others may have a county hearing officer to handle appeals. Appeals can also be made to the governing body of the local agency.

Within 20 days after service of a final administrative order or decision regarding administrative fines or penalties, a person contesting that final administrative order or decision of the local agency may appeal in Superior Court for a “de novo” review of the local agency’s action. Additionally, a 2008 court decision ruled that a person may challenge an administrative fine or penalty through a petition for writ of mandate as an alternative to the appeal for de novo review (Martin v. Riverside County Dept. of Code Enforcement (2008) 166 Cal. App. 4th 1406).

Local agencies may also establish collection mechanisms for fines and penalties. One common collection mechanism is the imposition of a lien on the property, so that when the property is sold, the local government gets paid. These liens are “ordinary liens, meaning a lien that follows the normal order of priority of being satisfied when a property is sold. Otherwise, local agencies must ultimately go through a civil court proceeding to collect fines or penalties.

Under state law, a violation of a local ordinance is a misdemeanor unless by ordinance it is made an infraction. In general, every ordinance violation that is an infraction is punishable by:

• A fine not exceeding $100 for a first violation.
• A fine not exceeding $200 for a second violation of the same ordinance within one year.
• A fine not exceeding $500 for each additional violation of the same ordinance within one year.

A violation of local building and safety codes that is an infraction is punishable by higher fines of:

• A fine not exceeding $130 for a first violation.
• A fine not exceeding $700 for a second violation of the same ordinance within one year.
• A fine not exceeding $1,300 for each additional violation of the same ordinance within one year.

Cities and counties may also impose fines and penalties through civil or criminal proceedings. These fines and penalties are limited to $1,000 per violation and six months in prison.

Cannabis regulation. On November 8^th, 2016, California voters approved Proposition 64—the Control, Regulate and Tax Adult Use of Marijuana Act (AUMA)—which legalized the recreational use of cannabis by adults age 21 and older. AUMA provides for the licensure and regulation of commercial adult cannabis activities by various state agencies and imposes an excise tax and a cultivation tax on cannabis and cannabis products. Proposition 64 was subsequently amended by SB 94 (Committee on Budget and Fiscal Review, 2017) and AB 133 (Committee on Budget, 2017), which clarified certain provisions of Proposition 64 and established a single regulatory scheme for both medical and recreational cannabis activity and commerce, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA).

MAUCRSA establishes a three-tier system of licensing for commercial cannabis activity, including production, distribution, and retail sale. Entities engaged in commercial cannabis activity must possess licenses to conduct particular activities, issued by the Department of Cannabis Control, which administers and enforces MAUCRSA. Current law establishes 20 types of cannabis licenses, including subtypes, for cultivation, manufacturing, testing, retail, distribution, and microbusiness and requires each licensee (except for testing laboratories) to clearly designate whether their license is for adult-use or medicinal cannabis.

Local regulation of cannabis. MAUCRSA grants local governments wide latitude to regulate commercial cannabis activity within their jurisdictions. Specifically, MAUCRSA:

• Allows cities and counties to regulate or entirely prohibit commercial cannabis activity within their boundaries;
• Prohibits state licensing authorities from approving an application for a license if the application would violate a local ordinance, and allows local governments to review applications for state licenses and to deny those applications if they are in conflict with local laws; and
• States its provisions shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate cannabis businesses, including local zoning and land use ordinances and business license requirements, or limit any law enforcement or local permitting activities.

MAUCRSA also states its provisions, and any regulations promulgated by state licensing agencies, shall not be deemed to limit the authority or remedies of a city or county under any law, including local governments’ police powers. However, the Legislature prohibited local governments from banning, or effectively banning, the delivery of medicinal cannabis to patients or primary caregivers within their jurisdictions (SB 1186, Wiener, 2022).

Local agency enforcement of cannabis violations. In recent years, the Legislature has enacted several measures to enhance the ability of local governments to apply and enforce penalties on illegal cannabis operations. In 2018, the Legislature enacted AB 2164 (Cooley), which allowed local governments to immediately impose penalties for code violations if they are related to illegal cannabis cultivation, rather than giving violators an opportunity to cure, as is generally required when imposing administrative fines. However, the ordinance must give a person a reasonable amount of time to remedy any violation if:

• The legal tenant of the property is the one subject to the enforcement action;
• The rental property owner or agent can show the rental or lease agreement prohibits the cultivation of cannabis; and
• The rental property owner or agent did not know the tenant was illegally cultivating cannabis and no complaint, property inspection, or other information alerted the rental property owner or agent to the illegal cannabis cultivation.

Last year, AB 1684 (Maienschein) further strengthened local penalty and enforcement authority for unlicensed cannabis activity. It expanded the ability of local governments to immediately impose fines or penalties to also include other types of unlicensed cannabis activities: manufacturing, processing, distribution, or retail sale. It also granted local agencies the ability to immediately impose the administrative fines and penalties upon the property owner and upon each owner of the occupant business entity engaging in unlicensed commercial cannabis activity, and to hold them jointly and severally liable for the administrative fines and penalties. Under AB 1684, local agencies can also refer cannabis enforcement cases to the Attorney General. Finally, AB 1684 caps the immediately-imposed fines and penalties at $1,000 per violation and $10,000 per day, but makes it clear larger fines permitted elsewhere in law can still be imposed.

Local agencies continue to report challenges with unlicensed cannabis activity. State licenses (and many local licenses) require payment of the applicable licensing fees. These fees can be costly: for example, cultivation license fees range from $1,205 to $77,905 per year (plus additional fees based on the square footage of the operation), depending on the size and type of cultivation operation.

With the legalization of cannabis—under a strict regulatory framework and subject to taxation and licensing fees—there is greater incentive to both illegally cultivate cannabis outside the regulatory program and to divert illegally grown cannabis into the legal market. Illegal cannabis grows are often accompanied by violations of other local ordinances, such as building and safety standards.

Local agencies maintain that the administrative fines are difficult to collect in the case of illegal cannabis operations because operators can shut down quickly and disappear before a fine can be collected. In the case of violations of any local codes, it can be difficult to collect fines for code violations because the code enforcement officer that identified the violation must refer it to the local prosecutor who must go to court to attempt to collect fines and penalties, which is time-consuming and may not be a high priority. The Rural County Representatives of California and the County of Santa Clara want the Legislature to provide additional tools to local governments for the collection collect fines and penalties.

Proposed Law

Assembly Bill 491 makes several changes to a local agency’s ability to collect administrative fines or penalties, including changes that apply to all administrative fines and penalties, as well as changes that are specific to violations of cannabis-related ordinances.

First, AB 491 allows a local agency to establish, by ordinance, a procedure to collect administrative fines or penalties by placing a lien on the parcel of land on which the violation occurred. The ordinance must require service or mailing of notice to the owner of the parcel before the lien can be recorded, and to the owner of an encumbrance of record on the property. Once a copy of the notice of lien is recorded in the county recorder’s office, the lien has the same force, effect, and priority as a judgment lien.

Second, AB 491 allows a local agency to file a certified copy of a final decision of the local agency that directs the payment of an administrative fine or penalty and, if applicable, a copy of an order of the superior court rendered on an appeal from the local agency’s decision with the clerk of the superior court of any county. Judgment must be entered immediately by the clerk in conformity with the decision or order. AB 491 prohibits the clerk of the superior court from charging a fee in connection with entering this judgment.

Third, when a violation pertains to a local ordinance to regulate cannabis businesses under MAUCRSA, AB 491 provides that the appeal processes spelled out for administrative fines or penalties is the exclusive means of judicial review for an administrative fine or penalty that does not exceed $35,000, and thereby prohibits judicial review via a writ of mandate.

The bill also provides that its remedies or penalties provided by this section are cumulative to the remedies or penalties available under other law.

Comments

1. Purpose of the bill. According to the author, “Counties and cities are currently authorized to enforce local ordinances through several methods, including code enforcement and imposition of administrative penalties. However, the existing penalty statutes were primarily designed for ordinary zoning and building violations, and these processes not always well suited to addressing large-scale lucrative illegal commercial cannabis operations. To strengthen enforcement mechanisms for local jurisdictions, AB 491 provides effectual tools for addressing illicit land use activities through streamlined judicial review and efficient collection of a final penalty order in the same manner presently used for pesticide enforcement fines.”

2. More powerful than you can possibly imagine. When local governments use their enforcement authority, property owners need substantial due process safeguards to ensure that the coercive power of the government is not used improperly. AB 491 tips the balance towards local governments and away from property owners in two ways—one specific to cannabis, and one that applies more broadly. First, AB 491 removes the writ of mandate as an alternative means of challenging local agency fines and penalties for cannabis violations, which removes one avenue for property owners to dispute a penalty. Second, AB 491 allows local agencies to skip the step of bringing an action in superior court to collect unpaid fines for any violation after appeals under this section of law by going straight to filing an order for a money judgment for the fine. This authority allows local governments to collect fines more easily, but removes some of the procedural steps that serve as a safeguard for property owners because a local agency would no longer have to bring a civil suit. As a result, it puts the burden on the property owner to dispute a fine after it has already been collected, instead of requiring a local government to go to court when a property owner doesn’t pay. Additionally, a local agency could use this authority before other appeals—including a petition for writ of mandate—had been exhausted. This could have the effect of limiting the ability of property owners to avail themselves of all the ways to challenge a local agency’s determinations. To strike a balance between the need for enhanced collection and enforcement mechanisms and the rights of property owners, the Committee may wish to consider amending AB 491 to:

• Limit the authority to file judgments instead of bringing a civil case to only those violations that pertain to cannabis, State Housing Law and laws pertaining to the safety of rental housing, and fire hazards; and
• Provide that this authority, except in the case of cannabis, can be used after all appeal avenues have been exhausted.

3. “Liening” in. Local governments already use liens to collect fines and penalties, based on the broad authorization to adopt procedures for collection of penalties in law, as well as their Constitutional police power. This lien authority, while not explicitly authorized in statute, has been the subject of litigation. Courts have generally upheld this authority (see, for example, City of Santa Paula v. Narula (2003) 114 Cal.App.4th 485). However, one unpublished (and therefore non-precedential) case states “California law does not authorize cities to collect nuisance fines or penalties by attaching a lien or imposing an assessment,” largely on the basis that several bills to expressly grant such authority have previously been vetoed. (Mechammil v. City of San Jacinto (9th Cir. 216) 653 Fed.Appx. 562.) The main difference between these cases is that both Mechammil and the vetoed bills it cited concerned efforts to collect penalties through superiority special assessment liens that are paid before ordinary liens. AB 491 addresses the potential for future litigation by explicitly establishing that local governments can use ordinary liens (not higher priority liens) to collect any administrative fines and penalties.

4. Related legislation. AB 1448 (Wallis, 2023) originally contained several provisions similar to AB 491, including provisions removing a petition for a writ of mandate to challenge cannabis violations, allowing local agencies to collect specified civil penalties as administrative penalties, and granting the ability to use a special assessment lien (rather than a lower-priority ordinary lien as authorized by this bill) to collect fines and penalties. These provisions were removed from the bill, leaving only changes that redirected some civil penalties to local treasuries when a local prosecutor brings an action for unlicensed cannabis activity.

In addition, the Legislature has considered three other measures that would have granted local governments the ability to use higher priority liens or other powerful collection mechanisms to collect fines or penalties, specifically:

• AB 2317 (Saldana, 2010) would have allowed local governments to use nuisance abatement liens and special assessments to collect administrative penalties, with a sunset date of January 1, 2014. The Senate Local Government Committee approved AB 2317 by a vote of 3-1. But Governor Schwarzenegger vetoed AB 2317 with the following message:

“I am returning Assembly Bill 2317 without my signature. It is important that the due process rights of homeowners are balanced against a local government's right to collect a nuisance abatement fine. The current system that requires a local government to seek judicial approval to impose a lien properly balances these opposing interests. For this reason I am unable to sign this bill.”

• AB 129 (Beall, 2011) would have allowed local governments to use special assessments for unpaid fines or penalties after following specified procedures. The Senate Governance and Finance Committee approved AB 129 by a vote of 6-3. But Governor Brown vetoed AB 129 with the following message:

“I am returning Assembly Bill 129 without my signature. At a time when property owners are struggling to pay their mortgages, this bill would weaken the due process requirements for local building departments to obtain property liens. Local governments already have a fair process in place, and I see no reason to change it.”

• AB 345 expanded nuisance abatement liens and special assessments to include administrative penalties, with a sunset date of January 1, 2023, and would have also increased the maximum administrative fines for violations of city building codes and safety standards. AB 345 passed the Senate Governance and Finance Committee by a vote of 5-1 but was subsequently amended for an unrelated purpose.
• SB 1416 (McGuire, 2018), which would have allowed cities and counties to recover fines through nuisance abatement liens and special assessments until January 1, 2024. The Senate Governance and Finance Committee approved SB 1416 on a vote of 5-0. But Governor Brown vetoed SB 1416 with the following message:

“I am returning Senate Bill 1416 without my signature. This bill allows, until January 1, 2024, cities and counties to recover fines related to nuisance abatement through liens and special assessments. I vetoed a similar bill in 2011 because I was concerned that allowing local governments to collect fines by assessing them against an owner's property reduced important due process protections. My thoughts on the matter have not changed.”

5. Coming and going. The Senate Rules Committee has ordered a double referral of AB 491: first to the Committee on Local Government to hear issues relating to local fine authority, and second to the Committee on Judiciary.

6. Gut and amend. AB 491 originally contained provisions relating to animal shelters. On September 13, 2023, the author amended AB 491 to remove those provisions and insert the current contents pertaining to administrative fines and penalties.

Assembly Actions

Not relevant to the current version of the bill.

Support and Opposition

(5/24/24)

Support: County of Santa Clara (Sponsor)
California State Association of Counties 
League of California Cities
Rural County Representatives of California 

Opposition: None received.

-- END --

Date of Hearing: April 26, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 491

Author:(Wallis) – As Introduced Ver:February 7, 2023

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the California Department of Tax and Fee Administration (CDTFA) to ensure virtual or remote participation in its annual hearing on proposed changes to the Sales and Use Tax (SUT) Law.

FISCAL EFFECT:

Minor and absorbable costs to CDTFA to continue ensuring virtual participation in its annual SUT hearing, a practice first adopted during the COVID-19 pandemic.

COMMENTS:

1. Purpose. According to the author:

The Harris-Katz California Taxpayers’ Bill of Rights requires the CDTFA to conduct an annual hearing, where taxpayers and industry representatives can share their proposals on changes to the state [SUT]. Until the COVID pandemic, this hearing was conducted in person in Sacramento. Since the pandemic, the CDTFA has done the hearing using remote technology. AB 491 simply requires the CDTFA to continue providing taxpayers the option of participating in this process without having to travel to Sacramento, which will, in turn, expand public input.

1. Annual SUT Hearing. Existing law requires CDTFA to perform an annual, systemic identification of recurrent taxpayer noncompliance issues and provide an annual report to the Governor. As part of this effort, CDTFA must conduct an annual hearing where industry representatives and individual taxpayers may present their SUT Law modification proposals to facilitate compliance with the law. During the COVID-19 pandemic, CDTFA enabled virtual participation in this hearing to reduce the risk of disease transmission. This bill permanently requires CDTFA to conduct the hearing in this manner.
2. Related Legislation. AB 1704 (Santiago) requires the Department of Alcoholic Beverage Control (ABC) to broadcast, via live video feed, the drawing conducted to determine the priority order in which ABC will consider license applications. AB 1704 is pending on the Assembly Consent Calendar.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: April 17, 2023

ASSEMBLY COMMITTEE ON REVENUE AND TAXATION

Jacqui Irwin, Chair

ABPCA Bill Id:AB 491 (

Author:Wallis) – As Introduced Ver:February 7, 2023

Majority vote. Fiscal committee.

SUBJECT: Sales and use taxes: public hearings

SUMMARY: Requires the California Department of Tax and Fee Administration (CDTFA) to ensure taxpayers may participate in a specified hearing remotely or virtually. Specifically, this bill:

1. Requires the CDTFA to ensure parties may participate virtually or remotely in the CDTFA's annual hearing to review proposals brought forward by the public that improve compliance with the law.
2. Replaces references to the "board" with the "CDTFA", as applicable.

EXISTING LAW establishes the California Taxpayers' Bill of Rights, which requires the CDTFA to perform an annual, systematic identification of areas of recurrent taxpayer noncompliance and to report its findings in its annual report to the Governor. In making this examination, the CDTFA is required to compile and analyze sample data from its audit process, as specified, and to conduct an annual hearing where industry representatives and individual taxpayers may present their Sales and Use Tax Law modification proposals that further facilitate compliance with that law.

FISCAL EFFECT: No estimated impact on state revenues.

COMMENTS:

1. The author has submitted the following statement in support of this bill:

The Harris-Katz California Taxpayers' Bill of Rights requires the CDTFA to conduct an annual hearing, where taxpayers and industry representatives can share their proposals on changes to the state Sales and Use Tax. Until the COVID pandemic, this hearing was conducted in person in Sacramento. Since the pandemic, the CDTFA has done the hearing using remote technology. AB 491 simply requires the CDTFA to continue providing taxpayers the option of participating in this process without having to travel to Sacramento, which will, in turn, expand public input.

1. Committee Staff Comments:
   1. COVID-19: In March 2020, Governor Newsom proclaimed a state of emergency due to the novel coronavirus, commonly referred to as COVID-19. In response, the CDTFA began virtually convening its annual meeting to consider public proposals to promote taxpayer compliance with certain laws. The CDTFA still permits taxpayers engaging in the hearing to participate remotely. This bill would codify existing practice at the CDTFA.
   2. Creation of the CDTFA: Established by a constitutional amendment in 1879, the state Board of Equalization (BOE) was restructured in 2017 with the passage of AB 102 (Committee on Budget), Chapter 16, Statutes of 2017. AB 102 created the CDTFA and the Office of Tax Appeals, delegating to them functions that were previously administered by the BOE. This bill would replace references to the BOE with the CDTFA, where applicable.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Harrison Bowlby / REV. & TAX. / (916) 319-2098