Existing law provides for the establishment of air pollution control districts and air quality management districts. Existing law declares a district a body corporate and politic and a public agency of the state, and prescribes the general powers and duties of a district. Existing law authorizes a district to receive funding from specified sources, including, but not limited to, grants, permit fees, and penalties. Existing law also defines dependent special districts and independent special districts for purposes of the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000.

This bill would designate a district as an independent a special district for purposes of receiving state funds or funds disbursed by the state, including federal funds. The bill would also require, if eligibility for funds requires a district to be considered either a dependent or an independent special district, the entity distributing those funds to use the definitions for those terms set forth in the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000, as specified, to determine eligibility.

Existing law provides for the establishment of air pollution control districts and air quality management districts. Existing law declares a district a body corporate and politic and a public agency of the state, and prescribes the general powers and duties of a district. Existing law authorizes a district to receive funding from specified sources, including, but not limited to, grants, permit fees, and penalties.

This bill would designate a district as an independent special district for purposes of receiving state funds or funds disbursed by the state, including federal funds.

SENATE COMMITTEE ON

Senator Anthony Portantino, Chair

2023 - 2024 Regular Session

SB 563 (Archuleta) - Air pollution control districts and air quality management districts: dependent and independent special districts: funding

Bill Summary:

SB 563 would designate air pollution control districts and air quality management districts (air districts) as special districts for purposes of eligibility requirements for receiving state funds or funds distributed by the state, as specified.

Fiscal Impact:

• Unknown, potentially significant future cost pressures by expanding eligibility for funds that may be distributed to independent or dependent special districts to include the state’s 35 air districts. (General Fund, special funds, federal funds)

Background:

Existing law, The Cortese-Knox-Hertzberg Act of 2000, controls the manner in which local officials change the boundaries of cities and special districts, and designates a local agency formation commission (LAFCO) in each county to oversee boundary changes. Besides the more common annexations to cities and special districts, LAFCOs also control district formations, consolidations, and dissolutions, as well as city incorporations, consolidations, and disincorporations. The Cortese-Knox-Hertzberg Act emphasizes the state’s policy to encourage orderly growth and development, as well as efficient and effective delivery of governmental services by the local agencies that can best provide them.

The Act includes a general definition of special district as agency of the state formed under general law or a special act for the local performance of governmental or proprietary functions, and also separately defines independent special districts and dependent special districts, based on the governance structure. Independent special districts include any special district having a legislative body whose members are all elected by registered voters or landowners within the district, or whose members are appointed to fixed terms, as specified. On the other hand, dependent special districts include any special district that has a legislative body that consists, in whole or in part, of ex officio members who are officers of a county or another local agency, or who are appointees of those officers, and who are not appointed to fixed terms. The definitions of “special district,” “dependent special district,” and “independent special district” all explicitly exclude specified entities, including a state, county, city, school district, and an air pollution control or air quality maintenance district.

The California Air Resources Board (CARB) works with the federal Environmental Protection Agency and oversees the state’s non-vehicular air pollution efforts through 35 air pollution control districts and air quality management districts. Air districts adopt and enforce rules and regulations to achieve and maintain state and federal air quality standards affected by businesses and facilities, ranging from oil refineries to auto body shops to dry cleaners. State law spells out the membership of these local air districts’ governing boards, but there are many variations. Some are county-specific, while others are regional entities with representation from more than one county, and some have unique memberships spelled out in district-specific governing statutes. Existing law authorizes air districts to receive funding from specified sources, including grants, subventions, permit fees, penalties, and certain fees imposed on motor vehicles registered within their respective boundaries.

Proposed Law:

SB 563, notwithstanding any other law, would specify that an air district must be deemed a special district for purposes of receiving state funds or funds distributed by the state, including federal funds. For purposes of the bill, “funds” are defined to include, but not limited to, moneys, loans, grants, financial incentives, and other economic benefits. The bill would require an entity distributing funds to dependent or independent special districts to use specified statutory definitions of “dependent special district” and “independent special district” to determine a district’s eligibility for funding, regardless of the explicit exclusion of air pollution control or air quality maintenance districts from those definitions.

Related Legislation:

AB 2582 (Bloom), which was introduced in 2022 but never heard by a committee, was substantially similar to this bill, but contained provisions making it retroactive to January 1, 2020.

Staff Comments:

The many impacts of COVID-19, including mandatory “stay-at-home” orders, led to unanticipated costs and loss of revenue for local governments. Cities and counties received some direct support from federal COVID-19 relief efforts, but special districts did not receive this support. As part of the 2021-22 Budget, AB 128 (Ting, 2021) appropriated $100 million for independent special districts that encountered unanticipated costs or loss of revenue due to the COVID-19 public health emergency. The measure required the Department of Finance (DOF) to develop eligibility criteria, and a plan to distribute the funding by September 1, 2021. The plan was required to give funding priority to certain independent special districts that did not receive other fiscal relief from the state or federal government, that provide services to rural or disadvantaged communities, and that experienced other specified hardships. Since AB 128 did not include a definition of independent special district for purposes of awarding the funds, there was some initial confusion regarding eligibility of air districts to receive an allocation. DOF relied on the State Controller’s database of special districts, which relies on the statutory definitions of dependent and independent special districts in the Cortese-Knox-Hertzberg Act. Ultimately, DOF determined that air districts did not qualify for the funding because those definitions explicitly exclude air pollution control and air pollution maintenance districts. On July 28, 2022, DOF notified the Legislature that it fully distributed the $100 million in funding to 263 independent special districts.

This bill is intended to ensure that air districts would be eligible for any future allocations of funds that are designated for distribution to special districts. Staff notes that expanding the pool of eligible funding recipients to include air districts would create unknown cost pressures on funds made available in the future. The magnitude of the cost pressures would depend upon the specific eligibility criteria, the source and amount of available funding, and the demand for those funds.

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SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Anna M. Caballero, Chair

2023 - 2024 Regular

Air pollution control districts and air quality management districts: independent special districts: funding

Provides that an air district is an independent special district for purposes of receiving state and federal funds.

Background

The Legislature has the authority to create, dissolve, or otherwise modify the boundaries and services of local governments. Beginning in 1963, the Legislature delegated the ongoing responsibility to control the boundaries of cities, county service areas, and most special districts to local agency formation commissions (LAFCOs) in each county. Subsequent legislation has modified the responsibilities and authority of LAFCOs, including a major revision of the LAFCO statutes in the Cortese-Knox-Hertzberg Local Government Reorganization Act of 2000 (AB 2838, Hertzberg). The Cortese-Knox-Hertzberg Act emphasizes the state’s policy to encourage orderly growth and development, as well as efficient and effective delivery of governmental services by the local agencies that can best provide them.

The Cortese-Knox-Hertzberg Act separates special districts into one of two categories: independent and dependent. Independent special districts include any special district having a legislative body whose members are all elected by registered voters or landowners within the district, or whose members are appointed to fixed terms, and excludes any special district having a legislative body consisting, in whole or in part, of ex officio members who are officers of a county or another local agency or who are appointees of those officers other than those who are appointed to fixed terms. On the other hand, dependent special districts include any special district that has a legislative body that consists, in whole or in part, of ex officio members who are officers of a county or another local agency, or who are appointees of those officers, and who are not appointed to fixed terms.

The Cortese-Knox-Hertzberg Act exempts certain types of districts, including air districts, because they are not generally subject to its provisions.

Air districts. California’s efforts to protect the public from the harmful effects of air pollution and help prepare the state for the effects of climate change involve federal, state, and local governments. The California Air Resources Board (CARB) works with the federal Environmental Protection Agency and spearheads the state’s non-vehicular air pollution efforts through 35 air pollution control districts and air quality management districts (collectively referred to as “air districts”). CARB comprises 16 members, including 12 members the Governor appoints and the Senate confirms. Five of these members are selected from local air districts, four must be experts in fields that shape air quality rules, two are members of the public, and one serves as the CARB chair. The remaining four members include two members who represent environmental justice communities (one each appointed by the Senate and the Assembly) and two non-voting members for legislative oversight (also one each appointed by the Senate and the Assembly).

CARB oversees the state’s 35 air districts, who adopt and enforce rules and regulations to achieve and maintain state and federal air quality standards affected by businesses and facilities, ranging from oil refineries to auto body shops to dry cleaners. State law spells out the membership of these local air districts’ governing boards, but there are many variations. Some are county-specific, while others are regional entities with representation from more than one county, and some have unique memberships spelled out in district-specific governing statutes.

The South Coast Air Quality Management District. Created by the Legislature in 1977, the South Coast Air Quality Management District (SCAQMD) is the air pollution control agency for all of Orange County, the urban portions of Los Angeles, Riverside and San Bernardino counties, the Salton Sea, and a part of the Mojave Desert Air Basin. SCAQMD's governing board adopts policies and regulations that promote clean air within its four-county area. A 13-member board governs SCAQMD, consisting of:

• Four county supervisors representing Los Angeles, Orange, Riverside, and San Bernardino counties, elected by their boards of supervisors.
• Six City Council members representing the cities in each county, including one member the Mayor of the City of Los Angeles selects.
• One member the Governor appoints.
• One member the Speaker of the Assembly appoints.
• One member the Senate Rules Committee appoints.

For the SCAQMD to take action, it needs a quorum of seven members. If there are two or more vacancies, six members constitute a quorum until a vacancy is filled. Members serve four-year terms, or until the appointment of their successor.

SCAQMD receives most of its revenues from annual operating and emission fees, permit processing fees, toxic “hotspots” fees, area sources fees, source test/analysis fees, and transportation plan fees. SCAQMD also receives revenues from penalties, settlements, hearing board fees, interest, and miscellaneous income.

COVID-19 relief funding for independent special districts. The many impacts of COVID-19, including mandatory “stay-at-home” orders, led to unanticipated costs and loss of revenue for local governments. Cities and counties received some direct support from federal COVID-19 relief efforts. Special districts did not. While counties could pass along revenue to dependent special districts where the county board of supervisors also served as the dependent special district board, cities and counties had little incentive to pass along limited relief dollars to independent special districts they did not manage. AB 128 (Ting, 2021) appropriated $100 million for independent special districts that encountered unanticipated costs or loss of revenue due to the COVID-19 public health emergency. The measure required the Department of Finance (DOF) to develop eligibility criteria, and a plan to distribute the funding by September 1, 2021. The plan had to prioritize independent special districts:

• That did not receive other fiscal relief from the state or federal government;
• Based on the per capita unanticipated costs or loss of revenue the independent special district incurred;
• That anticipated employee layoffs, service reductions, facility closures, or fiscal emergencies without fiscal relief; and
• That provided services to rural or disadvantaged communities.

After developing the plan, DOF had to notify the Joint Legislative Budget Committee. AB 128 did not define independent special districts for the purposes of this funding. DOF relied upon the State Controller’s database of special districts, which in turn relied upon the definitions in the Cortese-Knox-Hertzberg Act. In this database, the Controller classified some air districts as independent, like Northern Sierra Air Quality Management District, while classifying others as dependent, like SCAQMD. SCAQMD disputed its classification so that it could apply for the $100 million, since its board served fixed terms, and the Controller agreed to change its classification. However, on October 29, 2021, the Controller informed SCAQMD that because the definition of special district excludes air districts, it could not designate SCAQMD to be an independent special district, but notified the district that DOF did not have to use this classification to decide funding eligibility for the program. Ultimately, DOF determined that SCAQMD was ineligible to receive the funds. On July 28, 2022, DOF notified the Legislature that it distributed the funding to 263 independent special districts. The largest grant of $6 million went to the Tulare Local Healthcare District in Tulare County. The smallest grant of $555 went to the Weed Recreation and Park District in Siskiyou County.

SCAQMD wants to ensure that its designation as a special district does not make it ineligible for future state programs.

Proposed Law

Senate Bill 563 provides that, notwithstanding any other law, an air district must be deemed an independent special district for purposes of receiving state funds or funds disbursed by the state, including federal funds. The measure defines funds to include moneys, loans, grants, financial incentives, and other economic benefits.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “Existing law’s definitions of what is a ‘district,’ ‘special district,’ ‘dependent special district’ and ‘independent special district’ are ambiguous and at times contradictory. Some statutory definitions categorically exclude air districts, while other definitions include them. As a result, local air districts that would otherwise qualify as ‘independent’ are currently not categorized as such. This has had and will continue to have implications on their eligibility to receive vital state and federal funding being made available to similar agencies that are categorized as ‘independent special districts’. During the pandemic federal funding was made available through the American Rescue Plan Act (ARP) to provide fiscal relief to local public agencies for unanticipated costs and revenue losses incurred due to the COVID-19 pandemic. ARP gave states and local agencies the authority to transfer a portion of these funds to special districts. This federal legislation did not define special districts as ‘independent’ nor ‘dependent.’ At the state level, this federal funding was appropriated through the Annual Budget Act and directed specifically to ‘independent special districts’ only. Due to contradictory and ambiguous definitions in state statute, air districts were deemed ineligible to even apply for these critical funds. Legislation is needed to give these districts the opportunity to apply for future funding.”

2. Necessary? DOF notified the Legislature that it finished distributing the entire $100 million COVID relief funding for independent special districts on July 28, 2022. Since no independent special district funding remains, what problem does SB 563 solve? If the Legislature allocates any future funds to independent special districts, the measure could help SCAQMD qualify for funds. However, there is no guarantee that any future funding would have the same eligibility requirements. Also, if the Legislature developed another such program, SCAQMD could work with the Legislature to ensure that program makes them eligible even without this legislation. The Committee may to consider whether the need for this legislation is justified.

3. We are what we say we are. While there was much back and forth between the Controller and SCAQMD about whether they met the definition of an independent special district, the Controller ultimately decided that it could not be an independent or dependent special district because air districts are not included in the definition of a special district. Air districts have many different board structures. For example, the Sacramento Metropolitan Air Quality Management District’s board includes 14 members, including all five members of the county board of supervisors, and 9 city council members. However, the respective county board of supervisors often serve as ex-officio members on air districts that affect a single county. Instead of acknowledging this variation, SB 563 deems all air districts to be independent special districts for the purposes of receiving state funds. Rather than make this general categorization, the Committee may wish to consider amending the bill to clarify that air districts are special districts for the purposes of receiving state funds, and if eligibility for funds requires a district to be considered either a dependent or an independent special district, the entity distributing those funds must use the existing definitions for those terms.

4. Previous legislation. AB 2582 (Bloom, 2022) contained identical provisions to SB 563, except it was retroactive to January 1, 2020. The bill was never heard in the Assembly Local Government Committee.

Support and Opposition

(4/21/23)

Support:
South Coast Air Quality Management District (Sponsor)
Bay Area Air Quality Management District
California Air Pollution Control Officers Association
San Diego County Air Pollution Control District

Opposition: None submitted.

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