Senate Standing Committee on Revenue and Taxation

The committee on Rev and tax will now come to order. Do I have announcements? No announcements? Is there a quorum? No.

Let's see. Without a quorum present, we will begin as a subcommittee and we'll establish a quorum once we have sufficient membership of the committee present. First author is present and ready to go. So, assuming, would you like to present your bill?

Sure. Thank you, Mister Chair and members. Good morning. I wanna just, thank you all for taking the time today to hear this bill. I'm proud to present AB 817, which will address several pressing issues brought about because of a lineage facility fire in my district over two months ago.

That fire broke out on a 500,000 square foot cold storage warehouse in the heart of my district in Boyle Heights. For those who are not familiar with Boyle Heights, it is a neighborhood in East LA, a neighborhood surrounded by freeways that has been historically underinvested and the victim of one of the largest environmental disasters in California history, the fallout of the Exide battery recycling plant. But that is not what we're here to talk about today. Today is about a devastating fire.

A fire lasted eight days and spewed out smoke that choked the surrounding community.

A fire that left a warehouse with 88,000,000 pounds of rotting food and attracted untold amounts of flies and rats even to this day. My community has been in a situation for almost two months now where residents cannot live in their own home, when the heat rises and temperature spikes, so residents can't eat, they can't sleep, and they cannot simply even breathe.

And while the city and the county have been working hard to keep Lineage on a tight cleanup deadline, more can be done, and that's why we are presenting AB 817. AB 817 will tackle two key issues brought about by this fire. First, by preventing any new building permits to companies like Lineage until they can show they have a contingency fund set aside for disasters like this.

The fund will exist to ensure that money will be available for food assistance, housing assistance, air quality monitoring, and health care. Because if you're gonna do business in the community, you better be able to support it when you mess it up. Second, it will ensure that any settlement that a resident or business gets from a future litigation because of its incident is tax free from the state. Should the community wish to pursue legal action, we wanna stand by their side. That money is not income.

It's compensation for suffering. They have been through enough and shouldn't have to worry about paying taxes on money suffering. They have been through enough and shouldn't have to worry about paying taxes on money that's rightfully owed to them. AB 817 will not undo what has already been done, but it will make sure for every community in California that this never happens again without a plan, resources, and accountability.

This morning, primary witnesses in support of AB 817 is Willie Armstrong, senior director of state affairs for Los Angeles mayor, Karen Bass, and Shana Englund with the California Community Foundation, reading a statement on behalf of local nonprofits who have been on the ground since day one responding to the needs of community due to the fire who unfortunately couldn't make it today. Take it away.

Good morning.

Yes. Well, I'm I'm a little disappointed the mayor's not able to come here, but I'm sure you'll be able to fill in well. So please proceed. You have two minutes.

Good morning, Chair members. Willie Armstrong, senior director of state affairs on behalf of Los Angeles mayor Karen Bass, proud sponsor of AB 817. We wanna thank the author for bringing this timely legislation forward, and we will continue to support this endeavor to bring relief to and accountability for the Boyle Heights community.

The Lineage fire was not just a fire. It became a crisis for families in Boyle Heights. Families have dealt with unbearable odors, rotting food, rodents, and flies while trying to work, run their family business, send their children to school, and simply live their lives. No family should have to live that way.

As a consequence of the Lineage fire, Mayor Bass has issued emergency orders, demanded the removal of 85,000,000 pounds of spoiled food, provided emergency housing assistance for 1,300 residents and families, helping them to temporarily relocate and get connected to critically needed resources.

We cannot change, as the author indicated, what happened at Boyle Heights, but we can change what happens next. AB 817 sends a message that, number 1, companies must be prepared when something goes wrong, and, two, communities must be protected. The bill requires large coal facilities to maintain a contingency fund before receiving new building permits. These funds could be used for food assistance, temporary housing, air quality monitoring, health care needs, and vector control, among other things.

AB 817 also includes tax relief provisions for qualified residents, property owners, and businesses affected by the Boyle Heights fire.

Settlement funds intended for harm, displacement, and disruption should be available for recovery, not taxes income. And for those for these reasons, on behalf of Los Angeles mayor Karen Bass, respectfully ask for your aye vote on AB 817.

Good morning. I'm Shana England. I'm vice president of the California Community Foundation. We have anchored and supported community recovery from the Lineage Fire in Boyle Heights. I'm here on behalf of Raquel Roman, the executive director of Proyecto Pastoral, one of our grantees and partners, in this recovery.

She couldn't be here, so I'm reading remarks that she sent. For nearly forty years, Proyecto Pastoral has worked alongside families, youth, workers, immigrants, unhoused neighbors, and small businesses in Boyle Heights and the surrounding East Side. On June 17, the eight day fire ignited a 500,000 square foot cold storage facility owned by Lineage in our community. For eight days, our community lived with smoke uncertainty and fear, and the prolonged blaze generated significant quantities of toxic smoke and created dangerous air quality conditions for surrounding residential neighborhoods.

Summer school, early childhood centers were disrupted. Local businesses were impacted. And for many residents, most, this was not an environmental or public health issue. It was happening inside their homes and outside their front doors. Our neighbors reported burning eyes, throat irritation, coughing, difficulty breathing, nausea, dizziness, and many other symptoms. And while residents were trying to protect their families, community organizations like Prieto were forced to become emergency responders.

We responded because that's what we do. We worked alongside community partners and government agencies. We purchased approximately $10,000 worth of air purifiers and distributed them to community members. Again, we did this because this is what we do in our community, but let me be clear. Community organizations should not have to shoulder the financial and operational burden of an industrial disaster of this magnitude.

And what was particularly troubling was the limited support our community received from those responsible. We should not have to organize our own response while the company operating a massive industrial facility in the middle of a residential community was largely absent from that response. The Lineage Fire is not an isolated incident. Between 2020 and 2024, The US averaged approximately 1,500 warehouse fires every year. Large warehouse houses and and cold storage facilities are increasingly located in and near communities, schools, homes, and small businesses.

In fact, there are several other facilities just like this, in within spinning distance of the this, this facility. When something goes wrong, the consequences don't stay inside the warehouse. Again, the burden of an industrial disaster should not fall on neighboring residents, small businesses, schools, community organizations, or taxpayers. And again, AB 817 can't undo the damage that the Lineage fire caused. It can't give families back the days they spent worrying about whether it was safe to breathe or let their kids go outside.

But we can help ensure that the next community does not face the same uncertainty or face it alone. For these reasons, thank you for your time and respectfully ask on behalf of the Boyle Heights community for your aye vote on Assembly bill 817.

Okay. I thank the, primary witness. Do we have any other community witness who wish to voice their opinion? Please give your name and your organization.

Good morning, Chair and members. Sasha Horwitz, Los Angeles Unified School District in support.

Thank you.

Good morning, all. Talar Alexanian, government relations for AltaMed Health Services here in strong support. Thank you.

Thank you. Are there any other members of the public wishing to support voice support for this measure? Are there any primary witnesses in opposition? Please approach the the table if you'd like and begin your presentation. You'll have two minutes.

Good morning. My name is Cal thank you very much. With the California League of Food Producers, whose members represent a wide variety of food processors, beverage producers. We handle fruit, vegetables, olives, dairy products, snack foods, just to name a few. Thank you for the opportunity to share our thoughts on AB 817 today.

First, and most importantly, I wanna recognize the devastating impact of the June 17 warehouse fire in Assembly on Assemblymember Gonzales' district. We have deep empathy for the Boyle Heights and Los Angeles communities who are suffering and truly understand the desire to put in stronger procedures to support these communities if similar incidents occur in the future.

We do have concerns with many aspects of AB 817 that ensure tax or we do not have any concerns, excuse me, that ensure tax exemptions for settlement funds and those that received these funds in response to these events. However, we are concerned with the contingency requirements in the bill that create unintended consequences for a wide range of industries that provide Californians with essential products and services. Therefore, we are opposed unless amended today.

As written, AB 817 reaches far beyond the dedicated cold storage warehouses. It would affect food producers, distributors, growers, packers, frozen food manufacturers, agricultural Cooperatives, retailers, dairy facilities, and even pharmaceutical distribution centers. Requiring a contingency fund as a condition of a permit could discourage investment in new and existing facilities at a time when California's food supply chain already faces capacity challenges. Imposing a contingency fund of up to 20,000,000 could jeopardize investment in new facilities and, investment in improving existing facilities.

For these reasons, we request AB 817 be narrowed to apply to only new facilities that are 20,000 square feet or more and fully refrigerated.

And that the fund amount be tied to the risk posed by the materials stored inside. We also understand and request clarity on how the contingency fund would be calculated, administered, or audited. In lieu of these amendments, we would request a delay in implementation, provide stakeholders time to work with the author, and improve the bill next year.

We urge you not to rush the legislation through and allow more time to gain better understanding of what is lacking in current law and what would be most helpful to communities in the future. For these reasons, we are opposed unless amended. Thank you.

Next witness, please identify yourself and proceed.

Good morning, Chair and members. My name is Katie Davey. I'm the Executive Director with the Dairy Institute of California. Dairy Institute of California represents milk processors and dairy product manufacturers with processing plants located in our state. Thank you for the opportunity to share our concerns regarding AB 817.

We would like to start by acknowledging the heavy toll of the June 17 warehouse fire on the Boyle Heights community in Los Angeles, and we agree on the need for clear procedures to handle future emergencies effectively. However, the one size fits all approach being presented to you today will hamper the ability of dairy processors in California to upgrade their cold storage facilities, discourage investment in new facilities, and will harm the ability of California to attract new dairy processors to our state.

There are a 114 active dairy manufacturing plants across California. Many of these manufacturing operations have a cold storage facility. Dairy processors hold products in cold storage immediately after processing to prevent microbial growth, preserve product quality, and satisfy strict food safety regulations at the state and federal level.

California is the number one dairy state in the nation, employing over a 150,000 people in which many of them are unionized. Our members have manufacturing plants, distribution centers, and cold storage facilities in urban, suburban, industrial, and rural settings. For California's zero industry to grow and provide good manufacturing jobs for Californians, we need cold storage facilities for the products we manufacture.

Imposing a 20,000,000 contingency fund on cold storage facilities threatens our members operations and directly compromises their ability to invest in growth and expansion of current facilities as well as fund energy efficiency improvements. To lessen these impacts, we would request AB 817 be narrowed to apply only to massive new cold storage facilities, of fully refrigerated space located in urban environments.

In the event of an emergency, dairy products are easy to dispose of and do not require extensive remediation. We also ask that the fund amount be tied to the risk posed by the materials stored, The scope of the bill will be limited with delayed implementation to give us time to address our concerns with the author. Cold storage facilities are essential to delivering nutritious dairy products to Californians and we are committed to working with the author and all stakeholders to find a balanced, equitable approach. However, we must remain opposed unless amended today. Thank you.

I thank the witnesses. Are there any members of the public that wish to voice their opposition? Identify yourself and what organization you are standing in for?

Yes. Rachel O'Brien. Thank you, members and Chair, author. Rachel O'Brien with the California Grocers Association. We're opposed unless amended.

Good morning, Chair and members. Tricia Geringer with Agricultural Council of California. Respectfully, were opposed unless amended.

Good morning. Taylor Triffo on behalf of Variety of Agricultural Associations, oppose unless amended, but what we're encouraged by conversations with the author. Thank you.

Morning. Elizabeth Esquivel at the California Manufacturers and Technology Association, also an opposing unless amended. Thank you.

Good morning, Chair members. Melissa Koshlaychuck with Western Growers. We align our comments with those of the lead opposition testimony opposing unless amended. Thank you.

Good morning. Erin Rod on behalf of the Almond Alliance, also oppose unless amended. Thank you.

Chloe King with Political Solutions on behalf of the Healthcare Distribution Alliance, oppose unless amended. Thank you.

Nicole Quinones on behalf of the Global Cold Chain Alliance, oppose unless amended. Thank you.

Corianna Miller with the California Chamber of Commerce. Also, respectfully oppose unless amended.

Good morning, Mister Chair, members. Skyler Wannakott, MBF, California Business Properties Association. In respectful oppose unless amended position. Just wanna thank the author and his staff in continuing to work together.

Are there any other witnesses that wish to voice opposition? I think the witnesses know. Any members of the committee? Mister Grayson, you're the only other member.

Thank you, Mister Chair. Glad to be teaming up with you today. This was a terrifying incident and I wanna commend the author for being incredibly responsive to your constituents and to the needs that exist because of this tragedy in your district. There are a lot of lessons to be learned. I don't believe that management of the warehouse that morning woke up and said today's a good day for a fire.

And I say that not trying to be funny. I say that because the same would go for those who designed the zoning plan. Didn't decide to one day wake up and say, hey, we zone this warehouse to be right in the middle of a residential area. I think it's a great place to have a fire today. And so nobody in other words, nobody expected it which is why this is an incredible opportunity to take for takeaways for some lessons.

My commentary here leads to a question. The delay is, I I heard a request for delay. Is there going to be a delay in your bill, for implementation?

I wanna thank Senator for your comments. I know we've talked about this, a couple times, and I know that considering that this bill just hit us, this week, and we've only had a couple days to do that. Everything is on the table and all options in terms of amendments. We have been speaking with, folks in opposition and those you heard on the microphone today about what does delay mean.

My concern is I don't wanna delay my community any further, and so which is why this bill is coming in the first place.

And we have spoken to people who said, hey. Didn't even know there were so many storage facilities that existed in a good way. But it is eye opening to say we might wanna check our own systems to make sure that we don't become the next Boyle Heights. Right. And so you could delay it and and so that we can come to an understanding.

But for the purposes of the tax pieces of it, we wanna keep this bill intact. But we are continuing those conversations to have those amendments probably next twenty four hours. But we are working toward that goal.

Yeah. The clock is ticking. The clock is ticking. And with seventy two hour rule, you're you're really getting close to the deadline.

I have one other questions. Sure. In your conversations as the bill would move forward If it gets out, would there or has there already been consideration as to this fund that, your bill addresses or as a requirement or a mandate? Are there options? Is there flexibility? Because capital is the lifeblood of of doing business.

Correct.

And if you tie up capital, the business doesn't survive. So is there flexibility to where a a company could bond or carry a rider on the insurance that they have? Something to where they're not actually tying up their capital, but they but they can show that there is responsible plan moving forward if there was a disaster.

I think that's a great suggestion. We're open to to having that conversation, I think, and taking that into consideration. I think the reason why we came to that number is Lineage itself has only given to community organizations $3,000,000, and it's still not even cleaned up today. They the report just came out that they said they were over a 100% clean. They lied.

They mush they pushed the goalpost again. For their own cleanup for their own company, they've paid 80 to 100,000,000 themselves just to clean up their own mess. And so the community has not seen any of those dollars, which is why we came up with that figure. But we are open to adjusting it to to the suggestion you just made so that it makes it easier. But the goal here is is that this is only during a state of emergency Right.

And this is an insurance for the community to know that if you're gonna be in this area, that they're not gonna be devastated should a state of emergency occur like this one.

Right. So I would I would suggest then that if you're going to open up the flexibility of either a bond or or a writer on a current insurance policy Okay. That it it stipulates that it's only for community

Fair.

Response rather than them using it up for their own purpose.

Correct.

For finance.

Okay. Yeah.

No, it's a good point.

Okay. Thank you.

I think the Senator does the vice Chair have any comments? You're recognized?

Thank you. Thank you, Chair. To the author, did you have quite a bit of opposition coming from the agricultural sector and, you know, California was built on the economy of of agriculture, particularly the district that I represent. Can you talk a little bit about what work you've done with the opposition to answer their questions and to get their voice in this in this proposition gap?

We're continuing to have conversations and amendments that could be coming out very soon. The short of it, to answer that question. Yeah. Are there certain groups that you're working with, certain constituent bases? Because it's quite a long list of opposition.

I'm aware of the long list that's also not from my area, and they're also not suffering the consequences of a of a disastrous fire that happened here. And so many of my voices in my community don't have the affordability to travel up here, which is why we do have two individuals here who were able to testify.

But I will say that with that long list, we are having those conversations with them, but there's a longer list of people who are suffering as a result of this fire.

Okay. So would you categorize this bill at more as a district bill?

It certainly does raise the rate, raise the red flag in other parts of the state where these coal shortages do exist that if it happens in their neighborhood across the street from a park or a school, it could present a problem.

Okay. Alright. Alright. Thank you.

Fair question.

I think the vice Chair, and I thank, Assemblymember Gonzalez for this effort. It's impressive, how, willing you are to work with the opposition to find, the right solution. And, of course, the bio the the the fire harmed residents and businesses. And it was no fault of their own that this happened. And not yet, but it's continuing.

It's ongoing. I don't believe they know when this is gonna end. So it's kind of a nightmare scenario for people who live in the area. And I wanna acknowledge the opposition. Cold storage facilities are absolutely critical for our food distribution and and safety.

Well, the, all the concerns are outside of the scope of this committee's jurisdiction. I hope this bill can be crafted to maintain, access while responding to this disaster in your district. And I know that you're really working to to protect the people that live there, but also protect people that live in the vicinity of these kinds of facilities, close to our facilities.

So I'm happy to support your bill, and I encourage you to continue to work with oppositions to to create the the best bill that's that's possible. Would you like to close?

No. Just just thank you so much for the conversation. Thank you members for for the the the dialogue and the suggestions and we will continue to work with opposition the next couple of hours that we have and hope to get to a good place that that's meant not just for Boyle Heights but for the rest of the state. Thank you. And respectfully ask for a vote.

Okay. Is there a motion on the bill? So moved. That moved by Oh, okay. Yes. We need to establish a quorum. Thank you. Would the secretary call a quorum?

[Roll Call]

We have a quorum. And now, we are ready to move on to a vote. And the motion has been moved. Would, secretary call the roll?

[Roll Call]

The vote is two to one. The bill is on call. And the and the the committee will go into recess until we get an additional members. Thank you for your witnesses. Would the secretary call the roll?

[Roll Call]

The vote is three to one of the bills out.