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HomeMy WebLinkAboutED Opposing Proposition 16Agenda Item No: Meeting Date: March 1, 2010 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: City Manager Prepared by: Stephanie Lovette, City Manager Approval: Economic Development Coordinator SUBJECT: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL OPPOSING PROPOSITION 16, "NEW TWO-THIRDS REQUIREMENT FOR PUBLIC ELECTRICITY PROVIDERS" ON JUNE 2010 BALLOT RECOMMENDATION: Join with the League of California Cities and MCCMC in opposing Proposition 16. BACKGROUND: San Rafael is a member of Marin County Council of Mayors and Councilmember's ("MCCMC"). The MCCMC Legislative Committee was established in the organization's bylaws with one member from each City/Town Council and two City Managers or their designees. Greg Brockbank is the San Rafael representative and Barbara Heller is the alternate. The two City Mangers are from Belvedere and San Rafael. Nancy Mackle and Stephanie Lovette have been designated by Ken Nordhoff to staff this committee. The Committee's duties are to review Federal and State legislation affecting MCCMC members. The Committee's scope of advocacy falls into the following categories: a) fiscal protection b) local control c) transportation investment d) housing/land use e) Other issues directly impacting Marin County cities and towns Occasionally, legislation is proposed that does not impact the majority of the MCCMC members. In these situations, the impacted cities generally take an individual position. For example, San Rafael and Novato often take individual positions on issues pertaining to redevelopment agencies. There are also situation's where a City Council takes an individual position in addition to the MCCMC action because the Council wants to provide a stronger public statement about their position on a particular issue or the city has additional information to present regarding the impact of the proposed legislation on their city. FOR CITY CLERK ONLY File No.: Council Meeting: Disposition: The San Rafael City Council expressed a desire to take an individual position on Proposition 16 at their February 16, 2010 meeting. ANALYSIS: Proposition 16 is a proposed constitutional amendment relating to voting requirements for expanding or establishing publically owned electricity providers. Californians currently receive electricity service from one of three types of providers; investor owned utilities ("IOU"), local publically owned utilities and electric service providers ("ESP"). Investor owned utilities are regulated by the CPUC and provide 68% of retail electricity service in the State, publically owned utilities are not regulated by the CPUC and provide 24% of retail electricity service and ESP's are also not regulated and provide 8%. State Law also allows cities and counties or .a combination of both to arrange to provide electrical service within their jurisdictions through a contract with an electricity provider other than the local IOU. This is known as Community Choice Aggregation ("CCA"). Proposition 16 would prohibit local government from implementing a plan to become an aggregate electricity provider ("CCA") or use public funds to establish or expand electric delivery without a 2/3 approval of the voters within the territory to be serviced. The League of California Cities opposes the Proposition because it would erode the autonomy of municipal utilities and potentially affects a City's ability to annex land to the extent the City has a municipal utility. In addition, the League has a long standing policy that cities should have the opportunity to utilize the CCA program. MCCMC voted to oppose Proposition 16 due to the following concerns: a) erosion of local control and autonomy in choices of sources and pricing b) potential impact on the Marin Energy Authority c) financial and logistical obstacles to implementation if an election and 2/3 vote is required San Rafael is a member of the Marin Energy Authority, a Joint Powers Authority, established under the CCA legislation which would be negatively impacted if Proposition 16 were to pass. FISCAL IMPACT: Unknown at this time. No direct impact on the City of San Rafael. OPTIONS: • Provide a public statement by adopting the Resolution opposing Proposition 16 • Modify the Resolution • Request further information • Reject the staff recommendation and not oppose Proposition 16 ACTION REQUIRED: Staff recommends that the Council adopt the Resolution opposing Proposition 16. ATTACHMENTS: Proposition language, staff recommendation to the League of California Cities Committee on Environmental Quality and analysis provided to the CA Attorney General from the CA Legislative Analyst's Office. CITY COUNCIL OF THE CITY OF SAN RAFAEL RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL OPPOSING PROPOSITION 16, "NEW TWO-THIRDS VOTE REQUIREMENT FOR PUBLIC ELECTRICITY PROVIDERS" ON JUNE 2010 BALLOT WHEREAS, California State Ballot Petition 009-0015, the "New Two-thirds Vote Requirement for Public Electricity Providers" has qualified for the June 2010 statewide ballot as Proposition 16; WHEREAS, the primary sponsor for the Proposition is Pacific Gas and Electric, an Investor Owned Utility; and WHEREAS, if adopted, this Proposition would prevent a simple majority of citizens from determining whether they want Community Choice Aggregation, a program authorized by the State Legislature in 2007; WHEREAS, this Proposition would erode the autonomy of existing municipal utilities and potentially impacts the autonomy of other local governmental functions; WHEREAS, publically owned utilities including the City of Palo Alto, the City of Redding, the City of Glendale, and the Northern California Power Agency have opposed this Proposition; and WHEREAS, the League of California Cities opposes the Proposition; and WHEREAS, on February 22, 2010 the Marin County Council of Mayors and Councilmember's ("MCCMC") through its Legislative Committee voted to oppose the Proposition; and WHEREAS, the City of San Rafael is a member of the Marin Energy Authority ("MEA") and this proposition would negatively impact MEA operations. NOW, THEREFORE, BE IT RESOLVED that the San Rafael City Council hereby joins with other cities throughout the State and the League of California Cities in opposing Proposition 16. BE IT FURTHER RESOLVED that the San Rafael City Council hereby directs staff to notify the League of California Cities regarding this action. I, Esther C. Beirne, City Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council held on the first day of March 2010, by the following vote, to wit: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: ESTHER C. BEIRNE, City Clerk May 28, 2009 VIA PERSONAL DELIVERY The Honorable Edmund G. Brown, Jr.. Attorney General 1300 1 Street Sacramento, CA 95814 Attention: Krystal Paris, Initiative Coordinator . . 0 9— 0 0 15 .G►VF, r JUN 0 12009 INITIATIVE COORDINATOR ATTORNEY GENERAL'S OFFICE Re: Request for Title and Summary- Initiative Constitutional Amendment Dear Mr. Brown: Pursuant to Article II, Section 10(d) of the California Constitution and Section. 9002 of the Elections Code, I hereby request that a title and summary be prepared for the attached initiative entitled 'The Taxpayers Right to Vote Act" as provided by law. Included with this submission is the required proponent affidavit signed by myself as proponent of this measure pursuant to section 9608 of the California Elections Code. My address as a registered voter is provided and attached to this letter, along with a check for $200.00. All inquires or correspondence relative to this initiative should be directed to Nielsen, Merksamer, Parrinello; Mueller & Naylor, .LLP, 1415 L Street, Suite 1200, Sacramento, CA 95814,.(916) 44676752, Attention: Steve Lucas (telephone: 415/389- 6800). Thank you for your assistance. r Sincerely_; _ orR b�rt Lee Pence, �rgronent Enclosure: Proposed, Initiative EXHIBIT A Section 1. FINDINGS AND DECLARATIONS 0 9- 0 0 1 5 The People do find and declare: A. This initiative shall be known as "The Taxpayers Right to Vote Act." B.. California law requires two-thirds voter approval for tax increases for specific purposes. C. The politicians in local governments should be to the same standard before using public funds, borrowing, issuing bonds guaranteed by ratepayers or taxpayers, or obtaining other debt or financing to start or expand electric delivery service, or to implement a plan to become an aggregate electricity provider. D. Local governments often start or expand electric delivery service,, or implement a plan to become an aggregate electricity provider, without approval by a vote of the people. E. Frequently the start-up, expansion, or implementation plan requires either construction or acquisition of facilities or other services necessary to deliver the electric service, to be paid for with public funds, borrowing, bonds guaranteed by ratepayers or taxpayers, or other debt or financing. F. The source of the public funds, borrowing, debt, and bond financing is generally the electricity rates charged to ratepayers as well as surcharges or taxes imposed on taxpayers. G. Such use of public funds and many forms of borrowing, debt or financing do not presently require approval by a vote of the people, and where a vote is required, only a majority vote may be required. Section 2. STATEMENT OF PURPOSE A. The purpose of this initiative is to guarantee to ratepayers and taxpayers the right to vote any time a local government seeks to use public funds, public debt, bonds or liability, or taxes or other financing to start or expand electric delivery service to a new territory or new customers, or to implement a plan to become an aggregate electricity provider. B. If the start-up or expansion requires the construction or acquisition of facilities or services that will be paid for with public funds, or financed through bonds to be paid for or guaranteed by ratepayers or taxpayers, or to be paid for by other forms of public expenditure, borrowing, liability or debt, then two-thirds of the voters in the territory being served and two-thirds of the voters in the territory to be served, voting at an election, must approve the expenditure, borrowing, liability or debt. Also, if the implementation of a plan to become an aggregate electricity provider requires the use of public funds, or financing through bonds guaranteed by ratepayers or taxpayers, or other forms of public expenditure, borrowing, liability or debt, then two- thirds of the voters in the jurisdiction, voting at an election, must approve the expenditure, borrowing, liability or debt. Section 3. Section 9.5 is added to Article XI of the California Constitution to read: Sec. 9.5. (a) Except as provided in subdivision (h), no local government shall, at any time, incur any bonded or other indebtedness or liability in any manner of use any public funds for the construction or acquisition of facilities, works, goods, commodities, products or services to establish or expand electric delivery service, or to implement a plan . to become an aggregate electricity provider, without the assent of two-thirds of the voters within the jurisdiction of the local government and two-thirds of the voters within the territory to be served, if any, voting at an election to be held for the purpose of approving the use of any public funds, or incurring any liability, or incurring any bonded or other borrowing or indebtedness. (b) "Local government' means a municipality or municipal corporation, a municipal utility district, a public utility district, an irrigation district, a city, including a charter city, a county, a city and county, a district, a special district, an agency, or a joint powers authority that includes one or more of these entities. (c) "Electric delivery service" means (1) transmission of electric power directly to retail end-use customers, (2) distribution of electric power to customers for resale or directly to retail end-use customers, or (3) sale of electric power to retail end-use customers. (d) "Expand electric delivery service" does not include (1) electric delivery service within the existing jurisdictional boundaries of a local government that is the sole electric delivery service provider within those boundaries, or (2) continuing to provide electric delivery service to customers already receiving electric delivery service from the local government prior to the enactment of this section. (e) "A plan to become an aggregate electricity provider" means. a plan by a local government to provide community choice aggregation services or to replace the authorized; local public utility in whole or in part for electric delivery service to any retail electricity customers within its jurisdiction. (f) "Public funds" means, without limitation, any taxes, funds, cash; income, equity, assets, proceeds of bonds or other financing or borrowing, or rates paid by ratepayers. "Public funds" do not include- federal ncludefederal funds. (g) "Bonded or.other indebtedness or liability" means, without limitation, any borrowing, bond, note, guarantee or other indebtedness, liability or obligation, direct or indirect, of any kind, contingent or otherwise, or use of any indebtedness, liability or obligation for reimbursement of any moneys expended from taxes, cash, income, equity, assets, contributions by ratepayers, the treasury of the local government or other sources. (h)This section shall not apply to any bonded or other indebtedness or liability or use of public funds that (1) has been approved by the voters within the jurisdiction of the local government and within the territory to be served, if any, prior to the enactment of this section; or (2) is solely for the purpose of purchasing, providing or supplying renewable electricity from biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric generation of 30 megawatts or less, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, or tidal current, or providing electric delivery service for the local government's own end use and not for electric delivery service to others. Section 4. Conflicting Measures A. This initiative is intended to be comprehensive. It is the intent of the People that in the event that this initiative and another initiative relating to the same subject appear on the same statewide election ballot, the provisions of the other, initiative or initiatives are deemed to be in conflict with this initiative. In the event this initiative shall receive the greater number of affirmative votes, the provisions of this initiative shall prevail in their entirety, and all provisions of the other initiative or initiatives shall be null and void. B. If this initiative is approved by voters but superseded by law or by any other conflicting ballot initiative approved by the voters at the same election, and the conflicting law or ballot initiative is later held invalid, this initiative shall be self-executing and. given full force of law. Section 5. Severability The provisions of this initiative are severable. If any provision of this: initiative or its application is held to be invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or. application. 11 LEAGUE OF CALIFORNIA CITIES Committee on Environmental Quality (Action Item) Staff: Kyra Ross, Legislative Representative Dane Wadle, Legislative Analyst The California Taxpayers RiEht to Vote Act (Act) Policy Question: What position, if any, should the League take on the "The California Taxpayers Right to Vote Act," which would require a two-thirds majority of voters before a local government could establish a Community Choice Aggregation (CCA) program, use public funding to become a CCA or expand electric service to new territory or customers. Staff Recommendation: Oppose. Committee Recommendation: Initiative Summary: The Act, which would require a two-thirds majority of voters before a local government could establish a CCA program, use public funding to become a CCA or expand electric service to new territory or customers. Specifically, this initiative would prohibit any local government (including charter cities, special districts, agencies and joint power authorities) from incurring any bonded or other indebtedness or liability in any manner or use of any public funds for the construction or acquisition of facilities, works goods, commodities, products or services to establish or expand electric delivery service, or to implement a plan to become an aggregate electricity provider, without the assent of two-thirds of the voters within the jurisdiction of the local government and two-thirds of the voters within the territory to be served, if any, voting at an election to be held for the purpose of approving the use of any public farads, or incurring any liability, or incurring any bonded or other borrowing or indebtedness. Support/Opposition: PROPONENTS: Pacific Gas and Electric Co. OPPONENTS: Sierra Club, The Utility Reform Network, Local Power Ino. City of Berkeley, City of San Francisco, Town of Fairfax Marin Energy Authority (representing 4 cities, 4 towns and the County of Marin), City of Roseville, City of Redding, City of Lodi, Local Clean Energy Alliance, Bay Localize Fiscal Effects: Potentially significant impact to cities that would like to form or participate in a CCA or that would need to fund an election under this Act. EXHIBIT A Comments: • The League has existing policy on CCA's that includes: o "...cities should have the opportunity to become aggregators for municipal [electric] operations or the community at large. As an aggregator, a city would be able to combine the electric loads of various users and negotiate the purchase of electricity for those users." o "...the League agrees that cities that are aggregators should be required to follow the same consumer protection standards as other aggregators, that participation in aggregation by an electricity user should be voluntary, and that cities should have the opportunity to serve as aggregators for their municipal operations or for those residential or commercial customers who wish to participate in a city -sponsored aggregation program." o The League believes that the autonomy of municipal utilities should not be eroded. The League will oppose any legislation that harms municipal utilities. • The CCA program, established in 2002, allows local governments to purchase blocks of power to sell to residents, allowing cities and counties to become competitors to private utilities. Unlike a municipal utility, a CCA does not own the transmission and delivery systems (i.e., the poles and wires), but is responsible for providing the electric commodity (the electrons themselves) to its constituents. Cities and counties that have looked at CCA's do so for a number of reasons, including greater control over the amount of non-polluting, renewable energy they use, as well as local control over retail electric rates. While a number of localities have looked at becoming CCA's only the San Joaquin Valley Power Authority has been finalized and approved by the California Public Utilities Commission. However, the San Joaquin Valley Power Authority suspended its activities in June, 2009. Marin Energy Authority, the City and County of San Francisco, the City of Davis and the City of Clovis are all currently in the process of forming CCA's to provide energy to their residents. This measure also potentially affects a city's ability to annex additional land. To the extent a city has a municipal utility that currently provides electric services and would like to grow in the future; the Act would prohibit any annexation of land (or expansion of electric service) vote for the purposes of providing electric service to the new customers without the required 2/3rds vote. • Proponents of the Act argue that this initiative will allow the people who are going to pay the bill have the right to vote on who provides their energy. Opponents argue that the Act reduces the ability of people to choose between private and public utility companies because of the prohibitive cost of holding an election. They also argue that the two-thirds vote requirement is too high a standard and would kill any community-based competition. REI Attachment 1 65 YEARS OF Hon. Edmund G. Brown Jr. Attorney General 1300 I Street, 17" Floor Sacramento, California 95814 Attention: Ms. Krystal Paris Initiative Coordinator Dear Attorney General Brown: Pursuant to Elections Code Section 9005, we have reviewed a proposed constitu- tional amendment initiative relating to voting requirements for expanding or establish- ing publicly owned electricity providers (A.G. File No. 09-0015). BACKGROUND Provision of Electricity Service in California California Electricity Providers. Californians generally receive their electricity service from one of three types of providers: investor-owned utilities (IOUs), local publicly owned electric utilities, and electric service providers (ESPs). These providers provide 68 percent, 24 percent, and 8 percent, respectively, of retail electricity service in the state. Investor -Owned Utilities. The IOUs are owned by private investors and provide electricity service for profit. The three largest electricity IOUs in the state are Pacific Gas and Electric, Southern California Edison, and San Diego Gas and Electric. Each IOU has a unique, defined geographic service area and is required by law to serve customers in that area. The California Public Utilities Commission (CPUC) regulates the rates charged by IOUs and how they provide electricity service to their customers. Publicly Owned Utilities. Publicly owned electric utilities are public entities that pro- vide electricity service to residents and businesses in their local area. Not regulated by CPUC, publicly owned electric utilities set their own terms of service, including the rates charged to their customers. Electricity service is currently provided by local governments through several different governmental structures authorized under state law, including: • Utility departments of cities, such as the Los Angeles Department of Water and Power. • Municipal utility districts, such as the Sacramento Municipal Utility District. Hon. Edmund G. Brown Jr. July 7, 2009 • Public utility districts, such as the Truckee Donner Public Utility District. • Irrigation districts, such as the Imperial Irrigation District. Electric Service Providers. The ESPs provide electricity service to customers who have chosen not to receive service from the IOU or publicly owned utility that would otherwise serve their geographic area. Under this approach, an electricity customer en- ters into what is termed a "direct access" contract with an ESP that delivers electricity to the customer through the local utility's transmission and distribution system. Electric service provider rates are not regulated by CPUC. There are currently eighteen regis- tered ESPs, mainly serving large industrial and commercial customers. Individual elec- tricity consumers are currently barred from entering into ESP contracts, although state law will again permit this to occur several years from now. Community Choice Aggregation In addition to the ESP arrangements discussed above, state law allows a city or a county, or a combination of the two, to arrange to provide electrical service within their jurisdiction through a contract with an electricity provider other than the IOU that would otherwise serve that local area. This version of direct access is referred to as "community choice aggregation." Although no community choice aggregator (CCA) currently exists to provide electricity service in California, several communities are ex- ploring this option. Under this approach, electricity would be purchased by the CCA from an ESP in- stead of the local IOU. However, the transmission and distribution system of the IOU serving that local area would continue to be used to deliver the electricity to the cus- tomers. Electricity customers within that jurisdiction would automatically get their elec- tricity from the CCA unless they elected to continue to receive service from the IOU serving their local area. Voter Approval Requirements for Publicly Owned Electricity Providers As noted above, publicly owned utilities can be organized under several different types of government structures, such as municipal utility districts. Each type of local government entity that is authorized to provide electricity service, and that is consider- ing either the start-up of electricity service or the expansion of existing service beyond its current service area, is subject to certain state requirements. Various statutes specify whether voter approval is required for the start-up of electricity service by authorized local government entities. Under state law, if a local government intends to expand its electricity service into a new territory, that new area must be annexed and a majority of the voters in the area proposed for annexation must approve the expansion. However, no vote of the public is generally required in such cases within the existing service terri- tory of the local governmental entity that is proposing the expansion. (In some cases, a local commission requires such a vote as a condition of approving the annexation.) Lo- Hon. Edmund G. Brown Jr. 3 July 7, 2009 cal agency action to create a CCA, in contrast, may be undertaken upon a vote of the lo- cal agency governing board and does not require local voter approval. PROPOSAL The measure places new voter approval requirements on local governments before they can use "public funds"—defined broadly in the measure to include tax revenues, various forms of debt, and ratepayer funds—to start up electricity service, expand elec- tricity service into a new territory, or to create a CCA. First, if an authorized local gov- ernment entity seeks to start up electricity service, it must receive approval by two- thirds of the voters in the area proposed to be served. Second, if an existing publicly owned utility seeks to expand its electric delivery service into a new territory, it must receive an approval by two-thirds of the voters in both the area currently served by the utility and the new area proposed to be served. Third, the measure requires two-thirds voter approval for a local government to create a CCA. The measure provides three exemptions to local governments from these voter ap- proval requirements: • If the use of public funds has been previously approved by the voters both within the existing jurisdiction of the local government and the territory pro- posed for expansion. • If the public funds would be used solely to purchase, provide, or supply specified types of renewable electricity, such as wind or solar power. • If the public funds would be used only to provide electric delivery service for the local government's own use. FISCAL EFFECTS Local Administrative Casts for Elections. Because this measure requires voter ap- proval for specified local government actions, it would result in additional costs to local governments each time a proposal requiring voter approval was placed on the ballot. These costs would primarily be related to preparing and mailing election -related materi- als. In most cases, the balloting could be consolidated with already scheduled elections. The increased election -related costs due to this measure would probably be minor. Potential Impact on State and Local Government Costs and Revenues. This meas- ure could affect local government costs and revenues due to its potential effects on the operation of publicly owned utilities and CCAs. It could also affect the finances of state and local government agencies in California because of its potential impact on electric- ity rates. These effects would largely depend upon future actions of voters and local governments. We discuss these potential effects in more detail below. Hon. Edmund G. Brown Jr. 4 July 7, 2009 First, the new public voter approval requirements for the start-up or expansion of publicly owned utilities or the formation of CCAs could, in some cases, result in public disapproval of such changes. Also, the existence of these new voter approval require- ments could deter some local government agencies from proceeding with such plans. To the extent that this occurred, local government agencies could collect lower revenues from electricity customers, and incur lower costs for the operation and coordination of electricity services, than would otherwise be the case. Second, the enactment of this measure could also affect the finances of state and lo- cal government agencies in California due to its potential impact on electricity rates. As noted above, some local government agencies might not start up or expand a publicly owned utility into a new territory or create a CCA as a result of the measure's new voter approval requirements. In this event, the rates paid by electricity customers in that and neighboring jurisdictions could be higher or lower than would otherwise have been the case. This could affect state and local government costs, since many public agencies are themselves large consumers of electricity. To the extent that changes in electricity rates affect business profits, sales, and taxable income, these factors could affect state and lo- cal tax revenues. The net fiscal effect of all of these factors on the finances of state and local govern- ment agencies is unknown. SUMMARY In summary, the initiative would have the following major fiscal effect: • Unknown net impact on state and local government costs and revenues, de- pending on future voter decisions, due to the measure's potential effects on electricity rates and publicly owned utility operations. Sincerely, Mac Taylor Legislative Analyst Michael C. Genest Director of Finance