HomeMy WebLinkAboutCities, Various; 1999-03-17;GROUP COST SHARING AGREEMENT RE:
PROPERTY TAX ASSESSMENT ON ELECTRIC GENERATING PLANTS
This agreement ("Agreement") is made by and between the members signing
below ("Members"). As of March 3, 1999, the following cities expressed their intention
to enter into this Agreement: Carlsbad, Chula Vista, El Segundo, Grand Terrace,
Huntington Beach, Oxnard and Redondo Beach. The Members of the group ("Group")
shall be the entities which execute this Agreement and pay their per capita share of the
fees and costs as discussed below. This Agreement constitutes a mechanism for the
undersigned individual entities to develop a uniform strategy and to share costs regarding
the assessment of property taxes on electric generating plants located within each
individual city. Nothing in this Agreement creates a joint powers authority.
Recitals
WHEREAS the State of California, State Board of Equalization has initiated a
rulemaking process regarding the property tax assessment on deregulated electric
generating facilities within the state to determine whether a unitary or locally assessed
method should be used;
The Members have determined that it is in their individual and collective best
interests to present a common approach in favor of the locally assessed method and to
otherwise reduce their costs by cooperating among themselves; and
The Members have decided that it is in their individual and collective best
interests to share legal counsel to advocate their position to the State Board of
Equalization and the State Legislature.
NOW, THEREFORE, for the mutual consideration described herein, the
Members agree as follows:
Agreement
1. PURPOSE AND SCOPE. The Members hereby join together to form
this Group in order to develop a uniform strategy and share costs regarding some or all of
the following activities, hereinafter referred to as the "Matters":
(a) develop and implement a uniform strategy regarding representation in the
rulemaking process, litigation (if necessary), legislative advocacy and
forensic accounting to obtain local tax assessment of the electric
generating facilities in their jurisdictions;
(b) retain joint counsel (see Paragraph 10 below) to implement these
purposes; and
(c) take all reasonable and necessary steps to effectuate this Agreement.
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Group Cost Sharing Agreement Re: Property Tax Assessment on Electric Generating Plants
2. MEMBERSHIP. This Agreement shall not become effective until at
least five (5) Members sign this Agreement and make payment of their per capita fees
and costs incurred by joint counsel to date. Through March 17,1999, Membership shall
be open to any party wishing to join. After March 17,1999, non-Members may be
removed from the mailing list and any request by a non-Member to join the Group after
that date shall be submitted to the Members for their approval. After March 17,1999,
approval shall require a vote of a majority of the Voting Power (as defined below in
Paragraph 4) present and voting at a meeting called for the purpose of considering such
request for admission. Unless otherwise agreed upon, the new Member shall be deemed
a Member from the outset and shall be assessed and shall pay all sums which said
Member would have been obligated to pay had it joined on the effective date.
3. GROUP MEETINGS. The Members may authorize or direct actions
under this Agreement only at meetings duly held and called for such purpose. Meetings
may be called for any purpose at any time by any two (2) or more Members of the Group.
The Group shall meet as needed to discuss any matters and to decide the Members' views
regarding the matters. Meetings can be held by telephone, and a Member participating by
telephone shall be deemed present at any meeting. Notices of such meetings shall be
provided in writing, by telecopier or by electronic mail at least seven (7) days in advance
or, where necessary because of time limitations, by telephone, telecopier or electronic
mail at least two days in advance. In the event a meeting is called on less than seven (7)
days written notice, the Members calling the meeting shall make a reasonable effort to
provide notice in fact to every Member. A quorum shall consist of fifty percent (50%) of
the Members. The Members shall attempt to make decisions on a consensus basis.
However, if no consensus can be reached, the Members agree that decisions shall be
made on the basis of a majority of the Voting Power, as defined in Paragraph 4 of this
Agreement, of the Members present and voting so long as a quorum is present. However,
except for the administrative functions of the Group, such as hiring joint counsel and
expending funds to undertake the activities of the Group, the Group shall not have any
authority to bind any Member to any agreement with the State or any other third party. A
Member eligible to vote at a Group meeting may assign in writing its vote to another
Member eligible to vote at the meeting.
4. VOTING POWER. At any Group meeting, each paying Member will
have equal voting power.
5. COMMITTEES. The Members may decide to form a Group Steering
Committee to assist the Members with the administrative functions of the Group.
Membership on the Group Steering Committee shall be open to the representative of any
Member who notifies Shari Freidenrich, City Treasurer of the City of Huntingdon Beach,
in writing of his or her interest in participating on the Group Steering Committee.
(a) Privilege and Confidentiality. Each Member and any individual serving
on any committee on behalf of any Member agrees to maintain the
privileged nature and confidentiality of all communications and
proceedings of such committees. This obligation shall continue in the
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event such individual should leave the employ of or otherwise cease to
represent such Member, and shall survive a Member's withdrawal or
removal from the Group and/or the dissolution or termination of the
Group.
(b) Powers, Duties and Responsibilities. The powers, duties and
responsibilities of the Group Steering Committee shall include:
(1) retaining, coordinating, supervising and directing the activities of
joint counsel (see Paragraph 10 below);
(2) appointing subcommittees to handle specific matters;
(3) negotiating and referring matters to the Group; and
(4) conducting such other administrative activities as are necessary
and proper to carry out the purposes of this Agreement.
(c) Voting. The Group Steering Committee shall attempt to make decisions
by consensus; however, on any matter put to a vote, such matter shall be
decided by a majority of the voting power of the Members of the Group
Steering Committee present in person, on the telephone or by proxy at the
meeting. A meeting of at least three (3) Members of the Group Steering
Committee shall constitute a quorum.
(d) Report to the Group and Call for Group Meetings. The Group
Steering Committee shall report in writing its decisions, actions, and
recommendations to the Group from time to time as may be necessary to
keep the Group fully informed of matters covered by this Agreement, and
shall call meetings of the Group and refer to such meetings for a vote any
matters which, in the judgment of the Group Steering Committee, should
be referred.
(e) Without Compensation. The Members of the Group Steering Committee
shall serve as volunteers without compensation from the Group.
6. SHARED COSTS. Those activities authorized by the Group Steering
Committee or the Group to be undertaken on behalf of the Group, including the retention
of joint counsel (see Paragraph 10 below), shall be funded by the Members as shared
costs (herein, "Shared Costs").
7. RIGHT OF SEPARATE COUNSEL. Notwithstanding that joint
counsel may be retained with respect to any matter, each Member reserves the right to
select and retain its own counsel to represent such Member on any matter, and to advise
joint counsel that such Member is not to be represented by or through joint counsel with
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respect to any such matter. All Group Members retain full power and authority to act
independently.
8. WITHDRAWAL. Any Member may withdraw from all participation in
this Agreement upon thirty (30) days written notice to the rest of the Group, except that
such Member shall remain liable for its share of all Shared Costs assessed pursuant to this
Agreement up to the date of withdrawal, and shall be subject to the terms and conditions
applicable to withdrawing or removed Members.
9. REMOVAL OF A MEMBER. If any Member's interests or actions are
regarded as contrary to the interests of the other Members, such Member may be
removed from this Agreement by a vote of two-thirds of the Voting Power of the
Members present in person, by telephone or by proxy at a Group meeting called for the
purpose of considering such removal. In the event any Member fails to pay any portion
of any assessed financial contribution pursuant to this Agreement within thirty (30) days
following service of notice of such assessment, that Member shall be considered in
default and may be removed from this Agreement by a vote of two-thirds of the Voting
Power of the Members present in person, on the telephone or by proxy at a Group
meeting called for the purpose of considering such removal. Such removed Member
shall make no use whatever of privileged information gained by that Member through
Group participation.
10. JOINT COUNSEL. The Members agree that they will jointly retain the
law firm of Howard, Rice, Nemerovski, Canady, Falk & Rabkin ("Howard Rice Firm")
to represent the Members under this Agreement. Nothing in this Agreement shall prevent
the Members from selecting other or additional counsel to represent them under this
Agreement.
(a) The Members agree that the representation provided by the Howard Rice
Firm is subject to the terms and conditions, including any conflict waivers,
which are set forth in the retention agreement between the City of
Huntington Beach and the Howard Rice Firm ("Retention Agreement"),
attached hereto as Attachment 1 and incorporated by reference herein.
(b) The Members, the Group and the Howard Rice Firm agree that all
confidential information developed or exchanged on a confidential,
privileged or private basis ("Confidential Information") by, between and
among any Members and/or the Howard Rice Firm for the purpose of
advancing the joint interests of the Members under this Agreement shall
be kept confidential from any non-Member. All Confidential Information
shall remain confidential and privileged, and shall not be disclosed to any
entity or person which is not a Member unless authorized by the Members,
or the Group Steering Committee, or as required by law. Nothing bars
disclosure of essential information to insurance carriers, or disclosure by
the Howard Rice Firm of Confidential Information to attorneys
representing non-Members with similar interests, on a confidential basis.
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The Members intend that no claim of work product protection, attorney-
client privilege or any other privilege be waived by reason of participation
or cooperation pursuant to this Agreement. Any Confidential Information
and any Member's obligation to not disclose.Confidential Information to
any non-Member shall survive a Member's withdrawal or removal from
the Group and/or the dissolution or termination of the Group.
(c) Information disclosed by the Members to the Howard Rice Firm may be
disclosed to any other Member and each Member expressly consents to
treat such disclosure to it as being for the sole purpose of effectuating the
purposes of this Agreement. Such disclosure shall not be deemed a waiver
of the attorney-client privilege, the work product protection, or any other
privilege. Each Member agrees to keep any shared information
confidential.
(d) It is understood that the Howard Rice Firm has agreed with the Members
that, in the event the Howard Rice Firm determines that a conflict of
interest has arisen or is imminent or likely, the Howard Rice Firm will
promptly notify the Members of such actual or probable conflict of
interest. In the event a conflict arises out of the representation described-
in this Agreement, the Members agree to make reasonable efforts to
resolve such conflict in a timely manner. In the event such conflict cannot
be resolved, the individual Member with whom the conflict exists
consents to the continued representation of the Group and the Members of
the Group by the Howard Rice Firm.
(e) Each of the individual Members of the Group agree that it will not, in any
forum, claim that the representation by the Howard Rice Firm described
herein or the continued representation of the Members or the Group after
the failure to resolve a conflict constitutes negligence, breach of fiduciary
duty, breach of the applicable rules of professional responsibility or any
other breach of duty.
(f) The Members agree that the costs of all legal services and expenses of the
Howard Rice Firm regarding the Howard Rice Firm's representation of the
Group and the Members of the Group under this Agreement shall be
considered Shared Costs.
(g) All attorney work product shall be the property of the Group. It is the
intent of each Member that communications with the Howard Rice Firm
or other counsel and among themselves shall be protected from disclosure
to third parties by reason of the attorney-client privilege and the work
product protection. Each Member agrees that it shall maintain and
preserve the confidentiality of all privileged and/or work product materials
and that such materials shall not be disclosed to non-Members of the
Group without the prior written consent of the Group Steering Committee.
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Group Cost Sharing Agreement Re: Property Tax Assessment on Electric Generating Plants
Any Member removed or withdrawing from the Group shall be prohibited
from utilizing any work product or privileged material in a manner
adverse to the interests of any Member. Any Member removed or
withdrawing from the Group shall not claim or assert that the Howard
Rice Firm or other counsel have a conflict of interest in their continued
representation of the Group, nor shall any such Member object to the
Howard Rice Firm's or other counsel's continued representation of the
remaining Members, nor shall any such removed or withdrawing Member
make any use whatever of privileged information gained by that Member
through Group participation.
(h) Each Member agrees to sign the Retention Agreement, or a separate
retention agreement if the Howard Rice Firm decides a separate retention
agreement is necessary.
11. PAYMENT OF FEES AND COSTS. The Members agree to pay for the
services of joint counsel as follows:
(a) Payment of the Howard Rice Firm. The Howard Rice Firm
shall submit its fees and costs directly to the City of Huntingdon
on a monthly basis. The City of Huntingdon Beach will distribute
the bills to each Member, who shall have ten (10) days from the
date of service to provide written notice to the City of Huntington
Beach of any disputes regarding the bill submitted by the Howard
Rice Firm. The City of Huntington Beach will pay the Howard
Rice Firm on behalf of the Members and shall separately bill each
Member for its per capita share of the bill. Each member shall
make its per capita payments to the City of Huntington Beach
within thirty (30) days of the date of City of Huntington Beach's
service of the bill. The checks shall be made payable to "City of
Huntington Beach". Provided, however, that the City of Grand
Terrace will not be required to pay its per capita share of the
Howard Rice Firm bill and will instead be required to commit the
services and assistance of its city's staff as from time to time
requested by the other Members. The City of Grand Terrace will
still be held responsible to pay its share of any Group costs, such
as photocopying and conference call charges.
(b) Contemplation of Direct Billing to Each Member. The
procedures for payment outlined above are designed for initial
payment of joint counsel while the Members contemplate
payment procedures where joint counsel directly bills each
Member for its per capita share.
SIGN A TURES ON NEXT PA GE
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12. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall constitute one and the same document. This Agreement shall
terminate upon a majority vote of the Voting Power of the Members after appropriate
notice of the voting has been provided to all Members under. Paragraph 3 above.
13. AUTHORITY TO ENTER AGREEMENT. Each person executing this
Agreement warrants that he or she has been authorized to do so by the party on behalf of
which he or she is executing it.
exceed $25,000
" Agreement.
CITY OF CARLSBAD
withou
MEMBER'S NAME (print name of entity)
By:.
Signature
FRANK MANNEN
Print name of person signing
ASSISTANT CITY MANAGER
Title
Dat
Designated representative for receipt of any communications, including invoices:
Name:Ms. Erin K. Letsch
Entity:_City of Carlsbad
Address:
E-Mail:
1200 Carlsbad Village Drive
Carlsbad, CA 92008
Telephone: 760 434-2807
Facsimile: 760 U3U-1987
N/A
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AGREEMENT BETWEEN
THE CITY OF HUNTINGTON BEACH AND
HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKTN,
A PROFESSIONAL CORPORATION,
FOR LEGAL SERVICES REGARDING
THE AES GENERATING PLANT AND THE UNITARY TAX
THIS AGREEMENT is made and entered into this day of 1999,
' by and between the CITY OF HUNTINGTON BEACH ("City") and HOWARD, RICE,
NEMEROVSKI, CANADY, FALK & RABKIN, A Professional Corporation ("Legal
Counsel").
WHEREAS, City desires to employ legal counsel in connection with challenging
the application of the unitary tax to the AES electrical generating plant;
Legal Counsel represents that it is ready, willing and able to provide the legal
services to the City;
NOW, THEREFORE, the parties hereto mutually agree as follows:
SECTION 1. Employment. Subject to the limits contained in Section 2 below,
City hereby employs Legal Counsel and Legal Counsel hereby accepts such employment
to serve as special counsel to the City regarding establishing, through legal analysis,
administrative rulemaking, and potentially, litigation, that the unitary tax levied by the
State Board of Equalization should no longer be applied to the AES electrical generating
plant.
SECTION 2, Fees. Legal Counsel's fees and costs for serving as special counsel
shall be as set forth in Exhibit A, provided that in no event shall the total fees and costs
exceed $20,000. Legal Counsel shall comply with the Billing Procedures set forth in
Exhibit B. Invoices for legal services shall be due thirty (30) days after receipt.
SECTION 3. Reporting. In performing legal services under this Agreement,
Legal Counsel shall work under the direction and control of the City Attorney and shall
not render additional legal services other than those specified in this Agreement without
the advance concurrence of the City Attorney. Legal Counsel shall consult with the City
Attorney on the strategy and conduct of the case and shall not file any motions without
prior approval of the City Attorney.
SECTION 4. Termination. This Agreement may be terminated by the City at
, any time by giving written notice to Legal Counsel with or without cause. In the event of
termination, all finished and unfinished documents, pleadings, exhibits, reports, and
evidence shall, at the option of the City, become its property and shall be delivered to it
by Legal Counsel. Subject to giving reasonable notice to arrange alternative counsel,
Legal Counsel retains the same right to terminate its representation.
SECTION 5. Independent Contractor. Legal Counsel is, and shall be, acting
at all times in the performance of this Agreement as an independent contractor herein and
not as an employee of City. Legal Counsel shall secure at its expense and be responsible
for any and all payment of income tax, social security, state disability insurance
compensation, unemployment compensation, Workers' Compensation, and payroll
deductions for Legal Counsel and its officers, agents and employees, and all business
licenses, if any, in connection with the services to be performed hereunder.
SECTION 6. Workers' Compensation. Legal Counsel shall comply with all of
the provisions of the Workers' Compensation Insurance and Safety Acts of the State of
California, the applicable provisions of Division 4 and 5 of the California Labor Code
and all amendments thereto; and all similar state or federal acts or laws applicable; and
shall indemnify, defend and hold harmless City from and against all claims, demands,
payments, suits, actions, proceedings and judgments of every nature and description,
including attorneys' fees and costs presented, brought or recovered against City, for or on
account of any liability under any of said acts which may be incurred by reason of any
work to be performed by Legal Counsel under this Agreement.
SECTION 7. Professional Liability Insurance. Legal Counsel shall furnish a
professional liability insurance policy covering the work performed by it hereunder. Said
policy shall provide coverage for Legal Counsel's professional liability in an amount not
less than $1,000,000 per occurrence and in the aggregate. A claims made policy shall be
acceptable if the policy further provides that:
1. The policy retroactive date coincides with or precedes the professional
services contractor's start of work (including subsequent policies
purchased as renewals or replacements).
2. Legal Counsel will make every effort to maintain similar insurance during
the required extended period of coverage following project completion,
including the requirement of adding all additional insureds.
3. If insurance is terminated for any reason, Legal Counsel agrees to
purchase an extended reporting provision of at least two (2) years to report
claims arising from work performed in connection with this Agreement.
4. The reporting of circumstances of incidents that might give rise to future
claims. Under no circumstances shall this insurance contain a self-insured
retention, or a "deductible" or any other similar form of imitation on the
required coverage in excess of $10,000.
SECTION 8. Certificates of Insurance. Prior to commencing performance of
the work hereunder, Legal Counsel shall furnish to City certificates of insurance subject
to approval of the City Attorney evidencing the foregoing insurance coverages as
required by this Agreement; said certificates shall:
1. provide the name and policy number of each carrier and policy; and
2. shall state that the policy is currently in force;
Legal Counsel shall maintain the foregoing insurance coverages in force until the
work under this Agreement is fully completed and accepted by City.
The requirement for carrying the foregoing insurance coverages shall not derogate
from the provisions for indemnification of City by Legal Counsel under the Agreement.
City or its representative shall at all times have the right to demand the original or a copy
of all said policies of insurance. Legal Counsel shall pay, in a prompt and timely
manner, the premiums on all insurance hereinabove required.
SECTION 9. Responsible Attorney. Legal Counsel hereby designates Steven
Mayer as the attorney primarily responsible for the services rendered hereunder. Primary
responsibility for the work shall rest with Mr. Mayer, and no work will be assigned to
attorneys within the firm without notice to the City Attorney.
SECTION 10. Delegation. This Agreement is a personal services agreement, and
the hereunder shall not be performed by or delegated to any person or entity other
services provided hereunder shall not be performed by or delegated to any person or
entity other than Legal Counsel without the express prior written approval of the City
Attorney.
SECTION 11. Modification. No waiver or modification of this Agreement or of
any covenant, condition, or limitation herein contained shall be valid unless in writing
and duly executed by the party to be charged therewith.
SECTION 12. City Employees and Officials. Legal Counsel shall not employ
any City official or any regular City employee in the work performed pursuant to this
Agreement. No officer or employee of City shall have any financial interest in this
Agreement in violation of California Government Code Section 1090, et seq.
SECTION 13. Immigration. Legal Counsel shall be responsible for full
compliance with the immigration and naturalization laws of the United States and shall,
in particular, comply with the provisions of 8 U.S.C. § 1324a regarding employment
verification.
SECTION 14. Nondiscrimination. Legal Counsel agrees not to discriminate
against any person or class of persons by reason of sex, age, race, color, creed, physical
handicap, or national origin in employment practices and in the activities conducted
pursuant to this agreement, in accordance with Government Code § 19702.
SECTION 15. Notices. Any notices or special instructions required to be given in
writing under this Agreement shall be given either by personal delivery to Legal Counsel
or to the City Attorney as the situation shall warrant, or by enclosing the same in a sealed
envelope, postage prepaid, and depositing the same in the United States Postal Services,
addressed as follows:
TO CITY: TO LEGAL COUNSEL:
Gail Hutton, City Attorney Steven L. Mayer, Esq.
City of Huntington Beach Howard, Rice Nemerovski, et al.
2000 Main Street Three Embarcadero Center, 17th Floor
Huntington Beach, CA 92648 San Francisco, CA 941 11
Telephone: (714) 536-5555 (415) 434-1600
Facsimile: (714) 374-1590 (415) 217-5910
SECTION 16. Entire Agreement. This Agreement contains the entire agreement
between the parties respecting the subject matter of this Agreement and supersedes all
prior understandings and agreements, whether oral or in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by and through their authorized officers the day, month and year first above
written.
HOWARD, RICE, NEMEROVSKI, CANADY, CITY OF HUNTINGTON BEACH, a
FALK & RASKIN, municipal corporation of the State of
A Professional Corporation California
Name
Its
Name
Its
STEVEN "L. MAYER U
Vice President
DIRK M. SCHENKKAN
Secretary
City Attorney J? -.2
APPROVED AS TO FORM:
City Administrator
City Attorney
REVIEWED AND APPROVED: ' *•/ *- /?**
WD 011499/f-NEWNEW/W6/714737/v2
EXHIBIT A
Steve Mayer - $345/hour
Associates - $150-230/hour
The rates set forth herein shall remain in effect through December 31, 1999. Any
changes in rates thereafter will be applicable to the City upon notice.
EXHIBIT B
October 9, 1996
Subject: Billing Protocol
Our city has adopted the following billing protocol. Your firm will be compensated or
reimbursed only when your charges are in compliance with this protocol. If you have questions
concerning it, please contact the City Attorney for clarification.
In the event you wish to negotiate changes due to the internal operation of your firm, please raise
them in writing. Any changes to this protocol will need prior, written approval from the City
Attorney or the assigned Deputy City Attorney.
In the interest of fairness; all special counsel are required to comply with this protocol. This
protocol is also to be used in conjunction with any new proposal for services.
Billing Protocol
A. General
1. Special counsel and the office of the City Attorney will be associated as counsel on all
matters. The format for inclusion of this office on the pleadings is as follows:
GAIL HUTTON, City Attorney (SEN 57372), and
[Your Firm Name and Address]
2. A different case name will be adopted for each individual matter to facilitate tracking
individual cases, or advisory matters. Each invoice shall include the case name and the
City's claim number. Your case number may be included for your convenience.
3. General accounts are not permitted without prior approval. That is, unless they are
prearranged, a general account is not to be opened. In the event that a general account
is approved, a separate case name should still be used if a matter exceeds four hours.
4. If you are provided with a new case directly from staff, or if a matter arises that
requires you to open a new file, the City Attorney should be informed immediately.
5. Generally, the City Attorney will rely upon you for guidance on litigation strategy.
Nonetheless, City Attorney approval is necessary for all motions, including demurrers,
motions for summary judgment and discovery motions.
6. This office should be consulted prior to the retention of services of an expert witness,
court reporter, or private investigator.
7. We expect that discovery disputes will be resolved without court intervention. If this
is impossible due to the conduct on the other side, please inform the City Attorney
immediately.
Our accountants will send a request for an auditor response letter annually. Please
respond to these promptly. In complicated cases where more than 2.5 hours is
required, please contact the City Attorney before drafting your response.
B. Travel
9. We expect that only one attorney from your firm will attend meetings, depositions and
arguments, although a second person may be needed for trials and major hearings.
Only in unusual cases can travel by more than one attorney be justified.
10. Charges for attorney time during travel is normally not reimbursable and will only be
paid if such time is actually used in performing services for the City or as otherwise
arranged with the City.
11. Automobile expenses are limited to $0.27 per mile. All other travel expenses shall be
approved in advance. Meals are not billable to the City, without prior arrangement.
; (monthly)
12. All billing shall be done monthly in one-tenth hour (0.10) increments and matched to
an appropriate breakdown of the time that was taken to perform that work and who
performed it. Minimum billing charges are unacceptable. Please charge for actual time
spent. For example, minimum of .2 for phone calls or .4 for letters is unreasonable
unless that is an accurate measure of time spent.
13. The attorney to whom the retainer letter is addressed shall be the principal attorney
handling all significant aspects of the case. We may authorize one other individual,
usually an associate, to handle a case, but only with our prior permission. Please
inform the City Attorney who that person will be and his/her qualifications. We do not
anticipate that any other attorney will bill on this case without prior notification. If an
urgent issues arises or a court appearance needs to be covered, please call the City
Attorney to inform us first. For each approval requested, you may contact the
designated Deputy City Attorney if the City Attorney is unavailable.
14. We encourage the use of paralegals for any task that can be delegated. However,
similar to attorneys, no more than two paralegals (but preferably one) should work on
each case without the City Attorney's prior approval.
15. Law clerks present a unique situation. We recognize your need to train new associates;
however, as a public entity we cannot afford to pay for training. Law clerks can be
used, with prior approval, and only when it will be beneficial or cost-effective for the
City.
16. Each month's bill should include a total to date. That total should provide, at a glance,
the total fees and costs incurred to date for the case. This will facilitate our approach
of cost-effective management of cases, and avoid a situation of spending $40,000 in
legal fees on cases where only 520,000 is at stake.
17. Telephone, cellular phone and postage charges are billable at actual cost. A copy of all
service bills/costs should accompany the billing for each single item that exceeds
$75.00. The fee for the sending or receiving of facsimiles will not exceed SO.25 per
page. Photocopier costs should be no more than the actual cost of duplication, or $. 1 0
per page, whichever is less.
18. We do not pay for secretarial time or secretarial overtime. We do not pay attorneys or
paralegals for secretarial tasks or tasks that should be subsumed into your overhead.
For example, faxing, mailing, arranging for messengers and calendaring are not
acceptable charges.
19. We do not pay for word processing charges. This includes per page or hourly charges.
20. We do not pay for billing or discussion of bills. If we have questions about billing or
need additional information on bills, that is not a chargeable event; you should respond
without charging the city for the time required.
21. Do not charge for file opening or file closing. These are not true tasks or adequate
descriptions of legal activities.
22. We appreciate when you have researched an issue previously and use that research on
the present case. The city has retained you because of your past experience. Do not
charge the city for work you have done and billed another client for in the past.
23. Special counsel are to pay all costs of the lawsuit, including expert witness fees and
transcripts, and include these charges in the monthly billing unless otherwise directed.
D. Reporting.
24. Each month, special counsel shall prepare a brief summary of activity on each case.
Each monthly summary should include attempts at settlement if any.
25. After the first monthly summary is sent, you may copy the prior month's summary with
an indication in the last few sentences at the end of each summary of any relevant
changes during the month. Special counsel shall not charge more than one hour per
case for this summary without prior approval.
26. We need copies of all motions or briefs. Unless previously requested you do not need
to send drafts or miscellaneous correspondence, Significant pieces of correspondence
should be copied to us, along with copies of all research memos.
27. If a case is likely to be a loser, we want to know up front in order to minimize litigation
costs, and settle the case. We do not want to be informed of the low probability of
success on the eve of trial. You are not expected to be a guarantor of success or an
insurer, all that we ask for is your best guess.
28. Special counsel shall notify the City Attorney if it becomes apparent that legal fees for
a case will exceed or are exceeding S5.000. Outside counsel shall submit a budget
estimating fees and costs, identify the work expected to be done, the identity and
billing rate of each attorney and paralegal to be involved, and the amount of time the
work is expected to take. Thereafter, the City Attorney shall be updated quarterly of
the estimated fees and costs.
"Penny-wise and pound foolish" is not our approach. Cost-effective representation is. These
billing guidelines are instituted to ensure that your bills convey the information that is necessary
to manage outside litigation.
We appreciate your services and feel that this protocol will make the attorney-client relationship a
smooth one for both sides. Because these guidelines are set out in advance, they are designed to
minimize any confusion or misunderstanding. If you feel hamstrung by this protocol, please raise
the issue. Our concern is the results and total cost, not saving a dollar to spend a thousand.
WD 010899/3-NEWNEWAV8/714737/V2
AON Aon Services Group
3 CIC -7 *H 1Q: 2?
--. • -- .CITY ATTCKNEi
December 4th, 1998
Mr. Scott Field,
Deputy City Attorney,
City of Huntington Beach,
2000 Main Street, Fourth Floor,
Huntington Beach, CA 92648
RE: Howard Rice Nemerovski Canady Folk & Rabkin
Verification of Professional Liability Insurance
Policy Year: June 15,1998 to June 15,1999
Dear Mr. Field:
As instructed by Mrs. Mary Jane Hargrove of the above referenced firm, please find
enclosed an original Verification of Insurance for the firm's current professional liability
coverage.
I trust you will find the attached to be in order; however, should you have any questions
please feel free to contact us.
Very truly yours,
Daniel D. Klauss
Vice President
License £0795465
cc: Mrs. Mary Jane Hargrove
Howard Rice Nemerovski Canady Falk & Rabkin
AIS Affinity Insurance Agency, Inc.
525 Market Street • Suite 770 • San Francisco. California 94105-2715 • tel: (415) 222-7301 • fax: (415) 222-7302
CA License #0795465 J:«CLAUSSWOWARDWt\SlVOftun6uchl.TH.ioe
AON
ISSUED TO:
VERIFICATION OF INSURANCE
City of Huntington Beach
Attn: Scott Field, Deputy City Attorney
Aon Services Group
WE, the undersigned Insurance Brokers, hereby verify that certain Underwriters at Lloyd's, London
and Various Insurance Companies have issued the following described insurance each for their own
part and not one for the other, and which is in force as of the date hereof: -
PROFESS10NAL INDEMNITY INSURANCE
NAME OF ASSURED: HOWARD RICE NEMEROVSKI CANADY FALK & RABKIN, A
• PROFESSIONAL CORPORATION and others as more fully described
in the Primary Policy wording.
PRIMARY
POLICY NO.
9624 468
INSURERS
Underwriters at Lloyd's,
London and Various
Insurance Companies
PERCENTAGE
100.00%
POLICY YEAR
June 15,1998 12:01 a.m.
to
June 15, 1999 12:01 a.m.
LIMIT:Not less than $1,000,000 (an annual aggregate not subject to reinstatement
as provided for in the Policy wording)
CANCELLATION
PROVISION: Policy is non-cancelable during the period of insurance.
Subject to the terms, conditions, exclusions and limitations of the Policy.
This document is furnished as a matter of information only. The issuance of this document does not
make the person or organization to whom it is issued an additional Assured, nor does it modify in
any manner the contract of insurance between the Assured and the Underwriters. Any amendment,
change or extension of such contract can only be effected by specific endorsement attached thereto.
Date: December 4th, 1998
??ROVSD AS TO POBMa
RUTTOH
-r.'.^7 Attorney
PER:
Daniel D. Klauss
Vice President
AIS Affinity Insurance Agency, Inc.
Lie. # 0795465
AIS Affinity insurance Agency, Inc.
525 Market Screec • Suite 770 • San Francisco, California 94105-2715 • eel: (415) 222-7301 • fax: (415) 222-7302
CA License #0795465
February 16, 1999
TO: CITY ATTORNEY
ASSISTANT CITY MANAGER
ADMINISTRATIVE SERVICES DIRECTOR
<&FROM: Risk Manager /
PROPERTY TAX ON ELECTRIC GENERATING PLANTS
As you know, several cities in which there are power plants have held two meetings, one
on January 12, 1999 and the second on January 25, 1999. The purpose of these meetings
was to identify strategy(ies) to increase the allocation of power plant property taxes to the
host cities.
At the January 12, 1999 meeting, it was decided that attorney Steve Mayer would prepare
an issue paper to be submitted to the State Board of Equalization (SBOE) and the cities
would share in this cost. Exhibits 1,2,3 and 4 provide information on this matter and the
January 12, 1999 meeting.
At the January 25, 1999 meeting it was decided to establish a Steering Committee
comprised of Huntington Beach, Long Beach and Carlsbad, prepare an RFP for
consulting services to evaluate the impact of a change to the current assessment practices,
and to obtain an estimate for all consulting services so that an estimate of shared costs
could be proposed to the member cities. See Exhibit 5 regarding Steve Mayer's fees for
his work up to the projected date the Board will take action. Also at that meeting, Dave
Elder, a representative of the City of Long Beach, stated that he had been working with
Steve Peace's office on language for a bill to provide for local assessment of power plant
property (I later learned that he is a consultant to Long Beach and functioning as that
City's legislative representative).
On February 5, 1999 I had a message from Huntington Beach City Treasurer Shari
Freidenrich stating that on February 10, 1999, she and Long Beach were attending
meetings with the League of California Cities and Senator Peace, and I was invited to
attend. I attended and results of those meetings are shown in Exhibit 6.
Finally, while in Sacramento, Huntington beach provided a draft cost sharing agreement
prepared by an attorney with the City of Huntington Beach. I have not attached it
because a slightly revised one has been mailed (we should have it by today). Huntington
Beach's goal is to get it signed as soon as possible so attorney Mayer can proceed with
his work (please note timeline on pages 25 and 26 of Exhibit 4).
At this time, per our verbal agreement at the January 12, 1999 meeting, we owe
approximately $3,000 for attorney Mayer's work in January. When I receive the cost
sharing agreement we can discuss where we go from here. Please let me know if you
have any questions.
JfiN-21~i999 08=15 CITY OF ropi . • -iT ut^ -H p. 02/09
Memo
Office of the City Treasurer
To Distribution List
EXHIBIT 1
JoyodBurtngL Olyof MoroBay
xc Honorable Mayor and City Council Members
Gail Mutton, City Attorney
Scott Reid, Deputy City Attorney
Ray Silver, City Administrator
Metanie Fallen, Assistant City Administrator
David Biggs, 'Economic Development Director
Supervisor Sava, County of Orange
Webster Guiltory, Orange County Assessor
David Jones, League of California Cities
Bernard C. Barmann, Sr. County Counsel, County of Kern
Steve Mayer, Attorney
Rom Shari L Freidenrich, City Treasurer
i
Date January 15, 1999
Re Status of Property Tax on Electric Generating Plants - Unitary Tax v. Locally
\ have attached the agenda and the minutes from the meeting held in the City of Redondo
Beach on January 12, 1999.- The City of Huntington Beach coordinated the meeting and I
have attached a copy of the agenda for your review. If you did not attend the meeting,
please call Shari Freidenrtch, City Treasurer tf you have any questions. The next meeting
will be on January 25, 1999 also at Redondo Beach. We will be finalizing the issue paper to
be presented to the State Board of Equalization Property Tax Committee the first week of
February. We need to determine if an cities should physically sign the paper or if ft win be
presented by Steve Mayer as retained by all of the Cities. The Cities present at the meeting
on January 12 agreed to jointly fund the costs of the attorney retained by Huntington Beach.
We expect the initial cost to be less than $15,0X30 total for the issue paper.
I have also attached a tentative agenda for the meeting to be,held on Jarwary 25, 1999.
Ptease RSVP to my office if you will be attending at 714-536-6200 or FAX 714-374-1 603.
Attachment AES11599.doc
jHN-21-iyyy «y:i^ LIIY ut-
MINUTES
UNITARY TAX V. LOCALLY ASSESSED PROPERTY TAX
ON ELECTRIC GENERATING PLANTS AND FOR UTILITY(\ '
January 12, 1999
12:00
Present: See Attached List
Absent: City of Riverside, City of Morrow Bay
Summary of Meeting:
• The City of Huntington Beach opened the meeting and discussed the basics issues relating to the
sale of the IS regulated electric utility plants in 1998 to private companies. It was also brought
up by several cities attending that they were not part of the 15, but had plants which were
expected to sell to private companies in 1999 and others had co-generating facilities which the
State Board of Equalization (SBE) was proposing to assess on a unitary baas.
• We then discussed the position that the SBE had taken in December, 1 99S at the Property Tax
Committee meeting on December 7, and the subsequent SBE meeting on December 10, 1998.
• The impact on Cities was brought up and a key point addressed was how the State would assess
the value and any Goodwin consideration. This could have a significant impact on the dollars
provided to the City if the State used a lower value that than expected to be proposed by the
County Assessor's. It was noted that Redondo Beach in working with Los Angeles County
Assessor's had potentially increased the value of the transaction from the initial recording from
the Assessor Office in relation to this issue. The entire group which consisted of both financial
and legal representatives from eight cities and a variety of industry consultants (HDL and MRC)
agreed that the locally assessed valuation method would provide a significant increase in
property tax revenue to the Cities which have deregulated electric utility plants.
• The group reviewed all options and made the following decisions:
1 . A joint issue paper prepared by the attorney retained by the City of Huntington Beach, Steve
Mayer would be prepared and the costs shared by all Cities. This issue paper will be
presented at the January 25, 1999 meeting and faxed to all Cities on Friday, January 22, 1999
with the agenda.
2. A Legislative Committee consisting of Rich Barnard, Deputy City Administrator -
Huntington Beach and Dave Elder, Consultant to Long Beach would determine which
Assemblyman should have include a "tentative bin" on this issue if the Cities decide to move
forward on legislative action. The City of Huntington Beach indicated that they, have already
talked to Assemblyman Baugh who would consider holding a position for a bill. The
committee would determine the best Author of the BOl. It would be expected from all Cities
that they would talk to their Legislatures to co-sponsor the bill if necessary.
3 . Each City should take responsibility for contacting the following;
• County Assessor's office
• Redevelopment Office in each City
• League of California Cities
AESm0112.doc 1
• County Supervisor's office
• School Superintendents in their Cities district
• Mayors and City Councils of each City
These groups v/ill all benefit from having increased revenue (or in the case of Schools, not
having the state backfill as much money which can then be used for other purposes). ' .
A contact person for each organization was provided to Shari Freidenrich to follow up with all
materials. A copy of that list is attached.
Adjournment: The meeting adjourned at 2:40 PM. The next scheduled meeting is January 25,
1999.
Minutes prepared by: City of Huntington Beach
AEStn0112.doc
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CHTY OF OAKLAND
' VINCENT 1_ JONES
ASSISTANT TO crrv ATTOANET -
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(510)23&-6517
M 238-6SOO
TTT 238-7367
e<mail:
) FRANK M..OCAWA »>LA2A, 6TH FIJI. OAKLAND,
CIEN ft. COOCINS
Assistant City Attorney
Tel: (619) $91-5037
Office of ihe dry Anorney
276 Fourth Avenue
ChulaVisw. CAS 1?10
Ernfe H. O'Dell
CltyTrecourer
*15 Diamond Street
OfyofRedondoBaoch '•
'' y'TeL (310)372-
• * P< .'
90277
Citv of Cartsbs
James F. El I Fort
Admlnlstrativo S«rv1c* Director
FAX <760)
| 1 soo Carlsbad Village orlv*
I Carlsbad. California 92OO8-19S9
LAW OFFICES
VOODS & DAUBE LIP
LINDA L DAUBEressio*tAi. c««ro
ATTOHNEV AT LAW
SONOMA. CUJFQflNlA 9S*7fr701) r»tI707> IM-1776 (707, M.
WILUAM5 * 50«eNS*H (So
ROBERT MESSINCER
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LOS AMOEieS, CM^TBRMA 40017
Oty of
MARK S. MANIC
Deputy City Attorn
(80S) 39S-74J
Fax (805) 38S-74;
Office oi the City Attorney
300 West Third Street. Suit* 300 Oward. California 930 JO
HclL Revenue Management for Local
Hinderllter. de Llamas & Associates
HdL Coren & Cone
PAL'LA J. CONB
(909) 9SM335 I f« [909| 861-7726 !
1340 Valley Vista Drive I Suite 200
Diamond Bar. California I 91766
L\ sTT
A.C. (UAJLW) KOCH
ATTORNEY AT LAW
500 N. BRAND 8OUIEVARO
SURE 1030
SlENDALg, CAilFOf?NIA 91203
TEL. (813)500-«444; FAX (818)500-9979
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JftN-21-1999 08:16 CITY OF CHRLSBfiD 760 720 9461 P 06/09
Unitary Tax v. Locally Assessed Property Tax
On Electric Generating Plants and for Utility Deregulations
Redondo Beach City Hall
415 Diamond Street Redondo Beach, Califoroia
Tuesday, January 12,1999 12 noon
1. Sale of Plants
• Exhibit 1
2. State Board of Equalization (SHE) Information
" Exhibit 2 - Issue Paper
• Exhibit 3 - Summary of SEE Action
3. Impact of change on Cities (estimate)
• Exhibit 4 - Huntmgton Beach (estimated impact)
4. Options available to Cities
A. Litigation to challenge SBE jurisdiction
B. Administrative Rulemaking
• February 2,1999 - SBE Workshop, Culver City
C. Legislation
• Exhibit 5 - Allocation of Tax Revenues
D. Joint Approach among 15 affected cities
5. Recommendations
DiVectfons to Redondo Beach City Hall:
>
Coming from the North on the 405
Exit Inglewood Avenue, right to 190th Street, right to Pacific Coast Highway, left to Diamond, right to first
driveway, right and park under Library
Coming from the South on the 405
Exit Western Avenue, left to 190th Street (just after you go under the Freeway), right on 190th to Pacific
Coast Highway, left to Diamond, right to first driveway, right, and park under Library
After parking under Library, take elevator to 1st Floor, exit Library front door, right past Council
chambers proceeding west to City Door E.
SBE199.doc
JHN-21-1393 08:16 CITY Uh CflKLSBRD Y60 720 9461 P.07/09
Unitary Tax v. Locally Assessed Property Tax
On Electric Generating Plants and for Utility Deregulations
Redondo Beach City Hall
,415 Diamond Street
Monday, January 25,1999
List of Attendees:
Redondo Beach, California
1:00 p.m.
Jim Elliott
Mark Manion
Paul Lewow
Dave Elder
Robert Messingas
Frank Rowlen
Ernie O'Dell
Linda Crittondon
AmieRoss
Stan Remelmeyer
Earl Hobbs
Shari Freidenrich
Scott Field
Richard Barnard
Barbara Hennesy
Lyle Haynes
John Fuji!
Glen Gdogins
AlKoch
Paula Cone
Andrew Nickerson
Vincent Jones
Linda Daube
Aaron Jones
Add as contacts:
Bill Bue
ErinLetsch
City of Carlsbad
City of Oxnard
CttyofOxnard
City of Long Beach
City of El Segundo
City of Redondo Beach
City of Redondo Beach
City of Oakland
City of Huntlngton Beach
City of Redondo Beach
City of Long Beach
City of Huntington Beach
City of Huntington Beach
City of Huntington Beach
City of Long Beach
City of Chula Vista
City of Huntington Beach
City of Chula Vista
MRC
HDL
HDL
City of Oakland
City of PittsburQ
City of Redondo Beach
City of El Segundo
City of Carlsbad
.01/22/1999 13:19 7143741603 CITY O HUN! BLAUH "HUE.
IBIT 2
Unitary Tax v. Locally Assessed Property Tax
On Electric Generating Plants and for Utility Deregulations
Redondo Beach City Hall
.415 Diamond Street
Monday, January 25,1999
Redondo Beach, California
1:00 p.m.
1. Review of Staff Position for SEE for Feb. 2 meeting (meeting starts at 9:00
a.m., our issue will be later in morning - 5901 Green Valley Circle Room 207,
Culver City)
2. Analysis of Legal Issues - Steve Mayer
3. Consideration of Establishing Steering Committee
4. Billing mechanism for all Cities
5. Discussion of fiscal impact and whether a consultant should be hired
6. Update on legislative options
Directions to Redondo Beach City Hall:
Coming from the North on the 405
Exit Inglewood Avenue, right to 190th Street, right to Pacific Coast Highway, lett to Diamond, right to first
driveway, right, and park under Library
Coming from the South on the 405
Exit Western Avenue, ten to 190th Street Gust after you go under the Freeway), right on 190th to Pacific
Coast Highway, left to Diamond, right to first driveway, right, and park under Library
After parking under Library, take elevator to 1st Floor, exit Library front door, right past Council
chambers proceeding west to City Door E.
SBE199.doc
ur HUM,
CITY OF HUNTINGTON BEACH
Inter-Department Communication
To: All Interested Parties
From: Scott Field, Deputy City Attorney
Date: January 22,1999
Subject: Meeting of January 25,1999 in Redondo Beach regarding
Electricity Generation Plant Unitary Tax
At our meeting of January 12,1999, it was agreed that Steve Mayer would prepare a paper to be
submitted to the State Board of Equalization setting forth why deregulated electricity generation
plants should be subject to the local property tax instead of the unitary tax: Since then, Steve has
discovered some new information that suggests it would be premature for the cities to present
such a paper at this time. Instead, the paper will be presented in due course during the
administrative rule-making process. This delay will also provide all of us with an opportunity to
develop a factual record to support our legal arguments. A complete explanation of Steve's
proposed approach is attached.
Although Steve will not be providing a written paper for our January 25,1999, meeting, he will
be present and will describe orally some of the key legal issues that ultimately need to be
addressed
There will still be plenty of work for us to do at the January 25,1999, meeting. I suggest we
address the following topics:
1. A formal means for making recommendations to the group and distributing
information. I suggest that a steering committee of three or four cities be
appointed. The steering committee would be responsible for providing guidance
both to Steve Mayer along with the legislative advocates. The committee also
provides a means of distributing information to the group.
2. A billing mechanism for legal and consulting bills.
3. Discussion of whether we should hire a consultant to provide an independent
analysis of the fiscal impact of moving the 15 stand-alone plants from the unitary
tax rolls to the local property tax rolls.
4. A discussion of our legislative options, including carving out a new allocation
exemption for the unitary tax.
I am sure there are additional issues that others may wish to discuss. I look forward to meeting
with you again on January 25,1999.
SF-99Mcmos:T«0121
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January 20, 1999
CT: ,
ATTORNEY-CLIENT PRIVILEGE
Scott Field
Deputy City Attorney
City of Huntington Beach
2000 Main St.
Humington Beach, CA 92648
r..;
".,5
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Re; Electricity Generation Plant Assessment
Dear Scott:
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under Article XinfS'e&iWl^of the .Galifornias6onstitutioffito^assess^6tand-aione"-,,.,',
electricity genera'tio'n pl'a'trts that are notpart-of a-regulatcd'public',utility. The consensus
of the meeting was that the Issue Paper would be discussed at a meeting of the group on
January 25, 1999, and then submitted to the Board before or at that body's February 2,
1999 meeting. While I thought that this procedure made sense at the time, my opinion
has changed, partly as a result of talking to LrarqeAugustayioneiofAe^Board's^ lawyers
involved in this issue, and partly as the result of more thought as to how the cities ought
to proceed.
When I talked to Larry Augusta^Uat*riday,-he;informed:me>_that,the
meeting on Februaryr2i;was not intended to^be;substanrive,^butwa5-rasiead--to be devoted
to th"e procedural issues'the Board faced>msdeciding to itutiaf&a rule-maiking proceeding
devoting to the utility assessment issi^Sl^ecifes^
Palo Alto. 1755 EMOJOCAMK) KOAO. Svirn 200 • PAW ALTO. C\ HiOJ-3309 • Tturxoxt 650/842-6500 - fAUlMU £50/193-7912
610 NPOTOJT Ccxru Owe, Sun 450 • Nlwroxr BUOi. CA 9266C-64JS • TMMwoNf 949/721-^900 • PACSIMIU
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J.7^37416^,, ^%V CITY OF HUNT BEACH PAGE
Scott Field
January 20, 1999
Page 2
decide whether to initiate a formal rule-making proceeding by publishing proposed Rule
905 (which is contained in Dean Andal's memo of December 3, 1999 to the other Board
members), or whether to have additional, informal hearings before doing so. He also told
me that he understood Huntington Beach's position and did not see the need for further
input from us at this early, procedural stage. As he acknowledged, we and other
' interested parties will have plenty of opportunity to comment on the proposed rule during
the formal rule-making process, and the Board at that stage will be under a legal
obligation to respond to our comments in accordance with Government Code Section
11346.9(a)(3).
After our conversation, Larry sent me a "tentative timeline," which will be
submitted to the Board before the February 2 meeting, According to this timeline, a copy
which is enclosed, after the draft rule is published, the staff will conduct a briefing
session for all interested parties, the parries will have a month to prepare materials to
submit to the Board's staff, and there will be four days of meetings with interested parties
in early April.^The staff may then revise the proposed rule, and any revisions will in turn
trigger another opportunity for interested parties to submit materials to the staff at a
second round of meetings. All of this will occur before the formal public hearing and
Board vote on the proposed rule, which is tentatively scheduled for July 28, 1999.
In light of what I was told by Larry Augusta, and the proposed schedule, I
see no reason to submit anything substantive to the Board at this stage. Submitting
something now -runs the;risk that the Board and its?staff?will: pay, less, attention to our
submission later, on the assumption that we have nothing new to say, l^reover^as tnc
encJojed.timeUnenn'di'catesfih'ereiwill be abundant opportunities: for both formal, and
informal meetings with and presentations to the Board s staff during the formal rule-
making process. Accordingly, there is a real risk that submitting substantiveKomments
now would be perceived as by the staff as an attempt to "jump the gun," and would make
the, staff-less-likely to consider our future submissions on the merits.
submission on the merits we do make should be
cpordinatedf if possible, with the attorneys for the five companies which own the fifteen
"merchant plants" sold during 1998. At the present rime, however, I have only identified
one of these attorneys (the attorney for AES), and have not been able to talk to him
because of the intervening holiday. In my view, it is absolutely critical to find out
whether the plant operators agree with our point of view, and how forceful they will be in
taking that position, before we submit anything to the Board.
JAN-29-1999 09:52 +1 415 217 591$P. 03
.01/22/1999 13:19 7143741683 Cl- •.-.- HUNT
U. 1300 j -' '
Scott Field
January 20,1999
Page 3
This is so for a variety of reasons, not all of which were readily apparent
when we had our meeting. To begin with, the staff s.legal analysis that was given to the
Board in November 1998 asserted that these stand-alone generation facilities have several
characteristics of public utilities, including the dedication of their property to public use,
the need for siting certification, and their impact on large populations. &££ Staff Issue
Paper (Nov. 16,1998) at 6. I think the position of the plant owners on these issues will
be critically important in trying to disparage the staff recommendation. Yet, at the
present time, we don't know what that position will be.
Moreover, the owners of the stand-alone generating facilities are in a better
position than are the affected cities to analyze the economic impacts of proposed Rule
905. As you know, the proposed rule would subject to SBE assessment,all private
companies that obtain 80% or more of their gross receipts from the sale:of electricity
(excluding sales "through a private line not tied to the grid"). This means, in principle,
that a company which owns one or more stand-alone generating facilities might be,able to
escape SBE assessment if its other businesses generated 21% of its gross receipts.
Accordingly, the proposed rule might be easy for a company to circumvent. While there
might be regulatory reasons why this might not occur, we won't know the real-world
impact of the proposed 80% test (and, thus, whether we should oppose it or support it),
before we talk to the attorneys for the stand-alone plants.
I also suspect that either the regulated utilities or the owners of the stand-
alone plants can contribute to the legal analysis of the jurisdictional issue. One of the key
facts supporting the cities' position is the exclusion of the stand-alone generation
facilities from the definition of "public utilities" in Public Utilities Code Section 216(g).
Sfifi Staff Issue Paper (Nov. 16,1998) at 6. Because we don't have the legislative history
of AB 1890 (although we should certainly get it), we don't know why the Legislature
amended Section 216 as part of that statute to exclude the stand-alone generation
facilities from the definition of "public utilities." But I'm sure the answer lies buried in
AB 1890's legislative history, and that the attorneys for the regulated utilities know the
answer.^Because that legislative history may be quite helprul,|ppsiiii^l^^bmi;tT4
an^irlp^^B^^^ntifwe Mow7why«PufeHc Utilities Code S'ection 24-6(g^was "
adopted
Finally, we are far from having our own facts in order. One of the key
reasons why local assessment of generation facilities make sense is because these
facilities directly and adversely impact local communities, without providing
JRN-20-1999 09:52 +1 415 21? 59f0 9SX P. 04
01/22/1999 13:19 7143741683 Cl HUN IU
Scott Field
January 20,1999
Page 4
corresponding lax revenues. Our position will be enhanced when we provide dramatic
examples of such impacts to the Board. Yet we are not ready to do so, because we have
not had the opportunity to discuss these issues with the individual cities.
For all these reasons, I think it is premature to submit anything to the Board
at this time. Instead, I think the meeting on January 25 should be devoted to the
following topics: (I) reviewing the staff submission for the February 2 meeting (which I
haven't yet seen); (2) figuring out whether we should participate in that meeting and what
we should say; and (3) identifying the attorneys for the five plant owners that we should
contact to try and work out a coordinated strategy.
I look forward to discussing these issues with you as soon as possible.
Sincerely,
SLM/SXP
WD 0120W1-129060I/71906JM
JflN-20-1959 39:53 +1 41S 217 5918, 96*P. 05
.01/22/1999 13:19 7143741683 C1IY Ul- HUN I ao
FAX
TO:Steve
Howard. Rice,
3 Embarcadero Center,
Suite 700
$an Francisco, CA 94111
of Equalization
450 N Street. MIC: 82
P. 0. Box 942879
Sacramento, CA 94279-
0082
91&445-6493
916-323-3387
D
, _ .• D *>ryouf»v«w Q please Comment
, hen, are ccpi9s Of .
10 1998 meeting, and the proposed time line for «>™a?^™"™
e line la tentative and subject to approval by the Board
$9 JJ 03
JflN-20-1999 09:53 415 217 59*0 P. 06
l Y ur
PgLOTOSEP ?IAN OF AGTKW AND TUVTE USE
ADOPTION OF HXJUE 905
ASSESSMENT OF COMPANIES OWNING
ELECTBIC GENERATION fAdUITES
1999
February 2, 1999 - Board authorizes publication of Rule - Culver City Board Meeting.
Ternary 5, 1992 - Legal prepares necessary documenrs.and submits them to BPD for
tfansnrittal to OAL. BPD transmits draft Rule to OAL for
Publicadon.
Febraaiy 19. 1999 - OAL publishes Rule and begins public comment period,
Staff malls draft Rule and proposed meeting schedule to interested
. parties.
' February 26. 1 999 - Staff conducts briefing session for til Interested parties to provide
overview of proposed Rule end answer preliminary questions .
March 31, 1999 - Interested parties to submit to staff any materials they wish
distributed or discussed at w^^'flffi iti April.1
April 6-9, 1999 - First meetings with interested parties - one group each day2
April 22, 1999 - Deadline for staff TO complete possible revisions for management
review.
April 27, 1999 -. Deadline for management corameats on possible revisions.
April 30, 1999 - Staff mails possible revisions to interested parties. '
May 21, 1999 - Interested parties to submit to staff any materials they wish
distributed or discussed at meetings in June.
June 3, 1999 - Second meeting with interested parties Goint meeting),
1 Place aatc Out (fcii deadli
tearing date^Jufy 21, 1999. AU comments MbiaUjdferfaictlitftiwi^teMlad^
raleatkiflg file, vad wpoodadto a$ required by law.
They do
noc replace tbe ^^ official Public Hewing vttcHistchednledfa; July 21, 1999. As aatad In feotnoic 1, all
'comzacms w»a boccro pan of tbe ofBeial ivldDakinc file, aod ^U be accepted uauliho Public Hearing
Date.
JflN-26hl999 09=53 *1 415 217 9S* P.07
01/22/1999 13:19 7143741603
JHNJMI. £U.
June 7-11,1999 - Suff meets and 4&ifa on any proposed revisions to published
Rule.
June 18.1999 - Staff completes final issue paper, matrix and other necessary
documents for internal review.
June 21-25,1999 - Circulate final documents for internal review and approval
July 1,1999 - Staff distributes draft revisions and tupporting materials to Board
wd interested parties for public hearing at the July 28 Board
meeting.
July 28,1999 - Public hewing and Board vote on Rule.
August 6,1999 - Final docurneau submitted to OAL for review.**
September 17,1999 - OAL approves Rule and fflea with the Secretary of State
..October 18,1999 - Effective date of Rule 905
** If the Rule is adopted by the Board on July 28, final documents will be completed and
forwarded to OAL for approval If there arc DO problems, Hub should be approved by
mid .August
. If the Rule as published is changed by the Board on Jury 28, the changed version will likely
to placed in. what is known as the 15 day ffle for public review and comment, and the Rule
will be brought back io the Board for final adoption at the Auguit 31-September.2 or the
October S -7 B oard meeting. ,In the event that the Rule is ignificantiy dunged by The
Board, the Rule may hive to be republijhcd and a new public hearing date established.
The new date would most likely be at the late October Board meeting in Culver City, or
the November meeting in Sacrameoto, in order to have the Rule approved by OAL and
effective on 1/1/2000,
January 13,1999
'
JflN-20-1939 09:53 +l 415 21? 59ll 96X P. 88
01/22/1999 13:19 7143741603 CiIY Uh HUN I PWlafc. ii
DRAFT
LEGISLATIVE PROPOSAL
100.7 Jurisdiction for Assessment of Electric Generation
Facilities constructed or sold after the Passage nf AR
(Ch. 854.
Commencing with the 1999/2000 fiscal year, Electrical
Generation Facilities, including power plants,
cogeneration facilities and new generation facilities
purchased, constructed or operated by non-regulated
public utilities companies after January 1, 1997 shall be
assessed by county asssessors.
Post-It" brand fax transmittal memo 7571 »o<pigw /
CO.Co.
Dept
01-21-99 05.26PM Put
AC. • t_ii.r i i
Law Offices Of
HOWARD
RICE
NEMERDV5KI
CANADYFALK
&RABKJN
A Professional Corporation
THREE EMBARCADERO CENTER, 7m FLR
SAM FRANCISCO, CALIFORNIA 94111-4065
TELEPHONE 415/431-1600
FACSIMILE 415/Z17-5910
DEMIST RICEHO"M(D N NEMCTOVSXIWCHAW> •v CANADY
JtKQMia PA1XJK.
UWIMd B- RASKIN
RAYMOND P- HAAS
ROBWT E. COO DING. JR •
MAIITIN R. GUOC
STZVIN L MAYHB
JXME5 L IOPE5
DIRK M 5CHENKXAN
THOMAS A, IAKSEN
STEVEN t. SCHOH
KBNNKTH G (lAUSMAN
DONALD P. MttiS
H JOSEPH ESCXER HI
RAWIY A. AOTOTT
ANTHONY * AiCU»i~
BlliABETH 3. 5ALVESON
H MATHEV MOORB
PETER J. BUSCH
HONAJJ3H STAR
WT C, MORtSSIAU-
MARKD I
RJCXARD C. pVCOBS
AIAW W JPAKCK
CHAMW P OUTMTTR
5TUAKT 5. U7TON
VIA FACSTMILE
ATTORNEY-CLIENT PRIVILEGE
Shari Freidenrich
City Treasurer
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
EXHIBIT 3
MABTMA K. COOOWC-CKAALOTTE M- iwooNTIMOTHY 5. MOCA.VN
ROSEMAlff 5. TAM.TONST8PUBN J. DtCOSM
JO5g?H A. CRBCO-
MMETA.NZXON
BffllNAKD i- BUUt
FW*N ? SCHUWtAX
DONALDS SCHSRW
CUYN K- LAZAMJS
TOOD E- THOMPSON
KENNCTHD.GARY M. KAPLAN
DOUClAS A, X
MATTMnf J MOOBSDANIEL i A.SIHOV
CAJtVS SOBNCTT
PTTQIJ, 8UA5
ANNE-MAWI EttWAS
SIMON J.DAVIO M.
2VE H CEKVAMTEX
SXTC A. KKWJX
SHjOU M-L Q^ING
SAQflN D ADAH:v»3CARIOC MORMOR---KATHKYN A VACLAV-SCOTT O. KJMDJ.V-SCOTTNDUA-VPR
DAMD P CAMPOS
JEPTRTr 2- PAUCI'."
JONATHAN W- Kf-x:
BAJ«A»A A. ^WIHU
PAUUW! t CAIAHO8
WEJJAMJ. LAP7EKTY
K£NNTT>f A- NZALB
PALTK. ROCTK5
JOHN E. F.ICIIHORST
ANNETTB U HUJST
UNDAQ.fOYBooms j-
PATOOA T JOHA.NX
SCOTT X- MOWN"
SETHI. KjAWCT
^••NTTCT L BIACKMAN
PAMtU K. FUlMEtMATTNBW j. «m-
OENISEM. WLEYSHANNON L *HJTE»CAXY R. BKUHT<$M. UNDA WAO5AK1
DANIQE CAOl
ERir. f, DAMON1
OJZAMTH T, SCOTTBARBARA JLSMTTH
, YAMINI
T. M.VHT1S'
\ P V.VN GO'-iD
CKWITOPHH! L ='.
DAVID M- STnyr^
PETES J DM3E.<C
QfCouraef
MENHY TT HO^.VO
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MICHAEL s.
FSTDCTICJ ATJAM
ff ^rf-ttf*J<" A
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ANTHONY GKUMRACH*
L JUUV3 M. TUJMAJJ' <*
JOANNSBA1,
5HBtLliTJ.SU
WRITER'S DIFECT OIAL' (d!5j 399.5039
WRJTBR'S E-MAIL; jp7iyer@hricc.ann
Februarys, 1999
Re: Assessment of Stand-Alone Electricity Generation Plants
Dear Shari:
I am writing this letter to bring you up to date on what occurred at the February
1999 meeting of the State Board of Equalization and to share my thoughts as to what needs to
next
As you may recall, on January 22,1999, SBE staff published another Issue Pap^'
dealing with the Board's jurisdiction over stand-alone electricity generation plants. Unlike the ^
issued in November, 1998, this paper focused primarily on the procedural issues facing the Bo«~
it initiates the rule-making procedure contemplated at its December, 1998 meeting. The seconc:
gave the Board the options of initiating a rule-making proceeding now, through publication of<
proposed Rule 905 in the Notice Register, or delaying publication pending the outcome of a s«ne.5 &V
informal meetings between staff and interested parties.
On my way to the meeting, I learned that SBE member Dean Andal had
his colleagues on the Board a memo detailing proposed changes in the proposed version of Ru
contained in the January 22 Issue Paper (which was, in turn, based on an earlier proposal by
This memo was sent only a few days before the Board's February 2 meeting.
Palo XAcc 1755 EMBAiCADCTO ROAD. SITOS 200 • PALO AlTO, CA 94303-3309 • TOJEFHONB 650/842-8500 • PACKMILB 650/493-7912
Urn/port Beach: 610 Nprpour OENTD* DJUVE, Jure 450 • NEWPORT BEACH, CA 92660-6435 • TSlZPHOw 949/721-6900 - TACSMILS 949^21-6910
FEB 05 '99 12:02PM HOWPRD/RICE/ET PL. (415)217-5910 P.5
Shari Freidenrich
City Treasurer
February 5, 1999
Page 2
At the outset of the February 2 meeting, staff suggested that they needed to re fine
proposed rule in light of Dean Andal's latest proposal and therefore requested a delay in the timeu-
they had originally proposed. Although this idea engendered initial opposition from Andal, the
public sentiment in favor of delay was overwhelming, as one speaker after another (from industr
utilities, municipalities, and county's assessors) endorsed delaying the rule-making process.
Accordingly, the Board postponed further consideration of this issue until the meeting of its Prej.<
Tax Committee on February 23, 1999. Pending receipt of further materials from the staff, it see:;
that the agenda for this meeting, too, will be purely procedural, Ls., whether to publish a propose.
rule and start the formal rule-making procedure now or whether to postpone publication until lar:
the administrative process.
I think there are two tasks which need to be done as soon as the various cities tha:
have attended our recent meetings commit to financial participation. First, I think we need to
immediately start coordinating our efforts with potential allies. On the way to the Board meeting.
spoke to Peter Michaels, an attorney at Cooper, White & Cooper in San Francisco, who represer<T
three major regulated utilities (PG&E, Southern California Edison, and San Diego Gas & Electric
well as one of the major operators of the "merchant plants." (I believe Duke Energy), Peter told
that all of his clients support local assessment and are trying to develop a coordinated strategy, t.
think we need to work closely with Steve Davis, who represents a different group of plant opera;c»r
The utility lawyers and the cities should begin developing a coordinated approach that, among
things, addresses one of the key claims made by the staff in support of its recommendation to a ?;
jurisdiction over the stand-alone plants-that the merchant plants continue to operate as public
utilities. We should also start working together on the legislative front.
Second, and simultaneously, we need to refine our own position on the jurisdict::.
issue. During the February 2 meeting, Dean Andal several times emphasized the need for writt-r
submissions by all interested parties. While I certainly do not guarantee that anything we can sa-
would prevent the Board from attempting to assert jurisdiction over the merchant plants, I do thl
we need to continue preparing our own Issue Paper if we are to have any credibility with the Bo-r
Before I can proceed further, however, I need to know that the cities are willing • :
fund the effort outlined in ray letter to you of January 28, 1999. There is a lot of work that need
be done, but I cannot continue to work on this project without assurance of payment. If you
further information from me to convince more cities to join our efforts, please let me know.
Very truly yours,
fENL.MAYBk
WD 020599/1-U9CK50I/25/724024M
EXHIBIT 4
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
(PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
TELEPHONE (916) 324-2642
FAX (916) 323-3387
January 22, 1999
JOHAN KLEHS
First Distnct. Hayward
DEAN F ANDAL
;econd District, Stockton
CLAUDE PARRISH
Third District, Torrance
JOHN CHIANG
Fourth Distnct, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento
E L SORENSEN, JR
Executive Director
TO INTERESTED PARTIES:
INFORMATION RELATING TO THE RULEMAKING PROCESS
FOR PROPOSED RULE 905 - ASSESSMENT OF
COMPANIES TRANSMITTING OR SELLING ELECTRICITY
STATE BOARD OF EQUALIZATION MEETING
FEBRUARY 2,1999,9:00 A.M.
5901 GREEN VALLEY CIRCLE
CULVER CITY, CALIFORNIA
Board staff provides the following information to parties interested in the procedures to be
followed by the State Board of Equalization with respect to proposed Rule 905:
What will happen at Culver City on February 2?
At its meeting in Culver City, the Board of Equalization (Board) will only take the first step in
the consideration of a proposed new Rule to clarify its jurisdiction over electric generation
facilities. The Board will not make any final decisions on assessment jurisdiction on February 2.
T1ie^firstvStep?jgi&^
^^he^Bj}ard^f8i&d«^
Whichever option is selected by the Board, there will be a series of meetings between staff and
interested parties to discuss the proposed Rule. These meetings will provide the opportunity for
all interested parties to study the proposed Rule, and offer written and oral comments before the
Interested parties are advised that they should wait until the comment period begins to make any
comments on the substance of the Rule, and not to make substantive comments at the February 2
meeting. Any comments on that date will not become part of the official rulemaking file.
-2-
What is the Rulemaking Process?
The rulemaking process is governed by the Administrative Procedure Act (APA), which is
administered by the Office of Administrative Law (OAL). The purpose of the APA is to ensure
that all new rules meet certain criteria and that there is opportunity for public comment. OAL
has a web site at "www.oal.ca.gov" which provides information about the rulemaking process
and links to relevant law.
Briefly, the rulemaking procedure is this:
1. After the Board authorizes publication of a proposed Rule, OAL publishes the Rule in the
Notice Register; this begins a comment period of at least 45 days in which the public may
provide written comments. Board staff must respond to all written comments; the comments
and the responses become part of the "rulemaking file."
2. During this comment period, Board staff will meet with interested parties to receive
comments on the proposed Rule. At the end of the comment period, the Board will conduct a
formal noticed public hearing. Both oral and written comments may be made at that time.
The Board then votes as to whether or not to adopt the Rule.
3. If the Rule is adopted as published or with non-substantial or solely grammatical changes, the
Rule will be forwarded to OAL. OAL has 30 days to review the rulemaking file and approve
or disapprove the Rule. In the event OAL disapproves the Rule, it is returned to the Board.
The Board would likely revise and re-publish the Rule. If OAL approves the regulation, it is
filed with the Secretary of State and becomes effective in 30 days, or on some other date
requested by the Board. The Rule will need to be effective before January 1, 2000, the lien
date for the 2000-2001 tax year.
4. If the Rule, as adopted, is changed from the published rule, but sufficiently related to the text
as published in the original notice of hearing, an additional comment period of at least 15
days is provided before the Board adopts the revised regulation. This is popularly known as
"placing the Rule in the 15-day file." The Rule will then be scheduled for final adoption at a
subsequent Board meeting.
5. If the changes in the Rule are more significant than described above, the Rulemaking
procedure may start again from the beginning, with publication and a new 45-day period for
public comment.
ee^^
California Staff has also proposed a number of other meetings with interested parties; the dates
and places of those meetings have not yet been finalized, but a proposed time line is attached.
-3-
Staff has prepared, for the Board's consideration, a number of documents related to assessment
jurisdiction. The following documents are attached hereto:
1. Issue Paper Number 99-001
2. Express Terms of Rule 905
3. Letter to Interested Parties - Questions and Answers
4. Proposed Plan of Action and Time Line
If you have any questions, please call Larry Augusta at (916) 445-6493; Janet Saunders at (916)
324-2642; Ray Hirsig at (916) 324-0028; or Harold Hale at (916) 324-0031.
FORMAL ISSUE PAPER
(Rev. 10-87)
STATE Of CAUFORN1A
BOARD OF EQUALIZATION
Issue Paper Number_2S=QQl
BOARD OF EQUALIZATION
KEY AGENCY ISSUE
Board Meeting
Business Taxes Committee
Customer Services Committee
Legislative Committee
Property Tax Committee
Other
Proposed Rule Relating To Jurisdiction For Assessment Of
Electric Generation Facilities (Supplementing Issue Paper 98-032)
L Issue
What jurisdiction for assessment of electric generation facilities should the Board
propose by regulation considering the conflicting viewpoints that have been expressed
by interested parties in both the public and private sector?
EL Staff Recommendation
TnFBoard should~prorx>se the attaete
assessment-jurisdiction over-electrierpu^^
reallocation of-value¥
III. Other Alternative(s) Considered
A. State assessment of all companies with generation facilities over 50 megawatts
capacity that sell at least 50% of their generated power through grid.
B. State assessment of companies owning generation facilities of any megawatt
capacity and selling electricity.
C. County assessment of companies owning generation facilities and selling
electricity, unless those companies are otherwise subject to state assessment.
Formal Issue Paper Number 99-001 Page 2
(Rev. 10/97)
IV. Background
In Issue Paper 98-032, the staff identified for the Board the basic issues relating to assessment
jurisdiction of electric generation facilities following the passage of AB 1890. The staff
recommended that, as a first step, on January 1, 1999, the Board continue to assert assessment
jurisdiction over facilities which had been sold by state assessees by asserting jurisdiction over
those companies which purchased the facilities. The staff recommended as a second step that on
January 1, 2000, the Board assert assessment jurisdiction over all companies with facilities with
a generation capacity of 50 megawatts or more unless that company sold less than 50% of the
power generated at the plant through the statewide grid.
At the December, 1998 meeting of the Board, the staff orally revised the second step of its
recommendation to recommend that the Board pursue the issue of the assessment of the
remainder of the electric generation facilities in the state through the formal rulemaking process.
After hearing public testimony, the Board adopted the staff revised recommendation and directed
staff to prepare a comprehensive draft regulation dealing with assessment of all electric
generation facilities for presentation to the Board for publication and initiation of the rulemaking
process at the Board's February meeting in Culver City. Mr. Andal presented a draft Rule which
has served as a starting point for staff to prepare a proposed Rule.
Staff has considered the oral comments made by the Board and oral and written testimony
presented at the December 7, 1998 Board meeting, and has discussed the possible options for the
draft rule with the staff of Board member's offices. The staff believes these comments can be
summarized as follows:
BbardfMembers^andg
• Maintaining the Board's jurisdiction over companies that are public utilities
• Excluding most, if not all cogeneration facilities from state assessment
• Minimizing any change from the current assessment patterns
• Minimizing disruption of allocation of assessments among local revenue districts,
particularly where there has been reliance on the current allocation patterns in
approving the siting of facilities
• Minimizing the impact on the tax liabilities of the private companies involved
• Assuring that similarly situated companies are treated similarly for taxation purposes
• The view that a test other than the 50 megawatt test would be appropriate for
cogeneration facilities
Local Governments
• Some would gain; some would lose revenues because of the differences in allocations
based on state v. local assessment. Their positions on assessment naturally follow
their economic interests
• Some jurisdictions have made financial, land use and other decisions and
commitments based on local assessment of certain facilities. They would not favor
state assessment if it affects those commitments
Formal Issue Paper Number 99-001 Page 3
• Counties in general express concern about loss of local control with state assessment
• Some expressed the view that tax revenues should go to districts providing services,
not to non-service providers through a countywide pool
Industry
• Several representatives expressed uncertainty and concern as to the effect on their
property tax liability
• Several questioned whether state assessment would mean that their other operations,
nationally and in businesses other than electric generation would come under state
scrutiny and control
• Some expressed concern about potential increased local opposition to siting of
facilities if allocations are disrupted
• Some saw possible benefits to industry from state assessment such as dealing only
with one assessor, increased expertise of the board hearing appeals, the certainty of
annual resolution of appeals and trial de novo
Staff of Energy Commission
• In order to foster competition, it is important that similarly situated companies are
treated the same.
• There may be increased local opposition to siting if there is state assessment.
The staff has developed its proposed rule based on Board direction as we understand it, and
taking into account the comments made by interested parties.
V. Staff Recommendation
A. Description of the Staff Recommendation
e staff recommendation would :
Confirm Board authority to assess all companies transmitting or selling electricity
Continue local assessment of all plants that are currently locally assessed, thus
avoiding any allocation disruptions
Provide for local assessment of cogeneration facilities where the owner is engaged in
another primary business and the cogeneration facility is owned by a subsidiary, other
legal entity or separate division
Provide a window of opportunity for certain companies to achieve Qualifying Facility
status for their facilities, which would place those companies under local assessment
Leave to local assessment small generation facilities which have insignificant impact
on the supply of electricity to the public
Leave to local assessment all companies which do not sell power for transmission
through the statewide power transmission grid
Leave to local assessment all marketers, brokers, aggregators and other resellers
7/
Formal Issue Paper Number 99-001 Page 4
Specific Matters of Concern
Public Utility Assessment Jurisdiction. The staffs proposed rule would define electric
public utility so as to continue the Board's traditional jurisdiction, which is to assess "public
utilities." Staff believes this concept of the Board's jurisdiction is confirmed by legislative and
constitutional intent, case law and long standing practice. The staffs proposal would leave to
local assessment companies which are not public utilities in the sense that are not organized and
operated primarily to sell electricity to the public or have little or no impact on the supply of
electricity available to the public.
New Companies Entering the Market. The staffs proposal would bring under state
assessment those companies who enter the competitive market for electricity in California, either
by purchasing existing facilities or developing new facilities. In staffs view, the role of these
companies is indistinguishable from the role of traditional regulated utilities and they are public
utilities. It is appropriate and equitable to have these companies within the purview of state
assessment.
Cogeneration Facilities Owned by Companies Not Primarily in the Electric Power
Business. The staffs proposal would not include within state assessment most co-generators
who have another primary business, and who developed cogeneration facilities primarily for
reasons other than entering the energy business. This is accomplished by both the exclusion for
QF's, and by defining "company" to be any separate entity or separate division of a larger, non-
utility business.
Allocations of Values and Resultant Revenues. Staff is of the view that in those case
where facilities and companies are currently locally assessed because of past Board policy
decisions, and local jurisdictions and/or companies relied on that valuation method and its
resultant allocation of tax revenues in making their siting and expansion decisions, the
companies and facilities should continue to be locally assessed. It is appropriate in these cases to
consider the practical economic impact because the assessment jurisdiction decision is consistent
with board policy.
Similarly, staff recommends that the Qualifying Facility exemption be extended to the
end of the year 1999 for those facilities which are currently in the final planning stages. These
plans have proceeded with certain assumptions about assessment jurisdiction and resultant
revenue implications. The staff has used the Qualifying Facility status to identify the locally
assessed facilities, since they all have that status. The extension is consistent with treatment of
other existing qualifying facilities, and confirms past practice.
Staff does not support the view of those local jurisdictions which suggest that the issue of
state assessment or local assessment should turn on the fact that their jurisdiction will gain
additional revenues as a result. These jurisdictions have not relied on past Board policies, and
^
Format Issue Paper Number 99-001 Page 5
Industry Concerns. Much of the concern expressed by industry is the result of
uncertainties and questions about the result of state assessment versus local assessment. Many of
these questions will be resolved by the provisions excluding QF's from state assessment and
defining "company" as any separate entity or division. The other concerns will be answered by
staff in a separate question and answer format that will be distributed to the interested parties. In
large part, these concerns are not constitutional assessment jurisdiction issues, and should not
affect the rulemaking process.
Energy Commission Staff Concerns. Staff believes that the concerns of the Energy
Commission staff will be met by the staff proposal. These concerns are valid where reliance has
been placed on past Board policies, but cannot override the Board's assessment jurisdiction for
new facilities.
The 50 Megawatt Threshold. TK&propb*^ staff
recommendation in Issue Paper 98^-032~'in«thatvtests^other;than the 50 megawatt capacity>are used
to distinguish certain facilities:* "Concern had been expressed that the 50 megawatt test was not
an appropriate test, as it was somewhat arbitrary, and had resulted in development of some
facilities at 49 megawatt capacity that were not distinguishable from those with a 50 megawatt
capacity for purposes of taxing similarly situated companies equitably. Staff weighed these
concerns against the stated goal of eliminating from state assessment the small power plants
which were numerous and did not fit the mold of what is usually considered a public utility. The
staff, therefore, concluded that the 50 megawatt capacity test was still a valid threshold for
determining what size plant should be considered a public utility and subject to state assessment.
The staff modified this by adding an aggregation criterion, that is, if a company owns one or
more facilities, and the aggregate capacity is more than 50 megawatts, the Board can review the
facts and may determine that the company is primarily in the electric business and should be
state assessed. Staff has information that there are some 834 plants under 50 MW capacity,
which supply approximately 17% of the power capacity, and that this number includes plants
owned by exempt municipal utilities. Thus, the amount of capacity owned by investor owned
companies with facilities under 50 megawatt capacity is less than 17% of the statewide capacity.
B. Pros of the Staff Recommendation
1. Maintains the status quo of both state and local assessment for all assessees
2. Avoids shifts in allocations among local taxing jurisdictions.
3. Provides complete stability in the assessment and taxation system
4. Promotes greater uniformity and consistency of valuation through centralized state
assessment.
5. Fully recognizes and utilizes existing expertise in conducting complex appraisals.
6. Provides for unitary appraisal by one assessing agency for companies operating in
more than one county, which makes efficient use of company and government
resources.
7.
Formal Issue Paper Number 99-001 Page 6
7. Continues valuation of these properties with no increase in staffing and cost to
government.
C. Cons of the Staff Recommendation
1. Not all generation facilities will be assessed using the same method of arriving at
taxable value. County assessed properties are valued pursuant to Article XTTTA
(Proposition 13); state assessed properties are assessed annually at fair market value.
2. From the viewpoint of local government, this alternative does not provide the
increase in local authority or control that other alternatives may provide.
3. Some facilities completed after December 31, 1999, which are similar in capacity to
locally assessed qualified facilities, will be state assessed and therefore not similarly
treated for assessment purposes.
D. Statutory or Regulatory Change
No statutory change is required. This is a proposed regulation to clarify existing
statutory, constitutional and case law.
£. Administrative Impact
This proposal would have no administrative impact as it continues the current
assessment jurisdiction responsibilities.
F. Fiscal Impact
1. Cost Impact
This proposal would have no fiscal impact as it continues the current assessment
jurisdiction responsibilities.
2. Revenue Impact
There is no revenue impact caused by this rulemaking activity.
G. Taxpayer/Customer Impact
There is no taxpayer customer impact as the result of this rulemaking activity as it
interprets and applies existing law, and basically confirms existing practices.
H. Alternatives A, B and C.
These Alternatives are discussed in detail in Issue Paper 98-032 (copy attached)
Formal Issue Paper Number 99-001 Page 7
Prepared by: Legal Division, Property Taxes Section
Current as of January 7, 1999
•-9
RULE 905 - ASSESSMENT OF COMPANIES TRANSMITTING
OR SELLING ELECTRICITY.
iifonii(a) General. For purposes of article XIII, section 19 of the-Calironiia Constitution, a company
transmitting or selling electricity means a company which is'an electric public/utility as defined
in this rule.
\ \s
(b) Electric Public Utility Defined. Except as provided\in si livision (c)\belo\v. me/term
"electric public utility" for property tax assessment purposes/means and includes any company
generating, distributing or transmitting electricity andselliDg electricity to the public or through
the Power Exchange for sale to the public throughjhe statewide poVer transmission grid. The
term also includes any company that is requirecTte~hold a\ertificate of pubKc convenience and
necessity issued by the California Public l^tiljties Commission, in order to transmit or distribute
electricity.
(c) Exclusions. The term "elec
(1) A company
--—^^commercial busineSsJf the
in(}tistna>orcormnercia^busini
) A comp;
described in Chapte
Jtilit
mblic utility"nclude:
only a generation facility on the premises of an industrial or
ty generated by the facility is used exclusively by the host
.eter, broker, aggregator or other reseller of electricity as
0ommencihfi>with section 330) of Division 1 of Part 1 of the Public
otherwise engaged in distributing, generating, transmitting, or selling
raich owns one or more generating facilities each of which has been
classifiedxas aXQualifyuig Facility (QF)" by the Federal Energy Regulatory Commission prior to
December 34, 1999(provided the company: does not own any other generation facility which is
not classified^ a "Qualifying Facility (QF);" or, is not otherwise engaged in distributing,
transmitting, or selling electricity to the public.
(4) A company which owns one or more electric generation facilities, the aggregate
capacity of which will not produce sufficient electricity to have a significant impact on the
supply of electricity available to the public. A company which owns one or more electric
generation facilities with an aggregate capacity of less than 50 megawatts, and is not otherwise
rule905.doc »,
engaged in distributing, transmitting or selling electricity to the public, shall be conclusively
presumed to be excluded from the term "electric public utility" under this paragraph.
(d) Company. For purposes of this section, "company" means:
(1) A person as defined in Revenue and Taxation Code section 19;
(2) A separate division or other functional unit of a business enterprise which is created
/-~N ' \ /^and maintained to operate any electric generation facility^wherel the\ business] enterprise is
/ /" \ ^y /engaged in a primary business other than generating/ transmitting, distributing or selling
electricity to the public. The business enterprise must maintain accounting\nd other records
sufficient to distinguish the costs and revenues of the \sep\rate/aiy/sion\pr unit from other
divisions and units of the business enterprise.
(e) Examples. The following examples illustrate the appl/cation, of the criteria and definitions
in this section. The classification in each example is\ based onlyvon the limited description
offered. Classification of an actual company/^ property must be based, on all the relevant facts
concerning that company or property.
(1) Company AB is a partnership owned by parthe^VA arkhB; Company AB owns only
one cogeneration facility which
company owned by B. The co§
the Federal Energy Re§
cogeneration facilrtysdoes nc
Bis an electric public
property of Company C is
e separate legal entitle
through the gruTand also provides steam to alect
ition facility Nhas b^en/certified as a Qualifying Facility by
iinmission prior to Dot ember 31, 1999. Ownership of the
Company AB an electric public utility,
owned subsidiary of multinational Company C. Company
ed in this rule and is subject to state assessment. The
state assessment since Company C and Company AB
JOO, Company AB builds a generation facility with a capacity greater
than 50 megawatts wJiic/h is operated at capacity and sells all the electricity generated by the
facility th meN^ublic/through the statewide grid, and is determined by the Board to have a
significant rmpactxm the supply of electricity available to the public. The facility has been
certified as a Qtialifying Facility by the Federal Energy Regulatory Commission. Company AB
will be state assessed.
(4) Company P owns both Qualifying Facilities and non-qualifying facilities. The
aggregate generation capacity of the facilities is over 50 megawatts, and power generated is sold
to the public through the statewide transmission grid, and the facility has been determined by the
Board to have a significant impact on the supply of electricity to the public. Company P will be
state assessed.
(5) Company S has a certificate of convenience and necessity from the California Public
Utilities Commission, and owns and operates several generation facilities which are not
Qualifying Facilities and which have an aggregate capacity over 50 megawatts. Company S is
also engaged in activities as a marketer, broker, aggregator or reseller/Company S will be state
assessed.
Authority: Government Code section 15606
Reference: California Constitution, Article XIII, section 19;
Revenue and Taxation Code sections 110, 721,
Public Utilities Code Ch. 2.3 (Commencing wi
Division 1 of Part 1.
1/12/99
h/property/drafts/Augusta/rule905A.doc
/t
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION JOHAN KLEHS
450 N STREET, SACRAMENTO. CALIFORNIA F"* O*nct Har*"d
(PO BOX 942879, SACRAMENTO, CALIFORNIA 942794XJ82) DEAN F ANDAL
TELEPHONE (916) 324-2642 s"cood Da^a~Stac>ao"
FAX (916) 323-3387 JanuaTV 12 1999 CLAUDE PARRISH
•J ' Third District, T<xranc»
JOHN CHIANG
Fourth Dirtnct. Lo» Angela*
KATHLEEN CONNELL
Controller, SacramentoTO INTERESTED PARTIES:
E. L SORENSEN, JR.
Executive Director
QUESTIONS AND ANSWERS
PROPOSED PROPERTY TAX RULE 905
ASSESSMENT OF COMPANIES TRANSMITTING OR SELLING ELECTRICITY
At its February 2, 1999, meeting in Culver City, the Board will consider a recommendation from
its staff that the Board authorize publication of a proposed new property tax rule addressing the
assessment of companies transmitting or selling electricity. The new rule is proposed in response
to the restructuring of the electrical utility industry as enacted by A.B.1890 (Stats. 1996, ch. 854,
eff. Sept. 24, 1996). If the proposed rule is authorized for publication, the formal rulemaking
procedures will begin, with a public comment period followed by a public hearing and adoption
on July 28, 1999. This schedule should provide adequate time for public comment. A copy of the
proposed rule is attached. In preparing this proposed rule, a number of questions have arisen; this
letter addresses some of those questions.
Please note that these answers are based on the rule as proposed. At the February 2, 1999 Board
meeting, the Board may modify the proposed rule and authorize publication of the modified rule.
The material set forth below is based on the proposed rule attached hereto and may be different if
the rule is modified.
Questions Relating to Existing Generation Facilities
1. Question: What is the impact on the tax revenue for a city which now has a Qualifying Facility
(QF) within its boundaries which is presently county assessed and is the only generation facility
owned by a company that is not otherwise a state assessee?
Answer; Under the specific and limited facts stated, there will be no change. The QF will
continue to be assessed by the county assessor. However, this assumes the company in question
does not change its holdings, its organization or ownership or otherwise becomes an electric
public utility.
/
Questions and Answers 2 1/12/99
Proposed Property Tax Rule 905
2. Question; What if the facility loses its QF status through action by the Federal Energy
Regulatory Commission (FERC)? Or if its standard offer contract terminates and the QF makes
all its electric sales through the Independent System Operator (ISO) and the Power Exchange
(PX)?
Answer; No change in assessment jurisdiction solely because the QF status ends or is no
longer meaningful; as long as the QF has received its QF certification prior to the date set out in
the rule, December 31, 1999, it will be county assessed.
3. Question; What if there is major expansion or a teardown and repowering of an existing
plant which was QF certified before 12/31/99?
Answer; Depending on the facts of the situation, if a facility undergoes major expansion or
repowering, Board staff may consider the facility to be a new facility; new facilities will be state
assessed if they are not otherwise excluded.
4. Question: A company owning an existing cogeneration facility which is a QF decides to end
its steam production and to produce electricity for sale through the grid. It is now county
assessed. Will it be changed to state assessment?
Answer; No. See the answer to question 2.
Questions Relating to State Assessment
5. Question; What is "state assessment" as opposed to "county or local assessment"?
Answer: "State assessment" as opposed to "county assessment" (also called "local
assessment") means that it is the State Board of Equalization, rather than the county assessor,
which determines the assessed value to be placed on the roll for the real and personal property
owned and used by a company. The values established for state assessed property by the State
Board of Equalization are placed on the "Board Roll." The values for properties assessed by the
county assessor are placed on the "Local Roll." The final Property Tax "Roll, " used to determine
taxes due by application of the appropriate tax rate, contains both the Board Roll and the Local
Roll.
"Assessment" refers to the value that is placed on the assessment roll and is taxed by applying the
appropriate tax rate. The value is a Proposition 13 value for county assessed property (Revenue
and Taxation Code section 50 et seq.) and fair market value determined annually for state
assessed property (Revenue and Taxation Code section 110 et seq.).
"Valuation" is the appraisal process used to determine the fair market value, expressed in dollars,
of a subject property; counties and Board staff use the same basic valuation methodology to
18
Questions and Answers 3 1/12/99
Proposed Property Tax Rule 905
determine current market value; however, the assessed value on the Local Roll is the lower of the
current market value or the property's base year value under Proposition 13.
6. Question: Does "state assessment" mean that a company has to pay taxes to the county
AND to the state?
Answer: No. There is no additional state tax. The tax that applies is the local property tax
whether the property is state assessed or county assessed.
7. Question: If a company is state assessed, is it required to meet additional legal requirements
and undergo increased government scrutiny?
Answer: Property statements are filed with, and subject to audit by, the State Board of
Equalization rather than county assessor. The Board's authority is limited to matters relating to
taxation of property. The Board is not a regulatory agency.
8. Question: What is the "appraisal unit" of state assessed property?
Answer; The "Appraisal unit" is defined as the unit or units of functionally related
operating assets (unitary property) owned by an electric public utility, that:
a. Would typically be purchased and/or sold in the marketplace, and
b. Are operated as a unit in the course of the electric generation operations.
EXAMPLE: A company purchased three generation facilities in three different counties.
If the operations and accounting records of the different plants are not commingled,
depending on the facts of the operations, the Board may assess each plant as a separate
appraisal unit. However, if all three plants are operated as a single unit, the Board will set
values for the property as a unit, and allocate values back to the three counties according to
the amount of property in each county.
9. Question; If three generation plants in three different counties are acquired and operated as
one unit, how will the Board value the property? How will the Board allocate value back to each
situs county?
Answer; Board staff will value the three plants as one appraisal unit and the Board will adopt
a single value for that unit. The value will be allocated to the counties in which the company
owns property based on procedures historically used by the Board. In the absence of market
value data, a cost basis is used to allocate value to each of the three counties.
10. Question; What is "unitary property" and what is "nonunitary property?"
Answer: Revenue and Taxation Code section 723 provides:
Questions and Answers 4 1/12/99
Proposed Property Tax Rule 905
"The Board may use the principle of unit valuation in valuing properties of
an assessee that are operated as a unit in a primary function of the
assessee. When so valued, those properties are known as 'unitary
property.' Property of an assessee not valued through the use of the
principle of unit valuation is known as 'nonunitary property.' When
valuing nonunitary property, the Board shall consider current market value
information of comparable properties provided by the assessor just prior
to the reappraisal by the Board of that property."
For purposes of applying this section, "unitary property" means all taxable assets owned or used
by a company in its operation as an electric public utility.
"Nonunitary property" means assets owned by the company and not used or required in the
electric generation operations. Nonunitary property is excluded from the appraisal unit.
11. Question; Assume Company AB is a multinational energy corporation which has purchased
three generation plants (that are not QFs) in three different counties in California; the three plants
are operated within the general corporate/administrative structure of Company AB. What is the
scope of the Board's valuation of Company AB's assets?
Answer; Since Company AB is an energy corporation, its electrical operations are part of its
primary function as referenced in Revenue and Taxation Code section 723. The three generation
plants in California are therefore, unitary property. Although unitary property is usually valued as
"a going concern" wherein the entire unit is considered, the Board has authority to assess only
that property located in California. Board staff will use financial and other applicable data for
California operations and value the property based on that data. Also, if the company has
established a separate "company" as defined in proposed Rule 905, subdivision (d)(2) for the
operations of the generation plants in California, the Board's assessment will be limited to the
property of that company.
However, if a company's operations and accounting records are intertwined nationally or globally
to the degree that the value of the California property cannot be readily segregated from the value
of a company's property outside California, it may be necessary to place a value on the total
property of the company (both inside and outside California) and allocate to California and the
situs counties the estimated value of property located in California. The responsibility is on the
company to maintain adequate financial records to distinguish the property in California.
12. Question; Assume: Company AB in question 11, a multinational energy corporation, also
owns a small restaurant chain. Is the property in the restaurant chain valued by the Board?
Answer: Yes. The restaurant chain would be valued by the Board as nonunitary property
owned by a state assessee, and the property will be assessed annually at fair market value.
Questions and Answers 5 1/12/99
Proposed Property Tax Rule 905
13. Question: What if a company owns a QF that is presently county assessed, and acquires
another generation plant that is state assessed under Proposed Rule 905?
Answer: If both generation plants are operated as a unit, the QF is unitary property of the
state assessed company and would be state assessed. See Proposed Rule 905, subdivision (e)(4).
However, if the company establishes a separate company pursuant to Proposed Rule 905,
subdivision (d)(2) to operate the QF, the county assessed QF property would not be part of the
state assessed appraisal unit.
Questions Relating to Valuation Methods
14. Question; What are the valuation methods used by the Board?
Answer: The Board uses standard valuation and appraisal procedures and methods. Staff
calculates current fair market value using applicable procedures and methods; the calculated
values are set forth on an Appraisal Data Report (ADR) and are given appropriate weighting.
The methods used by the Board include: income approach, historical cost less depreciation,
reproduction cost less depreciation, replacement cost less depreciation, comparable sales and the
stock and debt approach. These approaches follow standard appraisal procedures and are
described in Assessors Handbooks 501 - Basic Appraisal and 502 - Advanced Appraisal. See
also Property Tax Rules 1, 2, 3, 4, 6, and 8.
15. Question: What appeal rights does a company have if it disagrees with the value set by the
Board and how do they differ from appeal rights in a county assessment?
Answer; The Board adopts the values for state assessed properties in May of each year. If a
company disagrees with the value determined by the Board, it may file a petition for reassessment
and request a hearing. Hearing procedures are set forth in Rules 5040 through 5042 and 5070 et
seq. The Board hears appeals from the values set in May, and must decide all petitions no later
than December 31 of each year. If a company still disagrees, it may pay the tax and file an action
in superior court. The court proceeding is de novo .
At the county level, assessments by the county assessor are contested by filing an application for
reduction with the local board of equalization, which is either an assessment appeals board or the
county board of supervisors sitting as a board of equalization. Local boards of equalization
follow Board rules as well as local rules. The decision must be made within two years. If not
satisfied with the decision of the local board of equalization, the taxpayer, after paying the tax and
filing a claim for refund, may file a court action. The court's review is not de novo, but rather a
review of the record of the local hearing, and the substantial evidence test is applied.
Questions and Answers 6 1/12/99
Proposed Property Tax Rule 905
Questions Relating to the Measure of tai
16. Question: What is the difference between county assessment where Proposition 13 is
applicable and state assessment where fair market value is determined annually ?
Answer; County assessment of real property is made pursuant to "Proposition 13."
This measure essentially stabilizes the assessed value of real property at its fair market value
as of the time of acquisition by establishing a "base year value," with adjustments pursuant
to Revenue & Taxation Code sections 50 and 51 for inflation (limited to two percent
annually), new construction and change in ownership. However, if the fair market value of
the property falls below the base year value factored forward, the county assessor is
required to lower the value to the current fair market value pursuant to the provisions of
"Proposition 8."
State assessment is based on a determination of the fair market value of the property
as determined annually. Property operating as a unit is considered the "appraisal unit" and is
taxed as a going concern. [Revenue & Taxation Code sections 721 through 723. ITT World
Communications, Inc. v. City and County of San Francisco (1985) 37 Cal.3d 859]
Prop. 13 base year values and state assessed values may be the same at the time of
acquisition whether there is state assessment or county assessment; both state and county
valuation is set at "fair market value" as of the time of acquisition for the first year of
ownership. However, as time passes, because state assessment is made annually based on
current value, there may be a variance between a Prop. 13 value and the fair market value
calculated by the SEE.
Theoretically at least, it would be expected that county assessed property would be
assessed at a value equal to or lower than state assessed property; however, it is expected
that there will be significant new construction in the electric generation industry that could
minimize the impact of applying the acquisition value aspect of Prop. 13, as adjustments to
base year values would be made to reflect the value of the new construction.
17. Question: Can the principles of Prop. 13 ever be applied to state assessed property?
Answer; No. The courts have ruled that Proposition 13 does not apply to state assessed
property. [See ITT World Communications, Inc. cited above.]
Questions Relating to Allocation of Tai Revenue
18. Question; How does allocation of assessed values and resultant tax revenue differ between
state assessment and local assessment?
Questions and Answers 7 1/12/99
Proposed Property Tax Rule 905
Answer: State assessed unitary values are allocated by the Board to a countywide tax rate
area in each county where the assessee has property. Each county auditor uses a statutory
formula to allocate taxes from the countywide tax rate area to tax rate areas throughout the
county. Revenue for county assessed property, on the other hand, is distributed to the tax rate
areas in which the particular property is situated, (see Rev. and Tax Code §§ 95 et seq.)
We hope this information proves helpful. If you have any additional questions, please feel free to
contact Janet Saunders, Tax Counsel, at (916) 324-2642 or Harold Hale, Principal Property
Appraiser at (916) 324-0031.
h/property/dnfti/augusU/QA2.doc
PROPOSED PLAN OF ACTION AND TIME LINE
ADOPTION OF RULE 905
ASSESSMENT OF COMPANIES OWNING
ELECTRIC GENERATION FACILITIES
1999
February 2, 1999 - Board authorizes publication of Rule - Culver City Board Meeting.
February 5, 1999 - Legal prepares necessary documents and submits them to BPD for
transmittal to OAL. BPD transmits draft Rule to OAL for
Publication.
February 19, 1999 - OAL publishes Rule and begins public comment period.
Staff mails draft Rule and proposed meeting schedule to interested
parties.
February 26, 1999 - Staff conducts briefing session for all interested parties to provide
overview of proposed Rule and answer preliminary questions.
March 31,1999 - Interested parties to submit to staff any materials they wish
distributed or discussed at meetings in April.1
April 6-9, 1999 - First meetings with interested parties - one group each day2
April 22, 1999 - Deadline for staff to complete possible revisions for management
review.
April 27, 1999 - Deadline for management comments on possible revisions.
April 30, 1999 - Staff mails possible revisions to interested parties.
May 21, 1999 - Interested parties to submit to staff any materials they wish
distributed or discussed at meetings in June.
June 3, 1999 - Second meeting with interested parties (joint meeting).
1 Please note that this deadline does not limit your right to submit comments at any time up to the public
hearing date, July 28, 1999. All comments submitted before that time will be included in the official
rulemaking file, and responded to as required by law.
2 Please note that these informal meetings are for fact finding purposes only and are voluntary. They do
not replace the official Public Hearing, which is scheduled for My 28,1999. As stated in footnote 1, all
comments will become part of the official rulemaking file, and will be accepted until the Public Hearing
Date.
June 7-11, 1999 - Staff meets and decides on any proposed revisions to published
Rule.
June 18, 1999 - Staff completes final issue paper, matrix and other necessary
documents for internal review.
June 21-25, 1999 - Circulate final documents for internal review and approval.
July 1, 1999 - Staff distributes draft revisions and supporting materials to Board
and interested parties for public hearing at the July 28 Board
meeting.
July 28, 1999 - Public hearing and Board vote on Rule.
August 6, 1999 - Final documents submitted to OAL for review.**
September 17, 1999 - OAL approves Rule and files with the Secretary of State
October 18 , 1999 - Effective date of Rule 905
** If the Rule is adopted by the Board on July 28, final documents will be completed and
forwarded to OAL for approval. If there are no problems, Rule should be approved by
mid August.
If the Rule as published is changed by the Board on July 28, the changed version will likely
be placed in what is known as the 15 day file for public review and comment, and the Rule
will be brought back to the Board for final adoption at the August 31-September 2 or the
October 5-7 Board meeting. In the event that the Rule is significantly changed by the
Board, the Rule may have to be republished and a new public hearing date established.
The new date would most likely be at the late October Board meeting in Culver City, or
the November meeting in Sacramento, in order to have the Rule approved by OAL and
effective on 1/1/2000.
January 13, 1999
905time.doc
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ATTORNEY-CLIENT PRIVILEGE
Shari Freidenrich
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City of Huntington Beach
234 Main Street
Re: SBE Rule-making
Dear Shari:
January 28, 1999
At your request, I have prepared the attached estimate for my participation in the
rule-making process which the State Board of Equalization (SBE) intends to hold on the
proposed rule (Rule 905) dealing with its jurisdiction to assess electricity generation facilities.
In preparing the estimate, I have tried to give myself enough time to do the job
right and to anticipate tasks that might call for additional time, such as coordinating our efforts
with attorneys for the generation plants and reviewing proposed legislation. In evaluating this
estimate, you should keep several things in mind.
First, the estimate includes forty hours of time that have already been spent during
January, 1999. This time was spent preparing for and participating in the meetings on January 12
and 25, beginning preparation of the "Issue Paper" for submission to the SBE, and preparation of
the letter sent to Scott Field on January 20, 1999.
Second, this estimate assumes that all of the steps in the process set forth in the
SBE staffs proposed timetable take place. This process assumes a briefing session for all
interested parties conducted by SBE staff, a separate meeting between staff and the Cities,
revisions of the proposed rule, a second round of meetings with staff to discuss the proposed
revisions, and a formal public hearing before the Board on the proposed rule. In all, there will be
five meetings with the SBE and/or staff that I will need to prepare for and attend. Obviously, if
Palo Alto- 1755 EMBAKCADERO ROAD, Sum 200 • PAW ALTO. CA 94303-3309 • TELEPHONE 650/642-8500 • FACSIMILE 650/493-7912
Newport Beach: 6lO NFarorr CENTO DRIVE, SUITE 450 • NEWPORT BEACH, CA 92660-6435 • TELEPHONE 949/721-6900 • FACSIMILE 949/721-6910
Jan. IQ. my j:u4fM riuwAid), KR.L, ui AL. . ,/uroyiu NO. SDOJ r. j/4
From:S. L. Mayer
Shari Freidenrich
City Treasurer
January 28, 1999
Page 2
some steps in this process do not occur (e.g., if the staff does not revise the proposed rule and
schedule a second round of meetings), the hours devoted to the project will decrease.
Third, the estimate also contemplates three meetings with the client group, in
addition to the five meetings with the SBE or its staff. Obviously, if the group decides to have
fewer meetings (by relying on a steering committee and other forms of communication), the time
estimate would be correspondingly less.
Fourth, because I have tried consciously not to provide a misleading, "low-ball"
estimate, I believe that it may be possible to do the necessary work for less than the amount
quoted herein. If that occurs, obviously the cities will reap any savings.
My agreement with Huntington Beach provides that any work performed during
1999 will be billed at 1998 rates. Obviously, I will extend the same rate to any other cities that
sign on.
At my 1998 hourly rate of S345, the 260 hours proposed in the estimate would
result in total fees of $89,700. If one assumes another $5,000 in costs (which may be less, since
we have agreed not to charge for word processing and to limit other costs such as faxing and
photocopying), the total would be approximately $95,000. Eight cities (other than Pittsburg)
have sent representatives to our meetings. If each city contributed equally, each would pay one-
eighth of $95,000, or $11,875. This seems a small amount to pay for legal representation in light
of the amounts at stake.
If you have any questions regarding the enclosed estimate or anything else
relating to this representation, please let me know. I look forward to working with the cities on
this important matter.
Very truly yours,
STEVEN L
Enclosure
WD 012899/M290601/48/721684/V1
Jan. £Q. i jj 0. u 1 r m tio. ODOJ r, <i/;
From:S. L. Mayer
Description of Time
Time spent between Jan. 1 and Jan. 28
Time spent preparing for and attending 1/12 and 1/25 meetings
Preparing Issue Paper
Preparing letter re Board procedure and discussions with staff
Total time between Jan. 1 and Jan. 28
Preparing Issue Paper for First Round of Meetings
Review of rule revisions and materials submitted by others
Meetings with Board and/or staff
2/2/99 (procedural meeting)
2/26/99 (first meeting between staff and all parties)
4/6/99 (separate meeting with staff)
6/3/99 (joint meeting between staff and all parties)
7/28/99 (formal public hearing on proposed rule)
Total meetings
Three meetings with client group
Coordination and consultation with allies
Review and analysis of proposed legislation
Total
Hours
15
20
5
5
10
15
15
15
Hours
40
50
40
60
25
35
10
260
WD 012899/1-1290601/721630/vl
EXHIBIT 6
City of Carlsbad
Risk Management
February 11, 1999
Ms. Shari Freidenrich
City Treasurer
City of Huntington Beach
2000 Main Street
Huntington Beach, CA 92648
Dear Ms. Freidenrich:
As we discussed, the following is a summary of the results of our (Huntington Beach, Long
Beach, Carlsbad, Redondo Beach and Pittsburg) February 10,1999 meetings with David Jones,
Legislative Representative of the League of California Cities, and John Rozsa, staff consultant to
Senator Steve Peace.
League of California Cities: We met with Mr. Jones at the League to determine the position, if
any, the League might take on the issue of local vs. state assessment of power plant property
taxes.
According to Mr. Jones, in general, the League is supportive of local assessment, and would
likely support our efforts; however, for formal action by the League it will be necessary to
submit our position to the League's committee on taxes.
Senator Peace: Senator Peace has voiced support for local assessment of power plant property
and a strong interest in introducing a bill to address this matter. However, we have learned that it
may be necessary to anticipate compromises, including the grandfathering of tax revenue
recipients at their current levels, to achieve success with legislation providing for local
assessment. The theory is that the increase in value of the properties would then go to the cities
in which the plants reside.
We had an appointment with Senator Peace to determine his thoughts on this and to discuss the
matter. Unfortunately, there had been a scheduling mix-up and Senator Peace was not available,
so we met with his staff consultant John Rozsa. Mr. Rozsa stated that he will be working on the
legislation for Senator Peace.
Mr. Rozsa listened to our concerns about the importance of local assessment and our frustration
with the difficulty in identifying the current value of each of the plants, and the methodology for
valuation following the purchase by unregulated companies. Many of us with a plant that was
under the ownership of a regulated company, and said company also owned another plant in the
same County, have been unable to obtain a disaggregated value for the plant within our city. In
addition, based on conflicting information from the Board, we are uncertain if the most recent
purchase prices will be used at all, or reduced by such intangibles as goodwill.
1200 Carlsbad Village Drive • Carlsbad, CA 92008-1989 • (760) 434-2807 • FAX (760) 434-1987
Mr. Rozsa reiterated the Senator's commitment to local assessment and the need to consider the
impact to other tax recipients, and stated that he would try to obtain the valuation information
from the State Board of Equalization for us. I will ensure that there is follow-up to determine if
he is able to obtain this information.
In light of the Senator's commitment to and concerns about local assessment, the many
unknowns we have identified and which any consultant for us will also encounter, and Mr.
Rozsa's willingness to try to obtain valuation information for us, the Steering Committee
believes that it would be prudent to postpone the distribution of a request for proposals at this
time.
'If there are concerns or questions, any member of our group should call the representatives of the
cities in attendance at yesterday's meetings to discuss these matters and any concerns that need
to be addressed. To those on the distribution list below, please provide a copy of this memo and
attachment to anyone else in your city that should be reviewing these matters. I am leaving it up
to the individual cities to provide the information that is appropriate to their respective
consultants.
Finally, today, I received a copy of Senator Peace's bill, SB No. 329, and I have attached it for
everyone's information.
ERIN K. LETSC
Risk Manager
Attachment
c: DISTRIBUTION LIST:
Mr. Glen Googins, City of Chula Vista
Mr. Robert Messinger, City of El Segundo
Mr. John Fujii, City of Huntington Beach
Mr. John Reefstin, City of Huntington Beach
Mr. Richard Barnard, City of Huntington Beach
Mr. Amie Boss, City of Huntington Beach
Ms. Barbara Hennessy, City of Long Beach
Mr. Dave Elder, City of Long Beach
Mr. Earl Hobbs, City of Long Beach
Mr. Vincent Jones, City of Oakland
Mr. Mark Manion, City of Oxnard
Ms. Linda Daube, City of Pittsburg
Mr. Michael Woods, City of Pittsburg
Mr. Frank Rowlen, City of Redondo Beach
Mr. Ernie O'Dell, City of Redondo Beach
Mr. Stan Remelrneyer, City of Redondo Beach
H: Feedback on Sacramento Meetings
r ,
-SENATE BILL No. 329
: • ^_________^____
Introduced by Senator Peace
Februarys, 1999
An act to add Section 401.7 to the Revenue and Taxation
Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
SB 329, as introduced, Peace. Property taxation: electric
facilities: local assessment.
The California Constitution requires the State Board of
Equalization to annually assess the property, other than
franchises, of a public utility in the form of a company
transmitting or selling gas or electricity.
This bill would require, for the 1999-2000 fiscal year and
each fiscal year thereafter, that county assessors assess
electrical generation facilities, including power plants,
cogeneration facilities, and new generation facilities, that are
purchased or constructed after January 1, 1997, by an entity
other than a regulated public utility company. By imposing
new assessment duties upon local assessors, this bill would *
impose a state-mandated local program.
The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated
by- the state. Statutory provisions establish procedures for
making that reimbursement.
This bill would provide that no reimbursement is required
by this act for a specified reason.
Vote: majority. Appropriation: no. Fiscal commititee: yes.
State-mandated local program: yes.
99'
rSB 329 — 1 —
'The people of the State of California do enact as follows:
1 SECTION 1. Section 401.7 is added to the Revenue
2 and Taxation Code, to read:
3 401.7. For the 1999-2000 fiscal year and each fiscal
4 year thereafter, electrical generation facilities, including
5 power plants, cogeneration facilities, and new generation
6 facilities, purchased or constructed after January 1, 1997,
7 by an entity other than a regulated public utility
8 company, shall be assessed by county assessors.
9 SEC 2. No reimbursement is required by this act
10 pursuant to Section 6 of Article XIIIB of the California
11 Constitution because this act provides for offsetting
12 savings to local agencies or school districts that result in
13 no net costs to the local agencies or school districts, within
14 the meaning of Section 17556 of the Government Code.
..r
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