Report — June 16

2014-15 STATE BUDGET

The Legislature is scheduled to meet this weekend on Sunday, June 15th, “Fathers’ Day,” to approve the final 2014-15 state budget. The Governor and legislative leadership have spent the week finalizing details of the $107.8 billion general fund spending plan. The budget should be approved without much debate. Once approved by both houses of the Legislature, the Governor has until June 30, to grant his approval. A summary of the highlights of the 2014-15 state budget will be provided when available.

CALIFORNIA STATE LEGISLATURE

Labor Contracting; client liability. Assembly Bill 1897 would hold a contracting business equally liable for any wage, workers’ compensation coverage and work safety violations committed by a contractor for any work performed for the contracting business “within its usual course of business,” even though the contracting business did not have direct control over the working conditions of the contractor’s employees. The bill defines “usual course of business” as the “regular and customary work of a business, performed within or upon the premises or worksite” of the contracting business.

The bill is Co-Sponsored by the California Labor Federation (Labor FED) and the Teamsters and is labor’s latest attempt at limiting or restricting businesses’ ability to use temporary contract labor on a regular basis. This is one of the labor unions highest priority bills. This week, Assembly Member Roger Hernandez held a press conference on the Capitol steps with Teamsters President Jim Hoffa in support of the measure. Labor FED alleges “that companies are attempting to circumvent workplace safety and compensation standards by using staffing agencies to supply ‘temporary’ workers for full-time positions instead of hiring them.

While the proposal is heavily supported by labor, it is equally opposed to by the business community, including the California Cable & Telecommunications Association. The Labor FED has stated that the cable industry is not the target of the measure and believes it would not have any impact on the industries operations. CCTA disagrees. Although CCTA is still officially opposed to the measure, we continue to discuss possible amendments with legislators and the proponents that would either remove the cable industry from the measure altogether or minimize the bills impact on the cable industry’s operations.

The Senate Labor and Industrial Relations Committee approved AB 1897 and sent the measure to the Senate Judiciary Committee for consideration. It is scheduled to be heard in the Senate Judiciary Committee Tuesday, June 24th. This bill is on the California Chamber of Commerce “Job Killer” list.

Property Crimes; Disconnecting Communications Services. Assembly Bill 1782 (Chesbro) would increase the criminal fine up to $10,000 for any person who “willfully and maliciously” disconnects or obstructs any communications infrastructure, including the backup power supply or removal of deep cycle batteries, or electrical lines. Pursuant to current law, the penalty is $500 or up to one-year in the county jail.

The cable industry has seen a dramatic increase in the number of incidents of willful damage to its broadband networks. Historically, cable networks primarily provided multichannel video service, but today provide advanced residential and business communications services and broadband bandwidth for large data centers and cellular towers (backhaul). Cable networks also support critical services like E-911, and are the basis for enabling telemedicine, emergency alerts, energy efficiency monitoring and home security services and other innovative technologies.

Dependable communication services are critical for public safety, national security and California’s economic sustainability. The California Cable & Telecommunications Association supports AB 1782. The measure is also supported by a number of communications service providers, electrical utilities and law enforcement agencies.

AB 1782 will be heard the Senate Public Safety Committee next Tuesday, June 17th for consideration.

Split-Roll Tax. Assembly Bill 2372 (Ammiano) would require property tax reassessments at market value for any real property held by legal entities (i.e. businesses) when 90 percent or more of ownership interests are sold or transferred in a rolling three-year period. The bill would specify that a “purchase or transfer” of ownership interests includes a merger, acquisition, private equity buyout, transfer of partnership shares, or any other means by which a legal entity acquires the ownership interests of another legal entity, including subsidiaries or affiliates. The bill would also require the State Board of Equalization (BOE) to report to the Legislature, no later than January 1, 2020, regarding the implementation of these changes of ownership, including the economic impact and frequency of reassessments of real property owned by legal entities. The bill would also require the BOE to notify assessors if a change in control or a change in ownership of a legal entity has occurred. The bill would increase the penalty for failure to file a “change in ownership” statement with the BOE from 10 percent to 15 percent.

The California Taxpayers Association (Cal-Tax) is opposed to the measure because it would have an adverse impact on small corporations and family-owned limited partnerships and LLCs. Real property owned by legal entities that are privately held would be subject to reassessment when natural turnover of their shares (death in the family) causes cumulative transfers of at least 90 percent over a three-year period. Cal-Tax also points out that although bill includes a stock churning provision exempting publicly traded entities from reassessment, the bill would penalize other normal business activities like mergers, buyouts, acquisitions, transfer of partnership shares, or “by any other means.” And finally, the Cal-Tax points out in cases where there is a death in a family, increasing the penalty for failure to notify the BOE of a change of ownership on surviving family member unaware of the requirement is egregious.

AB 2372 is set to be heard next week on Wednesday, June 18th in the Senate Governance and Finance (tax) Committee.

Infrastructure Financing Districts; Broadband. On June 11th, Assembly Bill 2292 (Bonta) was recently amended to authorize “any infrastructure financing districts” (IFD’s) to finance public capital facilities or projects that include broadband.

When creating an IFD, current law requires a city or county to develop an infrastructure plan, send copies to every landowner, consult with other local governments, and hold a public hearing. Local officials must find that the public facilities are of community wide significance and provide significant benefits to an area larger than the IFD. Every local agency that will contribute property tax increment revenue to IFD must approve the plan. Current law also requires a two-thirds voter approval of the formation of the IFD and the issuance of bonds. To repay the bonds, IFDs divert property tax increment revenues from other local governments for a period of 30 years. Cities and counties can create IFDs and issue bonds to pay for community scale public works, including highways, transit, water systems, sewer projects, flood control, child care facilities, libraries, parks and solid waste facilities.

According to the Author, the intent of AB 2292 is to help cities and counties to finance broadband projects using IFD’s to “incentivize high-tech companies and businesses to move into their communities, and increase access to telecommunications services for schools and residents. The bill is sponsored by the City of San Leandro. According to the City, when the loss of redevelopment agencies, it is exploring alternative methods for attracting businesses to the San Leandro community.

CCTA is reviewing the proposal and working with member companies to assess the potential impact on broadband. The proposal is scheduled to be heard next week on Wednesday, June 18th in the Senate Governance and Finance (tax) Committee.

For CCTA Tracked Legislation by Subject use this link CCTA Legislative Report *

*These links are not for public distribution and are real-time. If you have any questions about these links or the information located at the links, don’t hesitate to contact Richelle Orlando .

CALIFORNIA REGULATORY UPDATE

CCTA filed Comments on the Draft Resolution (T-17443). CCTA filed Comments on the Draft Resolution (T-17443) implementing timelines for the California Advanced Services Fund (CASF) to address SB 740 requirements, related to the “right of first refusal” for broadband projects. CCTA urged the Commission to reject the proposed timelines unless they were modified to be consistent with the current CASF rules. Specifically, CCTA argued that the “right of first refusal” required by SB 740 could not be reasonably met by implementation of a timeline that requires existing providers to file a “letter of intent” by September 26, 2014, identifying current buildout and upgrade plans. Instead, CCTA urged the commission to provide for the right of first refusal using its current rules that allows for counteroffers to CASF applications 45 days from the submission of a grant request. In addition, CCTA opposed the proposed requirement that upgrades and buildouts of existing providers be completed within six months. CCTA will submit its Reply Comments June 16.

California Teleconnect Fund: R. 13-01-010. A Revised Staff Report recommending changes to the California Teleconnect Fund was issued May 30. The ALJ has since issued a ruling establishing workshops to discuss the Staff proposal and any other proposal on July 1 and 2. The Staff Report proposes to eliminate voice service from the Teleconnect program unless that service is the only mechanism to receive broadband, eliminate eligibility of CBOs with revenues in excess of $5 million, and provide a uniform dollar discount for services, rather than a percentage discount. CCTA will participate in the workshops.

Complaint of TURN regarding the basic service rates of AT&T California: C. 13-12-005:. TURN filed a complaint in December alleging that AT&T’s basic service rates were no longer just and reasonable. AT&T filed a Motion to Dismiss. A Prehearing Conference rejected AT&T Motions, and the parties have now submitted briefs on the burden of proof. AT&T argues that TURN, as the complainant, has the burden of proof to show that AT&T rates are unreasonable. TURN argues that AT&T must prove that its rates are reasonable. CCTA continues to monitor this proceeding for any impact on basic service rates and regulation.

DIVCA Franchise Renewal Proceeding. CCTA will file its Opening Comments June 16 on the Proposed Decision in the Commission’s Rulemaking determining rules governing state video franchise renewals. In general, CCTA supports the Proposed Decision because it is based on the provisions of the DIVCA statute. A copy of CCTA’s filing will be available next week.

Spotlight