Joseph Krist
Publisher
CALIFORNIA HOUSING
One of the approaches to solving California’s affordable housing shortage has been the use of Accessory Dwelling Units (ADUs). As was the case after the post-war expansion in the second half of the 20th century, many of California’s communities enacted restrictive zoning codes in the 1940s, 50s, and 60s to limit population density. Like the other jurisdictions across the country, the laws designated large areas for single-family residences and enforced minimum lot sizes, effectively controlling urban sprawl.
A combination of demographic issues along with tax policy that discourages the transfer of homes over the generations have kept homes off the market. To address this, homeowners hoped to be able to create housing on oversize lots. The concept behind the move was historically reflected in “mother-daughter” houses, the conversion of space for an apartment (granny flats) and other structures converted to residences.
The well-known housing market issues were already driving some use of ADUs when legislation was enacted to support and advance the concept. Assembly Bill 68, passed in 2019, reduced ADU permit approval time from 120 days to 60 days and prevented municipalities from imposing lot size or parking requirements. Assembly Bill 881 further allowed property owners to build ADUs without living on the same property, enabling ADU investments.
In 2020, one in 10 new homes built in California was an ADU. ADUs accounted for 20% of new home construction 2023. That is likely to continue and increase as a trend supported by additional legislation. In October 2023, the Legislature addressed the issue of restrictions on the ability of ADU owners to rent the homes. Assembly Bill 1033, allows Californians to buy and sell them as condominiums.
Property owners in participating cities will be able to construct an ADU on their land and sell it separately, following the same rules that apply to condominiums. A key provision of the law gives cities to opt out and continue to require rental. In terms of tax issues, ADUs will be treated as discreet units for purposes of taxes and utilities. A property will also have to form a homeowners association to assess dues to cover the cost of caring for the property’s exterior and shared spaces, such as the driveway, a pool or a common roof.
FLORIDA GAMING COMPACT STANDS
The Supreme Court rejected an appeal of a suit challenging the compact between the State of Florida and the Seminole Tribe. (see 11.6.23 MCN). The case has been making its way through the federal judicial system since the compact was executed. The plaintiffs – two competing betting companies – had failed to see the deal overturned through two appeals court panels including an en banc appeal. The companies in February filed a petition seeking review at the Supreme Court after the full appellate court refused to reconsider the panel’s decision.
Under the terms of the 30 year compact, the Seminoles agreed to pay Florida about $20 billion, including $2.5 billion over the first five years. The deal also authorized the Seminoles to offer craps and roulette at their casinos and to add three casinos on tribal property in Broward County. It also allowed pari-mutuels (like the plaintiffs) to contract with the Seminoles and share revenue from sports betting. In November the Tribe rolled out a sports-betting app and in December launched craps and roulette at its casinos.
The Seminoles began making payments to the state in January and have paid more than $357 million under the revenue-sharing agreement, including a payment made Monday. A rule was adopted by the U.S. Department of the Interior earlier this year that allows states to enter compacts similar to Florida’s with Indian tribes.
ELECTRIFICATION
The Pasadena (CA) Water and Power municipal utility announced the approval of two contracts for renewable power. A 10-year $47.1 million contract wind energy contract with CalWind Resources Inc., begins on May 1, 2025. is for a 20-megawatt wind turbine facility named Wind Resource II Project located in Tehachapi, California. A 15-year, $55.3 million contract with Glenarm BESS LLC, a special purpose entity created by EPC Energy Inc., is for a 25 MW battery energy storage system. Pasadena Water and Power’s 2023 Integrated Resource Plan which recommends installing substantial solar and battery resources within Pasadena.
This year’s budget/legislative season saw three fronts open up in the effort to restrict or eliminate gas stoves. California, Illinois, and New York considered bills which would have required warning labels on gas stoves. Legislative proposals in New York failed to gain support and the Illinois effort was equally unsuccessful. In New York, the originally proposed bill was based on U.S. EPA pronouncements that components of natural gas, nitrogen dioxide and carbon monoxide, are “poisonous” and could “lead to the development of asthma, especially in children.”
California continues to look at a labeling requirement after the courts ruled that efforts by California municipalities to ban gas stoves were not legal. California’s proposed label originally cited the U.S. Environmental Protection Agency and a state environmental health agency saying stoves emit pollutants indoors at concentrations that exceed outdoor air quality standards. A pending bill was amended to remove those references.
COLLEGES
There has rightly been much focus on the operating difficulties plaguing smaller colleges. At the same time, many of the large state systems are under pressure as well. The University of California system has been dealing with a variety of job actions by faculty and staff. Now, Penn State is dealing with staffing and expense issues as well. In May of this year, it announced the University’s Voluntary Separation Incentive Program (VSIP).
It has announced that a total of 383 employees, or about 21% of those who were eligible, opted for the VSIP. Roughly 77% of the employees who took the offer were staff. The university said the dollar value of the salaries and fringe expenses associated with these 383 employees is $43 million. A budget deficit had climbed to $49 million. In exchange for their voluntary departure from the university, employees received a lump sum payment equal to a year’s salary.
Employees that were eligible for the program included tenured or tenure-line faculty, academic administrators and staff who are full-time employees and not on fixed-term contracts.
WATER
The Southwest Kansas Groundwater Management District was established by the State of Kansas to manage the use of groundwater pumped from the Ogallala aquifer. This massive underground water source has driven agriculture in the eight Ogallala states (Colorado, Kansas, Nebraska, New Mexico, Oklahoma, South Dakota, Texas, and Wyoming). It has long been recognized that groundwater is a finite resource and some areas have taken to concepts supporting reduced water use.
The District oversees groundwater usage and development in a 12 county area which is overwhelmingly agricultural. It has been a laggard in terms of encouraging conservation. Last year, Kansas lawmakers passed legislation squarely targeting the Southwest Kansas Groundwater Management District.
Crop irrigation accounts for 85% of all water use in Kansas—even more in western Kansas. Other districts have offered financial assistance to farmers investing in water-efficient irrigation systems and championed large-scale restrictions on pumping. GMD only spent 13% of its conservation-related budget between 2010 and 2022. This has raised concerns about District management.
Last year, in response to the criticisms, the district changed its financial statements, reporting fewer, broader categories. The new financial structure did not distinguish travel costs from other expenses. The travel is related to management efforts to build support for a pipeline to deliver Missouri River water from the east side of the state to its far west. The organization twice has trucked water 400 miles from the Missouri River to western Kansas in an effort to generate support for the idea.
As for conservation, Oklahoma allows farmers to use up to two feet of water each year on every acre they own. But usage is not monitored. Farmers report annual estimates of water usage. The state has not banned the drilling of new irrigation wells. Legislation passed this year that would require irrigators to meter their water use was vetoed by the Governor.
ROAD FUNDING AND DELIVERY FEES
In 2023, the Washington State Legislature enacted HB 1125, which included a budget proviso for a study on how a retail delivery fee could be implemented in Washington. The study must: Determine the annual revenue generation potential of a range of fee amounts; Examine options for revenue distributions to state and local governments based upon total deliveries, lane miles, or other factors; Estimate total implementation costs, including start-up and ongoing administrative costs; and Evaluate the potential impacts to consumers, including consideration of low-income households and vulnerable populations and potential impacts to businesses. The study should document and evaluate similar programs adopted in other states.
The study has now landed some two weeks before its deadline. Among other things the study found that the impacts will reflect the fact that households with an income above the statewide median tend to spend more on e-commerce than those below the statewide median, regardless of location. Generally, individuals from urban areas spend significantly more in the aggregate on e-retail purchases. Those who live in urban areas tend to spend more on online retail purchases than those from rural areas. New businesses or small businesses with gross revenues/sales less than $1 million in the previous calendar year will be exempt.
There are only two current comparables. Colorado, which enacted its fee in 2022, charges 28 cents on every delivery regardless of value. It generated $75.9 million in its first year for local and state uses, and clean transportation priorities. Businesses with $500,000 or less in sales are exempt. Minnesota enacted its fee in 2023 and it will be levied starting this July. The state will charge 50 cents only on deliveries of $100 or more. It will raise an estimated $59 million for cities and towns. The state exempts businesses with $1 million or less in annual sales.
Disclaimer: The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column. The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned. Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice. Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed. Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.