BILL NUMBER: AB 2115 CHAPTERED 09/20/04 CHAPTER 610 FILED WITH SECRETARY OF STATE SEPTEMBER 20, 2004 APPROVED BY GOVERNOR SEPTEMBER 20, 2004 PASSED THE ASSEMBLY AUGUST 27, 2004 PASSED THE SENATE AUGUST 25, 2004 AMENDED IN SENATE AUGUST 23, 2004 AMENDED IN SENATE JULY 27, 2004 INTRODUCED BY Committee on Budget (Steinberg (Chair), Bermudez, Chan, Diaz, Dymally, Goldberg, Hancock, Jackson, Levine, Liu, Montanez, Nakano, Pavley, Reyes, Simitian, and Wolk) FEBRUARY 18, 2004 An act to amend Sections 6585 and 25350.6 of the Government Code, to amend Sections 33607.5 and 33681.12 of, and to add Section 33681.15 to, the Health and Safety Code, and to amend Sections 97.70, 97.71, 97.72, 97.73, 7203.1, 10754.11, 11001.5, and 11005 of, and to repeal Section 97.74 of, the Revenue and Taxation Code, relating to local government finance, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 2115, Committee on Budget. Local government finance. (1) The Marks-Roos Local Bond Pooling Act of 1985 generally authorizes a joint exercise of powers authority to issue bonds to assist local agencies in financing public capital improvements, working capital, liability or other insurance needs, or projects, subject to specified conditions. Existing law requires that such an authority consist of at least 100 local agencies if the authority issues bonds for which VLF receivables, as defined, are pledged to the payment of the bonds. This bill would specify that this requirement does not apply to an authority that so pledges VLF receivables for a county of the first class. (2) The Vehicle License Fee (VLF) Law establishes, in lieu of any ad valorem property tax upon vehicles, an annual license fee for any vehicle subject to registration in this state. Beginning with the 2004-05 fiscal year and for each fiscal year thereafter, existing law requires that each city, county, and city and county receive a vehicle license fee adjustment amount (VLFAA), as defined, from a Vehicle License Fee Property Tax Compensation Fund that exists in each county treasury. Existing law requires that the VLFAA of the County of Orange be reduced by specified amounts allocated to that county under the VLF Law for the service of indebtedness, as provided. Existing law reduces, for the 2004-05 and 2005-06 fiscal years, the VLFAA of a city or a city and county by an amount determined pursuant to a formula that is based upon the amount of vehicle license fee money, local sales and use tax revenues, and ad valorem property tax revenues allocated to the city or city and county for the 2002-03 fiscal year. Existing law also pledges, to the service of specified debt instruments, moneys to which the County of Orange may be entitled under the VLF Law. This bill would delete the requirement that the VLFAA of the County of Orange be reduced, and would instead allocate a specified amount of the revenues derived under the VLF Law to that county for the service of indebtedness and other uses. This bill would also pledge to those specified debt instruments moneys to which the County of Orange may be entitled from a Vehicle License Fee Property Tax Compensation Fund. This bill would require that the VLFAA of a city and county be reduced by an amount determined pursuant to a formula that is based solely upon the amount of vehicle license fee money allocated to the city and county for the 2002-03 fiscal year, as specified. (3) Existing law requires a redevelopment agency to make specified payments in specified fiscal years to taxing entities, and requires that these payments be allocated among these entities in proportion to the percentage share of property tax revenues received by these entities in these fiscal years. This bill would require that these percentage shares be determined without regard to certain property tax revenue allocations and property tax revenue allocation reductions required by specified statutes. (4) Existing law requires a redevelopment agency, for the 2004-05 and 2005-06 fiscal years, to make certain payments to county Educational Revenue Augmentation Funds (ERAFs). Existing law provides that the amount of these payments be based upon certain calculations made by the Director of Finance based upon a specified Controller's report for the 2002-03 fiscal year. This bill would instead provide that the director's calculations be based upon the most recent version of this Controller's report. This bill would also authorize a county redevelopment agency to enter into a loan agreement with the county to have the agency remit amounts in excess of its required payment to the county ERAF, if certain conditions are met. This bill would also authorize any redevelopment agency, if certain conditions are met, to enter into an agreement with an authorized issuer, as defined, to loan the agency moneys to make the required payment to the county ERAF. (5) Existing property tax law requires the county auditor, in each fiscal year, to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures, and generally requires that each jurisdiction be allocated an amount equal to the total of the amount of revenue allocated to that jurisdiction in the prior fiscal year, subject to certain modifications, and that jurisdiction's portion of the annual tax increment, as defined. Existing law requires the auditor to reduce, for the 2004-05 and 2005-06 fiscal year, the total amount of property tax revenue that is otherwise required to be allocated to an enterprise or a nonenterprise special district, as defined, by an amount calculated by the Controller pursuant to a specified formula based, in certain instances, upon the 2000-01 edition of a specified report issued by the Controller. For a nonenterprise special district, existing law requires that this reduction equal 10% of a specified portion of these revenues for each of those fiscal years. This bill would revise and recast these provisions to ensure that the total reduction for all special districts equals $350,000,000 for each of those fiscal years and would make conforming changes to related provisions. This bill would reduce, for the 2004-05 and 2005-06 fiscal years, the total amount of ad valorem property tax revenue allocated to the Laguna Niguel Community Service District by a specified amount and, if a certain condition is met, by an additional amount for each of the 2006-07 and 2007-08 fiscal years, as provided. This bill would also specify that "nonenterprise special district" does not include certain mosquito abatement districts formed pursuant to a specified statute. By changing the manner in which county auditors allocate property tax revenues, this bill would impose a state-mandated local program. (6) The Bradley-Burns Uniform Local Sales and Use Tax Law (Bradley-Burns Law) authorizes a county that adopts a specified ordinance to impose a local sales and use tax at a rate of 1.25%, and similarly authorizes a city, located within a county imposing such a tax rate, to impose a local sales and use tax rate of up to 1% that is credited against the county rate. Beginning July 1, 2004, and continuing through the revenue exchange period, as defined, existing law temporarily suspends the authority of a county or a city to impose a tax under the Bradley-Burns Law by requiring a county or a city imposing a sales and use tax under that law to impose that tax at the rate that was specified in the local ordinance as of January 1, 2004, reduced by 0.25%. This bill would instead require that, during the revenue exchange period, a county imposing a sales and use tax under that law impose that tax at a rate of 1% and require an imposing city to impose that tax at a rate of 0.75% or less. (7) Existing law requires the Controller, on August 15, 2006, to transfer moneys from the state General Fund to the Gap Repayment Fund (GRF) in an amount equal to an amount that was not allocated to cities, counties, and cities and counties as a result of a specified provision of the Budget Act of 2003. Existing law requires that moneys in the GRF be allocated among cities, counties, and cities and counties based upon the relative population of these entities. This bill would instead require that moneys in the GRF be allocated among cities, counties, and cities and counties based upon the amount that was not allocated to each of these entities as a result of the specified provision of the Budget Act of 2003. (8) This bill would also state legislative findings and declarations that the bill is an interim statute, and that its operation be suspended if Proposition 65 is approved by the voters at the November 2, 2004, statewide general election and becomes operative. This bill would also state the Legislature's intent in enacting this and another previous bill. (9) 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, including the creation of a State Mandates Claims Fund to pay the costs of mandates that do not exceed $1,000,000 statewide and other procedures for claims whose statewide costs exceed $1,000,000. This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions. (10) This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 6585 of the Government Code, as amended by Section 2 of Chapter 211 of the Statutes of 2004, is amended to read: 6585. The definitions in this section shall govern the construction and interpretation of this article. (a) "Authority" means an entity created pursuant to Article 1 (commencing with Section 6500). In the case of an authority issuing bonds pursuant to this chapter in which VLF receivables, as defined in subdivision (i), are pledged to the payment of the bonds, other than VLF receivables so pledged for a county of the first class, an authority shall consist of not less than 100 local agencies. (b) "Bond purchase agreement" means a contractual agreement executed between the authority and the local agency whereby the authority agrees to purchase bonds of the local agency. (c) "Bonds" means bonds (including, but not limited to, assessment bonds, redevelopment agency bonds, government issued mortgage bonds, and industrial development bonds), notes (including bond, revenue, tax, or grant anticipation notes), commercial paper, floating rate, and variable maturity securities, and any other evidences of indebtedness and also includes certificates of participation or lease-purchase agreements. (d) "Cost," as applied to a public capital improvement or portion thereof financed under this part, means all or any part of the cost of construction, renovation, and acquisition of all lands, structures, real or personal property, rights, rights-of-way, franchises, easements, and interests acquired or used for a public capital improvement; the cost of demolishing or removing any buildings or structures on land so acquired, including the cost of acquiring any lands to which the buildings or structures may be moved; the cost of all machinery and equipment; finance charges; interest prior to, during, and for a period after, completion of that construction, as determined by the authority; provisions for working capital, reserves for principal and interest and for extensions, enlargements, additions, replacements, renovations, and improvements; the cost of architectural, engineering, financial and legal services, plans, specifications, estimates, administrative expenses, and other expenses necessary or incident to determining the feasibility of constructing any project or incident to the construction or acquisition or financing of any public capital improvement. (e) "Legislative body" means the governing body of a local agency. (f) "Local agency" means a party to the agreement creating the authority, or an agency or subdivision of that party, sponsoring a project of public capital improvements, or any city, county, city and county, authority, district, or public corporation of this state. (g) "Public capital improvements" means one or more projects specified in Section 6546. (h) "Revenue" means all income and receipts of the authority from a bond purchase agreement, bonds acquired by the authority, loans, installment sale agreements, and other revenue-producing agreements entered into by the authority, projects financed by the authority, grants and other sources of income, VLF receivables purchased pursuant to Section 6588.5, and all interest or other income from any investment of any money in any fund or account established for the payment of principal or interest or premiums on bonds. (i) "VLF receivable" means the right to payment of moneys due or to become due to a local agency out of funds payable in connection with vehicle license fees to a local agency pursuant to Section 10754.11 of the Revenue and Taxation Code. (j) "Working capital" means money to be used by, or on behalf of, a local agency for any purpose for which a local agency may borrow money pursuant to Section 53852, or for any purpose for which a VLF receivable sold to an authority could have been used by the local agency. SEC. 2. Section 25350.6 of the Government Code is amended to read: 25350.6. (a) Moneys credited to the Motor Vehicle License Fee Account in the Transportation Tax Fund or allocated to the Vehicle License Fee Property Tax Compensation Fund of the County of Orange pursuant to paragraph (2) of subdivision (a) of Section 97.70 of the Revenue and Taxation Code to which Orange County may at any time be entitled shall be pledged, without any necessity for specific authorization of the pledge by the board of supervisors, to all certificates of participation or lease-revenue bonds executed and delivered or issued, as the case may be, during 1996 or 1997, including obligations executed and delivered or issued before 2010 to refund those certificates of participation or lease-revenue bonds, to finance or refinance the lease or lease-purchase of property of the county and having a stated maturity of 20 years or more. Any refunding obligations shall not have a final maturity later than the final maturity of the refunded obligations. The amount so pledged with respect to any fiscal year of the county shall not exceed the amounts to be paid in that fiscal year on those certificates or lease-revenue bonds. (b) The state hereby covenants with the holders of any certificates of participation or lease-revenue bonds, including refunding obligations, entitled to the pledge granted by this section that, as long as any of the certificates of participation or lease-revenue bonds entitled to the pledge granted by this section shall remain outstanding, the state shall not alter or amend the deposit of moneys into, or the allocation of moneys credited to, the Motor Vehicle License Fee Account in the Transportation Tax Fund under Chapter 5 (commencing with Section 11001) of Part 5 of Division 2 of the Revenue and Taxation Code or the allocation of moneys to and from the Vehicle License Fee Property Tax Compensation Fund of the County of Orange under Section 97.70 of the Revenue and Taxation Code in any manner that would adversely affect the security of, or the ability of the county to pay the principal of and interest on, the certificates of participation or lease-revenue bonds entitled to the pledge granted by this section. However, nothing precludes any alteration or amendment if and when adequate provision has been made by law for the protection from impairment of the contract represented by the certificates of participation or lease-revenue bonds, and the right to so alter or amend is hereby reserved. The County of Orange may include this covenant of the state in the agreements or other documents underlying the certificates of participation or lease-revenue bonds. SEC. 3. Section 33607.5 of the Health and Safety Code is amended to read: 33607.5. (a) (1) This section shall apply to each redevelopment project area that, pursuant to a redevelopment plan which contains the provisions required by Section 33670, is either: (A) adopted on or after January 1, 1994, including later amendments to these redevelopment plans; or (B) adopted prior to January 1, 1994, but amended, after January 1, 1994, to include new territory. For plans amended after January 1, 1994, only the tax increments from territory added by the amendment shall be subject to this section. All the amounts calculated pursuant to this section shall be calculated after the amount required to be deposited in the Low and Moderate Income Housing Fund pursuant to Sections 33334.2, 33334.3, and 33334.6 has been deducted from the total amount of tax increment funds received by the agency in the applicable fiscal year. (2) The payments made pursuant to this section shall be in addition to any amounts the affected taxing entities receive pursuant to subdivision (a) of Section 33670. The payments made pursuant to this section to the affected taxing entities, including the community, shall be allocated among the affected taxing entities, including the community if the community elects to receive payments, in proportion to the percentage share of property taxes each affected taxing entity, including the community, receives during the fiscal year the funds are allocated, which percentage share shall be determined without regard to any amounts allocated to a city, a city and county, or a county pursuant to Sections 97.68 and 97.70 of the Revenue and Taxation Code, and without regard to any allocation reductions to a city, a city and county, a county, a special district, or a redevelopment agency pursuant to Sections 97.71, 97.72, and 97.73 of the Revenue and Taxation Code and Section 33681.12. The agency shall reduce its payments pursuant to this section to an affected taxing entity by any amount the agency has paid, directly or indirectly, pursuant to Section 33445, 33445.5, 33445.6, 33446, or any other provision of law other than this section for, or in connection with, a public facility owned or leased by that affected taxing agency, except: (A) any amounts the agency has paid directly or indirectly pursuant to an agreement with a taxing entity adopted prior to January 1, 1994; or (B) any amounts that are unrelated to the specific project area or amendment governed by this section. The reduction in a payment by an agency to a school district, community college district, or county office of education, or for special education, shall be subtracted only from the amount that otherwise would be available for use by those entities for educational facilities pursuant to paragraph (4). If the amount of the reduction exceeds the amount that otherwise would have been available for use for educational facilities in any one year, the agency shall reduce its payment in more than one year. (3) If an agency reduces its payment to a school district, community college district, or county office of education, or for special education, the agency shall do all of the following: (A) Determine the amount of the total payment that would have been made without the reduction. (B) Determine the amount of the total payment without the reduction which: (i) would have been considered property taxes; and (ii) would have been available to be used for educational facilities pursuant to paragraph (4). (C) Reduce the amount available to be used for educational facilities. (D) Send the payment to the school district, community college district, or county office of education, or for special education, with a statement that the payment is being reduced and including the calculation required by this subdivision showing the amount to be considered property taxes and the amount, if any, available for educational facilities. (4) (A) Except as specified in subparagraph (E), of the total amount paid each year pursuant to this section to school districts, 43.3 percent shall be considered to be property taxes for the purposes of paragraph (1) of subdivision (h) of Section 42238 of the Education Code, and 56.7 percent shall not be considered to be property taxes for the purposes of that section and shall be available to be used for educational facilities. (B) Except as specified in subparagraph (E), of the total amount paid each year pursuant to this section to community college districts, 47.5 percent shall be considered to be property taxes for the purposes of Section 84751 of the Education Code, and 52.5 percent shall not be considered to be property taxes for the purposes of that section and shall be available to be used for educational facilities. (C) Except as specified in subparagraph (E), of the total amount paid each year pursuant to this section to county offices of education, 19 percent shall be considered to be property taxes for the purposes of Section 2558 of the Education Code, and 81 percent shall not be considered to be property taxes for the purposes of that section and shall be available to be used for educational facilities. (D) Except as specified in subparagraph (E), of the total amount paid each year pursuant to this section for special education, 19 percent shall be considered to be property taxes for the purposes of Section 56712 of the Education Code, and 81 percent shall not be considered to be property taxes for the purposes of that section and shall be available to be used for education facilities. (E) If, pursuant to paragraphs (2) and (3), an agency reduces its payments to an educational entity, the calculation made by the agency pursuant to paragraph (3) shall determine the amount considered to be property taxes and the amount available to be used for educational facilities in the year the reduction was made. (5) Local education agencies that use funds received pursuant to this section for school facilities shall spend these funds at schools that are: (A) within the project area, (B) attended by students from the project area, (C) attended by students generated by projects that are assisted directly by the redevelopment agency, or (D) determined by the governing board of a local education agency to be of benefit to the project area. (b) Commencing with the first fiscal year in which the agency receives tax increments and continuing through the last fiscal year in which the agency receives tax increments, a redevelopment agency shall pay to the affected taxing entities, including the community if the community elects to receive a payment, an amount equal to 25 percent of the tax increments received by the agency after the amount required to be deposited in the Low and Moderate Income Housing Fund has been deducted. In any fiscal year in which the agency receives tax increments, the community that has adopted the redevelopment project area may elect to receive the amount authorized by this paragraph. (c) Commencing with the 11th fiscal year in which the agency receives tax increments and continuing through the last fiscal year in which the agency receives tax increments, a redevelopment agency shall pay to the affected taxing entities, other than the community which has adopted the project, in addition to the amounts paid pursuant to subdivision (b) and after deducting the amount allocated to the Low and Moderate Income Housing Fund, an amount equal to 21 percent of the portion of tax increments received by the agency, which shall be calculated by applying the tax rate against the amount of assessed value by which the current year assessed value exceeds the first adjusted base year assessed value. The first adjusted base year assessed value is the assessed value of the project area in the 10th fiscal year in which the agency receives tax increment revenues. (d) Commencing with the 31st fiscal year in which the agency receives tax increments and continuing through the last fiscal year in which the agency receives tax increments, a redevelopment agency shall pay to the affected taxing entities, other than the community which has adopted the project, in addition to the amounts paid pursuant to subdivisions (b) and (c) and after deducting the amount allocated to the Low and Moderate Income Housing Fund, an amount equal to 14 percent of the portion of tax increments received by the agency, which shall be calculated by applying the tax rate against the amount of assessed value by which the current year assessed value exceeds the second adjusted base year assessed value. The second adjusted base year assessed value is the assessed value of the project area in the 30th fiscal year in which the agency receives tax increments. (e) (1) Prior to incurring any loans, bonds, or other indebtedness, except loans or advances from the community, the agency may subordinate to the loans, bonds or other indebtedness the amount required to be paid to an affected taxing entity by this section, provided that the affected taxing entity has approved these subordinations pursuant to this subdivision. (2) At the time the agency requests an affected taxing entity to subordinate the amount to be paid to it, the agency shall provide the affected taxing entity with substantial evidence that sufficient funds will be available to pay both the debt service and the payments required by this section, when due. (3) Within 45 days after receipt of the agency's request, the affected taxing entity shall approve or disapprove the request for subordination. An affected taxing entity may disapprove a request for subordination only if it finds, based upon substantial evidence, that the agency will not be able to pay the debt payments and the amount required to be paid to the affected taxing entity. If the affected taxing entity does not act within 45 days after receipt of the agency's request, the request to subordinate shall be deemed approved and shall be final and conclusive. (f) (1) The Legislature finds and declares both of the following: (A) The payments made pursuant to this section are necessary in order to alleviate the financial burden and detriment that affected taxing entities may incur as a result of the adoption of a redevelopment plan, and payments made pursuant to this section will benefit redevelopment project areas. (B) The payments made pursuant to this section are the exclusive payments that are required to be made by a redevelopment agency to affected taxing entities during the term of a redevelopment plan. (2) Notwithstanding any other provision of law, a redevelopment agency shall not be required, either directly or indirectly, as a measure to mitigate a significant environmental effect or as part of any settlement agreement or judgment brought in any action to contest the validity of a redevelopment plan pursuant to Section 33501, to make any other payments to affected taxing entities, or to pay for public facilities that will be owned or leased to an affected taxing entity. (g) As used in this section, a "local education agency" is a school district, a community college district, or a county office of education. SEC. 4. Section 33681.12 of the Health and Safety Code, as added by Section 15 of Chapter 211 of the Statutes of 2004, is amended to read: 33681.12. (a) (1) During the 2004-05 fiscal year, a redevelopment agency shall, prior to May 10, remit an amount equal to the amount determined for that agency pursuant to subparagraph (I) of paragraph (2) to the county auditor for deposit in the county's Educational Revenue Augmentation Fund created pursuant to Article 3 (commencing with Section 97) of Chapter 6 of Part 0.5 of Division 1 of the Revenue and Taxation Code. During the 2005-06 fiscal year, a redevelopment agency shall, prior to May 10, remit an amount equal to the amount determined for that agency pursuant to subparagraph (I) of paragraph (2) to the county auditor for deposit in the county's Educational Revenue Augmentation Fund created pursuant to Article 3 (commencing with Section 97) of Chapter 6 of Part 0.5 of Division 1 of the Revenue and Taxation Code. (2) For the 2004-05 and 2005-06 fiscal years, on or before November 15, the Director of Finance shall do all of the following: (A) Determine the net tax increment apportioned to each agency pursuant to Section 33670, excluding any amounts apportioned to affected taxing agencies pursuant to Section 33401, 33607.5, or 33676. (B) Determine the net tax increment apportioned to all agencies pursuant to Section 33670, excluding any amounts apportioned to affected taxing agencies pursuant to Section 33401, 33607.5, or 33676. (C) Determine a percentage factor by dividing one hundred twenty-five million dollars ($125,000,000) by the amount determined pursuant to subparagraph (B). (D) Determine an amount for each agency by multiplying the amount determined pursuant to subparagraph (A) by the percentage factor determined pursuant to subparagraph (C). (E) Determine the total amount of property tax revenue apportioned to each agency pursuant to Section 33670, including any amounts apportioned to affected taxing agencies pursuant to Section 33401, 33607.5, or 33676. (F) Determine the total amount of property tax revenue apportioned to all agencies pursuant to Section 33670, including any amounts apportioned to affected taxing agencies pursuant to Section 33401, 33607.5, or 33676. (G) Determine a percentage factor by dividing one hundred twenty-five million dollars ($125,000,000) by the amount determined pursuant to subparagraph (F). (H) Determine an amount for each agency by multiplying the amount determined pursuant to subparagraph (E) by the percentage factor determined pursuant to subparagraph (G). (I) Add the amount determined pursuant to subparagraph (D) to the amount determined pursuant to subparagraph (H). (J) Notify each agency and each legislative body of the amount determined pursuant to subparagraph (I). (K) Notify each county auditor of the amounts determined pursuant to subparagraph (I) for each agency in his or her county. (3) The obligation of any agency to make the payments required pursuant to this subdivision shall be subordinate to the lien of any pledge of collateral securing, directly or indirectly, the payment of the principal, or interest on any bonds of the agency including, without limitation, bonds secured by a pledge of taxes allocated to the agency pursuant to Section 33670. (b) (1) Notwithstanding Sections 33334.2, 33334.3, and 33334.6, and any other provision of law, in order to make the full allocation required by this section, an agency may borrow up to 50 percent of the amount required to be allocated to the Low and Moderate Income Housing Fund pursuant to Sections 33334.2, 33334.3, and 33334.6 during the 2004-05 fiscal year and, if applicable, the 2005-06 fiscal year, unless executed contracts exist that would be impaired if the agency reduced the amount allocated to the Low and Moderate Income Housing Fund pursuant to the authority of this subdivision. (2) As a condition of borrowing pursuant to this subdivision, an agency shall make a finding that there are insufficient other moneys to meet the requirements of subdivision (a). Funds borrowed pursuant to this subdivision shall be repaid in full within 10 years following the date on which moneys are remitted to the county auditor for deposit in the county's Educational Revenue Augmentation Fund pursuant to subdivision (a). (c) In order to make the allocation required by this section, an agency may use any funds that are legally available and not legally obligated for other uses, including, but not limited to, reserve funds, proceeds of land sales, proceeds of bonds or other indebtedness, lease revenues, interest, and other earned income. No moneys held in a low- and moderate-income fund as of July 1 of the applicable fiscal year may be used for this purpose. (d) The legislative body shall by March 1 report to the county auditor as to how the agency intends to fund the allocation required by this section, or that the legislative body intends to remit the amount in lieu of the agency pursuant to Section 33681.14. (e) The allocation obligations imposed by this section, including amounts owed, if any, created under this section, are hereby declared to be an indebtedness of the redevelopment project to which they relate, payable from taxes allocated to the agency pursuant to Section 33670, and shall constitute an indebtedness of the agency with respect to the redevelopment project until paid in full. (f) It is the intent of the Legislature, in enacting this section, that these allocations directly or indirectly assist in the financing or refinancing, in whole or in part, of the community's redevelopment project pursuant to Section 16 of Article XVI of the California Constitution. (g) In making the determinations required by subdivision (a), the Director of Finance shall use those amounts reported as the "Tax Increment Retained by Agency" for all agencies and for each agency in the most recent published edition of the Controller's Community Redevelopment Agencies Annual Report made pursuant to Section 12463.3 of the Government Code. (h) If revised reports have been accepted by the Controller on or before September 1, 2005, the Director of Finance shall use appropriate data that has been certified by the Controller for the purpose of making the determinations required by subdivision (a). (i) (1) Notwithstanding any other provision of law, a county redevelopment agency may enter into a loan agreement with the legislative body to have the agency remit to the county's Educational Revenue Augmentation Fund for each of the 2004-05 and 2005-06 fiscal years an amount greater than that determined pursuant to subparagraph (I) of paragraph (2) of subdivision (a) if all of the following conditions are met: (A) The agency does not exercise its authority under subdivision (b) to borrow from its Low and Moderate Income Housing Fund to finance its payments to the county's Educational Revenue Augmentation Fund. (B) The agency does not have any outstanding loans from its Low and Moderate Income Housing Fund that were made under subdivision (b) of Section 33981.5, subdivision (b) of Section 33681.7, or subdivision (b) of Section 33681.9. (C) The loan agreement requires the county to repay any excess remitted amounts, including interest, to the agency within three fiscal years subsequent to the fiscal year in which the loan is made. (D) The agency making the loan does not participate in pooled borrowing under Section 33681.15. (2) A loan agreement described in paragraph (1) shall be transmitted to the county auditor not later than December 1 of the fiscal year in which the loan is made. Any amount remitted by the agency to the county Educational Revenue Augmentation Fund for the 2004-05 or 2005-06 fiscal year in excess of the amount determined pursuant to paragraph (1) of subdivision (a) shall be credited to the amount that would otherwise be subtracted by the county auditor pursuant to subdivision (a) of Section 97.71 of the Revenue and Taxation Code for, as applicable, the 2004-05 and 2005-06 fiscal years. SEC. 5. Section 33681.15 is added to the Health and Safety Code, to read: 33681.15. (a) For the purposes of this section, an "authorized issuer" is limited to a joint powers entity created pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code that consists of no less than 100 local agencies issuing bonds pursuant to the Marks-Roos Local Bond Pooling Act of 1984 (commencing with Section 6584) of the Government Code. (b) An authorized issuer may issue bonds, notes, or other evidence of indebtedness to provide net proceeds to make one or more loans to one or more redevelopment agencies to be used by the agency to timely make the payment required by Section 33681.12. (c) With the prior approval of the legislative body by adoption of a resolution by a majority of that body that recites that a first lien on the property tax revenues allocated to the legislative body will be created in accordance with subdivision (h), an agency may enter into an agreement with an authorized issuer issuing bonds pursuant to subdivision (b) to repay a loan used to make the payment required by Section 33681.12, notwithstanding the expiration of the time limit on establishing loans, advances, advances and indebtedness, and the time limit on repayment of indebtedness. For the purpose of calculating the amount that has been divided and allocated to the redevelopment agency to determine whether the limitation adopted pursuant to Section 33333.2 or 33333.4 or pursuant to an agreement or court order has been reached, any funds used to repay a loan entered into pursuant to this section shall be deducted from the amount of property tax revenue deemed to have been received by the agency. (d) A loan made pursuant to this section shall be repayable by the agency from any available funds of the agency not otherwise obligated for other uses and shall be repayable by the agency on a basis subordinate to all existing and future obligations of the agency. (e) Upon making a loan to an agency pursuant to this section, the trustee for the bonds issued to provide the funds to make the loan shall timely pay, on behalf of the agency, to the county auditor of the county in which the agency is located the net proceeds (after payment of costs of issuance, credit enhancement costs, and reserves, if any) of the loan in payment in full or in part, as directed by the agency, of the amount required to be paid by the agency pursuant to Section 33681.12 and shall provide the county auditor with the repayment schedule for the loan, together with the name of the trustee. (f) In the event the agency shall, at any time and from time to time, fail to repay timely the loan in accordance with the schedule provided to the county auditor, the trustee for the bonds shall promptly notify the county auditor of the amount of the payment on the loan that is past due. (g) The county auditor shall reallocate from the legislative body and shall pay, on behalf of the agency, the past due amount from the first available proceeds of the property tax allocation that would otherwise be transferred to the legislative body pursuant to Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code. This transfer shall be deemed a reallocation of the property tax revenue from the legislative body to the agency for the purpose of payment of the loan, and not as a payment by the legislative body on the loan. (h) To secure repayment of a loan to an agency made pursuant to this section, the trustee for the bonds issued to provide the funds to make the loan shall have a lien on the property tax revenues allocated to the legislative body pursuant to Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code. This lien shall arise by operation of this section automatically upon the making of the loan without the need for any action on the part of any person. This lien shall be valid, binding, perfected, and enforceable against the legislative body, its successors, creditors, purchasers, and all others asserting rights in those property tax revenues, irrespective of whether those persons have notice of the lien, irrespective of the fact that the property tax revenues subject to the lien may be commingled with other property, and without the need for physical delivery, recordation, public notice, or any other act. This lien shall be a first priority lien on these property tax revenues. This lien shall not apply to any portion of the property taxes allocated to the agency pursuant to Section 33670. SEC. 6. Section 97.70 of the Revenue and Taxation Code, as added by Section 21 of Chapter 211 of the Statutes of 2004, is amended to read: 97.70. Notwithstanding any other provision of law, for the 2004-05 fiscal year and for each fiscal year thereafter, all of the following apply: (a) (1) (A) The auditor shall reduce the total amount of ad valorem property tax revenue that is otherwise required to be allocated to a county's Educational Revenue Augmentation Fund by the countywide vehicle license fee adjustment amount. (B) If, for the fiscal year, after complying with Section 97.68 there is not enough ad valorem property tax revenue that is otherwise required to be allocated to a county Educational Revenue Augmentation Fund for the auditor to complete the allocation reduction required by subparagraph (A), the auditor shall additionally reduce the total amount of ad valorem property tax revenue that is otherwise required to be allocated to all school districts and community college districts in the county for that fiscal year by an amount equal to the difference between the countywide vehicle license fee adjustment amount and the amount of ad valorem property tax revenue that is otherwise required to be allocated to the county Educational Revenue Augmentation Fund for that fiscal year. This reduction for each school district and community college district in the county shall be the percentage share of the total reduction that is equal to the proportion that the total amount of ad valorem property tax revenue that is otherwise required to be allocated to the school district or community college district bears to the total amount of ad valorem property tax revenue that is otherwise required to be allocated to all school districts and community college districts in a county. For purposes of this subparagraph, "school districts" and "community college districts" do not include any districts that are excess tax school entities, as defined in Section 95. (2) The countywide vehicle license fee adjustment amount shall be allocated to the Vehicle License Fee Property Tax Compensation Fund that shall be established in the treasury of each county. (b) (1) The auditor shall allocate moneys in the Vehicle License Fee Property Tax Compensation Fund according to the following: (A) Each city in the county shall receive its vehicle license fee adjustment amount. (B) Each county and city and county shall receive its vehicle license fee adjustment amount. (2) The auditor shall allocate one-half of the amount specified in paragraph (1) on or before January 31 of each fiscal year, and the other one-half on or before May 31 of each fiscal year. (c) For purposes of this section, all of the following apply: (1) "Vehicle license fee adjustment amount" for a particular city, county, or a city and county means, subject to an adjustment under paragraph (2) and Section 97.71, all of the following: (A) For the 2004-05 fiscal year, an amount equal to the difference between the following two amounts: (i) The estimated total amount of revenue that would have been deposited to the credit of the Motor Vehicle License Fee Account in the Transportation Tax Fund, including any amounts that would have been certified to the Controller by the auditor of the County of Ventura under subdivision (j) of Section 98.02, as that section read on January 1, 2004, for distribution under the law as it read on January 1, 2004, to the county, city and county, or city for the 2004-05 fiscal year if the fee otherwise due under the Vehicle License Fee Law (Pt. 5 (commencing with Section 10701) of Div. 2) was 2 percent of the market value of a vehicle, as specified in Section 10752 and 10752.1 as those sections read on January 1, 2004. (ii) The estimated total amount of revenue that is required to be distributed from the Motor Vehicle License Fee Account in the Transportation Tax Fund to the county, city and county, and each city in the county for the 2004-05 fiscal year under Section 11005, as that section read on the operative date of the act that amended this clause. (B) (i) Subject to an adjustment under clause (ii), for the 2005-06 fiscal year, the sum of the following two amounts: (I) The difference between the following two amounts: (Ia) The actual total amount of revenue that would have been deposited to the credit of the Motor Vehicle License Fee Account in the Transportation Tax Fund, including any amounts that would have been certified to the Controller by the auditor of the County of Ventura under subdivision (j) of Section 98.02, as that section read on January 1, 2004, for distribution under the law as it read on January 1, 2004, to the county, city and county, or city for the 2004-05 fiscal year if the fee otherwise due under the Vehicle License Fee Law (Part 5 (commencing with Section 10701) of Division 2) was 2 percent of the market value of a vehicle, as specified in Sections 10752 and 10752.1 as those sections read on January 1, 2004. (Ib) The actual total amount of revenue that was distributed from the Motor Vehicle License Fee Account in the Transportation Tax Fund to the county, city and county, and each city in the county for the 2004-05 fiscal year under Section 11005, as that section read on the operative date of the act that amended this sub-subclause. (II) The product of the following two amounts: (IIa) The amount described in subclause (I). (IIb) The percentage change from the prior fiscal year to the current fiscal year in gross taxable assessed valuation within the jurisdiction of the entity, as reflected in the equalized assessment roll for those fiscal years. For the first fiscal year for which a change in a city's jurisdictional boundaries first applies, the percentage change in gross taxable assessed valuation from the prior fiscal year to the current fiscal year shall be calculated solely on the basis of the city's previous jurisdictional boundaries, without regard to the change in that city's jurisdictional boundaries. For each following fiscal year, the percentage change in gross taxable assessed valuation from the prior fiscal year to the current fiscal year shall be calculated on the basis of the city's current jurisdictional boundaries. (ii) The amount described in clause (i) shall be adjusted as follows: (I) If the amount described in subclause (I) of clause (i) for a particular city, county, or city and county is greater than the amount described in subparagraph (A) for that city, county, or city and county, the amount described in clause (i) shall be increased by an amount equal to this difference. (II) If the amount described in subclause (I) of clause (i) for a particular city, county, or city and county is less than the amount described in subparagraph (A) for that city, county, or city and county, the amount described in clause (i) shall be decreased by an amount equal to this difference. (C) For the 2006-07 fiscal year and for each fiscal year thereafter, the sum of the following two amounts: (i) The vehicle license fee adjustment amount for the prior fiscal year, if Section 97.71 and clause (ii) of subparagraph (B) did not apply for that fiscal year, for that city, county, and city and county. (ii) The product of the following two amounts: (I) The amount described in clause (i). (II) The percentage change from the prior fiscal year to the current fiscal year in gross taxable assessed valuation within the jurisdiction of the entity, as reflected in the equalized assessment roll for those fiscal years. For the first fiscal year for which a change in a city's jurisdictional boundaries first applies, the percentage change in gross taxable assessed valuation from the prior fiscal year to the current fiscal year shall be calculated solely on the basis of the city's previous jurisdictional boundaries, without regard to the change in that city's jurisdictional boundaries. For each following fiscal year, the percentage change in gross taxable assessed valuation from the prior fiscal year to the current fiscal year shall be calculated on the basis of the city's current jurisdictional boundaries. (2) "Countywide vehicle license fee adjustment amount" means, for any fiscal year, the total sum of the amounts described in paragraph (1) for a county or city and county, and each city in the county. (3) On or before June 30 of each fiscal year, the auditor shall report to the Controller the vehicle license fee adjustment amount for the county and each city in the county for that fiscal year. (d) For the 2005-06 fiscal year and each fiscal year thereafter, the amounts determined under subdivision (a) of Section 96.1, or any successor to that provision, shall not reflect, for a preceding fiscal year, any portion of any allocation required by this section. (e) For purposes of Section 15 of Article XI of the California Constitution, the allocations from a Vehicle License Fee Property Tax Compensation Fund constitute successor taxes that are otherwise required to be allocated to counties and cities, and as successor taxes, the obligation to make those transfers as required by this section shall not be extinguished nor disregarded in any manner that adversely affects the security of, or the ability of, a county or city to pay the principal and interest on any debts or obligations that were funded or secured by that city's or county's allocated share of motor vehicle license fee revenues. (f) This section shall not be construed to do any of the following: (1) Reduce any allocations of excess, additional, or remaining funds that would otherwise have been allocated to county superintendents of schools, cities, counties, and cities and counties pursuant to clause (i) of subparagraph (B) of paragraph (4) of subdivision (d) of Sections 97.2 and 97.3 or Article 4 (commencing with Section 98) had this section not been enacted. The allocations required by this section shall be adjusted to comply with this paragraph. (2) Require an increased ad valorem property tax revenue allocation or increased tax increment allocation to a community redevelopment agency. (3) Alter the manner in which ad valorem property tax revenue growth from fiscal year to fiscal year is otherwise determined or allocated in a county. (4) Reduce ad valorem property tax revenue allocations required under Article 4 (commencing with Section 98). (g) Tax exchange or revenue sharing agreements, entered into prior to the operative date of this section, between local agencies or between local agencies and nonlocal agencies are deemed to be modified to account for the reduced vehicle license fee revenues resulting from the act that added this section. These agreements are modified in that these reduced revenues are, in kind and in lieu thereof, replaced with ad valorem property tax revenue from a Vehicle License Fee Property Tax Compensation Fund or an Educational Revenue Augmentation Fund. SEC. 7. Section 97.71 of the Revenue and Taxation Code, as added by Section 22 of Chapter 211 of the Statutes of 2004, is amended to read: 97.71. Notwithstanding any other provision of law, for each of the 2004-05 and 2005-06 fiscal years, all of the following apply: (a) (1) The total amount of revenue required to be allocated to each county and each city and county under Section 97.70 shall be reduced by the dollar amount indicated as follows: Property Tax Reduction per County Alameda ....................... $ 14,993,115 Alpine ........................ 13,578 Amador ........................ 341,856 Butte ......................... 1,968,640 Calaveras ..................... 367,372 Colusa ........................ 227,244 Contra Costa .................. 9,266,091 Del Norte ..................... 260,620 El Dorado ..................... 1,465,981 Fresno ........................ 7,778,611 Glenn ......................... 302,192 Humboldt ...................... 1,433,725 Imperial ...................... 1,499,081 Inyo .......................... 188,370 Kern .......................... 6,684,032 Kings ......................... 1,409,501 Lake .......................... 531,524 Lassen ........................ 317,119 Los Angeles ................... 103,217,625 Madera ........................ 1,164,287 Marin ......................... 2,369,777 Mariposa ...................... 177,419 Mendocino ..................... 997,570 Merced ........................ 2,211,012 Modoc ......................... 119,325 Mono .......................... 92,964 Monterey ...................... 3,789,991 Napa .......................... 1,128,692 Nevada ........................ 503,547 Orange ........................ 27,730,861 Placer ........................ 2,219,818 Plumas ........................ 238,066 Riverside ..................... 14,161,003 Sacramento .................... 12,232,737 San Benito .................... 477,872 San Bernardino ................ 16,361,855 San Diego ..................... 27,470,228 San Francisco ................. 15,567,648 San Joaquin ................... 6,075,964 San Luis Obispo ............... 2,350,289 San Mateo ..................... 6,704,877 Santa Barbara ................. 3,894,357 Santa Clara ................... 17,155,293 Santa Cruz .................... 2,433,423 Shasta ........................ 1,592,267 Sierra ........................ 37,051 Siskiyou ...................... 496,974 Solano ........................ 3,796,251 Sonoma ........................ 4,439,389 Stanislaus .................... 4,516,707 Sutter ........................ 764,351 Tehama ........................ 618,393 Trinity ....................... 104,770 Tulare ........................ 3,781,964 Tuolumne ...................... 515,961 Ventura ....................... 7,085,556 Yolo .......................... 1,735,079 Yuba .......................... 620,137 (2) The total amount of reductions for all counties and cities and counties determined pursuant to this subdivision is three hundred fifty million dollars ($350,000,000) for the 2004-05 fiscal year and that same amount for the 2005-06 fiscal year. (b) (1) The total amount of revenue required to be allocated to a city and county under Section 97.70 shall be reduced by the product of the following two amounts: (A) The percentage represented by the following fraction: (i) The numerator is the total amount of money allocated to the city and county from the Motor Vehicle License Fee Account in the Transportation Tax Fund for the 2002-03 fiscal year pursuant to subdivision (c) of Section 11005, as reported in the State Controller' s Monthly Motor Vehicle License Fee Reports for the 2002-03 fiscal year. (ii) The denominator is the total amount of money allocated among all cities and cities and counties from the Motor Vehicle License Fee Account in the Transportation Tax Fund for the 2002-03 fiscal year pursuant to subdivision (c) of Section 11005, as reported in the State Controller's Monthly Motor Vehicle License Fee Reports for the 2002-03 fiscal year. (B) Three hundred fifty million dollars ($350,000,000). (2) (A) The total amount of revenue required to be allocated to each city under Section 97.70 shall be reduced by the sum of the following three amounts: (i) The product of the following two amounts: (I) The percentage represented by the following fraction: (Ia) The numerator is the total amount of money allocated to the city from the Motor Vehicle License Fee Account in the Transportation Tax Fund for the 2002-03 fiscal year, as reported in the State Controller's Monthly Motor Vehicle License Fee Reports for the 2002-03 fiscal year. (Ib) The denominator is the total amount of money allocated among all cities from the Motor Vehicle License Fee Account in the Transportation Tax Fund for the 2002-03 fiscal year, as reported in the State Controller's Monthly Motor Vehicle License Fee Reports for the 2002-03 fiscal year. (II) The product of the following two amounts: (IIa) Thirty-three and one-third percent. (IIb) The difference between three hundred fifty million dollars ($350,000,000) and the amount described in paragraph (1). (ii) The product of the following two amounts: (I) The percentage represented by the following fraction: (Ia) The numerator is the total amount of money transmitted to the city under Section 7204 for the 2002-03 fiscal year, as reported in Table 21A of the 2002-03 edition of the State Board of Equalization Annual Report. (Ib) The denominator is the total amount of money transmitted to all cities under Section 7204 for the 2002-03 fiscal year, as reported in Table 21A of the 2002-03 edition of the State Board of Equalization Annual Report. (II) The product of the following two amounts: (IIa) Thirty-three and one-third percent. (IIb) The difference between three hundred fifty million dollars ($350,000,000) and the amount described in paragraph (1). (iii) The product of the following two amounts: (I) The percentage represented by the following fraction: (Ia) The numerator is the total amount of ad valorem property tax revenue allocated to the city for the 2002-03 fiscal year, as reported in the 2001-02 edition of the State Controller's Cities Annual Report. (Ib) The denominator is the total amount of ad valorem property tax revenue allocated among all cities for the 2002-03 fiscal year, as reported in the 2001-02 edition of the State Controller's Cities Annual Report. (II) The product of the following two amounts: (IIa) Thirty-three and one-third percent. (IIb) The difference between three hundred fifty million dollars ($350,000,000) and the amount described in paragraph (1). (B) Notwithstanding subparagraph (A), the reduction required by this paragraph for any city shall not be less than 2 percent, nor more than 4 percent, of the general revenues of the city, as reported in the 2001-02 edition of the State Controller's Cities Annual Report. If the amount determined for a city under subparagraph (A) exceeds 4 percent of the general revenues of the city, as reported in the 2001-02 edition of the State Controller's Cities Annual Report, the amount of that excess shall be allocated among the reductions required for all other cities in percentage shares corresponding to those reduction amounts. (3) On or before September 15, 2004, the Controller shall notify the auditor of each county and city and county of the reductions required by this subdivision. (4) The total amount of reductions for all cities and cities and counties determined pursuant to this subdivision shall be three hundred fifty million dollars ($350,000,000) for the 2004-05 fiscal year and that same amount for the 2005-06 fiscal year. (5) (A) In lieu of a reduction under paragraph (2), a city may transmit to the county auditor for deposit in the county Educational Revenue Augmentation Fund an amount equal to that reduction. For the 2004-05 fiscal year, if the county auditor does not receive a payment under this paragraph from a city on or before October 1, 2004, the auditor shall make the reduction required by paragraph (2). For the 2005-06 fiscal year, if the county auditor does not receive a payment under this paragraph from a city on or before October 1, 2005, the auditor shall make the reduction required by paragraph (2). (B) Notwithstanding any other provision of law, to make the transmittals authorized by this paragraph, a city may use any funds or revenues, the use of which is not restricted by federal law or the California Constitution. (6) (A) Notwithstanding any other provision of law, a city that has established a reserve for subsidence contingencies may, for the 2004-05 and 2005-06 fiscal years only, retain interest earned on that reserve for the previous calendar year in an amount not to exceed the amount of the reduction for that city required by this subdivision. (B) The Legislature finds and declares that the amounts retained by a city pursuant to subparagraph (A) are in excess of trust needs and are free from the public trust for navigation, commerce, fisheries, and any other trust uses and restrictions. (C) A city that has retained an amount under subparagraph (A) shall, beginning with the 2006-07 fiscal year, repay to the reserve for subsidence contingencies that amount so retained. The repayment shall be made in annual increments, which increments shall not be less than five hundred thousand dollars ($500,000), until the amount retained by the city has been repaid. Those amounts repaid to the reserve for subsidence contingencies are subject to the public trust and shall be used only for the purposes prescribed by law for the reserve. (c) That amount of revenue that is not allocated to a county, city and county, or a city as a result of subdivisions (a) and (b), and that amount that is received by the county auditor under paragraph (5) of subdivision (b), shall be deposited in the county Educational Revenue Augmentation Fund and shall be allocated as specified in subdivision (d) of Section 97.3. (d) For the 2005-06 fiscal year and each fiscal year thereafter, the amounts determined under subdivision (a) of Section 96.1, or any successor to that provision, shall not reflect, for a preceding fiscal year, any portion of any allocation required by this section. SEC. 8. Section 97.72 of the Revenue and Taxation Code, as added by Section 23 of Chapter 211 of the Statutes of 2004, is amended to read: 97.72. Notwithstanding any other provision of law, for each of the 2004-05 and 2005-06 fiscal years, all of the following apply: (a) (1) (A) (i) Except as otherwise provided in clauses (ii) and (iii), the total amount of ad valorem property tax revenue, other than these revenues that are pledged to debt service, otherwise allocated for each of those fiscal years to each enterprise special district shall be reduced by the lesser of the following: (I) Forty percent of the amount of ad valorem property tax revenue of the district for the 2001-02 fiscal year, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (II) An amount equal to 10 percent of that district's total revenues for the 2001-02 fiscal year, from whatever source, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (ii) The total amount of ad valorem property tax revenue otherwise allocated for each of those fiscal years to each enterprise special district that is a transit district shall be reduced by 3 percent of the amount of ad valorem property tax revenue of the district for the 2001-02 fiscal year, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (iii) The total amount of ad valorem property tax revenue otherwise allocated for each of those fiscal years to an enterprise special district that also performs, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report, nonenterprise functions other than fire protection or police protection shall be decreased by both of the following, not to exceed 10 percent of a district's total revenues from whatever source, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report: (I) Forty percent of the amount of ad valorem property tax revenue of the district's enterprise functions for the 2001-02 fiscal year, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (II) Ten percent of the amount of ad valorem property tax revenue of the district's nonenterprise functions for the 2001-02 fiscal year, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (B) If an enterprise special district is located in more than one county, the auditor of each county in which that enterprise special district is located shall implement that portion of the total reduction, required by subparagraph (A) with respect to that district, determined by the ratio of the amount of ad valorem property tax revenue allocated to that district from the county to the total amount of ad valorem property tax revenue allocated to that district from all counties. (2) The Controller shall determine the amount of the ad valorem property tax revenue reduction required by paragraph (1) for each enterprise special district in each county. The Controller shall then determine whether the total amount of ad valorem property tax revenue reductions under paragraph (1) and Section 97.73 is less than three hundred fifty million dollars ($350,000,000). If, for either the 2004-05 or 2005-06 fiscal year, the total of the amount of these reductions is less than three hundred fifty million dollars ($350,000,000), the total amount of ad valorem property tax revenue allocated to each enterprise special district, other than an enterprise special district that is a transit district, shall be reduced by an additional amount equal to that district's proportionate share of the difference, provided that the total reduction under this section for a district shall not exceed 10 percent of that district's revenue from whatever source for the 2001-02 fiscal year, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. If, as a result of this 10-percent limitation, any portion of the difference remains unapplied, that remaining portion shall, as many times as necessary, be applied in proportionate shares among those enterprise special districts, other than transit districts, for which the 10-percent limitation has not been reached, until a three hundred fifty million dollar reduction ($350,000,000) has been applied. The Controller shall, on or before October 25, 2004, notify the Director of Finance of the reduction amounts determined under this subdivision. The Director of Finance shall, on or before November 12, 2004, notify each county auditor of the allocation reductions required by this paragraph and Section 97.73. (b) That amount of ad valorem property tax revenue that is not allocated to an enterprise special district as a result of subdivision (a) shall instead be deposited in the county Educational Revenue Augmentation Fund and shall be allocated as specified in subdivision (d) of Section 97.3. (c) For purposes of this section, all of the following apply: (1) "Enterprise special district" means a special district that performs, as reported in the 2001-02 edition of the State Controller' s Special Districts Annual Report, an enterprise function. "Enterprise special district" does not include a fire protection district that was formed under the Shade Tree Law of 1909 set forth in Article 2 (commencing with Section 25620) of Chapter 7 of Division 2 of Title 3 of the Government Code, a local health care district as described in Division 23 (commencing with Section 32000) of the Health and Safety Code, or a qualified special district as defined in Section 97.34. (2) With respect to an enterprise special district that also performs, as reported in the 2001-02 edition of the State Controller' s Special Districts Annual Report, a police protection nonenterprise function with certified peace officers, as described in Chapter 4.5 (commencing with Section 830) of Title 3 of Part 2 of the Penal Code, or a fire protection nonenterprise function, "the amount of ad valorem property tax revenue of the district for the 2001-02 fiscal year" does not include ad valorem property tax revenue of that district for fire protection or police protection nonenterprise functions, as reported in the 2001-02 edition of the State Controller' s Special Districts Annual Report. (3) For purposes of this section, "revenues that are pledged to debt service" includes only those amounts required as the sole source of repayment to pay debt service costs in the 2002-03 fiscal year on debt instruments issued by an enterprise special district for the acquisition of fixed assets. For purposes of this paragraph, "fixed assets" means land, buildings, equipment, and improvements, including improvements to buildings. (d) For the purposes of this section, if a special district's financial transactions do not appear in the 2001-02 edition of the State Controller's Special Districts Annual Report, the Controller shall use the most recent data available for that district. (e) For the 2005-06 fiscal year and each fiscal year thereafter, the amounts determined under subdivision (a) of Section 96.1, or any successor to that provision, shall not reflect, for a preceding fiscal year, any portion of any allocation required by this section. SEC. 9. Section 97.73 of the Revenue and Taxation Code, as added by Section 24 of Chapter 211 of the Statutes of 2004, is amended to read: 97.73. Notwithstanding any other provision of law, for each of the 2004-05 and 2005-06 fiscal years, all of the following apply: (a) (1) (A) The total amount of ad valorem property tax revenue, other than those revenues that are pledged to debt service, otherwise allocated for each of those fiscal years to each nonenterprise special district shall be reduced by 10 percent of the amount of ad valorem property tax revenue of the district for the 2001-02 fiscal year, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (B) (i) Notwithstanding subparagraph (A), for the Laguna Niguel Community Service District in the County of Orange, the reduction described in subparagraph (A) shall be 4 percent rather than 10 percent. (ii) If the district described in clause (i) is not dissolved before July 1, 2006, for each of the 2006-07 and 2007-08 fiscal years, the auditor shall reduce the total amount of ad valorem property tax revenue, other than those revenues that are pledged to debt service, otherwise allocated to that district for each of those fiscal years by 6 percent of the amount of ad valorem property tax revenue of the district for the 2001-02 fiscal year, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (C) If a nonenterprise special district is located in more than one county, the auditor of each county in which that nonenterprise special district is located shall implement that portion of the total reduction, required by subparagraph (A) with respect to that district, determined by the ratio of the amount of ad valorem property tax revenue allocated to that district from the county to the total amount of ad valorem property tax revenue allocated to that district from all counties. (2) The Controller shall determine the amount of the ad valorem property tax revenue reduction required by paragraph (1) for each nonenterprise special district in each county and notify the Director of Finance of these amounts on or before October 25, 2004. (b) That amount of ad valorem property tax revenue that is not allocated to a nonenterprise special district as a result of subdivision (a) shall instead be deposited in the county Educational Revenue Augmentation Fund and shall be allocated as specified in subdivision (d) of Section 97.3. (c) For purposes of this section, all of the following apply: (1) (A) "Nonenterprise special district" means a special district that engages solely, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report, in nonenterprise functions, and a qualified special district as defined in Section 97.34. (B) Notwithstanding any other provision of law, "nonenterprise special district" does not include any of the following: (i) A fire protection district that was formed under the Shade Tree Law of 1909 set forth in Article 2 (commencing with Section 25620) of Chapter 7 of Division 2 of Title 3 of the Government Code. (ii) A police protection district formed pursuant to Part 1 (commencing with Section 20000) of Division 14 of the Health and Safety Code. (iii) A fire protection district formed under the Fire Protection District Law of 1987 (Part 2.7 (commencing with Section 13800) of Division 12 of the Health and Safety Code) or a fire protection district formed under the Fire Protection District Law of 1961, or any of its statutory predecessors, and that existed on January 1, 1988. (iv) Any library special district, including, but not limited to, the following: (I) A county free library system established pursuant to Article 1 (commencing with Section 19100) of Chapter 6 of Part 11 of Division 1 of Title 1 of the Education Code. (II) A unified school district and union school district public library district established pursuant to Chapter 3 (commencing with Section 18300) of Part 11 of Division 1 of Title 1 of the Education Code. (III) A library district established pursuant to Chapter 8 (commencing with Section 19400) of Part 11 of Division 1 of Title 1 of the Education Code. (IV) A library district in unincorporated towns and villages established pursuant to Chapter 9 (commencing with Section 19600) of Part 11 of Division 1 of Title 1 of the Education Code. (v) A memorial district formed pursuant to Article 1 (commencing with Section 1170) of Chapter 1 of Part 2 of Division 6 of the Military and Veterans Code. (vi) A mosquito abatement district or a vector control district formed pursuant to Chapter 1 (commencing with Section 2000) of Division 3 of the Health and Safety Code, or any predecessor to that law. (vii) The Glenn County Pest Abatement District and the East Side Mosquito Abatement District formed pursuant to Chapter 8 (commencing with Section 2800) of Division 3 of the Health and Safety Code. (2) With respect to a nonenterprise special district that performs, as reported in the 2001-02 edition of the State Controller' s Special Districts Annual Report, nonenterprise functions and police protection services with certified peace officers, as described in Chapter 4.5 (commencing with Section 830) of Title 3 of Part 2 of the Penal Code, or nonenterprise functions and fire protection services, "the amount of ad valorem property tax revenue of the district for the 2001-02 fiscal year" does not include ad valorem property tax revenue of that district for fire protection or police protection nonenterprise functions, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (3) With respect to a nonenterprise special district formed pursuant to Article 3 (commencing with Section 5500) of Chapter 3 of Division 5 of the Public Resources Code that performs, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report, nonenterprise functions and police protection services with certified peace officers, as described in Chapter 4.5 (commencing with Section 830) of Title 3 of Part 2 of the Penal Code, or nonenterprise functions and fire protection services, "the amount of ad valorem property tax revenue of the district for the 2001-02 fiscal year" does not include total expenditures net of total revenues by that district for fire protection or police protection nonenterprise functions, as reported in the 2001-02 edition of the State Controller's Special Districts Annual Report. (4) For purposes of this section, "revenues that are pledged to debt service" includes only those amounts required as the sole source of repayment to pay debt service costs in the 2002-03 fiscal year on debt instruments issued by a nonenterprise special district for the acquisition of fixed assets. For purposes of this paragraph, "fixed assets" means land, buildings, equipment, and improvements, including improvements to buildings. (d) For the purposes of this section, if a special district's financial transactions do not appear in the 2001-02 edition of the State Controller's Special Districts Annual Report, the Controller shall use the most recent data available for that district. (e) For the 2005-06 fiscal year and each fiscal year thereafter, the amounts determined under subdivision (a) of Section 96.1, or any successor to that provision, shall not reflect, for a preceding fiscal year, any portion of any allocation required by this section. SEC. 9.5. Section 97.74 of the Revenue and Taxation Code is repealed. SEC. 10. Section 7203.1 of the Revenue and Taxation Code, as amended by Section 29.5 of Chapter 211 of the Statutes of 2004, is amended to read: 7203.1. (a) Notwithstanding any other provision of law, during the revenue exchange period only, the authority of a county or a city under this part to impose a tax rate as specified in an ordinance adopted pursuant to Sections 7202 and 7203 is suspended, and the tax rate to be applied instead during that period under any ordinance as so adopted is the applicable of the following: (1) In the case of a county, 1 percent. (2) In the case of a city, three-quarters of 1 percent or less. (b) For purposes of this section, "revenue exchange period" means the period on and after July 1, 2004, and before the first day of the first calendar quarter commencing more than 90 days following a notification to the board by the Director of Finance pursuant to subdivision (b) of Section 99006 of the Government Code. (c) Subdivision (a) is a self-executing provision that operates without regard to any decision or act on the part of any local government. A change in a local general tax rate resulting from either the rate limitations applied by subdivision (a) or the end of the revenue exchange period is not subject to voter approval under either statute or Article XIII C of the California Constitution. (d) Existing tax exchange or revenue sharing agreements, entered into prior to the operative date of this section, between local agencies or between local agencies and nonlocal agencies shall be deemed to be temporarily modified to account for the reduction in sales and use tax revenues resulting from this section, with those reduced revenues to be replaced as may otherwise be provided by law. SEC. 11. Section 10754.11 of the Revenue and Taxation Code, as added by Section 35 of Chapter 211 of the Statutes of 2004, is amended to read: 10754.11. (a) (1) On August 15, 2006, the Controller shall transfer from the General Fund to the Gap Repayment Fund, which is hereby created in the State Treasury, an amount equal to the total amount of offsets that were applied to new vehicle registrations before October 1, 2003, and that were applied to vehicle license fees with a due date before October 1, 2003, that were not transferred into the Motor Vehicle License Fee Account in the Transportation Tax Fund and the Local Revenue Fund due to the operation of Item 9100-102-0001 of Section 2.00 of the Budget Act of 2003. The amount of this transfer shall include transfers not made for offsets applied on or after June 20, 2003, transfers required under clause (iii) of subparagraph (B) of paragraph (2) of subdivision (a) of Section 11000 as that section read on June 30, 2004, and the additional amounts required to be transferred to the Local Revenue Fund pursuant to paragraph (2) of subdivision (a) of Section 11001.5 and paragraph (2) of subdivision (d) of that same section, less any amount that was appropriated under clause (iii) of subparagraph (D) of paragraph (3) of subdivision (a) of Section 10754, as that section read on June 30, 2004. (2) The Controller may make the transfer required by paragraph (1) prior to August 15, 2006, if that transfer is authorized by the Legislature. (b) Moneys in the Gap Repayment Fund are hereby appropriated to the Controller for allocation by the Controller to each city, county, and city and county in an amount equal to the amount that was not allocated to each of these entities due to the operation of Item 9100-102-001 of Section 2.00 of the Budget Act of 2003, less any amount that was allocated to each entity under clause (ii) of subparagraph (D) of paragraph (3) of subdivision (a) of Section 10754, as that section read on June 30, 2004. (c) This section is operative for the period beginning on and after July 1, 2004. SEC. 12. Section 11001.5 of the Revenue and Taxation Code, as amended by Section 37 of Chapter 211 of the Statutes of 2004, is amended to read: 11001.5. (a) (1) Notwithstanding Section 11001, and except as provided in paragraph (2) and in subdivisions (b) and (d), 24.33 percent, and on and after July 1, 2004, 74.9 percent, of the moneys collected by the department under this part shall be reported monthly to the Controller, and at the same time, deposited in the State Treasury to the credit of the Local Revenue Fund, as established pursuant to Section 17600 of the Welfare and Institutions Code. All other moneys collected by the department under this part shall continue to be deposited to the credit of the Motor Vehicle License Fee Account in the Transportation Tax Fund and first allocated to the County of Orange as provided in subdivision (a) of Section 11005 and as necessary for the service of indebtedness as pledged by Sections 25350.6 and 53585.1 of the Government Code and in accordance with written instructions provided by the Controller under Sections 25350.7, 25350.9, and 53585.1 of the Government Code, and the balance shall be allocated to each city and city and county as otherwise provided by law. (2) For the period beginning on and after July 1, 2003, and ending on February 29, 2004, the Controller shall deposit an amount equal to 28.07 percent of the moneys collected by the department under this part in the State Treasury to the credit of the Local Revenue Fund. All other moneys collected by the department under this part shall continue to be deposited to the credit of the Motor Vehicle License Fee Account in the Transportation Tax Fund and allocated to each city, county, and city and county as otherwise provided by law. (b) Notwithstanding Section 11001, net funds collected as a result of procedures developed for greater compliance with vehicle license fee laws in order to increase the amount of vehicle license fee collections shall be reported monthly to the Controller, and at the same time, deposited in the State Treasury to the credit of the Vehicle License Fee Collection Account of the Local Revenue Fund as established pursuant to Section 17600 of the Welfare and Institutions Code. All revenues in excess of fourteen million dollars ($14,000,000) in any fiscal year shall be allocated to cities and cities and counties as specified in subdivisions (b) and (c) of Section 11005. (c) Notwithstanding Section 11001, 25.72 percent of the moneys collected by the department on or after August 1, 1991, and before August 1, 1992, under this part shall be reported monthly to the Controller, and at the same time, deposited in the State Treasury to the credit of the Local Revenue Fund, as established pursuant to Section 17600 of the Welfare and Institutions Code. All other moneys collected by the department under this part shall continue to be deposited to the credit of the Motor Vehicle License Fee Account in the Transportation Tax Fund and allocated to each city, county, and city and county as otherwise provided by law. (d) Notwithstanding any other provision of law, both of the following apply: (1) This section is operative for the period beginning on and after March 1, 2004. (2) It is the intent of the Legislature that the total amount deposited by the Controller in the State Treasury to the credit of the Local Revenue Fund for the 2003-04 fiscal year be equal to the total amount that would have been deposited to the credit of the Local Revenue Fund if paragraph (1) of subdivision (a) was applied during that entire fiscal year. The department shall calculate and notify the Controller of the adjustment amounts that are required by this paragraph to be deposited in the State Treasury to the credit of the Local Revenue Fund. The amounts deposited in the State Treasury to the credit of the Local Revenue Fund pursuant to this paragraph shall be deemed to have been deposited during the 2003-04 fiscal year. (e) This section does not amend nor is it intended to amend or impair Section 25350 and following of, Section 53584 and following of, the Government Code, or any other statute dealing with the interception of funds. SEC. 13. Section 11005 of the Revenue and Taxation Code, as added by Section 40 of Chapter 211 of the Statutes of 2004, is amended to read: 11005. After payment of refunds therefrom and after making the deductions authorized by Section 11003 and reserving the amount determined necessary by the Pooled Money Investment Board to meet the transfers ordered or proposed to be ordered pursuant to Section 16310 of the Government Code, commencing with the 2004-05 fiscal year, the balance of all motor vehicle license fees and any other money appropriated by law for expenditure pursuant to this section and deposited to the credit of the Motor Vehicle License Fee Account in the Transportation Tax Fund and remaining unexpended therein at the close of business on the last day of the calendar month, shall be allocated by the Controller by the 10th day of the following month in accordance with the following: (a) First, to the County of Orange. For the 2004-05 fiscal year, that county shall be allocated fifty-four million dollars ($54,000,000) in monthly installments. For the 2005-06 fiscal year and each fiscal year thereafter, that county shall receive, in monthly installments, an amount equal to the amount allocated under this section for the prior fiscal year, adjusted for the percentage change in the amount of revenues credited to the Motor Vehicle License Fee Account in the Transportation Tax Fund from the revenues credited to that account in the prior fiscal year. Moneys allocated to the County of Orange under this subdivision shall be used first for the service of indebtedness as provided in paragraph (1) of subdivision (a) of Section 11001.5. Any amounts in excess of the amount required for this service of indebtedness may be used by that county for any lawful purpose. (b) Second, to each city, the population of which is determined under Section 11005.3 on August 5, 2004, in an amount equal to the additional amount of vehicle license fee revenue, including offset transfers, that would be allocated to that city under Sections 11000 and 11005, as those sections read on January 1, 2004, as a result of that city's population being determined under Section 11005.3. (c) Third, to the cities and cities and counties of this state in the proportion that the population of each city or city and county bears to the total population of all cities and cities and counties in this state, as determined by the population research unit of the Department of Finance. For the purpose of this subdivision, the population of each city or city and county is that determined by the last federal decennial or special census, or a subsequent census validated by the demographic research unit or subsequent estimate prepared pursuant to Section 2107.2 of the Streets and Highways Code. SEC. 14. The Legislature finds and declares all of the following: (a) (1) This act would, by means of provisions relating to the allocation of property tax and vehicle license fee revenues, comprehensively revise and reform local government finance. (2) The Local Taxpayers and Public Safety Protection Act, which appears as Proposition 65 on the November 2, 2004, general election ballot (hereafter Proposition 65), would suspend the effect and operation of any interim statute, as defined in Proposition 65, pending the approval of that interim statute in a specified manner by the statewide electorate at the first statewide election occurring after that statute takes effect. (3) This act comprehensively revises and reforms local government finance by means of various provisions that take effect between November 1, 2003, and November 3, 2004, and that, if proposed on or after November 3, 2004, would be subject to voter approval under Section 1 of Article XIII E of the California Constitution, as added by Proposition 65, should that measure be approved by the voters and take effect. (4) Therefore, this act is in its entirety an interim statute within the meaning of Proposition 65, the effect and operation of which is suspended pending voter approval as required by that measure, should that measure be approved by the voters and take effect. (b) (1) Chapter 211 of the Statutes of 2004 added Section 97.70 to, amended Section 10754 of, and repealed Section 11000 of, the Revenue and Taxation Code. The amendments made to Section 10754 of, and the repeal of Section 11000 of, the Revenue and Taxation Code deleted provisions relating to allocations of state General Fund revenues that were previously required to be made to cities, counties, and cities and counties to compensate these entities for revenue losses resulting from offsets to the vehicle license fee. Beginning with the 2004-05 fiscal year, Section 97.70 of the Revenue and Taxation Code provides ad valorem property tax revenues to cities, counties, and cities and counties in lieu of these allocations of state General Fund revenues. (2) Therefore, it is the intent of the Legislature in enacting this act and Chapter 211 of the Statutes of 2004 to ensure that, for the 2004-05 fiscal year and each fiscal year thereafter, no state General Fund revenues be allocated to cities, counties, and cities and counties to compensate these entities for offsets to the vehicle license fee, except as otherwise provided by Section 10754.11 of the Revenue and Taxation Code. SEC. 15. Notwithstanding Section 17610 of the Government Code, if the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code. If the statewide cost of the claim for reimbursement does not exceed one million dollars ($1,000,000), reimbursement shall be made from the State Mandates Claims Fund. SEC. 16. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to enact the statutory changes needed to implement the Budget Act of 2004 to allow the state and local governments to preserve the public peace, health, and safety, it is necessary that this act take effect immediately.