BILL ANALYSIS AB 157 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 157 (Anderson) As Amended August 17, 2010 Majority vote. Tax levy ----------------------------------------------------------------- |ASSEMBLY: |76-0 |(June 2, 2009) |SENATE: |36-0 |(August 23, | | | | | | |2010) | ----------------------------------------------------------------- Original Committee Reference: REV. & TAX. SUMMARY : Allows the County of San Diego to extend, by two years, the time period for transferring the base year value of property substantially damaged or destroyed by the Cedar Fire that began in October 2003 (Cedar Fire). The Senate amendments : 1)Delete the general provision that increased from five years to seven years the amount of time a property owner has to acquire or construct property to replace property substantially damaged or destroyed by any state-declared disaster and remain eligible to receive a base year value transfer. 2)Allow the County of San Diego Board of Supervisors to extend the time period for transferring the base year value of property substantially damaged or destroyed by the Cedar Fire to comparable property within the same county by two years. 3)Apply to the determination of base year values for fiscal year (FY) 2003-04 and FYs thereafter. 4)Provide that, notwithstanding Revenue and Taxation Code Section 2229, the state shall not reimburse any local agency for property tax revenues lost as a result of this bill. EXISTING LAW : 1)Values property at its 1975 fair market value, with annual increases thereafter limited to the amount of inflation or 2%, whichever is less, until the property changes ownership or new construction occurs. Once a "reassessable" event occurs, the value of the property for tax purposes is re-determined based AB 157 Page 2 on its market value. The value initially established, or re-determined where appropriate, is referred to as the "base year value." 2)Provides for various situations where the base year value of a property is either retained (notwithstanding new construction or a change of ownership), or transferred to another property. These special situations are provided under various constitutional amendments modifying the original Proposition 13 framework and serve to avoid the otherwise required reassessment of a property to its current market value. 3)Provides that persons who own property substantially damaged or destroyed in a state-declared disaster may transfer the base year value of that property to a property acquired or constructed as a replacement if it is acquired within five years of the disaster. AS PASSED BY THE ASSEMBLY , this bill: 1)Increased, from five years to seven years, the amount of time a property owner has to acquire or construct property to replace property substantially damaged or destroyed by a state-declared disaster and remain eligible to receive a base year value transfer. 2)Applied to any comparable replacement property acquired or constructed as a replacement for property substantially damaged or destroyed by a disaster occurring on or after October 1, 2007, and to the determination of base year values for FY 2007-08 and FYs thereafter. Applied, in addition, to any comparable replacement property acquired or constructed to replace property substantially damaged or destroyed by the Cedar Fire, and to the determination of base year values for FY 2003-04 and FYs thereafter. 3)Contained legislative findings and declarations regarding the need for special legislation. Specifically, the findings noted that many homeowners were still struggling to replace homes lost in the wildfires that occurred in San Diego County in October of 2003. 4)Takes immediate effect as a tax levy. AB 157 Page 3 FISCAL EFFECT : The Board of Equalization (BOE) estimates property tax losses of less than $10,000 per year. COMMENTS : The author states, "Assembly Bill 157 is a disaster relief bill that would extend the timeframe for survivors of the devastating 2003 Cedar Fire to replace their fire-destroyed properties." The author goes on to state, "Nothing will ever be the same again for survivors of these catastrophic fire events, but we can help. The time it takes to rebuild homes and lives cannot be underestimated, and for many, restoration is an ongoing challenge. Even now, property owners struggle to resolve the necessary but time-consuming issues surrounding the replacement of their [homes]. I introduced Assembly Bill 157 as a simple way to ensure a realistic timetable for addressing the losses that survivors have suffered." BOE states: 1)Base year value transfers provide tax relief to disaster victims. "Permitting persons to 'transfer' their base year value from one property to another provides tax relief by allowing property owners to continue paying taxes on the replacement property equivalent to that paid on the property from which they were displaced. Without a base year value transfer, the taxes on the new property would likely be significantly more because, under the general change in ownership laws, the taxes would be based on the property's current fair market value. The rationale for providing a base year value transfer is that the tax laws should not further afflict disaster victims by imposing upon them higher property taxes. If the disaster had not occurred, those individuals would not have been compelled to relocate and thereby forfeit their Proposition 13 protected base year values." 2)Five years might not be enough time. "While most property owners will likely fit into the existing five-year period, the financial impact to the individual property owner that doesn't can be significant. Delays occur for a variety of reasons: unsettled insurance claims, uninsured or underinsured property owners, limited supply of replacement properties available for purchase, and lack of construction workers. This is especially true where the disaster creates mass destruction in a localized area. And in present times, there are added reasons for delays, such as difficulties in obtaining AB 157 Page 4 financing or purchasers that are experiencing unprecedented delays in completing the purchase of a bank owned home." Committee Staff Notes: Under existing law, victims of the Cedar Fire had until October of 2008 to acquire replacement property eligible for a base year value transfer. Property purchased after this date would, generally, be assessed at its fair market value. Under this bill, a victim of the Cedar Fire who purchased comparable replacement property after October of 2008 would be entitled to retroactive application of a base year value transfer, assuming enactment of an appropriate ordinance by the San Diego County Board of Supervisors. Analysis Prepared by : M. David Ruff / REV. & TAX. / (916) 319-2098 FN: 0006245