BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
900 (De Leon)
Hearing Date: 08/30/2010 Amended: 08/27/10
Consultant: Mark McKenzie Policy Vote: L Gov 4-0
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BILL SUMMARY: AB 900, an urgency measure, would require the
City of Bell to pay the County of Los Angeles a specified amount
to refund property taxes collected in 2007-08, 2008-09, and
2009-10 that exceed maximum allowable statutory rates. If a
taxpayer cannot be located by December 31, 2011, remaining
amounts would be allocated to schools, as specified. The City
of Bell would reimburse the county auditor for actual and
reasonable costs to administer these provisions.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Foregone payments to $2,900 General
schools
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Proposition 13 of 1978 limits the ad valorem property tax rate
to one percent. This limit does not apply to property taxes or
special assessments needed to pay the interest and redemption
charges on any indebtedness approved by the voters before July
1, 1978, including extraordinary property tax rates imposed by a
local jurisdiction to make payments in support of pension
programs. AB 13 (Roos, 1985) froze extraordinary for pensions
approved by voters before the passage of Proposition 13 at their
1982-83 levels. To enforce this limit, existing law requires a
county auditor to reduce a local agency's property tax
allocation for amounts that exceed the statutory limits, and
allocates the amount to school districts located in the agency's
jurisdiction in proportion to average daily attendance.
An audit being conducted by the State Controller (SCO)
determined that officials in the City of Bell, during the three
fiscal years between 2007 and 2010, levied an extraordinary
property tax rate to pay the City's pension obligations that
exceeded the 0.187554% rate allowed under current law. As a
result, property owners in Bell paid approximately $2.9 million
in excess property taxes during those three years. The SCO has
directed the City of Bell to immediately reduce the property tax
levy for pension obligations to the allowable rate, and
specified that any amounts collected above the allowable rate
should be reallocated to the elementary, high school and unified
school districts within the City, pursuant to existing law.
Instead of allocating the overpaid amounts to the local schools,
AB 900 would provide for the repayment of the amounts to the
owners of the properties that were subject to the excess
taxation. Specifically, this bill would require the City of
Bell to pay to the Los Angeles County Auditor by December 31,
2010 an amount equal to the amounts collected in excess of the
statutory limits in the 2007-08, 2008-09, 2009-10 fiscal years,
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AB 900 (De Leon)
plus interest. The county auditor would make a refund to any
taxpayer who paid the excess tax in a manner consistent with its
tax refund practices. If the county is unable to locate an
eligible taxpayer by December 31, 2011, any remaining amounts
would be allocated to local schools pursuant to existing law.
Actual and reasonable costs incurred by the county auditor to
administer the tax refund requirements, including specified
overhead costs, would be reimbursed by the City of Bell.
AB 900 is one of a number of bills that address the controversy
surrounding compensation paid to officials in the City of Bell,
a small city with 38,867 residents, after voters approved a city
charter in 2005. Through public records requests, the Los
Angeles Times reported that Bell's City Manager received total
annual compensation of over $1.5 million, and some city council
members were being paid close to $100,000 per year for a
part-time office. This bill specifically responds to recent
reports that revealed that Bell officials illegally raised
property taxes in 2007 to cover rising pension costs for its
employees.
Under current law, the excess property tax revenues imposed by
the City of Bell from 2007 to 2010 would be allocated to local
schools. These revenues would count towards the Proposition 98
minimum funding guarantee, unless the state is in a Test 1 year,
and would directly offset General Fund payments to schools
serving the City of Bell. Since this bill would instead provide
property tax reimbursements directly to taxpayers, AB 900
represents a General Fund impact of approximately $2.9 million
in foregone savings. Any amounts not returned to taxpayers by
December 31, 2011 would be reallocated to schools, which would
reduce this impact to the extent taxpayers cannot be located.
By imposing new duties on the Los Angeles County Auditor related
to the allocation of property taxes, this bill creates a
reimbursable state-mandated local program. The bill specifies,
however, that all county auditor costs would be reimbursed
instead by the City of Bell.