BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 900
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 900 (De Leon)
          As Amended  August 27, 2010
          2/3 vote.  Urgency
           
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          |ASSEMBLY:  |     |(June 2, 2010)  |SENATE: |37-0 |(August 30,    |
          |           |     |                |        |     |2010)          |
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                    (vote not relevant)

          Original Committee Reference:   W.P. & W.  

           SUMMARY  :  Enacts property tax refund provisions related to  
          overpayment by citizens in the City of Bell (City).  

           The Senate amendments  delete the Assembly version of this bill,  
          and instead:

          1)Prohibit the current law governing the allocation of property  
            tax revenue attributable to a rate in excess of the maximum  
            allowable rate from applying to the City and the County of Los  
            Angeles (County) in fiscal years (FYs) 2007-2008, 2008-2009,  
            and 2009-2010.

          2)Require, instead, the City to pay the County, by December 31,  
            2010, an amount equal to the amount of excess ad valorem  
            property tax collected in FYs 2007-2008, 2008-2009, and  
            2009-2010, including interest calculated at the average rate  
            earned by the City on its idle funds during those years.

          3)Require the County to refund the amount it receives from the  
            City to any property taxpayers of the City who overpaid, in a  
            manner generally consistent with the County tax refund  
            practices.

          4)Require the City to reimburse the County for the actual and  
            reasonable costs of administering these provisions, including  
            applicable administrative and overhead costs as permitted by  
            federal standards.

          5)Require, if the County is unable to locate a taxpayer to make  
            a refund by December 31, 2011, that the amounts remaining from  
            the amounts paid by the City to the County be allocated to  
            elementary, high school, and unified school districts as  








                                                                  AB 900
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            provided under current law.

           EXISTING LAW  :

          1)Limits ad valorem taxes on real property to 1% of the full  
            cash value of that property as set forth in the California  
            Constitution.

          2)Provides that property taxes are collected by counties and  
            allocated to cities, counties, special districts,  
            redevelopment agencies, and school districts within the county  
            pursuant to statutory allocation formulas.

          3)States that if a jurisdiction imposes a property tax rate in  
            excess of the maximum rate authorized by the Basic Revenue  
            Allocations contained in the Revenue & Taxation Code, the  
            amount of property tax allocated to the jurisdiction shall be  
            reduced by $1 for each $1 of property tax revenue attributable  
            to the excess rate.
          4)Freezes the extraordinary property tax rates imposed by a  
            local jurisdiction to make for pensions approved by voters  
            before the passage of Proposition 13 at their 1982-83 levels.

          5)Provides that any property tax revenue that has been  
            subtracted from a jurisdiction's allocation pursuant to #3  
            above shall be allocated to elementary, high school, and  
            unified school districts within the jurisdiction's  
            jurisdiction in proportion to the average daily attendance of  
            each district.

           AS PASSED BY THE ASSEMBLY  , this bill required measurement and  
          reporting of water diversions within the Sacramento-San Joaquin  
          Delta to the State Water Resources Control Board.

           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee, this bill 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.









                                                                  AB 900
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           COMMENTS  :  An audit being conducted by the State Controller  
          determined that officials in the City (Los Angeles County),  
          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 rate allowed under state law.  For  
          over two decades, since the passage of AB 13 (Roos), Chapter  
          112, Statutes of 1985, which limited extraordinary property tax  
          rates, the City levied an extraordinary tax rate of 0.187554% to  
          pay for the City's pension obligations.  In 2007, City officials  
          began raising this extraordinary property tax rate above the  
          limit imposed by state law, levying rates of 0.237554% in  
          2007-08, 0.257554% in 2008-09, and 0.277554% in 2009-10.  As a  
          result, property owners in the City paid approximately $2.9  
          million in excessive property taxes during those three years.   
          Under current law, the Los Angeles County Auditor must lower the  
          City's property allocation by this amount and pay the amount  
          subtracted from the City's allocation to the Los Angeles Unified  
          School District and the Montebello Unified School District,  
          which serve the City.

          This bill prohibits the current law governing the allocation of  
          property tax revenue attributable to a rate in excess of the  
          maximum allowable rate from applying to the City and the County  
          in FYs 2007-2008, 2008-2009, and 2009-2010.  Instead, this bill  
          requires the City to pay the County, by December 31, 2010, an  
          amount equal to the amount of excess ad valorem property tax  
          collected in FYs 2007-2008, 2008-2009, and 2009-2010, including  
          interest calculated at the average rate earned by the City on  
          its idle funds during those years.
           
          This bill requires the County to refund the amount it receives  
          from the City of Bell to any property taxpayers of the City who  
          overpaid, in a manner generally consistent with the County's tax  
          refund practices.  This bill also requires the City to reimburse  
          the county for the actual and reasonable costs of administering  
          the bill's provisions, including applicable administrative and  
          overhead costs as permitted by federal standards.  If the County  
          is unable to locate a taxpayer to make a refund by December 31,  
          2011, the bill requires the amounts remaining from the amounts  
          paid by the City to the County to be allocated to elementary,  
          high school, and unified school districts as provided under  
          current law.

          This bill is not the Legislature's only response to the City's  
          fiscal decisions and practices which became public this summer.   








                                                                  AB 900
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          There are at least five other bills, including AB 192 (Gatto),  
          AB 194 (Torrico), AB 827 (De La Torre), AB 1955 (De La Torre),  
          AB 2064 (Huber), and SB 501 (Correa).

          Support arguments:  This bill promptly corrects an injustice by  
          returning the unlawfully obtained property tax revenues, with  
          accrued interest, directly to those taxpayers who paid the  
          excessive amounts.

          Opposition arguments:  Opposition may argue that existing law  
          provides for a reimbursement methodology in which property  
          owners may file a claim directly with the county to seek  
          reimbursement for overpayment. Utilizing the provisions of this  
          bill will result in a state General Fund hit of $2.9 million,  
          while the existing methodology avoids any cost to the General  
          Fund.

          The subject matter of this bill has not been heard by an  
          Assembly policy committee this legislative session.
           

          Analysis Prepared by  :    Katie Kolitsos / L. GOV. / (916)  
          319-3958 


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