BILL ANALYSIS
AB 900
Page 1
Date of Hearing: August 31, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 900 (De Leon) - As Amended: August 27, 2010
SUBJECT : Property taxation: City of Bell: refunds for
overpayment
SUMMARY : Enacts property tax refund provisions related to
overpayment by citizens in the City of Bell (City).
Specifically, this bill :
1)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 of Los
Angeles (County) in fiscal years (FYs) 2007-2008, 2008-2009,
and 2009-2010.
2)Requires, 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)Requires 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)Requires 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)Requires, 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
provided under current law.
6)States that the Legislature finds and declares that a special
law is necessary and that a general law cannot be made
applicable because of the unique circumstances encountered by
the City of Bell with respect to the collection of property
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taxes.
7)Provides that this bill is an urgency statute necessary for
the immediate preservation of the public peace, health, or
safety in order to ensure that taxpayers in the City of Bell
who overpaid on their property taxes are reimbursed, it is
necessary for this act to take effect immediately.
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 one dollar ($1) for each one dollar ($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.
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
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program. The bill specifies, however, that all county auditor
costs would be reimbursed instead by the City of Bell.
COMMENTS :
1)An audit being conducted by the State Controller determined
that officials in the City of Bell (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.
2)AB 900 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.
3)AB 900 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
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City to the County to be allocated to elementary, high school,
and unified school districts as provided under current law.
4)This bill is not the Legislature's only response to the City's
fiscal decisions and practices which became public this
summer. 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).
5)This measure requires a 2/3 vote of each house because it is
an urgency statute and will take effect immediately.
6)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.
REGISTERED SUPPORT / OPPOSITION :
Support
State Controller John Chiang [SPONSOR]
City of Bell
Howard Jarvis Taxpayers Association
Los Angeles County Board of Supervisors
Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958