BILL ANALYSIS                                                                                                                                                                                                    



                                                                AB 900
                                                                Page  1

        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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        |COMMITTEE VOTE:  |8-0  |(August 31, 2010)   |RECOMMENDATION: |Concur    |
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        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.









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        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 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  








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        all county auditor costs would be reimbursed instead by the City of  
        Bell.

         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  








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        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).

        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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