BILL ANALYSIS AB 900 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 900 (De Leon) As Amended August 27, 2010 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: | |(June 2, 2010) |SENATE: |37-0 |(August 30, | | | | | | |2010) | ----------------------------------------------------------------- ------------------------------------------------------------------------ |COMMITTEE VOTE: |8-0 |(August 31, 2010) |RECOMMENDATION: |Concur | | | | | | | ------------------------------------------------------------------------ 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. AB 900 Page 2 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 AB 900 Page 3 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 AB 900 Page 4 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 FN: 0006894