BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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                                 THIRD READING


          Bill No:  AB 2136
          Author:   V. Manuel Perez (D) & Salas (D), et al
          Amended:  8/17/10 in Senate
          Vote:     27 - Urgency

           
           SENATE REVENUE & TAXATION COMMITTEE  :  3-0, 6/23/10
          AYES:  Wolk, Alquist, Padilla
          NO VOTE RECORDED:  Walters, Ashburn

           SENATE APPROPRIATIONS COMMITTEE  :  11-0, 8/12/10
          AYES:  Kehoe, Ashburn, Alquist, Corbett, Emmerson, Leno,  
            Price, Walters, Wolk, Wyland, Yee

           ASSEMBLY FLOOR  :  69-0, 5/24/10 - See last page for vote


           SUBJECT  :    Disaster relief

           SOURCE  :     Author


           DIGEST :    This bill, an urgency measure, would provide the  
          following relief related to the earthquake that occurred in  
          Imperial County on April 4, 2010:  (1) disaster-related  
          fiscal assistance and tax relief to affected persons and  
          jurisdictions for losses sustained as a result of the  
          Imperial County earthquake, as specified, (2) acceleration  
          of loan forgiveness terms for any loans issued for the  
          rehabilitation, reconstruction, or replacement of lower  
          income owner-occupied manufactured homes under the CalHome  
          program following the Imperial County earthquake.  

                                                           CONTINUED





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           ANALYSIS  :    On April 4, 2010, a magnitude 7.2 earthquake  
          struck Baja California, Mexico, approximately 40 miles  
          south of the United States border.  The earthquake was  
          widely felt in southern California, particularly in  
          Imperial County, and damaged or destroyed numerous homes,  
          businesses, schools, water treatment and storage  
          facilities, and other public facilities.  On April 5, 2010,  
          Governor Arnold Schwarzenegger proclaimed a state of  
          emergency in Imperial County.  President Obama issued a  
          major disaster declaration related to the impact from the  
          earthquake in Imperial County on May 7, 2010.  The federal  
          declaration provides federal funding on a cost-sharing  
          basis for emergency work and the repair or replacement of  
          public facilities damaged by the earthquake, but does not  
          provide assistance for individuals.  

          I   Property Tax Reimbursement  .  Current law provides for a  
          downward reassessment of properties affected by a disaster.  
           Taxpayers are entitled to a refund of any "excess"  
          property tax paid on the property.  Taxpayers whose  
          property is damaged are also allowed to defer payment of  
          the next installment of property taxes pending receipt of a  
          corrected tax bill for the reassessed property.  For some  
          previous disasters, the Legislature has acted to provide  
          one-year state reimbursement of property tax losses to  
          local governments resulting from reductions in assessed  
          values of damaged or destroyed properties.  
           
          This bill provides for state reimbursement to backfill any  
          local government property tax revenue losses from  
          assessment reductions in Imperial County as a result of the  
          April 4, 2010 earthquake.  The state holds local  
          governments harmless for disaster-related 2009-10 property  
          tax losses, based initially on an estimate of loss,  
          followed by a corrective adjustment based on the actual  
          property tax loss.  Staff note that based on about $7  
          million in total projected reductions in assessed value of  
          commercial or residential property reported by county  
          officials, this bill will result in state allocations of  
          approximately $78,000 to local jurisdictions in Imperial  
          County, they also note that any allocations from the  
          Special Fund for Economic Uncertainties have a direct  
          impact on the budget deficit, which is currently projected  
          to be over $19 billion for the budget year.  







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          II.   Homeowners' Exemption  .  Current law exempts from the  
          property tax the first $7,000 of the assessed value of an  
          owner-occupied principal place of residence.  However,  
          properties that become vacant or are under construction on  
          the January 1 lien date are not eligible for this  
          homeowners' exemption for the upcoming tax year.  Local  
          jurisdictions are reimbursed by the state for property tax  
          losses due to the homeowners' exemption.

          This bill provides that any dwelling that qualified for the  
          exemption prior to the Governor's disaster proclamation  
          that was damaged or destroyed as a result of the April 2010  
          earthquake in Imperial County may not be denied the  
          exemption solely on the basis that the dwelling was  
          temporarily damaged or destroyed or was being reconstructed  
          by the owner.  According to the Imperial County Assessor's  
          Office, there were no residential properties completely  
          destroyed as a result of this earthquake.  The Board of  
          Equalization notes that a temporary absence from a damaged  
          home would not result in the homeowner's loss of the  
          exemption, so there should be no revenue loss as a result  
          of this provision.

          III.   Carry Forward of Casualty Loss Deduction  .  Current  
          law allows nonbusiness taxpayers to deduct uninsured  
          losses, less $100, to the extent the loss exceeds 10  
          percent of adjusted gross income.  Business taxpayers may  
          deduct losses against income; a portion of losses may be  
          carried forward to offset future years' tax liabilities for  
          up to 10 years.  Taxpayers may either claim the losses as  
          an itemized deduction in the year the loss occurs, or in  
          the preceding year by filing an amended return for the  
          prior year.  For previous disasters, legislation has  
          allowed both business and non business taxpayers to carry  
          forward 100 percent of their excess losses for 5 years, and  
          a portion of losses for another 10 years.

          This bill allows the special disaster loss carryover  
          treatment for losses sustained as a result of the April  
          2010 earthquake in Imperial County.  The Franchise Tax  
          Board (FTB) estimates a total revenue loss of approximately  
          $7,000 in 2009-10 due to losses sustained in those  
          counties.  To the extent that these deductions would have  







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          been claimed in later years had they not been taken on an  
          amended tax returns for the previous tax year, there is a  
          minor revenue gain in those later years.  Taxpayers that  
          choose to file an amended return to report the casualty  
          loss immediately will have a higher tax liability in  
          subsequent tax years.  

           CalHome Program
           The CalHome Program is administered by the Department of  
          Housing and Community Development (HCD) and provides  
          Proposition 1C general obligation bond funds as forgivable  
          loans to enable low and very low income households to  
          become or remain homeowners.  Existing law requires the  
          loans to be repaid in 20 years, with 10 percent of the  
          principal to be forgiven annually for each additional year  
          beyond the 10th year that the home is owned and  
          continuously occupied by the borrower.  On May 6, 2010, HCD  
          issued a notice of funding available (NOFA) that makes $10  
          million in Proposition 1C bond funds available from the  
          CalHome Program for loans related to the rehabilitation or  
          reconstruction of lower-income owner-occupied homes (both  
          conventional and manufactured homes) damaged by the  
          earthquake.  To date, HCD has awarded $1.5 million to  
          Imperial County for loans to 36 households, $1.32 million  
          to the City of Calexico for loans to 26 households, and  
          $1.5 million to the City of El Centro for 26 households.   
          HCD indicates that all of the awards to date would be used  
          to assist owners of manufactured homes that are currently  
          uninhabitable due to damage from the earthquake.  Most of  
          these manufactured homes are near the end of their useful  
          life.

          This bill specifies that any loans provided pursuant to the  
          CalHome Program Disaster Assistance for Imperial County for  
          rehabilitation, reconstruction, or replacement of lower  
          income owner-occupied manufactured homes will be repaid in  
          10 years, with 20 percent of the principal forgiven  
          annually for each year beyond the fifth year the home is  
          owned and occupied by the borrower.  This provision  
          accelerates the revenue losses associated with any loans  
          provided for manufactured homes damaged by the Imperial  
          County earthquake and reduce the owner-occupancy  
          requirements by ten years 








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           FISCAL EFFECT  :    Appropriation:  Yes   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Senate Appropriations Committee analysis:

                          Fiscal Impact (in thousands)

           Major Provisions                     2010-11     2011-12     
           2012-13          Fund
           Property tax reimbursement         $78                  
          General*

          Homeowner's exemption                        negligible  
          costs, if any                 General

          Disaster loss carry forward             $7 (FY 2009-10)      
          General

          CalHome loan forgiveness                acceleration of up  
          to $10                                         Bond**
                                   million in revenue                  
                                   losses
                                   by ten years, beginning in 2015.

          *Special Fund For Economic Uncertainties (NOTE: existing  
          law continuously appropriates moneys from this fund for  
          disaster-related allocations, so adding an allocation for  
          the disasters specified in the bill constitutes an  
          appropriation)
          ** Self-Help Housing Fund

           SUPPORT  :   (Verified  8/17/10)

          Board of Supervisors of the County of Imperial
          California State Association of Counties
          California State Legislature Rural Caucus
          City of El Centro
          Regional Council of Rural Counties
          Regional Council of Southern California Association of  
          Governments


           ASSEMBLY FLOOR  : 
          AYES:  Adams, Ammiano, Anderson, Arambula, Beall, Bill  







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            Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield,  
            Bradford, Brownley, Buchanan, Caballero, Charles  
            Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De  
            La Torre, De Leon, DeVore, Emmerson, Eng, Feuer,  
            Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,  
            Galgiani, Garrick, Gilmore, Hagman, Harkey, Hayashi,  
            Hill, Huber, Huffman, Jeffries, Jones, Lieu, Logue,  
            Bonnie Lowenthal, Mendoza, Miller, Monning, Nestande,  
            Niello, Nielsen, Norby, V. Manuel Perez, Portantino,  
            Ruskin, Salas, Silva, Skinner, Smyth, Solorio, Audra  
            Strickland, Swanson, Torlakson, Torres, Torrico, Tran,  
            Yamada
          NO VOTE RECORDED:  Bass, Evans, Hall, Hernandez, Knight,  
            Ma, Nava, Saldana, Villines, John A. Perez, Vacancy


          DLW:do  8/17/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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