BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  July 2, 2012

                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
                                Henry T. Perea, Chair
                   ACA 21 (Feuer) - As Introduced:  January 5, 2012
           
           2/3 vote.  

          SUBJECT  :  Property tax:  educational entities:  parcel tax. 

           SUMMARY:   Amends the California Constitution to lower the vote 
          threshold for a school district, community college district, or 
          county office of education to levy a parcel tax, subject to 
          certain requirements.   Specifically, this constitutional 
          amendment  :

          1)Allows for the imposition, extension, or increase of a parcel 
            tax on real property by a school district, community college 
            district, or county office of education, as may otherwise be 
            authorized by law, by approval of 55%, instead of two-thirds, 
            of the voters in that district or county voting on the 
            proposition, if all of the following conditions are met:

             a)   The proposition is approved by a majority vote of the 
               membership of the governing board of the school district, 
               community college district, or county office of education.

             b)   The proposition contains all of the following 
               accountability conditions:

               i)     A list of the specific purposes and programs to be 
                 funded.

               ii)    A requirement that the proceeds be used only for the 
                 purposes and programs specified in the proposition, and 
                 not for any other purpose. 

               iii)   A requirement that the governing board of the school 
                 district, community college district, or county office of 
                 education does both of the following:

                  (1)       Conduct an annual independent financial audit 
                    of the amount of parcel tax proceeds collected and 
                    expended, and the specified purposes and programs 








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                    funded.

                  (2)       Establish a citizens' oversight committee to 
                    review all expenditures of proceeds and financial 
                    audits and report its findings to the governing board 
                    and to the public. 

             c)   Allows an exemption from tax, to be claimed under 
               procedures established by the county, for any parcel that, 
               as of January 1 of each year, is owned by, and upon which 
               is located the principal residence of, a person or persons 
               who satisfy one of the following requirements:

               i)     Are 65 years of age or older, or, 

               ii)    Are receiving Supplemental Security Income for a 
                 disability, without regard to age. 

          2)Defines "parcel tax" to mean a special tax imposed upon a 
            parcel of real property at a rate that is determined without 
            regard to that property's value.

          3)Limits the total amount of parcel tax impositions, increases, 
            or extensions submitted to the voters for approval by a school 
            district, community college district, or county office of 
            education to $250, but allows this amount to be annually 
            adjusted for inflation.  

          4)Prohibits the usage of proceeds of any parcel tax, as 
            specified, to pay salaries of any administrator of any school 
            district, community college district, or county office of 
            education. 

          5)Does not  limit the authority of a school district, community 
            college district, or county office of education to impose a 
            special tax approved in accordance with California 
            Constitution Section 4 of Article XIII A or Section 2 of 
            Article XIII C. 

          6)Makes technical and conforming changes to Section 4 of Article 
            XIII A, Section 2 of Article XIII C, and Section 3 of Article 
            XIII D of the California Constitution. 

           EXISTING LAW:









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           1)Authorizes cities, counties, and special districts to impose a 
            general tax for general governmental purposes with the 
            approval of a majority of the voters.

          2)Prohibits special purpose districts and agencies, including 
            schools districts, from levying a general tax.  

          3)Authorizes cities, counties, and special districts to impose a 
            special tax for specified purposes with the approval of 
            two-thirds of the voters.  

          4)Does not allow cities, counties, or special districts to 
            impose an ad valorem tax on real property or a transactions 
            tax or sales tax on the sale of real property within that 
            city, county, or special district. 

          5)Authorizes school and community college districts to impose 
            qualified special taxes, in accordance with specified 
            procedures, including the approval of two-thirds of the voters 
            in the district.

          6)Provides that "qualified special taxes" must apply uniformly 
            to all taxpayers or all real property within the district and 
            do not include special taxes imposed on a particular class of 
            property or taxpayers.  

          7)Authorizes a school district to exempt from a "qualified 
            special tax" a person 65 years of age or older or a person 
            receiving Supplemental Security Income for a disability, 
            regardless of age.

          8)Allows school districts to create Community Facilities 
            Districts and assess Mello-Roos Special Taxes for school 
            facilities and maintenance services for elementary and 
            secondary school sites and structures.  Requires schools to 
            give priority attendance access to students residing in 
            community facilities districts.  

           FISCAL EFFECT  :  None

           COMMENTS  :   

           1)Author's Statement  .  The author states that, "If voters want 
            to invest in their local schools, they should have that 
            opportunity.  Requiring more than 66 percent of voters to 








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            approve added funding unfairly burdens parents and communities 
            who just want to make sure their kids get a good education.  
            As a result of the economic crisis, school districts that 
            endured years of distressing cuts may need to cut even more.  
            Local communities should have a fair choice to decide whether 
            to fund their schools with their own tax dollars.

          "According to EdSource, from 1983 to 2010, voters approved 289 
            parcel taxes in 542 elections (a 53% approval rate), but 92% 
            of the proposals received at least a majority vote. There are 
            approximately 980 school districts in California.  Clearly, 
            there is a desire on the part Ýof] a majority of voters to 
            help fund their local school districts.  This bill is designed 
            to help give voters that choice."

           2)Arguments in Support.  The proponents state that this measure 
            "could enhance the ability of funding resources and mitigate 
            the impact of the horrific cuts schools have taken these past 
            several years."  They believe that a 55% vote threshold for 
            parcel taxes "to help provide additional funding for local 
            school districts, community colleges, and County Offices of 
            Education is a more realistic approach to the current funding 
            shortfall our schools are facing."  
           
           3)Arguments in Opposition  .  The opponents argue that, "While 
            funding for school districts, community college districts and 
            county offices of education may be a laudable goal, parcel 
            taxes promote inequities among property owners."  The 
            opponents state that "a parcel tax promotes a highly 
            regressive, onerous tax structure that runs counterintuitive 
            to a basic fundamental theory of taxation - that is, taxes 
            should be based on an individual's ability to pay the tax."  
            Thus, a "high-income homeowner with a $1 million home would 
            pay the same parcel tax amount as a homeowner of modest means 
            with a modest residence."  Finally, the opponents argue that 
            "lowering the threshold to 55% will increase housing costs in 
            California, even for renters, who will have to absorb costs 
            from apartment owners."

           4)Background  .  Prior to 1970, the state's K-12 schools largely 
            relied on local property taxes levied at different rates and 
            yielding different amounts per pupil in more than 1,000 
            schools districts in this state.  State court rulings in the 
            Serrano v. Priest equalization cases forced the state to 
            revise basic school finance and established the revenue limit 








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            system.  ÝSerrano v. Priest (1971) 5 Cal.3d 584; Serrano v. 
            Priest (1976) 18 Cal.3d 728; Serrano v. Priest (1977) 20 Cal. 
            3d 25)].  In order to conform to the court's decision and 
            reduce the differences in per-pupil amounts, the state created 
            the revenue limit system that combines local property tax 
            revenues with state general aid and allows the state to 
            control the two revenue sources on a per pupil basis.  The 
            state does not fund basic aid districts, where local property 
            taxes met or exceeded the revenue limit.  

           5)Proposition 13 and Its Progeny  :  In 1978, Proposition 13 
            limited both the tax rates and assessments, thus significantly 
            reducing property tax revenues, eliminating the ability of 
            school districts to levy an incremental ad valorem tax on real 
            property and forcing the state to replace the lost revenues in 
            district revenue limits.  Proposition 13 also specified that 
            any local tax imposed to pay for specific governmental 
            programs--a "special tax"--must be approved by two-thirds of 
            the voters.  It was followed by Proposition 62, which 
            guaranteed that all local general tax increases be approved by 
            voters.  After Proposition 62, local governments resorted to 
            the use of fees and assessments, which did not require voter 
            approval, to fill the void.  In November 1996, voters enacted 
            Proposition 218, a Constitutional amendment intended to close 
            the so-called "Proposition 13 loopholes" relative to excise 
            taxes, benefit assessments, and fees, and to settle arguments 
            over the applicability of Proposition 62, (the voting 
            requirement for general taxes). Proposition 218 applies to all 
            local government agencies, including charter cities, and 
            controls how general taxes are levied.  As a result, the 
            Public Policy Institute of California notes that California 
            has some of the strictest rules in the nation for raising 
            local revenues.  ÝEllen Hanak, Paying for Infrastructure:  
            California's Choices, Public Policy Institute of California, 
            2009].  In 2000, Proposition 39 provided a narrow exception to 
            the two-thirds vote requirement for special taxes by 
            authorizing the passage of local school construction bond 
            measures by approval of 55% of voters. 

           6)"Qualified Special Tax."   School districts still have limited 
            authority to generate local revenues from qualified special 
            taxes, but most school funding is either received from the 
            state or federal governments, or controlled by the state 
            through revenue limits required to equalize per-pupil funding. 
             While Proposition 13 did not define the term "special tax", 








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            the courts, over time, have opined that a tax is a "special 
            tax" whenever expenditure of its revenues is limited to 
            specific purposes, i.e. the proceeds of the tax are earmarked 
            or dedicated in some manner to a specific project or projects. 
             In contrast, a tax is a "general tax" only when its revenues 
            are placed into the General Fund and are available for 
            expenditure for any and all governmental purposes.  ÝBay Area 
            Cellular Telephone Co. v. City of Union City (2008) 162 
            Cal.App.4th 686; Howard Jarvis Taxpayers Assn. v. City of 
            Roseville (2003) 106 Cal.App.4th 1178].  

          School districts and special districts are prohibited from 
            imposing general taxes (Proposition 218) and thus, by 
            definition, any tax levied by a school district or community 
            school district is considered to be a special tax subject to a 
            two-thirds voter approval.  Furthermore, a "qualified" special 
            tax must apply uniformly to all taxpayers (other than persons 
            over the age of 65) or real property within the district.  
            Therefore, thus far, those districts have only imposed 
            "qualified special taxes", under Government Code Section 
            50079, in the form of a parcel tax.  

           7)Parcel Tax.   A parcel tax is a flat fee imposed by a city, 
            county, or special district on each parcel, residential as 
            well as commercial, rather than on the assessed value of 
            property located within the local entity's jurisdiction.  
            Parcel taxes do not have a cap.  Parcel tax proposals voted on 
            in the last ten years varied from $26 per parcel to $765 per 
            parcel, with terms as short as two years, and some being 
            permanent.   

          Because the same dollar amount of tax is assessed on each parcel 
            of property, whether the parcel is one acre or 100 acres, 
            parcel taxes are generally regressive, which means owners of 
            smaller parcels of land pay a larger percentage of tax, in 
            comparison to owners of larger parcels of land.  Some 
            districts levy a rate at a fixed amount per square foot of 
            taxable land, and many include an annual inflation adjustment. 
             Existing law does not limit how the special tax proceeds may 
            be spent, and therefore, a local school board can specify in 
            the ballot measure how the funds will be used.  Generally, 
            local parcel taxes provide secure funding for teacher 
            salaries, books, materials and supplies, computers, and art, 
            music and sports programs.
             








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             Districts have increasingly turned to parcel taxes in recent 
            years as a result of fiscal stress:  in 2010, 38 districts 
            placed parcel taxes on the ballot, compared to 31 in 2009, and 
            13 in 2006.  Although all districts can propose a parcel tax 
            to their community, they are relatively rare in most of the 
            state.  Between 2001 and June 2009, out of roughly 980 
            California school districts, 132 conducted parcel tax 
            elections and 83 districts passed them.  Only seven of those 
            districts were located in Southern California, while 66 were 
            within the nine-county San Francisco Bay Area.  The districts 
            that had successful elections generally serve fewer low-income 
            students than the typical California school district.  The 
            median district levying a parcel tax had about 3,180 students 
            of whom 15% qualified for free/reduced-price meals and 9% were 
            English learners.  They are also disproportionately small, 
            with 66 (80%) of them serving fewer than 10,000 students.  

            In 2006, the California voters rejected Proposition 88 that 
            would have amended the California Constitution to levy an 
            annual $50 real property tax on most parcels with the funds 
            allocated to specified K-12 education programs.   

           8)Voting (but not paying) and Paying (but not voting).   
            Currently, as a special tax, a parcel tax levied by a school 
            or community college district requires approval at an election 
            of at least two-thirds of the qualified electors of such 
            district.  Courts have interpreted the phrase "qualified 
            electors of such district" to mean the registered voters 
            voting in the election concerning the proposed tax.  ÝNeilson 
            v. City of California City (2005) 133 Cal.App.4th 1296, 1312]. 
             ACA 21 would lower the threshold to 55% of the voters of the 
            district or county voting on the proposition.  

          The incidence of a parcel tax is borne by landowners.  
            Generally, nonresident landowners are not registered voters 
            and are not included among the voters voting on the proposed 
            parcel tax.  On the other hand, some registered voters who do 
            not own land within the district's boundaries are able to vote 
            on the parcel tax even though they will not be paying that tax 
            (at least not directly).  The Committee may wish to consider 
            whether it is equitable to lower the vote threshold for new 
            parcel taxes when some voters will not bear the costs and some 
            of those who bear the tax burden are precluded from voting. 

           9)Accountability.   Special taxes are subject to certain 








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            oversight and accountability provisions.  Local agencies must 
            issue a statement indicating the specific purpose of the tax 
            and use the proceeds only for that purpose.  Further, the 
            agencies must create an account in which proceeds are to be 
            deposited.  Finally, they must issue an annual report that 
            includes the amount of money collected and expended, along 
            with the status of any project required or authorized by the 
            tax measure.  

          ACA 21 contains additional accountability requirements, which 
            are identical to those included in Proposition 39.  ACA 21 
            also limits the total amount of parcel tax submitted to the 
            voters to $250 per parcel each year, adjusted for inflation. 

           10)County Offices of Education  .  ACA 21 gives the power to enact 
            parcel taxes to County Offices of Education, which currently 
            enjoy no taxing powers.  School districts, community college 
            districts, and other specified special districts may enact 
            these taxes by statute, but never before has the Legislature 
            allowed these powers to branches of county government. County 
            offices of education support school districts by performing 
            tasks that can be done more efficiently at the county level.  
            County offices often help formulate new curricula, staff 
            development and training programs, design business and 
            personnel systems, and perform many other services to support 
            school districts.  They also provide a wide range of services, 
            including special education, career technical education, 
            programs for at-risk youth, and instruction in juvenile 
            detention facilities (court schools).  Additionally, county 
            offices of education are responsible for monitoring districts 
            for adequate textbooks, facilities, and teacher 
            qualifications.  There are 58 county offices of education.  
            They are governed by elected boards and administered by 
            elected or appointed county superintendents.  If ACA 21 is 
            enacted, the Legislature may need to specify statutory 
            procedures for County Offices of Education to levy parcel 
            taxes.

           11)Effective date.   If approved by the Legislature, this measure 
            would appear on the next statewide election ballot and, if 
            enacted by the voters, would take effect as soon as the 
            election results are certified. 

           12)Related Legislation  .  









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          SCA 5 (Simitian), introduced in the 2011 legislative session, 
            would lower the vote threshold for school districts, community 
            college districts, and county offices of education to levy 
            parcel taxes from a 2/3 vote to 55% of the voters in the 
            district or county under specified circumstances.  SCA 5 is 
            currently pending in the Senate Committee on Elections and 
            Constitutional Amendments. 

          ACA 10 (Torlakson), introduced in the 2009-10 legislative 
            session, would have amended the California Constitution to 
            lower the constitutional vote requirement for approval of a 
            special tax to be levied by an education finance district from 
            two-thirds to a majority of the district voters.  ACA 10 
            failed to pass out of the Assembly by the constitutional 
            deadline. 

          ACA 9 (Huffman), introduced in the 2009-10 legislative session, 
            would have made changes to the voting requirements contained 
            in the California Constitution for special taxes and bonded 
            indebtedness for local government.  ACA 9 failed to pass out 
            of the Assembly by the constitutional deadline. 

          ACA 15 (Arambula), introduced in the 2009-10 legislative 
            session, would have lowered the constitutional vote 
            requirements for approval of a special tax, specifically for 
            providing funding for local transportation projects from 
            two-thirds to a 55% majority.  ACA 15 failed to pass out of 
            the Assembly by the constitutional deadline. 

          SCA 6 (Simitian), introduced in the 2009-10 legislative session, 
            amends the California Constitution to authorize school 
            districts, community college districts, and county offices of 
            education to impose a parcel tax on real property by a 55% 
            vote of the voters in the district or county.  SCA 6 failed to 
            pass out of the Senate by the constitutional deadline. 

           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Catholic Conference
          California School Employees Association
          California Teachers Association
          Community College League of California
          Riverside County School Superintendents' Association








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          San Diego Unified School District

           Opposition 
           
          California Taxpayers Association
          Howard Jarvis Taxpayers Association 
           
          Analysis Prepared by  :  Oksana Jaffe / REV. & TAX. / (916) 
          319-2098