BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 468
                                                                  Page  1

          Date of Hearing:  May 4, 2011

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                                Cameron Smyth, Chair
                     AB 468 (Smyth) - As Amended:  March 8, 2011
           
          SUBJECT  :  Property taxes: TEA formula allocation: maintenance or 
          improvement districts.

           SUMMARY  :  Clarifies how property taxes will be distributed to a 
          qualified city that becomes the successor agency after the 
          dissolution of a maintenance district.  Specifically,  this bill  : 
           

          1)Prohibits a county auditor from reducing a qualified no/low 
            city's Tax Equity Act (TEA) payment when it receives 
            additional property tax revenue due to the consolidation of a 
            maintenance or improvement district, commencing in the 2011-12 
            fiscal year.

          2)Requires a qualifying city to reimburse the auditor for the 
            actual and reasonable costs incurred by the auditor to 
            administer this paragraph and specifies that the qualifying 
            city's proportionate share of the costs to reimburse the 
            auditor shall be equal to the qualifying city's proportionate 
            share of increased property tax revenues received as a result 
            of this measure.

          3)Provides that reimbursement is required because the bill 
            provides for reimbursement to a local agency in the form of 
            additional revenues that are sufficient in amount to fund the 
            new duties that the bill imposes.

          4)States that this act is an urgency statute necessary for the 
            immediate preservation of the public peace, health, or safety 
            in order to ensure that local jurisdictions can meet 
            established timelines to begin the process of immediately 
            dissolving a maintenance district and serving as its 
            successor, and to give cities maximum budget flexibility.

           EXISTING LAW  :

          1)Allows, under the Improvement Act of 1911, local officials to 
            create an assessment district to fund transportation systems, 
            street paving, grading, sidewalks, parks, recreation areas, 








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            sewers, drainage systems, fire protection, flood control 
            systems, water systems, and other necessary improvements.

          2)Requires the auditor of each county with qualifying cities, as 
            defined, to make certain property tax revenue allocations to 
            those cities in accordance with a specified TEA formula 
            established in statute and to make corresponding reductions in 
            the amount of property tax revenue that is allocated to the 
            county.

          3)Provides, whenever a jurisdictional change is not required to 
            be reviewed and approved by a local agency formation 
            commission, the local agencies whose service area or service 
            responsibilities would be altered by the proposed change, 
            shall give notice to the State Board of Equalization and the 
            assessor and auditor of each county within which the territory 
            subject to the jurisdictional change is located. 

           FISCAL EFFECT  :  Unknown

           COMMENTS  :   

          1)About 30 cities that never levied a property tax before 
            Proposition 13 are called no property-tax cities, and about 60 
            cities that levied only low property tax rates are known as 
            low property-tax cities.  Counties must shift some of their 
            own property tax revenues to these no/low cities in the form 
            of TEA payments.  In most counties, TEA payments to the no/low 
            cities are equal to 7% of the property tax revenues generated 
            within their city limits. 
             
          2)The Simi Valley Lighting Maintenance District was formed by 
            the Simi Valley City Council in 1969 under the provisions of 
            the Improvement Act of 1911 to serve as a financing mechanism 
            in order to provide lighting maintenance services. The 
            Improvement Act of 1911 allows local officials to levy benefit 
            assessments on property owners to pay for those public 
            improvements and services that specifically benefit their 
            property.  A benefit assessment is an involuntary charge that 
            appears on a property owner's annual property tax bill. The 
            amount of the assessment is directly related to the amount of 
            the benefit their property receives.    

            The City of Simi Valley wants to take over the 
            responsibilities and dissolve the Simi Valley Lighting 








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            Maintenance District.  In order to do this, Simi Valley 
            follows the process in existing law to dissolve the district, 
            and once dissolved, any remaining revenues will be transferred 
            to the general fund.  If assessments have been pledged to pay 
            off bonds, then the assessments must continue until the bonds 
            are paid for.

            However, there is concern that since Simi Valley is considered 
            a no/low property city that the dissolution of the Simi Valley 
            Lighting Maintenance District will impact the TEA payment that 
            Simi Valley receives.  This bill remedies that problem by 
            prohibiting, starting in the 2011-12 fiscal year, the county 
            auditor from reducing the TEA payment by reason of that city 
            receiving property taxes that were previously allocated to a 
            maintenance or improvement district. 

          3)This bill is an urgency measure and will require a two-thirds 
            vote of the Legislature.

          4)Support arguments:  According to the author and the sponsor, 
            the City of Simi Valley, this bill allows the city the 
            necessary flexibility to dissolve its light maintenance 
            district and become the district's successor entity, which 
            will allow the city to maintain and operate all street lights 
            into the future.  The bill also requires the City to reimburse 
            the county auditor for costs incurred by the auditor's work in 
            administering the allocation changes.

            Opposition arguments: While the goal of the bill is to deal 
            specifically with the consolidation of Simi Valley Lighting 
            Maintenance district into the City and adjusting the property 
            taxes to reflect this change, the provisions of the bill are 
            broad in nature and would apply to any "qualifying city."  The 
            Committee may wish to consider whether the provisions of the 
            bill should apply specifically to Simi Valley in absence of 
            justification that other cities are in similar situations.





           REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           








                                                                  AB 468
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          City of Simi Valley

           Opposition 

           None on file
           

          Analysis Prepared by  :    Debbie Michel / L. GOV. / (916) 
          319-3958