BILL ANALYSIS Ó 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, AB 468 Page 2 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 AB 468 Page 3 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 Page 4 City of Simi Valley Opposition None on file Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958