BILL ANALYSIS Ó AB 468 Page 1 ASSEMBLY THIRD READING AB 468 (Smyth) As Amended May 27, 2011 2/3 vote. Urgency LOCAL GOVERNMENT 8-0 APPROPRIATIONS 17-0 ----------------------------------------------------------------- |Ayes:|Smyth, Alejo, Campos, |Ayes:|Fuentes, Harkey, | | |Davis, Gordon, Hueso, | |Blumenfield, Bradford, | | |Knight, Norby | |Charles Calderon, Campos, | | | | |Davis, Donnelly, Gatto, | | | | |Hall, Hill, Lara, | | | | |Mitchell, Nielsen, Norby, | | | | |Solorio, Wagner | ----------------------------------------------------------------- SUMMARY : Clarifies how property taxes will be distributed to the City of Simi Valley once the City becomes the successor agency after the dissolution of the City's maintenance district. Specifically, this bill : 1)Prohibits the county auditor from reducing the City of Simi Valley's Tax Equity Act (TEA) payment when the City receives additional property tax revenue due to the consolidation of a maintenance or improvement district, commencing in fiscal year (FY) 2011-12 2)Requires the City of Simi Valley to reimburse the auditor for the actual and reasonable costs incurred by the auditor to administer the provisions of the bill. 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 the Legislature finds and declares that a special law is necessary and that a general law cannot be made applicable because of the need to ensure that the City of Simi Valley can meet established timelines to begin the process of immediately dissolving a maintenance district and serving as its successor, to simplify city accounting, and to give the city maximum budget flexibility. AB 468 Page 2 5)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 the City of Simi Valley can meet established timelines to begin the process of immediately dissolving a maintenance district and serving as its successor, and to give the city 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, 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 : According to the Assembly Appropriations Committee, no fiscal impact to the state. COMMENTS : 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. The Simi Valley Lighting Maintenance District was formed by the AB 468 Page 3 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 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 FY 2011-12, the county auditor from reducing the TEA payment by reason of the City of Simi Valley receiving property taxes that were previously allocated to a maintenance or improvement district. Support arguments: According to 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: None on file. Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958 FN: 0000956 AB 468 Page 4