BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 468 HEARING: 6/22/11
AUTHOR: Smyth FISCAL: Yes
VERSION: 5/27/11 TAX LEVY: No
CONSULTANT: Weinberger
PROPERTY TAX ALLOCATION
FOR THE CITY OF SIMI VALLEY (URGENCY)
Prohibits a reduction in Simi Valley's property tax equity
allocation resulting from a maintenance district's
dissolution.
Background and Existing Law
Proposition 13 (1978) limited property tax rates to 1%,
cutting statewide property tax revenues by 57%. The power
to allocate the remaining property tax revenues became the
Legislature's duty.
The Legislature responded by allocating property tax
revenues to counties, cities, special districts, and school
districts based on each agency's pro rata share of the
property taxes collected within a county in the three
fiscal years prior to 1978-79 (SB 154, Rodda, 1978). In
1979, the Legislature permanently restructured the
allocation of property taxes, using SB 154's property tax
allocations as a base (AB 8, L. Greene, 1979).
As a result, most cities receive property taxes based on
their historical shares of property tax revenues. Each
city's revenues reflect its share in the three fiscal years
before Proposition 13. Cities which never levied a
property tax or which levied only low property tax rates
are called no- and low-property-tax cities. The
Legislature requires counties to shift some of their own
property tax revenues to these cities (AB 1197, W. Brown,
1988).
In most counties, the "no/low cities" get 7% of the
property tax revenues generated within their city limits.
In Ventura County, the auditor must use a different
formula, which gives a no/low city 4% of the local property
AB 468 -- 5/27/11 -- Page 2
taxes.
The Legislature has prohibited no/low cities' property tax
allocations from being reduced when they receive additional
property tax revenues from specified sources. County
auditors cannot reducing a no/low city's property tax
allocation if a special district is consolidated with, or
merged into the city after January 1, 1995 (SB 1361,
Wright, 1994). A county auditor is also prohibited from
reducing a city's tax equity allocation because the city
received additional property tax revenue from the county
under a "services for revenue agreement" (SB 1581, Escutia,
2000).
The Simi Valley Lighting Maintenance District is a citywide
maintenance district formed in 1969, under the Improvement
Act of 1911, to fund the maintenance of the traffic signals
system in the City of Simi Valley (Ventura County). The
District is a separate financial entity from the City's
General Fund. It is primarily funded by nearly $3 million
in property tax revenues that it receives under AB 8.
To give the City more fiscal flexibility, Simi Valley
officials want to dissolve the District and merge its
property tax revenues into the City's General Fund.
However, under the tax equity allocation formula, the
additional property tax revenues from the dissolved
district would flow to Ventura County, instead of Simi
Valley.
Proposed Law
Beginning with the 2011-12 fiscal year, Assembly Bill 468
prohibits the Ventura County Auditor from reducing the
amount of property tax revenue distributed to the City of
Simi Valley under the statutory tax equity allocation
formula if the City receives property tax revenues
previously allocated to a maintenance or improvement
district.
AB 468 requires the City of Simi Valley to reimburse the
auditor's actual and reasonable costs incurred to
administer the bill's provisions. The bill disclaims the
state's responsibility for reimbursing the Ventura County
Auditor for the cost of new duties related to allocating ad
AB 468 -- 5/27/11 -- Page 3
valorem property tax revenues, citing the bill's
requirement that the City of Simi Valley reimburse the
auditor's costs.
AB 468 contains findings declaring the need for a special
law that applies only to the City of Simi Valley.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . If the City of Simi Valley
dissolves its lighting maintenance district, the City would
still be responsible for maintaining city traffic signals
and street lighting. However, under the complex tax equity
allocation formula that determines how much property tax
revenue that the City receives, the maintenance district's
$3 million in revenues would go to Ventura County after the
District's dissolution. Although the County would gain
property tax revenues after the District's dissolution, it
is inconceivable that Simi Valley officials would dissolve
the district knowing that their City would lose those
property tax revenues. AB 468 enacts an understanding
between city and county officials that, if Simi Valley
dissolves its district, the revenues should remain with the
local government that inherits its responsibilities. This
understanding lets Simi Valley gain the flexibility of
adding property tax revenues into its General Fund without
depriving Ventura County of any property tax revenues that
it would receive under any foreseeable circumstances.
2. Urgency clause . Regular statutes take effect on the
January 1 following their enactment; bills passed in 2011
take effect on January 1, 2012. The California
Constitution allows bills with urgency clauses to take
effect immediately if they're needed for the public peace,
health, and safety. AB 468 contains an urgency clause so
that Simi Valley officials can immediately dissolve their
maintenance district and make the City its successor.
Assembly Actions
AB 468 -- 5/27/11 -- Page 4
Assembly Local Government Committee: 8-0
Assembly Appropriations Committee:17-0
Assembly Floor: 76-0
Support and Opposition (6/16/11)
Support : City of Simi Valley.
Opposition : Unknown.