BILL ANALYSIS                                                                                                                                                                                                    




                     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 




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          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 





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          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  





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          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.