BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 902
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        ASSEMBLY THIRD READING
        AB 902 (Alejo)
        As Introduced  February 17, 2011
        Majority vote 

         REVENUE & TAXATION  5-2                                          
         
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        |Ayes:|Perea, Beall, Charles     |     |                          |
        |     |Calderon, Fuentes, Gordon |     |                          |
        |     |                          |     |                          |
        |-----+--------------------------+-----+--------------------------|
        |Nays:|Donnelly, Harkey          |     |                          |
        |     |                          |     |                          |
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         SUMMARY  :  Removes the statutory cap imposed on certain types of fees 
        that a tax collector may charge in connection with a sale of 
        tax-defaulted property, and instead, requires the local board of 
        supervisors to establish those fees in the amounts that would allow 
        the county to recover its actual and reasonable costs, as provided.  
        Specifically,  this bill  :  

        1)Removes the $100 statutory limitation on the amount of the costs 
          that a tax collector may recover for attempting to contact 
          personally, and serve a written notice to, the owner-occupant of 
          the tax-defaulted property that is scheduled to be offered for 
          sale at a public auction.  

        2)Removes the $35 statutory limitation on the amount of the fee that 
          a tax collector may collect for obtaining the names and last known 
          mailing addresses of, and mailing specified notices to, parties of 
          interest, when the tax-defaulted property subject to the notice is 
          redeemed.  

        3)Clarifies that a tax collector, when the tax-defaulted property is 
          redeemed prior to the proposed sale to a public agency or a 
          qualified non-profit organization but after the county has 
          incurred notice or publication costs, may collect a fee in an 
          amount reasonably necessary to reimburse the tax collector for the 
          publication costs.

        4)Specifies that the fee that may be imposed in the above-mentioned 
          cases shall be established by the county board of supervisors 
          based on the amount of actual and reasonable costs incurred by the 








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          tax collector, in accordance with the requirements of Government 
          Code (GC) Chapter 12.5 (commencing with Section 54985) of Part 1 
          of Division 2 of Title 5, and shall be distributed to the county 
          General Fund (GF) or tax collector, whichever is applicable, once 
          the property is sold or redeemed. 

        5)Makes technical non-substantive changes to the corresponding 
          provisions of the Revenue and Taxation Code (R&TC). 

         FISCAL EFFECT  :  Unknown, but the Revenue and Taxation Committee 
        staff estimates that this bill will not impact state GF revenues. 

         COMMENTS  :

         Author's Statement  .  The author states that, "AB 902 gives counties 
        the ability to charge the actual and reasonable costs of locating 
        and serving a tax-defaulted property owner.  Currently, counties are 
        restricted to a maximum reimbursement of $100, regardless of the 
        actual costs incurred."

         Arguments in Support  .  The proponents of this bill argue that, while 
        tax collectors are required to provide a personal notice to property 
        owners who have a tax-defaulted residential property at risk of 
        being sold at public auction, they cannot recover more than $100 for 
        the staff time and transportation costs incurred in complying with 
        the requirement.  The proponents also state that this bill is 
        important to counties that are facing fiscal crisis since "the 
        ability and authority to bring fee levels closer to full cost 
        recovery would be of significant assistance."

         The $100 Statutory Cap  .  Once a county has decided to sell a 
        tax-defaulted property, it is under an obligation to make a 
        reasonable effort to contact the delinquent owner before proceeding 
        with a sale.  Under existing law, a tax collector is required to 
        provide a personal notice to property owners whose principal 
        residence is at risk of being sold at a tax sale.  If the personal 
        contact is not made after reasonable efforts by a tax collector, the 
        tax collector is required to attempt to serve written notice, as 
        specified.  The law allows the tax collector to add actual and 
        reasonable costs of this visit to the amount charged for redemption 
        of the property.  However, even though the tax collector can recover 
        the costs of locating and serving a notice on the delinquent owner, 
        the amount of those costs is capped at $100.  









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        According to the sponsor, in rare circumstances does this amount 
        cover the transportation costs and/or staff time.  For example, the 
        County of Monterey estimates a loss of $200 in each case of personal 
        contact attempted by the tax collector, whereas the County of Fresno 
        approximates that it loses about $50 per case.  This bill would 
        remove the $100 statutory cap imposed on the amount of costs that 
        may be recovered by a tax collector and would, instead, allow the 
        county to recover the actual cost of locating and personally serving 
        the owner of the tax-defaulted principal residence.  The amount of 
        actual and reasonable costs of making a personal contact would be 
        determined by the county board of supervisors, in accordance with 
        the rules prescribed by GC Chapter 12.5 of Part 1 of Division 2 of 
        Title 5.  This bill would also provide that, in order to reimburse 
        the county for the costs of a personal contact, a sum equal to the 
        total amount of the actual and reasonable costs, not subject to the 
        $100 cap, shall be distributed to the tax collector from the sale 
        price amount, as specified. 

         The $35 Statutory Cap  .  Under existing law, tax-defaulted property 
        subject to a recorded notice may be redeemed by the former owner by 
        payment of all delinquencies and statutory penalties prior to 
        disposition of the property or until the redemption right is 
        terminated, as specified.  When a tax-defaulted property is 
        redeemed, the tax collector is required to collect specified fees, 
        including a $35 fee for the costs incurred by the county in 
        obtaining the names and last known mailing addresses of, and for 
        mailing certain notices to, parties of interest (a so-called 'notice 
        fee').  The minimum redemption price must also include the cost of 
        publishing and advertising the property sale, in addition to other 
        associated penalties and costs.  

        This bill would repeal the $35 notice fee and, instead, would 
        require the tax collector to collect a fee equal to an amount of 
        actual and reasonable costs incurred by the county in notifying the 
        parties of interest, as defined, for each separately valued parcel 
        of real property and would authorize the full amount of the fee to 
        be distributed to the county GF.  This bill would also clarify that 
        the new notice fee amount and a publication fee would apply in the 
        case of a sale of tax-defaulted property to a public agency or a 
        qualified non-profit organization.  The amount of the notice fee 
        will be established by the county board of supervisors, in 
        accordance with the rules prescribed by GC Chapter 12.5 of Part 1 of 
        Division 2 of Title 5.  









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         "Actual and Reasonable" Costs  .  Under existing law, the majority of 
        all fees and charges imposed by a treasurer-tax collector in 
        connection with the administration of property taxes are established 
        and approved by the board of supervisors under GC Section 54985, 
        which allows the treasurer-tax collector to recover actual costs.  
        Specifically, a county board of supervisors has the authority to set 
        the amount of a fee or charge that is authorized to be levied by 
        another provision of law.  GC Section 54986 prescribes the rules 
        that the board of supervisors must follow before approving any new 
        fee or increasing an existing fee.  Thus, the board must hold at 
        least one public meeting, and at least 14 days prior to the meeting, 
        a written notice is required to be mailed to interested parties who 
        have filed for written notifications.  Finally, at least 10 days 
        prior to the meeting, the data indicating the amount of the cost, or 
        estimated cost, must be made available to the public.  

        The amount of the fee or charge must be the amount reasonably 
        necessary to recover the cost of providing any product or service or 
        the cost of enforcing any regulation.  The fee or charge may be the 
        average cost and can include direct and indirect costs.  The board 
        of supervisors may request the county auditor to conduct a study to 
        determine whether the fee or charge is reasonable.  A study 
        typically involves a review of the methodology used in calculating 
        the estimated costs.  Many counties ask the auditor to conduct a 
        study prior to presenting the amount of a new fee or an increase of 
        an existing fee to the board of supervisors for approval.
         
         Although existing law allows a tax collector to collect the amount 
        of the actual and reasonable costs incurred in an attempt to 
        establish a personal contact, it limits that amount to $100 and, 
        consequently, in many cases, does not allow the tax collector to 
        recover the actual costs incurred.  

         Proposition 26  .  On November 2, 2010, the voters approved 
        Proposition 26, an initiative constitutional amendment, that 
        expanded the definition of a "tax" to include many state and local 
        government assessments previously classified as "fees."  Among other 
        provisions, Proposition 26 amended Article XIII C, Section 1 of the 
        California Constitution to define the term "tax" as any levy, 
        charge, or exaction of any kind imposed by a local government, 
        except certain enumerated fees.  One type of those enumerated 
        exactions is "a charge imposed for a specific government service or 
        product provided directly to the payor that is not provided to those 
        not charged, and which does not exceed the reasonable costs to the 








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        local government of providing the service or product."  

        The personal contact fee and the notice fee are charged for the 
        costs of services provided by a local government.  As such, both 
        fees must comply with the requirements of Proposition 26.  The 
        actual and reasonable costs of providing the service may vary from 
        county to county and may very well be more than $100 or $35.  By 
        authorizing a local board of supervisors to set these fees, within 
        the confines of both GC Section 54986 and Proposition 26, this bill 
        would allow local governments the flexibility needed to recover the 
        actual costs incurred by them in complying with the requirements 
        applicable to tax sales.

         Related Legislation . 
         
         AB 820 (Gordon), introduced in the current legislative session, 
        would allow a tax collector to recover the actual and reasonable 
        costs incurred in preparing a certificate-of-payment showing taxes 
        paid.  AB 820 was heard by the Revenue and Taxation Committee and 
        passed out on a five to one vote on April 25, 2011. 

         
        Analysis Prepared by  :    Oksana Jaffe / REV. & TAX. / (916) 319-2098 


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