BILL ANALYSIS Ó
AB 1090
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Date of Hearing: May 27, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1090 (Blumenfield) - As Introduced: February 18, 2011
Policy Committee: Revenue and
Taxation Vote: 5-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill establishes the County Deferred Property Tax Program
for Senior Citizens and Disabled Citizens and allows counties to
participate in the program. Specifically, this bill:
1)Authorizes the county to allow deferral of property taxes to
owners of a residential dwelling who meets the following
criteria:
a) Has a household income that does not exceed $35,500.
b) Has attained eligibility for full Social Security
benefits, or is blind and disabled, as defined, except in
the case of retroactive deferment, as specified, in which
the age of eligibility shall be 62 years old.
c) Has equity in the residence of at least 20%.
2)Allows the county to require an eligible property owner to
furnish evidence of eligibility to continue participation in
the program in a subsequent year. Allows a participating
county to require a property owner to provide an appraisal in
support of the application.
3)Requires that the amount of property taxes deferred, plus any
interest accrued thereon, be secured by a county property tax
lien against the property owner's residential dwelling.
4)Authorizes a participating county to charge a property owner
an application fee and charge interest on the deferred
property taxes.
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5)Prohibits a lender from requiring a borrower to maintain an
impound account with regard to property taxes, once the
borrower has deferred these taxes pursuant to this bill, and
has submitted to the lender evidence of tax deferment.
6)Forbids a lender to file a notice of default based solely on a
borrower's failure to pay property taxes, if the borrower is
in the property tax deferment program.
FISCAL EFFECT
This bill may result in moderate costs to the General Fund due
to the provision allowing county tax collectors to cancel
delinquent penalties and interest that result in the state
backfilling the funds for K-12 schools under Proposition 98. In
addition, granting locally operated property tax liens priority
over existing State Controller's Office loan liens could result
in GF losses of approximately $150,000 since some debts to the
State Controller could become uncollectible.
COMMENTS
1)Purpose . The author states that, "The Senior and Disabled
Citizens Property Tax Postponement Program was suspended with
no warning in 2009, leaving program participants no time to
find alternative funding to pay property taxes. AB 1090 will
help elderly and disabled Californians stay in their homes and
grants previous program participants extra time to find vital
property tax financing by establishing a 5-year moratorium on
foreclosures and impound accounts. This mirrors the existing
county waiting period for tax sales. As a county opt-in
program, AB 1090 provides a way for counties to care for their
most vulnerable citizens."
2)Support. The proponents of this bill state that this measure
provides a "needed alternative to the state property tax
postponement program" and will "help thousands of disabled
individuals and older Californians remain in their homes by
permitting counties to defer their property taxes." The
proponents cite their own research showing that 28% of all
foreclosures or delinquencies involved homeowners age 50 and
older, and argue that this bill will help reduce foreclosures
for older and disabled Californians. The proponents also
maintain that counties "strongly endorse the priority lien as
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a long-standing practice for collecting local taxes and
assessments."
3)The state property tax (PT) postponement program . allows
eligible homeowners to defer payment of all, or a portion of,
the property taxes on their residences. The program was
enacted in 1977 and is administered by the State Controller.
The PT Postponement program is a loan program from the state
to eligible property owners. Each year, the state imposes
interest on the amount it pays to the county on behalf of the
taxpayer. The loan is secured by the property and is repaid,
with interest, when the taxpayer dies, sells the home, moves,
or allows a "senior lien" to become delinquent. In 2009, the
PT Postponement program was indefinitely suspended as part of
the budget reductions. The Controller's Office reports that,
over the long-term, the program is self-supporting. The PT
Postponement program collected $41 million more in PT
Postponement loan repayments than it disbursed in PT
Postponement loans.
4)Possible reinstatement of state program via the budget.
Assembly Budget Subcommittee 4, is scheduled to meet May 26t
to consider reestablishment of the state PT postponement
program. The proposal would use the money that has been
repaid this year, approximately $10 million, for continuing
the program.
5) This bill authorizes liens are called "super liens.
Generally, tax liens are payable in the order in which they
are recorded. However, property tax and special assessment
liens have priority over all other liens and are often termed,
super liens. This preferred status ensures that the county
will receive taxes that are due by placing it first in line
for payments when the house is sold. This bill confers a
similar favorable treatment to liens that would secure a
claimant's deferred property taxes under the proposed County
Deferred PTP program.
In contrast, PT Postponement loans were assigned "judgment
lien" status, which placed them in line to be paid off after
the liens recorded before them, but before the liens recorded
after them. The Controller's Office manages approximately
8,000 PT Postponement accounts, with about $95 million in
outstanding PT Postponement loans. These liens would be
subordinate to the new County Deferred PTP liens and may
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potentially result in GF losses.
6)Arguments in opposition . The opponents (the California
Bankers Association) object to the super lien and argue that
it is unnecessary, because those in the program must maintain
a minimum of 20% equity in their properties. They argue that
creation of a super lien status could cause program
participants to violate the terms of their mortgage contracts.
The opponents state that this bill would also limit the
ability of a lender/servicer to enforce performance of the
contract by precluding the commencement of non-judicial
foreclosure through the filing of a notice of default, and as
such, would impair the obligation of the mortgage contract in
violation of the state and federal constitutions.
7)Previous legislation. AB 1718 (Blumenfield), introduced in
the 2009-10 legislative session, was identical to this bill
and was vetoed by Governor Schwarzenegger.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081