BILL ANALYSIS Ó
AB 1350
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CONCURRENCE IN SENATE AMENDMENTS
AB 1350 (Lara)
As Amended June 23, 2011
Majority vote
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|ASSEMBLY: |78-0 |(May 19, 2011) |SENATE: |38-0 |(August 15, |
| | | | | |2011) |
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Original Committee Reference: L. GOV.
SUMMARY : Establishes new duties for county auditors, beginning
January 1, 2012, to verify that property tax rates increased or
extended by a jurisdiction for specified purposes do not exceed
rates authorized by existing law.
The Senate amendments make clarifying and technical changes to the
bill's provisions, specify the particular property tax rates that
must be verified by the county auditor, and require the county
auditor to reject the increase or extension of any property tax rate
that exceeds the statutory maximum rate of those specified property
tax rates.
EXISTING LAW :
1)Limits property tax to 1% except for specific bonded debt approved
by two-thirds of the voters after July 1, 1978, and voter
indebtedness approved by voters before July 1, 1978.
2)Prohibits local agencies from adopting new extraordinary rates,
and caps existing rates at the 1982-83 or 1983-84 level, except
for rates supporting general obligation bonds, water contracts,
and lease purchases.
3)Requires the City of Bell to pay the County of Los Angeles a
specified amount to refund property taxes collected in fiscal
years (FYs) 2007-08, 2008-09, and 2009-10 that exceed maximum
allowable statutory rates.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required a county auditor, prior to the collection of a property
tax imposed for specified purposes, to verify that a property tax
rate imposed, increased or extended by a jurisdiction, on or after
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January 1, 2012, does not exceed the maximum rate authorized by
existing law.
2)Required a jurisdiction to provide the county auditor with all
necessary documentation to verify the imposed property tax rate.
3)Required jurisdictions to reimburse the county auditor for costs
incurred by the county auditor to administer the verification.
4)Stated that no reimbursement is required by the bill because the
bill provides for reimbursement to a local agency in the form of
additional revenues that are sufficient to fund the new duties of
the bill.
FISCAL EFFECT : According to the Senate Appropriations Committee,
pursuant to Senate Rule 28.8, negligible states costs.
COMMENTS : Last year, an audit conducted by the State Controller
determined that officials in the City of Bell (Los Angeles County),
during the three fiscal years between 2007 and 2010, levied an
extraordinary property tax rate to pay the City's pension
obligations that exceeded the rate allowed under state law. For
over two decades, since the passage of AB 13 (Roos), Chapter 112,
Statutes of 1985, which limited extraordinary property tax rates,
the City of Bell levied an extraordinary tax rate of 0.187554% to
pay for the City's pension obligations. In 2007, city officials
began raising this extraordinary property tax rate above the limit
imposed by state law, levying rates of 0.237554% in 2007-08,
0.257554% in 2008-09, and 0.277554% in 2009-10. As a result,
property owners in the City paid approximately $2.9 million in
excessive property taxes during those three years.
The illegal increase in rates and subsequent overpayment was brought
to light in a letter from State Controller John Chiang to the
Auditor-Controller of the County of Los Angeles dated August 13,
2010. The letter noted that the City Council of Bell passed a
resolution in 2007 to increase, illegally, the level of tax being
assessed to pay the City of Bell's pension obligations, and that
those increased rates were assessed by the Los Angeles County
Auditor-Controller's office.
The Legislature responded by passing AB 900 (De León and De La
Torre), Chapter 223, Statutes of 2010, which required the City of
Bell to pay the County of Los Angeles an amount equal to the amount
of excess ad valorem property tax collected in FYs 2007-08, 2008-09,
and 2009-10, including interest calculated at the average rate
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earned by the City on its idle funds during those years. AB 900
additionally required the County to refund the amount it received
from the City of Bell to any property taxpayers of the City who
overpaid, in a manner generally consistent with the County's tax
refund practices.
This bill requires a county auditor, beginning January 1, 2012, for
any jurisdiction that extends or increases specified property tax
rates, to verify that a property tax rate imposed by a jurisdiction
does not exceed the maximum statutory rate. Those jurisdictions
would then be required to provide the county auditor with all
necessary documentation to verify the imposed rate, and would be
held responsible for funding the reimbursement of the county auditor
for the actual and reasonable costs to do such a verification.
Amendments taken in the Senate require the county auditor to reject
the increase or extension of any property tax rate that exceeds the
maximum statutory rate.
The City of Bell overcharged residents by increasing the already
levied extraordinary tax rate used to pay for the City's pension
obligations. According to the State Controller's Office, the City
of Maywood recently was found to have done the same thing in the
2009-10 year.
Support arguments: According to the author, this bill provides a
necessary "check" over public assets and public funds because
currently there is no mechanism in place to verify that the imposed
tax is legitimate or legal because current law does not require
county auditors to verify that the tax rate imposed does not exceed
the authorized amount in current law.
Opposition arguments: This bill creates additional workload for
auditors to verify that tax rates levied by local jurisdictions do
not exceed legal rates. While this is a laudable goal, the
Legislature may wish to consider whether the bill creates the
expectation that auditors under the provisions of the bill will
somehow be responsible if a local government within the county's
jurisdiction imposes an illegal rate, but it is not caught by the
county auditor.
Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958
FN: 0001372
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