BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 92| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 92 Author: Assembly Budget Committee Amended: 6/12/13 in Senate Vote: 21 ASSEMBLY FLOOR : Not relevant SUBJECT : Budget Act of 2013: State Administration Trailer Bill SOURCE : Author DIGEST : This bill makes various statutory changes necessary to implement the state administration related provisions of the Budget Act of 2013. ANALYSIS : This bill includes the following key changes: Housing and Infill Development: Liquidation of Encumbrances . Existing law provides that there is a Transit-Oriented Development Implementation Fund from which the Department of Housing and Community Development may provide grants and loans to cities, counties, transit agencies, and developers, for the purpose of developing higher density uses within close proximity to transit stations that will increase public transit participation. Existing law provides that there is a Regional Planning, Housing, and Infill Incentive Account in the Housing and Emergency Trust Fund of 2006, from which funds shall be made available upon appropriation of the Legislature. The funds are available for infill incentive grants for capital outlay related CONTINUED AB 92 Page 2 to infill housing development and other related infill development. Existing law appropriates various sums to both funds for use by the department for liquidation of encumbrances for limited periods of time. This bill extends the period of time during which the appropriated funds shall be available for liquidation for encumbrance until June 30, 2017. This bill also extends the period of time which appropriated funds from the Regional Planning, Housing, and Infill Incentive Account shall be available for liquidation of encumbrances until June 30, 2017. Community Development . Existing law, the Housing and Emergency Shelter Trust Fund Act of 2006, authorizes the issuance of general obligation bonds in the amount of $2,850,000,000. Proceeds of these bonds are used to finance various existing housing programs, capital outlay related to infill development, brownfield cleanup that promotes infill development, housing-related parks, and transit-oriented development administered by the Department of Housing and Community Development. Existing law appropriates $50,000,000 of bond revenues to the Department of Housing and Community Development. From that amount, existing law allocates $25,000,000 from the Regional Planning, Housing, and Infill Incentive Account for infill incentive grants, and allocates $25,000,000 from the Transit-Oriented Development Implementation Fund for transit-oriented grants, loans and money allocated and appropriated, that become disencumbered and redeposited in the Transit-Oriented Development Account, during the 2012-13 fiscal year, for the purpose of funding transit-oriented grants and loans. This bill allocates any funds that have been allocated and appropriated, that became disencumbered and redeposited in the Transit-Oriented Development Account during the 2013-14 fiscal year, for the purpose of funding transit oriented grants and loans. Section 1031 "Like-Kind" Exchanges . Under the personal income tax and the corporation tax, taxpayers are allowed to defer income taxes pursuant to certain exchanges of property. In conformity with federal law in the Internal Revenue Code Section 1031, California tax law allows that no gain or loss is recognized on the exchange of property held for investment CONTINUED AB 92 Page 3 purposes, if that property is exchanged for property of "like-kind" that is to be held for investment purposes. Existing law also allows the Franchise Tax Board (FTB) to propose an assessment upon failure to file a return, if required. This bill, effective January 1, 2014, requires taxpayers to file an informational return with the FTB if the property purchased in such "like-kind" exchange, is located out-of-state. In the event the annual notice or a required tax return is not filed, FTB is authorized to estimate net income and assess the tax owed pursuant to existing law. "Triple Flip" Clarification . The state issued Economic Recovery Bonds (ERBs) in the amount of $15 billion in 2004. In order to establish security on the bonds, legislation provided for a dedicated sales tax funded by a shift of one-quarter-cent local sales tax to the state. Local governments are compensated on a dollar-for-dollar basis by an increase in property tax revenue from Educational Revenue Augmentation Fund (ERAF), resources that will otherwise have gone to K-12 education. Local education, in turn, is made whole by an increase in the state minimum funding guarantee under Proposition 98. This "triple flip" is in place until the bonds are retired (estimated to be 2016), after which point, the one-quarter-cent sales tax will revert to local governments, property tax shifts from ERAF to local governments will cease, and the General Fund payments to local education will decline by an amount equal to the reinstated property tax revenues. Sales taxes are distributed to local governments three months after collection, which amounts are the basis of the ERAF property tax shift to compensate local governments for the one-quarter-cent sales tax reduction. Thus, during a fiscal year, the amounts actually distributed to local governments correspond to a period of time that includes one-quarter of the prior fiscal year and three-quarters of the current fiscal year. The original legislation was designed to hold local governments harmless during the period the bonds are outstanding. However, because of the three month lag period between the collection of the sales tax and distribution to local governments, local governments (under the current language) will come up short in the amount of one-quarter's worth of revenue. Because this lag was not incorporated in the original language, CONTINUED AB 92 Page 4 this bill clarifies that after the ERBs are paid-off, local governments will be compensated for the final two quarters of sales tax from the special one-quarter-cent sales tax. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No According to the Senate Budget and Fiscal Review Committee, this bill should not result in any changes to the Budget Act or related Budget actions. This bill contains an appropriation and has been identified as related to the Budget in the Budget Bill. JJA:d 6/13/13 Senate Floor Analyses SUPPORT/OPPOSITION: NONE RECEIVED **** END **** CONTINUED