BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    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  
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          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  

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          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,  

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          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

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