BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 483 HEARING: 8/21/13
AUTHOR: Ting FISCAL: No
VERSION: 8/13/13 TAX LEVY: No
CONSULTANT: Weinberger
DEFINITION OF LOCAL TAXES (URGENCY)
Defines "specific benefit" and "specific government
service" for the purpose of determining whether a levy is a
tax pursuant to Article XIIIC of the California
Constitution.
Background and Existing Law
Several state laws allow local officials to charge benefit
assessments to property owners to pay for public works and
public services. Proposition 218 (1996) requires owners of
real property to approve benefit assessments in a weighted
ballot election. Property owners vote in proportion to
their proposed assessments, which reflect how much their
property benefits from the proposed public works or public
services.
State law also allows local officials to create an
assessment district, often called a business improvement
district (BID), to levy assessments on business owners to
pay for specified types of physical improvements or
activities that benefit businesses within the district.
One type of business assessment-based district is a tourism
marketing district (TMD). TMDs are typically formed to
assess hotels and other lodging businesses to pay for
marketing and other activities that promote tourism within
the district and increase visitors' use of the hotels and
lodging facilities. The courts have said that assessments
on businesses, as opposed to real property, are not subject
to Prop. 218's provisions.
In November 2010, voters approved Proposition 26, which
amended the California Constitution to expand the
definitions of local taxes and tax increases that require
voter approval. Prop. 26 defined any levy, charge, or
exaction of any kind imposed by a local government as a
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tax, requiring voter approval, except for:
A charge for a specific benefit or privilege
conveyed directly to the payor and not conveyed to
those not charged.
A charge for a specific government service or
product provided directly to the payor and not
provided to those not charged.
A fee to cover certain costs of regulation.
Entrance fees for state or local property.
Fines imposed by a court or a local government.
A charge imposed as a condition of property
development.
Assessments and property related fees governed by
Proposition 218.
Because Prop. 26's exception for assessments applies only
to assessments governed by Prop. 218, the exception does
not apply to assessments on businesses. Improvements and
activities financed by TMDs and BIDs may be exempt from
Prop. 26's definition of a tax if they can be characterized
as charges for specific benefits or specific government
services provided directly to payors and not provided to
those not charged. However, Proposition 26 does not define
the terms "specific benefit" and "specific government
service." It is unclear whether assessments on businesses
for improvements or activities that produce benefits beyond
those provided directly to businesses qualify for any of
Prop. 26's exceptions. Recent lawsuits challenging
assessments levied by the City of San Diego's TMD cited
Prop. 26. While one of those suits has been dismissed and
two remain unresolved, they underscore the uncertainty
about Prop. 26's applicability to business assessments.
Stakeholders in TMDs and other BIDs worry that a narrow
interpretation of Prop. 26's provisions could prohibit
local governments from forming or renewing business
assessment-based districts without voter approval. They
want the Legislature to clarify that Prop. 26's definition
of a tax excludes assessments levied on businesses to pay
for benefits and services that a district provides directly
to the businesses that pay the assessments.
Proposed Law
Assembly Bill 483 defines the terms "specific benefit" and
AB 483 -- 8/13/13 -- Page 3
"specific government service" for the purposes of Articles
XIIIC and XIIID of the state constitution.
AB 483 defines "specific benefit" as a benefit provided
directly to a payor and not provided to those not charged.
AB 483 specifies that ancillary or other benefits to
nonpayors may be created in the course of providing the
specific benefit to payors. A benefit is not excluded from
classification as a "specific benefit" by reason of a
complete or partial exemption from the levy, charge, or
exaction imposed for that benefit, provided that a levy,
charge, or exaction imposed for that benefit is used to
provide that benefit only to the payor.
AB 483 defines "specific government service" as a service
that is provided by an agency directly to the payor and is
not provided to those not charged. A "specific government
service" can include safety, maintenance, landscaping,
marketing, events, capital improvements, and promotions. A
service is not excluded from classification as a "specific
government service" by reason of a complete or partial
exemption from the levy, charge, or exaction imposed for
that service, provided that a levy, charge, or exaction
imposed for that service is used to provide that service
only to the payor.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Tourism marketing districts,
business improvement districts, and lodging improvement
districts provide stable, locally controlled funding to
market specific destination areas with the goal of
increasing lodging occupancy and tourism activity. In many
communities, TMDs are replacing local tax dollars as the
primary funding source for convention and visitors bureaus.
These business assessment-based districts save local
governments millions of dollars, freeing local officials to
focus on critical budget priorities, while generating
millions of dollars in new local taxes through increased
tourist spending. Proposition 26 is creating uncertainty
about whether local governments' can establish new TMDs and
BIDs, or extend existing districts, without voter approval.
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AB 483 seeks to define two key terms to eliminate
confusion about how businesses assessment-based districts
can comply with Prop. 26's exceptions to the definition of
a tax. AB 483 provides the certainty that TMDs and BIDs
need to continue supporting tourism and other industries
that are vital to the state and local economies.
2. Voter intent . A primary goal of Proposition 26 was to
eliminate elected officials' ability to impose so-called
"regulatory fees" without voter approval, as authorized in
the California Supreme Court's ruling in the Sinclair Paint
case. However, the Legislative Analyst's Office analysis
of Proposition 26 in the voter information guide clearly
explained that Proposition 26's implications extended
beyond regulatory fees. The LAO noted that Proposition 26
"expands the definition of a tax and a tax increase so that
more proposals would require approval by two-thirds of the
Legislature or by local voters." The LAO's analysis
specifically stated that "some business assessments could
be considered to be taxes because government uses the
assessment revenues to improve shopping districts (such as
providing parking, street lighting, increased security, and
marketing), rather than providing a direct and distinct
service to the business owner." AB 483 resolves
ambiguities in Proposition 26's language in a manner that
would exclude many business assessments from being defined
as taxes that require voter approval. It is unclear
whether AB 483's definitions of terms used in Proposition
26 are consistent with the voters' intent in approving that
ballot initiative.
3. Urgency . Regular statutes take effect on January 1
following their enactment; bills passed in 2013 take effect
on January 1, 2014. The California Constitution allows
bills with urgency clauses to take effect immediately if
they're needed for the public peace, health, and safety.
AB 483 contains an urgency clause declaring that it is
necessary for its provisions to go into effect immediately
to ensure compliance with the California Constitution.
4. Gut and amend . As introduced, AB 483 replaced the term
"lien date" with the term "valuation date" in a statute
governing the comparable sales valuation method for
assessing property values. The June 26 amendments added
language authorizing counties to recover specified property
tax administrative costs. The Committee never heard that
AB 483 -- 8/13/13 -- Page 5
version of the bill. The August 12 amendments deleted the
bill's contents and inserted the language defining the
terms "specific benefit" and "specific government service."
Assembly Actions
Not relevant to the August 13, 2013 version of the bill.
Support and Opposition (8/15/13)
Support : California Travel Association; Anaheim Orange
County Visitor & Convention Bureau; Azul Hospitality Group;
California Association of Boutique & Breakfast Inns;
California Association of RV Parks & Campgrounds;
California Attractions & Parks Association; California
Business Properties Association; California Downtown
Association; California Hotel and Lodging Association;
California Restaurant Association; California Retailers
Association; Certified Folder Display Service, Inc.;
Chateau Montelena Winery; City of Pismo Beach Conference &
Visitors Bureau; Fresno Clovis Convention & Visitors
Bureau; Gaynes Consulting; Greater Palm Springs Convention
& Visitors Bureau; Hotel Council of San Francisco; Humboldt
County Convention & Visitors Bureau; LEGOLAND California
Resort; Los Angeles Tourism & Convention Board; Novato
Chamber of Commerce; Novato Courtyard by Marriott; Ojai
Valley Chamber of Commerce; Ojai Visitors Bureau; Orange
County Visitors Association; Pasadena Convention & Visitors
Bureau; Quality Inn Temecula; Rancho Cordova Travel and
Tourism; San Francisco Chamber of Commerce; San Francisco
Travel Association; San Mateo County/Silicon Valley
Convention & Visitors Bureau; Santa Barbara Conference &
Visitors Bureau and Film Commission; Santa Cruz County
Conference & Visitors Council; Santa Rosa Convention &
Visitors Bureau; Santa Ynez Valley Hotel Association; Sea
World San Diego; Sonoma County Tourism; Stockton Convention
and Visitors Bureau; Sunset Publishing; Team San Jose;
Temecula Valley Convention & Visitors Bureau; Vallejo
Convention & Visitors Bureau; Visit Mendocino Valley; Visit
Napa Valley; Visit Newport Beach; Visit Oceanside; Visit
Tri-Valley; Visit West Hollywood; Yosemite Sierra Visitors
Bureau.
Opposition : Unknown.
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