BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                AB 483
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        CONCURRENCE IN SENATE AMENDMENTS
        AB 483 (Ting)
        As Amended  September 4, 2013
        2/3 vote.  Urgency
         
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        |ASSEMBLY:  |     |(April 22,      |SENATE: |34-4 |(September 9,  |
        |           |     |2013)           |        |     |2013)          |
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             (Vote not relevant)


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        |COMMITTEE VOTE:  |8-1  |(September 11,      |RECOMMENDATION: |concur    |
        |(L. GOV.)        |     |2013)               |                |          |
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        Original Committee Reference:    REV. & TAX.  

         SUMMARY  :  Defines "specific benefit" and "specific government  
        service" for the purposes of determining whether a levy is a tax  
        pursuant to Article XIIIC of the California Constitution.  

         The Senate amendments  delete the Assembly version of this bill, and  
        instead:

        1)Define the following terms:

           a)   "Specific benefit" to mean "a benefit that is provided  
             directly to a payor and is not provided to those not charged.   
             A specific benefit is not excluded from classification as a  
             'specific benefit' merely because an indirect benefit to a  
             nonpayor occurs incidentally and without cost to the payor as  
             a consequence of providing the specific benefit to the payor";  
             and,  

           b)   "Specific government service" to mean "a service that is  
             provided by a local government directly to the payor and is  
             not provided by those not charged.  A specific government  
             service is not excluded from classification as a 'specific  
             government service' merely because an indirect benefit to a  
             nonpayor occurs incidentally and without cost to the payor as  
             a consequence of providing the specific government service to  
             the payor.  A 'specific government service' may include, but  
             is not limited to maintenance, landscaping, marketing, events,  








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             and promotions."  

        2)State that the local government bears the burden of proving by a  
          preponderance of the evidence that a levy, charge, or other  
          exaction imposed for a specific benefit for specific government  
          services is not a tax, that the amount is no more than necessary  
          to cover the reasonable costs to the local government in  
          providing the specific benefit or government service, and that  
          the manner in which those costs are allocated to a payor bear a  
          fair or reasonable relationship to the specific benefits or  
          services received by the payor. 

        3)Include an urgency clause allowing this bill to take effect  
          immediately upon enactment.  

        4)Make findings and declarations that the purpose of this bill is  
          to clarify that business improvement district and tourism  
          marketing district assessments are not taxes within the meaning  
          of Article XIIIC of the California Constitution merely because  
          they might generate indirect, secondary benefits for nonpayers,  
          provided that those indirect, secondary benefits occur  
          incidentally and without cost to the payors of the assessment. 


         EXISTING LAW  :

        1)Allows, under the Property and Business Improvement District Law  
          of 1994, property owners to petition a city or county to set up  
          an improvement district to levy assessments on property owners or  
          business owners for specified purposes.  

        2)Allows, under the Parking and Business Improvement Area Law of  
          1989, a city council or county board of supervisors to set up an  
          "improvement area" and levy assessments on businesses to pay for  
          several types of physical improvements or activities within the  
          area.  

        3)Defines a "tax" in Article XIIIC to mean "any levy, charge or  
          exaction of any kind imposed by a local government" with  
          specified exceptions.  

        4)Provides in Article XIIIC that the local government bears the  
          burden of providing by a preponderance of the evidence that a  
          levy, charge, or other exaction is not a tax, that the amount is  
          no more than necessary to cover the reasonable costs of the  








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          governmental activity, and that the manner in which those costs  
          are allocated to a payor bear a fair or reasonable relationship  
          to the payor's burdens on, or benefits received from, the  
          governmental activity. 

         AS PASSED BY THE ASSEMBLY  this bill made a technical, clarifying  
        change to property tax law.

         FISCAL EFFECT  :   None

         COMMENTS  :  The formation of an assessment district allows local  
        officials to charge benefit assessments on property owners to pay  
        for public works and public services.  Most assessments are levied  
        against real property, and are generally collected on the property  
        tax roll, secured by a lien against the assessed property, and  
        subject to Proposition 218 (1996).  Assessments levied in  
        connection with business improvement districts, however, are levied  
        on businesses, not real property, are not subject to Proposition  
        218, and are usually collected along with business license taxes  
        and are not secured by a lien against real property.  

        Business improvement districts (BIDs) are one model for how local  
        governments use assessment financing to pay for projects to attract  
        and retain businesses.  The Parking and Business Improvement Area  
        Law of 1989 allows a city council or county board of supervisors to  
        set up an "improvement area" and levy assessments on businesses to  
        pay for several types of physical improvements or activities within  
        the area.  The Property and Business Improvement District Law of  
        1994 allows property owners to petition a city or county to set up  
        an "improvement district" and levy assessments on property owners  
        to pay for promotional activities and physical improvements.  Local  
        officials may also use the 1994 law to assess business owners.  

        One type of business assessment district is a tourism marketing  
        district (TMD).  TMDs are formed by local businesses to assess  
        hotels and other lodging businesses to pay for marketing and other  
        activities to promote tourism.  According to the California Travel  
        Association, California's 65 TMDs "spent more than $120 million to  
        market and promote their destinations in 2010.  Their efforts  
        generated $8.9 billion in new, direct spending - a remarkable $70  
        return for each dollar invested."  

        Proposition 26 (2010) amended Article XIIIC to broaden the  
        definition of what constitutes a tax to include many payments  
        previously considered fees or charges.  Language in Proposition 26  








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        lists seven exceptions to what constitutes a local tax, including  
        two that are relevant to this bill:  1) A charge imposed for a  
        specific benefit conferred or privilege granted directly to the  
        payer that is not provided to those not charged, and which does not  
        exceed the reasonable costs to the local government of conferring  
        the benefit or granting the privilege; and 2) A charge imposed for  
        a specific government service or product provided directly to the  
        payer that is not provided to those not charged, and which does not  
        exceed the reasonable costs to the local government of providing  
        the service or product.

        According to the author, "The 2010 passage of voter-approved  
        Proposition 26 created potential legal uncertainty over these  
        Districts' ability to privately fund tourism marketing and  
        promotional activities.  In response to the ambiguity created by a  
        lack of defined terms in Proposition 26, this bill clarifies that  
        any incidental benefit from a TMD or BID to a business located  
        outside a district's boundary does not violate the law."

        Absent a definition for a "specific benefit" or a "specific  
        government service" there is legal uncertainty surrounding the  
        application of Proposition 26 to business-based assessments.   
        According to the Legislative Analyst's Office analysis of  
        Proposition 26, "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."  

        This bill defines the terms "specific benefit" and "specific  
        government service" for the purpose of Article XIIIC of the  
        Constitution.  This bill also mirrors language in Article XIIIC  
        added by Proposition 26 to state that the local government bears  
        the burden of proving, by a preponderance of evidence, that the  
        assessment charged for a specific benefit or government service is  
        not more than necessary to cover the costs of providing the  
        specific benefit or service, and that the costs are allocated are  
        in proportion to the benefit and service received.  This bill is an  
        urgency measure and is sponsored by the California Travel  
        Association.  

        Support arguments:  Supporters argue that this bill protects  
        California's tourism industry by clarifying a few key terms related  
        to the implementation of Proposition 26. 









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        Opposition arguments:  Opposition argues that this bill undermines  
        the will of the voters and changes the intent of Proposition 26.  


         Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916)  
        319-3958 


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