BILL ANALYSIS Ó
AB 748
Page 1
Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 748 (Eggman) - As Amended: May 6, 2013
Policy Committee: JudiciaryVote:9-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill modifies the interest accrual rate on certain
judgments against the state or a local public entity.
Specifically, this bill:
1)Provides, except as specified, that the prejudgment interest
rate on any tax or inverse condemnation claim resulting in a
judgment against a public entity, instead of accruing at 7%,
shall accrue at the same rate as the weekly average one-year
constant maturity U.S. Treasury yield, but shall not exceed 7%
per annum.
2)Provides that the interest rate per (1) shall control until
180 days after a judgment against the state becomes
enforceable, and then shall accrue at an annual rate equaling
the weekly average one-year constant maturity U.S. Treasury
yield at the time of judgment plus two percent.
3)Provides, except as specified, that the post-judgment or
post-settlement interest rate on a tax or inverse condemnation
claim against a local public entity shall accrue at a rate
equaling the weekly average one-year constant maturity U.S.
Treasury yield at the time of the judgment or settlement plus
two percent.
FISCAL EFFECT
Based on current interest rates (currently well below one
percent), likely significant savings to the state agencies and
local governments from reduced pre- and post-judgment interest
charges.
AB 748
Page 2
[According to the California State Association of Counties,
interest payments by counties from tax and inverse condemnation
claims exceeded $14 million over the last three years.]
COMMENTS
1)Background . In addition to damages, a prevailing plaintiff in
a civil suit is often entitled to prejudgment interest on the
amount of the claim and post-judgment interest on the amount
of the final judgment award. The state Constitution requires
the Legislature to set the rate of interest upon a judgment
rendered at no more than 10% per annum, but in the absence of
a legislatively set rate, the Constitution provides that the
interest rate shall be 7% per annum. The Legislature has set
a rate of 10% for civil suits between private litigants, and
the courts have held that the judgment interest rate for
claims against public entities is 7%.
2)Purpose . The author contends that these interest rates are too
high, having been set a time when interest rates generally
were much higher than today. The author contends this is
especially problematic for local governments, who are less
able to settle suits quickly and therefore can accumulate
significant prejudgment interest obligations. This bill
therefore ties the judgment interest rate on judgments or
settlements against a state or local public entity to the
weekly average U.S. Treasury yield, but not to exceed 7%.
Currently the U.S. Treasury yield is less than one percent per
annum, thus creating substantial reductions in both pre- and
post-judgment rates. This bill is supported by individual
local governments and associations representing cities,
counties, and districts.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081