BILL ANALYSIS Ó
AB 748
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 748 (Eggman)
As Amended August 30, 2013
Majority vote
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|ASSEMBLY: |64-14|(May 30, 2013) |SENATE: |39-0 |(September 9, |
| | | | | |2013) |
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Original Committee Reference: JUD.
SUMMARY : Bases the interest accrual rate on claims or judgments
against the state or public entities upon a United States (U.S.)
Treasury index, as specified. Specifically, this bill :
1)Provides, except as specified, that interest accrues in on any
tax or lien claim against a public entity that results in
public judgment against the public entity at a rate equal to
the weekly average one-year constant maturity U.S. Treasury
yield, but not to exceed 7% per annum.
2)Provides, except as specified, that when a judgment becomes
enforceable, as specified, interest accrues at an annual rate
equal to the weekly average one-year constant maturity U.S.
Treasury yield at the time of the judgment plus 2%, but not to
exceed 7% per annum.
3)Provides, except for claims approved by the California Victim
Compensation and Government Claims Board, that interest on the
amount of a judgment for the payment of moneys against the
state to accrue 180 days from the date of the final judgment
or settlement. Specifies that unless another provision of law
provides a different interest rate, interest on a tax or fee
judgment for the payment of moneys against the state or a
local entity accrues at a rate equal to the weekly average
one-year constant maturity U.S. Treasury yield at the time of
the judgment plus 2%, but not to exceed 7% per annum.
The Senate amendments modify accrual rate to the U.S. Treasury
yield plus 2% and eliminate a provision that would have applied
this accrual rate to inverse condemnation actions.
EXISTING LAW :
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1)Bars a suit for money damages against a public entity on a
cause of action for which a claim is required to be presented,
until a written claim has been presented to the public entity
and acted upon by the California Victim Compensation and
Government Claims Board, the governing body of a local public
entity, the Judicial Council, or the Trustees of the
California State University, as applicable, or has been deemed
to have been rejected, except as specified.
2)Provides that a judgment for the payment of money against the
state or state agency is enforceable until 10 years after the
judgment is final and provides that interest on the amount of
a judgment or settlement for the payment of money against the
state shall commence to accrue at 180 days from the date of
the final judgment or settlement. Specifies that this
provision does not apply to any claim approved by the
California Victim Compensation and Government Claims Board.
3)Provides that a judgment for payment of money against a local
public entity is enforceable until 10 years after the time the
judgment becomes final or, if the judgment is payable in
installments, until 10 years after the final installment is
due.
4)Requires, under the California Constitution, that the
Legislature set the rate of interest upon a judgment rendered
in any court of this state at not more than 10% per annum. In
the absence of the setting of such a rate by the Legislature,
the California Constitution provides that the rate of interest
on any judgment is 7% per annum. (Section 1 of Article 15 of
the California Constitution.) Provides, therefore, that the
interest rate on judgments against the state or a public
entity is set at 7% per annum. (Harland v. State of
California (1979) 99 Cal. App. 3d 839; California Fed. Savings
& Loan Assn. v. City of Los Angeles (1995) 11 Cal 4th 342.)
5)Provides for a legal rate of interest of 10% per annum on
civil judgments arising out of tort claims, as specified.
However, this provision does not apply to any tort actions
against a public entity, or a public employee acting within
the scope of employment.
6)Provides that every person who is entitled to recover damages,
as specified, is entitled also to recover interest thereon
from that day, except during such time as the debtor is
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prevented by law, or by the act of the creditor from paying
the debt. Specifies that this provision is applicable to
recovery of damages and interest from any such debtor,
including the state or any county, city, city and county,
municipal corporation, public district, public agency, or any
political subdivision of the state.
7)Provides that no interest is payable on the amount allowed by
the California Victim Compensation and Government Claims Board
on a claim if payment of the claim is subject to approval of
an appropriation by the Legislature. However, if the
appropriation is made, interest on the amount appropriated for
the payment of the claim commences to accrue 180 days after
the effective date of the law by which the appropriation is
enacted.
8)Provides, under federal law, that judgment interest rates in
federal district courts shall be calculated from the date of
the entry of the judgment, at a rate equal to the weekly
average one-year constant maturity Treasury yield, as
published by the Board of Governors of the Federal Reserve
System, for the calendar week preceding.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)Likely significant savings to state and local governments in
reduced interest payments for tax and fee judgments against
public entities based on the one-year constant maturity U.S.
Treasury (CMT) yield, which is currently significantly less
than 0.14%. Information from the counties indicates that
interest paid on three judgments alone totaled $18.5 million.
2)Unknown, potential reduction in revenues to state and local
entities to the extent interest payments on judgments against
public entities would have been paid to other state or local
entities at the higher rate of interest (in the case of City
of Clovis v. County of Fresno, for example, the City of Clovis
was paid $1.8 million in interest, but would have received a
significantly lower payment under the interest rates proposed
herein).
3)Potential increase in state interest payments related to
non-tax or non-fee judgments against state agencies that would
commence accruing interest immediately instead of 180 days
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from the date of final judgment or settlement pursuant to
existing law.
COMMENTS : 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 rationale for pre- and
post-judgment interest awards is twofold: 1) to compensate the
plaintiff for interest that would have accrued had the funds
been in the plaintiff's possession; and 2) to encourage
settlement, in the case of prejudgment interest, and to
encourage prompt payment of judgment, in the case of
post-judgment interest. The California Constitution requires
the Legislature to set the judgment interest rate 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 (in
the absence of a clear legislative mandate to the contrary) that
the judgment interest rate for claims against public entities is
7%. (Harland v. State of California (1979) 99 Cal. App. 3d 839;
California Fed. Savings & Loan Assn. v. City of Los Angeles
(1995) 11 Cal 4th 342.)
According to the author, the existing judgment interest regime
discussed above "was enacted during a time when inflation was
skyrocketing. At the time, the rates adopted were lower than
the market rates. Now the reverse has happened and market rates
are far lower, but there has been no adjustment to reflect
this."
This bill, therefore, would tie the judgment interest rate on
judgments or settlements against a state or local public entity,
that arise from a tax or fee claim, to the weekly average U.S.
Treasury yield, but not to exceed 7%. Specifically, this bill
adopts what is effectively a modified version of the judgment
interest rate established under federal law for civil actions
brought in federal court. The federal formula calculates the
judgment interest rate based on a rate equal to the weekly
average one-year constant maturity U.S. Treasury yield, as
published by the Board of Governors of the Federal Reserve
System, for the preceding calendar week. This bill would, for
any tax or fee claims against a government entity, apply the
federal treasury rate plus 2% to post-judgment interest rates,
but not to exceed 7% per annum.
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According the Urban Counties Caucus (UCC), the bill's sponsor,
this measure will "ensure that local governments would be
charged a reasonable interest rate on claims." UCC contends
that in the counties alone, interest rates have totaled over $15
million in just the last three years. UCC points out that these
payments come from taxpayer funds, and therefore "lowering the
interest rate will help to save money and ensure that all
parties are given a level playing field."
Analysis Prepared by : Thomas Clark / JUD. / (916) 319-2334
FN:
0002267