BILL ANALYSIS Ó
AB 1322
Page 1
Date of Hearing: April 29, 2013
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 1322 (Patterson) - As Introduced: February 22, 2013
SUSPENSE
Majority vote. Fiscal committee.
SUBJECT : Property tax postponement: senior citizens and
disabled citizens.
SUMMARY : Reinstates the Senior Citizens' Property Tax
Postponement (PTP) program that provided property tax deferment
to seniors and disabled persons. Specifically, this bill :
1)Reinstates the PTP program by repealing the suspension of the
program and allowing the State Controller (Controller) to
consider applications for the property tax postponement
program beginning July 1, 2014.
2)Establishes the Senior Citizens and Disabled Citizens PTP Fund
(Fund) within the State Treasury and annually appropriates
moneys in the Fund for the purposes of paying costs and
disbursements related to the postponement of property taxes of
eligible senior citizens and disabled citizens.
3)Requires PTP loan repayments to be:
a) Deposited directly into the Fund if they are not
deposited into the program's impound account; and,
b) Transferred to the Fund after a six-month period if they
are deposited into the program's impound account.
4)Requires the transfer of funds in excess of $10 million that
accumulate in the Fund to the General Fund (GF) and deletes
any GF appropriation for the program.
5)Takes effect immediately as a bill providing for
appropriations related to the Budget Bill.
EXISTING LAW :
AB 1322
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1)Establishes the Senior Citizens and Disabled Citizens PTP Law,
the Senior Citizens Tenant-Stockholder PTP Law, the Senior
Citizens Mobilehome PTP Law, and the Senior Citizens
Possessory Interest Holder PTP Law in the Revenue and Taxation
Code, all of which allow the Controller to pay property taxes
to county tax collectors on behalf of individuals over the age
of 62 or disabled persons making less than $39,000 in income
per year.
2)Requires a claimant to repay the Controller upon sale of the
home, which secures the property tax loan made by the
Controller.
3)Suspends the PTP program as part of the budget reductions to
the state's GF programs and prohibits individuals from filing
new claims for property tax postponement, and the Controller
from accepting applications, in the 2009 calendar year and
thereafter.
FISCAL EFFECT : Unknown.
COMMENTS :
1)Author's Statement . The author states that, "Many seniors and
Californians with disabilities on fixed incomes are faced with
tax bills they cannot afford. Until 2009, California had a
program in place that would allow seniors and disabled
Californians to defer their property tax bills until sale of
the home. When the Property Tax Postponement (PTP) Program
was eliminated in 2009 as a result of budget negotiations,
thousands of seniors and disabled Californians were left with
nowhere to turn. They were faced with having to choose
between buying food and medicine or paying their bills to the
state. AB 1322 would fix this problem by reinstating the PTP
program and giving seniors some flexibility with their
property tax bills."
2)Arguments in Support . The proponents of this bill state that
the PTP program "had a minimal start-up cost and, in most
years generated revenue for the state General fund." They
argue that it is a "valuable program that had been
instrumental in keeping thousands of seniors, blind, and
disabled individuals in their homes", and nearly "6000
homeowners benefitted from the program across nearly all
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counties in California." Proponents assert that, with the
elimination of the funding for the PTP program, seniors and
disabled persons "risk going into foreclosure, putting state
at risk regarding those liens it already holds."
3)The PTP Program and Its Suspension . California has several
property tax programs benefiting the elderly and disabled
individuals, including property tax reappraisal relief and now
suspended property tax assistance and PTP programs. Unlike
the property tax assistance program, the PTP program did not
refund a percentage of property taxes paid but, instead allows
eligible homeowners to defer payment of all, or a portion of,
the property taxes on their residences. The original program
was enacted in 1977, after the passage of a constitutional
amendment authorizing the postponement of property taxes
(California Constitution, Article XIII, Section 8.5).
The PTP program was a loan program from the state to eligible
property owners. Although initially designed for persons over
62 years of age, the PTP program was also available to
eligible blind and disabled persons, regardless of age.
However, claimants had to meet other additional criteria,
including having 20% equity in their homes and annual
household income of $39,000 or less. Claimants were required
to file applications annually with the Controller's Office,
between May 15th and December 10th of each calendar year for
the fiscal year (FY) beginning July 1 of that year. Upon
approval of the claim, the Controller either made payments
directly to the county tax collector or issued certificates of
eligibility to the claimant. A certificate constituted a
written promise of the state to pay all or part of the
property taxes on the home. The term "property taxes"
included everything on the claimants' secured property tax
bill, including special assessment, charges, and user fees, in
addition to ad valorem taxes. However, special assessments
levied independently of the county tax bill were ineligible
for postponement.
Under the program, in exchange for paying a claimant's property
taxes, the state placed a lien on the property for which state
funding was used. The loan was secured by the property and
was repaid, with interest, when the property owner died, sold
the home, moved, or allowed a "senior lien" to become
delinquent. Each year, interest accrued on the amount that
the State paid to the county on behalf of the property owner.
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Interest rates were set each year based on the annual yield
received by the state on its Pooled Money Investment Account.
There was no maximum amount of postponed property taxes that
could be accumulated under the PTP program. Over the last 30
years, the PTP program has provided assistance to more than
200,000 homeowners. Nearly every county has at least one
program participant, and most counties have several dozen
participants. Los Angeles County accounts for 21% of program
participants. San Diego, San Bernardino, Riverside, and
Orange counties have 28%, and the nine San Francisco - Bay
Area counties have approximately 19% of the program
participants.
On February 20, 2009, the PTP program was indefinitely suspended
as part of the budget reductions to the state's GF programs.
[SB x3 8 (Ducheny), Chapter 4, Statutes of 2009]. The
funding for the program was eliminated and the Controller was
prohibited from accepting any new applications after February
20, 2009. Consequently, the Controller's Office notified the
counties and each claimant who was approved for postponement
in FY 2008-09 that their application could not be accepted.
Most applications submitted by claimants in FY 2008-09 were
processed before the suspension became effective.
4)The Impact of the Suspension on Program Participants and
Counties . The PTP program helped thousands of low and
moderate income elderly, blind and disabled individuals to
remain in their homes. Historically, the loan repayments,
with few exceptions, have equaled or exceeded the annual
program expenditures and administrative costs. Over the
long-term, the program has been self-supporting. For example,
in 2007-08 FY and 2008-09 FY, the Controller's Office
collected less money than it disbursed in loans. However, the
overall cumulative fiscal impact of the program has been
positive: The PTP program collected $41 million more in PTP
loan repayments than it disbursed in PTP loans. In addition
to allowing program participants to remain in their homes, the
PTP program has also reduced county property tax default rates
and increased county tax collection revenues.
According to the survey conducted by the Controller's Office in
recent years, the program suspension has had a direct negative
impact not only on the program participants but also on the
counties. The suspension of the PTP program, coupled with the
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elimination of the Franchise Tax Board's Homeowners and
Renters Assistance program, has created a tremendous financial
hardship for low-income senior, blind, and disabled
homeowners. The program participants have expressed fear of
losing their homes to tax-default sales and foreclosures by
lenders because of the failure to pay property taxes directly
or through an impound account initiated by the lender. They
have also expressed concerns about becoming homeless or
dependent on family members and not being able to afford basic
necessities. Many claimants have been in the program for over
20 years and have been counting on the loan program to pay
their property taxes. More than 50% of the program
participants are 75 years of age or older, and 208 claimants
approved for FY 2008-09 were older than 90 years of age.
Furthermore, the counties have also been negatively impacted by
the program suspension. In 2010, the county tax collectors
reported a decrease in revenue due to higher delinquencies
rates, an increase in related workload, including the number
of properties that the counties were forced to sell as
tax-defaulted, and an increased strain on county services by
displaced homeowners.
5)The "County Deferred PTP" Program . In response to the
negative impacts of the suspension of the PTP program, the
Legislature enacted AB 1090 (Blumenfield), Chapter 369,
Statutes of 2011, creating the County Deferred Property Tax
Program. In contrast to the PTP program that was funded
exclusively by GF moneys, the County Deferred PTP program is
self-financing and not reliant on an annual GF appropriation.
It is funded by a participating county through a fund to be
established within its treasury. Upon adoption of a
resolution by the county's governing body, and with the
consent of the county treasurer, excess county funds are
deposited in the fund for the purpose of providing property
tax postponement loans to qualified claimants. AB 1090
established uniform statewide eligibility criteria for the
claimants and certain rules and guidelines for a County
Deferred Property Tax program. The counties are authorized to
charge claimants a specified interest rate on the property tax
loans and an application fee, which is used exclusively to
cover the costs of administering the program. Furthermore,
counties are allowed to grant retroactive relief for
individuals who could not obtain deferment when the
Legislature de-funded the original PTP program in 2009.
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Under the County Deferred PTP program, the property tax loans,
i.e. the amount of property taxes deferred, plus interest
accrued, are secured by a tax lien against the underlying
residential dwelling. The amount secured by the lien is
reduced by the amount of any payment, and is increased to
reflect interest accrual or subsequent deferral for the
claimant. If the lien is paid in full, the county tax
collector is required to record a release, evidencing the
satisfaction of all amounts secured by the lien, and remove
specified information from the secured roll and assessment
records required when property taxes are postponed.
The property taxes are immediately due and payable if the
claimant (a) ceases to own the building due to sale,
conveyance, or condemnation; (b) ends his/her permanent
residence dwelling; (c) experiences a fall in equity value
below the program's eligibility criterion; (d) refinances
existing loans on the property; or, (e) was erroneously
granted deferment because he/she did not meet eligibility
criteria. Finally, similarly to the suspended PTP program, AB
1090 precludes lenders from requiring a borrower to maintain
an impound, trust, or other type of account with regard to
taxes established after 1978, if the borrower chooses to
postpone taxes, unless required by federal law or if the
prohibition would impair the express obligations of a loan
agreement.
While the County Deferred Property Tax Program provides a county
with an option to defer property taxes for homeowners residing
within the county, it nonetheless leaves many low-income
homeowners without assistance in counties that choose not to
participate in the program.
6)What Does This Bill Do ? According to the sponsors, as the
result of the PTP program's suspension, many senior and
disabled homeowners are delinquent on their property taxes and
risk going into foreclosure proceedings. AB 1322 is intended
to restore the suspended PTP program, with certain
modifications, so that postponement claims can once again be
accepted by the Controller. This bill would create a
revolving fund to ensure that any administrative costs,
deposits, or disbursements remain in the program and would
provide a continuous appropriation for the Controller to pay
postponement claims. The design of the previous PTP program
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required some loan repayments to go to the GF and some
repayments to go to the program's impound account. These
later amounts were transferred to the GF after six months.
Thus, under the previous PTP program, appropriations were made
from the GF to pay the postponed property taxes, in contrast
to the revolving fund concept embodied in this bill.
AB 1322 is designed to help seniors and disabled individuals as
well as to lessen the risk to the GF. The Committee staff
estimates, however, that, to the extent that loan repayments
would not be transferred to or received by the GF in the
budget year 2013-14, resources that would be available to the
GF would decrease. An identical bill, ABx1 34 (Budget
Committee), introduced in the 2011 legislative session, was
vetoed by the Governor, and was estimated to result in an
annual GF decrease ranging from $7 million to $10 million.
7)Similar Legislation .
AB 1090 (Blumenfield), Chapter 369, Statutes of 2011,
established the County Deferred Property Tax Program for
Senior Citizens and Disabled Citizens and allowed each county
to elect to participate in the program.
ABx1 34 (Budget Committee), introduced in the 2011-2012
legislative session, was identical to this bill. AB x1 34 was
vetoed by the Governor:
The Seniors Citizens' Property Tax Postponement Law
was enacted
beginning for the 1977-1978 fiscal year to give
property tax relief to
seniors. It was subsequently expanded to included
blind and disabled
persons. The law was suspended in 2009 due to the
realities of the state's
budget. AB X1 34 would repeal the suspension so that
postponement claims
can once again be accepted by the Controller. In
addition, the bill would
establish a new fund in the State Treasury and provide
a continuous
appropriation for the Controller to pay postponement
claims.
AB 1322
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"Given the very significant cuts to state and local
core public services
that are occurring, the state cannot afford the $19.3
million that the
Department of Finance estimates this bill would cost
during the 2011-2012
fiscal year or the continuing estimated annual revenue
cost of $30 million."
REGISTERED SUPPORT / OPPOSITION :
Support
California Association of County Treasurers and Tax Collectors
California Association of REALTORS
California State Association of Counties
Howard Jarvis Association
Los Angeles County Office of the Assessor
Marin County Board of Supervisors
Rural County Representatives of California
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098