BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Kevin de León, Chair AB 2109 (Daly) - Controller: Reports: Parcel Taxes Amended: May 6, 2014 Policy Vote: G&F 7-0 Urgency: No Mandate: Yes Hearing Date: August 4, 2014 Consultant: Robert Ingenito This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 2109 would require (1) the State Controller's Office (SCO) to report annually on locally assessed parcel taxes and (2) local governments to provide information required by SCO to complete the report Fiscal Impact: SCO indicates that the bill would result in estimated first-year General Fund costs of $450,000 and ongoing costs of up to $200,000 annually to collect, process, analyze and publish parcel tax data. Potentially significant reimbursable costs to cities, counties and special districts (local governments) that assess parcel taxes to report the specified information to SCO. Background: A parcel tax is a special tax on property, and is generally not computed based on the property's value. Instead, parcel taxes are often flat fees imposed by a local government on each "parcel" of real property, both residential and commercial. Because a parcel may be a small residential plot or a 100-acre estate, parcel taxes are generally regressive, meaning owners of small parcels pay a larger percentage of tax compared with the land owned. Existing law does not impose limits on the use of special tax proceeds, allowing local governments to specify a particular use for parcel taxes in the relevant ballot measure. Generally, local parcel taxes provide funding for schools and other local building projects. Counties collect parcel taxes with property taxes, and then remit funds to the district imposing the tax. Property tax law generally guides parcel tax collection. AB 2109 (Daly) Page 1 Current law requires SCO to compile and publish on its internet site annual reports summarizing local agencies' finances, including their revenue sources. The reports are based on financial data submitted to SCO by local governments; SCO compiles the data reported by local governments but does not verify the information. The SCO reports detail the aggregate amount of various taxes collected by each local governmental entity, including the allocation of ad valorem taxes on real property, voter approved taxes, property assessments, and special assessments. The Legislative Analyst's Office (LAO) reported in late 2013 that parcel taxes generally represent a significant and growing source of revenues for local governments. Between 2001 and 2012, voters approved about 180 parcel tax measures to fund cities, counties, and special districts, and about 135 measures to fund K-12 districts. As the LAO noted, information on the statewide amount of parcel tax revenue collected by cities, counties, and special districts is not available. Proposed Law: This bill would require SCO to include specified information regarding parcel taxes in its annual report summarizing financial data for local governmental entities, including (1) the type and rate of the tax, (2) the number of impacted and exempted parcels, (3) the sunset date of the tax, (4) the revenue generated by the tax, and (5) the manner in which the revenue is being used. The bill would require each impacted city, county, and special district to furnish the pertinent information in the form and manner specified by the SCO. Related Legislation: This bill is similar to AB 892 (Daly) of 2013; however, AB 892 placed the parcel tax data collection and reporting requirements inside the Board of Equalization as opposed to SCO. AB 892 was held in the Assembly Appropriations Committee. Staff Comments: This bill's data requirements would require a modification to SCO's Local Government Reporting System (LGRS). SCO anticipates needing additional information technology resources on a limited term basis to accommodate the new parcel tax data reported by local governments. SCO would need .5 permanent PY on an ongoing basis thereafter. AB 2109 (Daly) Page 2 The California Constitution requires the State to reimburse local governments for the costs of new or expanded state-mandated local programs. Because AB 2109 imposes new requirements on counties, cities, and special districts, Legislative Counsel says that it imposes a new state mandate. AB 2109 requires the state to reimburse local agencies if the Commission on State Mandates determines that the bill imposes a reimbursable mandate.