BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2231| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2231 Author: Gordon (D), Levine (D), and Patterson (R) Amended: 8/18/14 in Senate Vote: 27 - Urgency SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/25/14 AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14 AYES: De León, Hill, Lara, Padilla, Steinberg NO VOTE RECORDED: Walters, Gaines ASSEMBLY FLOOR : 77-0, 5/27/14 - See last page for vote SUBJECT : State Controller: property tax postponement SOURCE : Author DIGEST : This bill largely recreates the property tax postponement (PTP) program by reestablishing the Senior Citizens and Disabled Citizens PTP Fund (PTP Fund) as an interest bearing fund to pay for the State Controller's (Controller) costs for administering the PTP and paying for disbursements to PTPs. Any loan repayments are also deposited into the PTP Fund, but the Controller must transfer any amounts in the PTP Fund that exceed $10 million to the General Fund. This bill allows counties to enact an ordinance to delay tax sales for properties formerly funded by the program that may be eligible for the reenacted program. CONTINUED AB 2231 Page 2 ANALYSIS : The Senior Citizens and Disabled Citizens PTP Law allows 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. The claimant must repay the Controller, who secures the loan by recording a lien, upon sale of the home. Loans do not become due and payable if the claimant or the claimant's spouse continues to occupy the home secured by the lien. The Controller's lien for a PTP loan does not have "super priority" status, similar to liens recorded by county treasurer-tax collectors for unpaid property taxes, which means that the county lien is paid before all others if the secured property is sold. When the Legislature enacted the PTP Law in 1983, it continuously appropriated $12.7 million annually to pay the face amount of all certificates of eligibility for the PTP program. In 2009, due to budgetary constraints, the Legislature prohibited persons from filing new claims for PTP, and the Controller from accepting applications (SB 8X3, Ducheny, Chapter 4, Third Extraordinary Session). This bill largely recreates the PTP program by reestablishing the PTP Fund as an interest bearing fund to pay for the Controller's costs for administering the program and paying for disbursements to PTPs. Any loan repayments are also deposited into the PTP Fund, but the Controller must transfer any amounts in the PTP Fund that exceed $10 million to the General Fund. This bill allows counties to enact an ordinance to delay tax sales for properties formerly funded by the program that may be eligible for the reenacted program. Additionally, this bill: Deletes the past program's $12 million continuous appropriation, Repeals the prohibition on the Controller accepting new applications for the program, allowing the Controller to start accepting new applications on July 1, 2016, Sweeps any current amounts in impound accounts into the PTP CONTINUED AB 2231 Page 3 Fund, Removes mobilehomes, houseboats, and floating homes, a part of the past program, from the reenacted program, and provides a wind down process for existing loans made to mobilehomes, Increases from $10 to $30 the fee the Controller can charge for providing the lien amount to a person with a legal or equitable interest in the property, Clarifies that the lien is secured when the Controller transfers funds to the county on the taxpayer's behalf, Provides that the lien must be recorded within 14 days of the transfer of funds and the notice of lien to the county by the Controller, Repeals the Controller's ability to subordinate the PTP lien if the state's interests are adequately protected, or pay the taxpayer's delinquent taxes, interest, and penalties in the event of a foreclosure on a senior lien, Requires the tax collector or assessor to notify the Controller within 60 days of processing that a change in ownership of the property enrolled in the program, Provides that amounts postponed become due and payable when the taxpayer refinances the home or enters into a reverse mortgage, Requires proceeds of a sale or condemnation of real property where the Controller recorded a PTP lien to instead flow to the PTP Fund, instead of an impound account, and prohibits the taxpayer from drawing on the proceeds in the PTP Fund, Deletes references to certificates of eligibility, and replaces them with electronic transfers to properly reflect the modern information technology that would implement the program, Requires the tax collector or assessor to inform the Controller of all amounts secured by a lien that becomes tax defaulted, CONTINUED AB 2231 Page 4 Directs the Controller to provide the tax collector with information necessary to execute a tax sale, requires the tax collector to certify under penalty of perjury that the information is necessary for the tax sales, and provides that this information is not a public record due to social security numbers needed for the sale, Require the tax collector or assessor to include the outstanding balance of a PTP loan in the minimum bid in the event of a tax-defaulted sale, and specify that if the minimum bid is not achieved, the proceeds would be divided between the SCO and the tax collector on a proportionate basis, Requires that a notice of lien for postponed property taxes be processed expeditiously, Converts to zero all losses and nonexpenses when determining whether the taxpayer's income qualifies for enrollment in the program, Increases from 20% to 40% for each postponement claim the amount of equity in the property necessary for a taxpayer to enroll in the program, Clarifies the definition of property taxes, Provides that taxpayers may file applications from September 1 to April 10 of the fiscal year, instead of May 15 to December 10 of the calendar year, In the event of willful neglect, requires the Controller to notify the claimant and provide a copy of the notification to the tax collector of the taxes due and the 30-day deadline for payment, and allows the tax collector to return funds and deny the claim, Requires the Controller to notify the claimant when it electronically transfers property taxes after initially reversing its decision to deny the claim. This bill requires the minimum price at which a tax-defaulted property may be offered for sale, and the ultimate sales price, must include the outstanding balance of any PTP loan. This bill authorizes a county to elect to cancel any delinquent penalties, CONTINUED AB 2231 Page 5 costs, fees, and interest associated with a tax-defaulted property that is eligible to file a PTP claim with the Controller prior to January 1, 2017. This bill enacts several technical and conforming changes to implement this bill's provisions, makes legislative findings and declarations regarding taxpayer information not being public records for purposes of the California Constitution's provisions for public records, and states that state reimbursement of any mandate created by this bill does not apply for specific reasons. Comments PTP is distinct from the Senior Citizens Property Tax Assistance Program (PTAP), administered by the Franchise Tax Board, which is a direct grant program to income-eligible senior citizens. The state has not funded PTAP since the 2007-08 Budget, so the state has not paid claims more recently than those made in 2007. In 2010, the Legislature enacted the County Deferred Property Tax Program for Senior Citizens and Disabled Citizens, which allowed participating counties to operate PTP programs using its own funds (AB 1090, Blumenfield, Chapter 133). Under the bill, counties can enact an ordinance participating in the program, set aside funds, accept claims, and defer taxes for eligible claimants. The County Auditor allocates the revenue to other local agencies such as cities, special districts, and school districts using county revenue as if the tax had been paid until the house is sold and the lien can be satisfied. The county opt-in program largely relies on eligibility criteria used for the state program, with some updates, and even allows counties to grant retroactive relief for individuals who could not obtain deferment when the Legislature defunded the program and precluded claimants from filing new claims. So far, only Santa Cruz County enacted an ordinance to grant postponements. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: The Controller administrative costs of approximately $3.64 CONTINUED AB 2231 Page 6 million (37.2 personnel years (PY)) in 2015-16, $3.49 million (37.2 PY) in 2016-17, $3.32 million (35.5 PY) in 2017-18, and $3.11 million (33.8 PY) ongoing. Costs in the first three years include IT improvements to the PTP accounting system and associated databases. (General Fund) Unknown General Fund costs, likely in the range of $10 million annually, to disburse new property tax loan claims, beginning in 2016-17. Eventually loan payments and accumulated interest would likely fully offset program expenditures. Likely reimbursable mandate costs for duties imposed on county tax administration officials. The previous PTP program was deemed to have imposed reimbursable activities on local agencies, resulting in annual General Fund expenditures of up to $285,000 before the program was suspended in 2009. SUPPORT : (Verified 8/18/14) California Assessors' Association California Association of County Treasurers and Tax-Collectors California Association of Realtors California State Association of Counties California Taxpayers Association Counties of Butte, Contra Costa, Del Norte, Fresno, Madera, Marin, Mariposa, Monterey, Napa, Nevada, Orange, Riverside, San Benito, San Bernardino, San Luis Obispo, San Mateo, Santa Clara, Santa Cruz, and Sonoma Howard Jarvis Taxpayers Association Rural County Representatives of California Veterans Caucus of the California Democratic Party ARGUMENTS IN SUPPORT : According to the author: Many California seniors and disabled citizens are living on fixed incomes. Those who are property owners are increasingly faced with tax bills they cannot afford. To assist, California created several property tax programs benefiting elderly and disabled individuals, including property tax reappraisal relief and the currently suspended property tax assistance and property-tax postponement (PTP) programs. The PTP program allowed eligible homeowners to defer payment of all, or a portion of, the property taxes on their CONTINUED AB 2231 Page 7 residences. It was essentially a loan program from the state to eligible property owners. In exchange for paying a qualified 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. (Interest rates were set each year based on the annual yield received by the state on its Pooled Money Investment Account.) This interest would eventually offset the State's cost of program administration. Unlike the property tax assistance program, the PTP did not refund a percentage of property taxes paid but instead allowed eligible homeowners to defer payment of all, or a portion of, the property taxes on their residences. The advantage of postponement (or deferral) over forgiveness was that the state was, over time, kept whole. ASSEMBLY FLOOR : 77-0, 5/27/14 AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Perea, John A. Pérez, V. Manuel Pérez, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins NO VOTE RECORDED: Patterson, Quirk-Silva, Vacancy AB:k 8/18/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 2231 Page 8 CONTINUED