BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                    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.

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           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  

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            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, 


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           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,  

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          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  

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            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  

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            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

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