BILL ANALYSIS                                                                                                                                                                                                    Ó




                     SENATE GOVERNANCE & FINANCE COMMITTEE
                            Senator Lois Wolk, Chair
          

          BILL NO:  SB 391                      HEARING:  4/24/13
          AUTHOR:  DeSaulnier                   FISCAL:  Yes
          VERSION:  4/2/13                      TAX LEVY: No
          CONSULTANT:  Grinnell                 

                     CALIFORNIA HOMES AND JOBS ACT OF 2013
          

          Enacts the California Homes and Jobs Act; applies a $75 fee  
          on recorded real estate documents.


                           Background and Existing Law  

          The California Constitution prohibits transaction taxes or  
          sales taxes on transfers of real property (Article XIIIA,  
          Section 4); however, in 1967, the Legislature authorized  
          counties to approve an ordinance to impose a documentary  
          transfer tax (DTT), which applies to deeds of transfer of  
          realty within that jurisdiction, and is based on the value  
          of the transfer.  In counties, the rate is fifty-five cents  
          ($0.55) for each five hundred dollars ($500) of value.  All  
          of California's 58 counties apply the tax, which is modeled  
          after the repealed Federal Documentary Stamp Tax.  Cities  
          may also enact ordinances to impose a DTT:  non-charter  
          cities within a County that impose a DTT may apply its tax  
          at half of the rate of the county and applies it as a  
          credit against the county rate.   Charter cities may impose  
          a DTT at a higher rate under the municipal affairs doctrine  
          in the California Constitution (Article XI, Section 5).  If  
          they do so at a higher rate than the non-charter rate, then  
          the city DTT does not serve as a credit against the county  
          tax.  
          Exemptions exist for public agencies acquiring land, land  
          acquired as a result of a plan of reorganization or  
          adjustment such as bankruptcy, and certain transfers in  
          lieu of foreclosure, among others.

          The Government Code prescribes additional fees that county  
          recorders charge when recording a change in ownership of a  
          property.  The law exempts public agencies from paying  
          these fees.

          In 2006, voters enacted the Housing and Emergency Shelter  




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          Trust Fund Act, which authorized the sale of $2.85 billion  
          in general obligation bonds for various housing projects  
          (Proposition 1C), on top of $2.1 billion in general  
          obligation bonds approved in 2002 (Proposition 46).   
          According to the State Treasurer, the state has sold almost  
          all Proposition 46 bonds, but $1.26 billion of Proposition  
          1C authorized bonds have not yet been sold.

          Citing a significant State General Fund deficit, Governor  
          Brown's 2011-12 budget proposed eliminating RDAs and  
          returning billions of dollars of property tax revenues to  
          schools, cities, and counties to fund core services.  Among  
          the statutory changes that the Legislature adopted to  
          implement the 2011-12 budget, AB X1 26 (Blumenfield, 2011)  
          dissolved all RDAs.  The California Supreme Court's 2011  
          ruling in  California Redevelopment Association v.  
          Matosantos  upheld AB X1 26, but invalidated AB X1 27  
          (Blumenfield, 2011), which would have allowed most RDAs to  
          avoid dissolution.  RDAs' dissolution deprived many local  
          governments of the primary tool they used to increase the  
          supply of affordable housing.  


                                   Proposed Law  

          Senate Bill 391 enacts the California Homes and Jobs Act of  
          2013, which creates the California Homes and Jobs Trust  
          Fund in the State Treasury.  The Legislature may  
          appropriate moneys in the fund to support development,  
          acquisition, rehabilitation, and preservation of low and  
          moderate income households.

          SB 391 imposes a fee of $75 whenever a person records a  
          real estate instrument, paper, or notice required or  
          permitted by law to be recorded, including:
              Deeds, grant deeds, trustee deeds, or deeds of trust,
              Reconveyance, and quit claim deeds,
              Fictitious deeds of trust,
              Assignment of deed of trust,
              Request for notice, and notice of default, 
              Abstract of judgment,
              Subordination agreement,
              Declaration or abandonment of homestead, 
              Release or discharge of lien or easement,
              Notice of trustee sale,
              Notice of completion, 





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              UCC financing statement
              Mechanics' lien,
              Maps
              Covenants, conditions, and restrictions.

          The measure specifically excludes from the fee any document  
          recorded in connection with a transfer subject to a  
          documentary transfer tax, essentially exempting property  
          transfers.  

          The bill provides that the fees shall be sent quarterly  
          with the Department of Housing and Community Development  
          for deposit in the Fund.  Counties must pay interest at the  
          legal rate for any funds not paid within 30 days of the end  
          of the quarter.

          The measure requires the Bureau of State Audits to conduct  
          periodic audits to ensure that the annual allocation to  
          individual programs is awarded in a timely fashion  
          beginning two years from the bill's effective date.  The  
          Department of Housing and Community Development must  
          include in its currently required annual report how funds  
          raised by the fee spent, and post the report on its  
          web-site.  

          The measure also makes legislative findings and  
          declarations.


                               State Revenue Impact
          
          No estimate.


                                     Comments  

          1.   Purpose of the bill  .  According to the author,  
          "Everyone in California needs a safe and affordable place  
          to call home.  For U.S. military veterans, former foster  
          youth, families with children, people with disabilities,  
          seniors on fixed incomes, and other vulnerable  
          Californians, however, the housing crisis isn't over.   
          Millions of Californians are caught in the "perfect storm"  
          - mortgages remain out of reach, credit standards have  
          tightened, and the foreclosure crisis has pushed more  
          people into a rental market already suffering from decades  





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          of short supply - leading to record-setting rent increases.  
           The most vulnerable risk joining the more than 130,000  
          Californians who are homeless on any given night.   
          Moreover, rents and mortgages within the reach of working  
          families are critical to maintaining California's business  
          competitiveness.  Numerous business groups say California  
          needs to increase the supply of housing options affordable  
          to workers so companies can compete for the talent that  
          drives California's economy.  At the same time,  
          California's investment in affordable homes has dried up.   
          State agencies have awarded nearly all of the  
          voter-approved bond funding for affordable housing.   
          Likewise, the elimination of redevelopment agencies has cut  
          off funding from the low- and moderate-income housing set  
          aside.  The California Homes and Jobs Act begins to restore  
          California's historic investments in affordable homes by  
          creating an ongoing, pay-as-you-go source of funding  
          dedicated to affordable housing development.  The act will:  

                 Create 29,000 jobs annually, primarily in the  
               beleaguered construction sector.
                 Help businesses attract and retain the talent that  
               fuels California's economy. 
                 Leverage an additional $2.78 billion in federal and  
               local funding and bank loans to build affordable homes  
               and create jobs.
                 Deploy these dollars in California communities  
               through a successful private/public partnership model.
                 Get California building again to create affordable  
               home options for all Californians."

          2.   Who pays  ?  An old piece of tax policy wisdom attributed  
          to Louisiana Governor Russell Long states that, "Don't tax  
          you, don't tax me, tax the man behind the tree."  SB 391  
          assesses a fee of $75 whenever a person records one of a  
          specified list of documents with the county to pay for  
          public housing programs, except for documents that transfer  
          deeds of realty.  As such, the responsibility to pay for  
          housing programs, previously paid for out by a combination  
          of redevelopment funds, state bonds, federal funds, and  
          proceeds from local exactions, is shifted onto the  
          individuals recording these documents, which includes  
          property owners, lenders, and borrowers, among others.   
          While resources for public housing programs have rapidly  
          dried up, is it appropriate to saddle a part of one class  
          of taxpayer with the burden to pay for affordable housing?   





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          For example, a contractor filing a mechanics' lien to  
          secure payment for services has to pay the fee, but the  
          individual purchasing a luxury home does not.  The  
          Committee may wish to consider whether the correct group of  
          taxpayers should bear the general, public cost of providing  
          affordable housing.

          3.   Magic words  .  While SB 391 states that the charge it  
          imposes is a fee, Legislative Counsel has keyed the measure  
          a tax increase for the purposes of Section III of Article  
          XIIIA of the California Constitution.  As such, the measure  
          requires the approval of 2/3 of the membership of the  
          Senate and the Assembly to be enacted.  Prior to 2010,  
          specified fees could be enacted by majority vote, but this  
          authority was significantly limited by Proposition 26  
          (2010).  

          4.   Show me the money  !  Joint Rule 37.4 prescribes that any  
          bill requiring action by the Bureau of State Audits, as SB  
          391 does, contain an appropriation for the cost of any  
          audit.  The Committee may wish to consider amending the  
          bill to provide the appropriation.

          5.   Do it again  .  SB 391 is almost identical to SB 1220  
          (DeSaulnier, 2012), which the Committee approved last year.  
           However, the measure received only 25 votes, two short of  
          the 2/3 necessary, on the Senate Floor.


                        Support and Opposition  (04/18/13)

           Support  :   California Housing Consortium (sponsor); Housing  
            California (sponsor); AARP; 
          Abode Communities; A Community of Friends; Alameda County  
            Board of Supervisors; Alameda 
          County Developmental Disabilities Council; Alpha  
            Construction Company; AMCAL Multi-
          Housing; American Baptist Homes of the West; Amity  
            Foundation; Amstutz Associates; 
          Angelus Plaza; Ashwood Construction; Asian Pacific  
            Environmental Network; Association of 
          Regional Center Agencies; Asthma Coalition of Los Angeles  
            County; Bay Area Business
          Roundtable; Bay Area Community Land Trust; Bay Area  
            Council; Bay Area Regional Health 
          Inequities Initiative; BRIDGE Housing; Burbank Housing  





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            Development Corporation; Cabrillo 
          Economic Development Corporation; Cahill Contractors;  
            California Apartment Association; 
          California Association of Housing Authorities; California  
            Association of Local Housing Finance 
          Agencies; California Building Industry Association;  
            California Coalition for Rural Housing; 
          California Coalition for Youth; California Conference of  
            Carpenters; California Council for Af
          fordable Housing; California Council of Community Mental  
            Health Agencies; California Disabil
          ity Services Association; California Housing Partnership  
            Corporation; California Partnership to 
          End Domestic Violence; California Police Chiefs  
            Association; California Reinvestment Coali
          tion; California Rural Legal Assistance Foundation; Bill  
            Lockyer, California State Treasurer; 
          Casa Major; Century Housing; Century Villages at Cabrillo;  
            Cesar Chavez Foundation; CHISPA; 
          City of Emeryville; City of Jurupa Valley; City of Lynwood;  
            City of Oakland; City of Oxnard; 
          City of Pasadena; City of Riverside; City of San Joaquin;  
            City of San Jose; City of San Mateo; 
          City of Santa Barbara; City of Santa Monica; City of West  
            Hollywood; Coachella Valley Housing 
          Coalition; Community Corporation of Santa Monica; Community  
            Health Improvement Partners; 
          Community Housing Opportunities Corporation; Community  
            Housing Works; Community 
          Working Group; Contra Costa Health Services; Corporation  
            for Supportive Housing; County of 
          Alameda; County of Contra Costa;  Curtom-Dunsmuir; DMB  
            Pacific Ventures; Domus Deveop
          ment; EAH Housing; East Bay Developmental Disabilities  
            Legislative Coalition; East Bay 
          Housing Organizations; East LA Community Corporation;  
            Ecumenical Council Pasadena Area 
          Congregations; Eden Housing; Enterprise Community Partners;  
            Environmental Health Coalition; 
          Episcopal Community Services of San Francisco; First Place  
            for Youth; Foundation for 
          Affordable Housing; Fullerton Chamber of Commerce; Gonzalez  
            Goodale Architects; Habitat for 
          Humanity California; Habitat for Humanity Greater San  
            Francisco; Habitat for Humanity Inland 
          Valley; Habitat for Humanity Pomona Valley; Habitat for  





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            Humanity Riverside; Habitat for 
          Humanity San Gabriel Valley; Habitat for Humanity San Luis  
            Obispo County; Habitat for 
          Humanity Santa Cruz County; Hamilton Family Center;  
            Highridge Costa Housing Partners; 
          Hollywood Community Housing Corporation; Home Builders  
            Association of Tulare/Kings 
          Counties; Home Start; Homes for Life Foundation; Housing  
            Authority for the City of
          San Buenaventura; Housing Choices Coalition for People with  
            Developmental Disabilities; 
          Housing Leadership Council of San Mateo County; ICON  
            Builders; InnerCity Struggle; Interfaith 
          Community Services; International Association for Women of  
            Color Day; Jamboree Housing 
          Corporation; John Stewart Company; Kennedy Commission; The  
            KTGY Group; Larkin Street 
          Youth Services; Laurin Associates; Lauterbach and  
            Associates; LeSar Development Consultants; 
          LifeSTEPS; LINC Housing; Little Tokyo Service Center;  
            Loaves and Fishes; Local Initiatives 
          Support Corporation; Los Angeles Area Chamber of Commerce;  
            Los Angeles Business Council; 
          Los Angeles Business Leaders Task Force on Homelessness;  
            Los Angeles Community Action 
          Network; L.A. Family Housing; LA Voice; Law Foundation of  
            Silicon Valley; Leading Age 
          California; League of Women Voters of California; Lutheran  
            Office of Public Policy; Mammoth 
          Lakes Housing; Marin Workforce Housing Trust; Mental Health  
            America of Los Angeles; Mercy 
          Housing MidPen Housing Corporation; Move LA; Multicultural  
            Communities for Mobility; 
          Mutual Housing California; Nancy Lewis Associates; National  
            Community Renaissance; 
          National Council of La Raza; National Housing Law Project;  
            Natural Resources Defense 
          Council; Neighborhood Housing Services of Los Angeles  
            County; Neighborhood Partnership 
          Housing Services; NeighborWorks Orange County;  
            Nevada/California Indian Housing Associa
          tion; Non-Profit Housing Association of Northern  
            California; Northern Circle Indian Housing 
          Authority; Northern California Community Loan Fund;  
            Opportune Companies; Orange County 
          Business Council; Orange County Housing Trust; Pacific  





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            Clinics; Palm Communities; Pasadena 
          Public Health Department; Peninsula Interfaith Action;  
            Penny Lane Centers; People Assisting the 
          Homeless; Peoples' Self-Help Housing Corporation;  
            PolicyLink; Public Advocates; Related 
          California; Resources for Community Development; Ruiz  
            Brothers Construction Co.; Rural 
          Community Assistance Corporation; Rural Communities Housing  
            Development Corporation; 
          Sacramento Homeless Organizing Committee; Sacramento  
            Housing Alliance; St. Joseph Center; 
          St. Paul's Senior Home and Services; San Benito County  
            Housing and Economic Development 
          Department; San Gabriel Valley Consortium on Homelessness;  
            San Luis Obispo County Housing 
          Trust Fund; Self-Help Enterprises; Service Employees  
            International Union (SEIU) California 
          State Council; 
          Sierra Business Council; Sierra Club California; Silicon  
            Valley Leadership Group; Skid Row 
          Housing Trust; Sonoma County Task Force for the Homeless;  
            Southeast Asian Community 
          Alliance; Southern California Association of Non-Profit  
            Housing; SPUR; Stand Up for 
          Neighborly Novato; State Independent Living Council; State  
            Treasurer Bill Lockyer; Step Up on 
          Second; Sun Country Builders; Sunseri Construction;  
            Tenderloin Neighborhood Development 
          Corporation; Thai Community Development Center; Thomas  
            Safran and Associates; T.R.U.S.T. 
          South LA; Turning Point Community Programs; United Homeless  
            Healthcare Partners; 
          United States Veterans Initiative; United Ways of  
            California; United Way of Fresno County; 
          United Way of Greater Los Angeles; Valley Economic  
            Development Center; Venice
          Community Housing Corporation; Visionary Home Builders;  
            Wakeland Housing and Develop
          ment Corporation; Walton Construction Services; Western  
            Center on Law and Poverty; 
          Women Organizing Resources, Knowledge, and Services  
            (WORKS); 


           Opposition  :    Board of Equalization Member Michelle Steel;  
          Board of Equalization Member George Runner; Butte County  





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          Clerk-Recorder; Calaveras County Clerk-Recorder; California  
          Land Surveyors Association; California Land Title  
          Association; City of Cypress; Colusa County Clerk Recorder;  
          Contra Costa County Clerk-Recorder; County Recorders'  
          Association of California; County of Lassen; County of  
          Orange; El Dorado County Recorder-Clerk; Hamman Real  
          Estate; Inyo County Clerk Recorder; Marin County  
          Assessor-Recorder-Clerk; National Notary Association;  
          Nevada County Clerk-Recorder; Plumas County Clerk; San  
          Bernardino County 
          Recorder-Clerk; San Luis Obispo County Clerk-Recorder;  
          Sonoma County Clerk-Recorder-Assessor; Stanislaus County  
          Clerk-Recorder;