BILL ANALYSIS Ó
SB 663
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 663 (Lara) - As Amended: June 30, 2014
Policy Committee: Local
GovernmentVote:9 - 0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill requires, for 2014-15 and each year thereafter,
voter-approved pension property tax revenues to be allocated to
the fund of the city or county whose voters approved the tax,
rather than the revenues being allocated to the Redevelopment
Property Tax Trust Fund pursuant to the redevelopment agency
(RDA) dissolution process.
FISCAL EFFECT
Unknown, ongoing costs likely in the range of $4 million to $8
million (GF) to backfill the schools' share of property tax
revenues, assuming the continuation of the Department of
Finance's (DOF) current policy of allocating voter-approved
pension property tax overrides to all taxing entities instead of
to the entity whose voters approved the tax.
According to the Department of Finance (DOF), in 2012-13 there
was approximately $40 million in pension property tax revenue
deposited into Redevelopment Property Tax Trust Funds as a
result of redevelopment dissolution. Some portion already goes
back to some cities for various reasons, including successful
lawsuits, and some portion is pledged as security for payment of
RDA obligations. Assuming 60% to 80% is otherwise committed,
the remaining 20% to 40% is eligible to be allocated back to
local taxing entities. Roughly half of property tax revenues
are distributed to schools, based on historical shares.
Accordingly, the state's cost would range from $4 million to $8
million (GF) to backfill the schools for the property tax
revenues they otherwise would have received under DOFs policy.
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It is worth noting that schools have not historically received a
share of the pension property tax revenues in question. Prior
to redevelopment the revenues from the pension property tax
overrides went to the city or county that imposed the tax. With
redevelopment, the tax increment went only to the redevelopment
agency, and in some cases was passed back immediately to the
underlying city or county. Allocating a portion of these
revenues to schools, post redevelopment dissolution, could be
characterized not as a reallocation of otherwise expected
revenues, but rather as new money to schools. Accordingly, the
"cost" to the state of this bill might more accurately be
described as foregone savings.
COMMENTS
1)Purpose . According to the author, this bill would establish
that pension related tax increment levies be allocated to the
taxing entity (impacted city or county) to pay for pension
obligations as voters approved and intended. The author
maintains that this bill corrects an oversight in the
redevelopment dissolution process which contradicts the will
of the voters who approved local property tax increases to
support city pensions, but which are now instead being
allocated to other local government entities.
2)Background . There are approximately 25 cities throughout the
state whose voters approved a tax for pension obligations for
city staff. Some pension levies were approved as early as the
1920s, with some cities amending and increasing their levy
through the late 1970s. The levies vary by city and range
from 0.05 percent to 0.45 percent. These rates are levied in
addition to the 1% general property tax rate.
Under redevelopment law, redevelopment agencies created
project areas that captured incremental property tax growth
within the project areas. For older RDAs, agencies received
growth in property tax revenue collected under the 1% rate, as
well as additional rates levied to fund debt - such as pension
obligations. In 17 cities, including 12 cities in Los Angeles
County, the tax increment from pension obligations was going
to a RDA. RDAs could then pass on to cities the portion of
tax increment that was intended by voters to be used for
pension obligations and other debts.
Under RDA dissolution, property tax increment is no longer
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allocated to RDAs. Instead, a county auditor-controller
deposits former RDA property tax increment, including tax
increment attributable to pension taxes, into a trust fund.
Revenues deposited to the trust fund are first used to pay
outstanding RDA obligations. Remaining revenues are then
distributed to the other local governments whose jurisdiction
overlaps with the former RDA based on each local government's
share of the 1% property tax. As a result, some pension tax
revenues that RDAs previously passed on to cities are now
being allocated to other local governments, including schools.
3)Recent Tentative Ruling . In April 1946, the voters of the
City of San Fernando approved a ballot measure authorizing the
levy of a special property tax to raise funds to pay the
City's annual obligations to the California Public Employees'
Retirement System. The Sacramento Superior Court issued a
tentative ruling on May 2, 2014, on whether the City of San
Fernando is entitled to receive revenues generated by certain
voter-approved local property taxes, notwithstanding the
adoption of the redevelopment Dissolution law. The Court
concluded that the City was entitled to that revenue.
According to the ruling, "Because the Pension Tax revenues are
not 'tax increment' required to be deposited in the
Redevelopment Property Tax Trust Fund, the County
Auditor-Controller should remit the Pension Tax revenues
directly to the City. It is not necessary for the revenues to
be funneled through the Successor Agency, or for the Successor
Agency to establish an 'enforceable obligation' to pay the
City. The Pension Tax revenues are separate property tax
revenues allocated directly to the City as the taxing agency."
4)Related Legislation . AB 1450 (Garcia) was recently amended to
insert language identical to the language in this bill. AB
1450 is pending in the Senate Rules Committee.
Analysis Prepared by : Jennifer Swenson / APPR. / (916)
319-2081