BILL ANALYSIS                                                                                                                                                                                                    



                                                                            



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                                    THIRD READING


          Bill No:  SB 1021
          Author:   Wolk (D)
          Amended:  4/2/14
          Vote:     21

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  5-2, 4/9/14
          AYES:  Wolk, Beall, DeSaulnier, Hernandez, Liu
          NOES:  Knight, Vidak


           SUBJECT  :    School districts:  parcel taxes

           SOURCE  :     California School Boards Association


           DIGEST  :    This bill allows school districts to impose parcel  
          taxes on a square foot basis, and tax parcels differently based  
          on classification.

           ANALYSIS  :    The California Constitution requires 2/3-voter  
          approval when a local agency wants to impose or increase a  
          special tax (Proposition 13, 1978).  However, the Legislature  
          must authorize school or special districts to impose taxes  
          because these agencies have no plenary taxing powers.   
          Responding to Proposition 13's reduction in local revenue, the  
          Legislature generally authorized all local agencies to impose  
          special taxes with 2/3-voter approval, but voters subsequently  
          approved an initiative requiring the Legislature to grant  
          specific taxing power to local agencies to impose taxes  
          (Proposition 62, 1986).  

          Prior to Proposition 62, school districts imposed parcel taxes  
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          to fund education; however, the initiative prompted school  
          districts to seek specific legislative authorization to ratify  
          the existing taxes and clarify the authority to impose new ones.  
           The Legislature allowed school and community college districts  
          to impose qualified special taxes that applied uniformly to all  
          taxpayers or real property within the district, and allowed  
          districts to exempt persons over the age of 65 from the tax.  In  
          1991, the Legislature additionally allowed 15 types of local  
          agencies to impose similar taxes; however, the legislation  
          allowed local agencies to tax unimproved property at a lower  
          rate than improved property, and contained no other exemptions.   
          (SB 158, Senate Local Government Committee, Chapter 70).

          This bill defines special taxes that apply uniformly to include  
          one or more taxes imposed:

           On a per parcel basis,

           According to the square footage of the parcel or its  
            improvements,

           According to the residential, multifamily residential,  
            industrial, or commercial classification of a parcel, so long  
            as the same rate of tax is levied on all properties of the  
            same classification, and

           At a lower rate on unimproved property.

          This bill allows districts to combine multiple parcels into one  
          when they are commonly owned and constitute one economic unit.

          This bill applies only to school district parcel taxes imposed  
          in the future; it contains "no inference" language that directs  
          courts to adjudicate cases similar to Borikas v. Alameda Unified  
          School District, 214 Cal. App. 4th 135, under the law in place  
          at the time the district imposed the tax.

           Background

           At least eight school districts have passed variable rate parcel  
          tax measures that utilize separate rates, based on square  
          footage or other property improvements, according to the  
          California School Boards Association.  For example, the Mountain  
          View-Whisman School District's parcel tax contains six rates  







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          that increase according to the size of the parcel; other  
          districts structure their taxes to account for multifamily and  
          mixed-use housing by imposing the tax on those uses per dwelling  
          unit, while imposing a different rate for single-family  
          residential and other uses.  

          In 2013, George Borikas successfully challenged Alameda Unified  
          School District's Measure H, which imposed a variable rate  
          parcel tax, at rates of:

          1.$120 per parcel per year for residential parcels, and  
            commercial and industrial parcels under 2,000 square feet, and

          2.15 cents per square foot for commercial and industrial  
            property above 2,000 square feet, not to exceed $9,500 per  
            year.

          The Court determined in Borikas v. Alameda Unified School  
          District that because the school district statute did not also  
          contain the language in SB 158 allowing for a lower rate on  
          unimproved property, districts could not differentiate property  
          by classification and assign different tax rates to each class.   
          The Court pointed specifically to the differences between the  
          two statutes in its decision:

            Section 50079.1 (the Community College District Statute) does  
            not include exemptions for senior or disabled taxpayers.  It  
            does, however, provide that "unimproved property may be taxed  
            at a lower rate than improved property."  The inclusion of  
            this additional language - expressly allowing community  
            colleges to classify and differentially tax real property -  
            makes manifest that the definitional language alone does not  
            allow [school] districts to establish rational classifications  
            and impose different tax rates."

          In Borikas, the Court eliminated school districts' ability to  
          apply different rates to property based on its classification,  
          or based on whether the property has improvements.  School  
          districts want to restore flexibility they thought they had  
          before the Court's decision.

          FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   Local:  
           No








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           SUPPORT  :   (Verified  4/15/14)

          California School Boards Association (source)
          AFSCME, AFL-CIO
          Alameda Unified School District
          Association of California School Administrators
          California Association of School Business Officials
          California Labor Federation
          California School Employees Association
          California Teachers Association
          Davis Joint Unified School District
          Kentfield School District
          Larkspur-Corte Madera School District
          San Diego Unified School District
          San Francisco Unified School District
          Wiseburn School District


           OPPOSITION :    (Verified  4/15/14)

          Air Logistics Corporation
          Apartment Association of Greater Los Angeles
          Apartment Association, California Southern Cities
          Associated General Contractors of California
          Building Owners and Managers Association of California
          California Apartment Association
          California Association of Realtors
          California Attractions and Parks Association
          California Bankers Association
          California Building Industry Association
          California Business Properties Association
          California Chamber of Commerce
          California Chemical Transfer Company, Inc.
          California Grocers Association
          California Healthcare Institute
          California Hotel and Lodging Association
          California Independent Petroleum Association
          California Manufacturers and Technology Association
          California Mortgage Bankers Association
          California Railroad Industry
          California Restaurant Association
          California Retailers Association
          California Tank Lines, Inc.
          California Taxpayers Association







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          Council of State Taxation
          East Bay Rental Housing Association
          Family Business Association
          Family Winemakers of California
          Howard Jarvis Taxpayers Association
          International Council of Shopping Centers
          NAIOP of California, the Commercial Real Estate Development  
          Association
          National Association of Real Estate Investment Trusts
          National Federation of Independent Businesses
          NorCal Rental Property Association
          Orange County Business Council
          Orange County Taxpayers Association
          San Diego County Apartment Association
          Santa Barbara Rental Property Association
          Silicon Valley Leadership Group
          Simi Valley Chamber of Commerce
          Southwest California Legislative Council
          Superior Tank Wash, Inc.
          TechAmerica
          Tenet Health Care Corporation
          West Coast Leasing, LLC
          West Coast Lumber and Building Material Association

           ARGUMENTS IN SUPPORT  :    According to the author, "Under the  
          recent court decision, school districts can no longer apply  
          higher or lower rates to parcels based on commercial,  
          industrial, or residential classification of the parcel.   
          Districts can't even tax an empty property at a lower rate than  
          an oil refinery or a research and development campus.  SB 1021  
          restores this needed local control by allowing school district  
          boards to structure its tax according to local values and  
          priorities.  Because these taxes must be approved by 2/3 vote of  
          local voters, school district boards must forge a communitywide  
          consensus to ensure voters approve the tax, evident by the high  
          approval rates in parcel tax elections.  The bill simply returns  
          local control to its state before the court case, and conforms  
          the school district law to 15 other laws that allow local  
          agencies to impose parcel taxes.  The bill doesn't grant any  
          additional powers to districts they didn't have before the case.  
           The choice SB 1021 presents is clear:  the Legislature can  
          decide who should and shouldn't pay local taxes, or local voters  
          can choose at the ballot box whether the tax placed on the  
          ballot by the locally elected school board after a full, public  







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          process is worth it."

           ARGUMENTS IN OPPOSITION  :    According to the opposition, this  
          bill overturns the Borikas decision on a prospective basis by  
          allowing more than 1,000 school districts to impose nonuniform  
          parcel taxes.  In other words, this bill allows school districts  
          to use property classifications  commercial, industrial,  
          single-family residential and multifamily residential  to impose  
          different tax rates.  For example, a school district may choose  
          to tax commercial property (shopping malls, restaurants, etc.)  
          at $2 per square foot; industrial property (manufacturing  
          facilities, warehouses, etc.) at $1 per square; single-family  
          residential property at $200 per parcel; and multifamily  
          residential property (apartment buildings, duplexes, etc.) at  
          $1,000 per parcel.

          Further complicating the parcel tax regime, this bill allows  
          school districts to treat multiple parcels as one under certain  
          conditions for purposes of a parcel tax.  If a developer owns an  
          office building on one parcel, and a to-be-developed, but  
          currently unimproved adjacent parcel, this bill would give the  
          taxing authority the ability to collapse the two parcels into a  
          single taxable site, and apply a parcel tax on the unimproved  
          site at a much higher rate.  This bill also appears to allow  
          school districts to impose layered parcel taxes:  A school  
          district could impose a parcel tax based upon square footage as  
          well as a parcel tax based upon the parcel's use, for example.  
           

          AB:nk  4/15/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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