BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          SB 1353 (Nielsen) - Williamson Act contracts.
          
          Amended: As Introduced          Policy Vote: G&F 7-0
          Urgency: No                     Mandate: No
          Hearing Date: April 28, 2014                            
          Consultant: Mark McKenzie       
          
          This bill does not meet the criteria for referral to the  
          Suspense File. 

          
          Bill Summary: SB 1353 would repeal the sunset date on provisions  
          that authorize counties to increase the assessed value of lands  
          under Williamson Act contract and retain the additional property  
          tax revenues, under specified circumstances. 

          Fiscal Impact: No immediate state revenue impacts because  
          schools would receive the same amount of property taxes whether  
          or not counties exercise the authority to reduce the duration of  
          Williamson Act contracts and retain an increased property tax  
          allocation.  Shorter contracts may allow schools to receive  
          property tax revenue increases sooner if a contract is not  
          renewed, which could result in future reductions in General Fund  
          expenditures pursuant to Proposition 98 minimum funding  
          guarantees.

          Background: Under current law, landowners and local officials  
          may enter into voluntary contracts that restrict land uses under  
          the Williamson Act.  These contracts generally run for 10 years,  
          but the duration is 20 years under more restrictive Farmland  
          Security Zones.  The contracts automatically renew each year  
          unless an action is taken to non-renew or cancel the contract,  
          as specified.  Williamson Act lands benefit landowners with  
          reduced property tax assessments for the duration of the  
          contracts.  The state has historically provided subvention  
          payments from the General Fund to counties for the loss of  
          county general fund resources related to lands under Williamson  
          Act contracts, but in recent years these payments have been  
          substantially reduced or effectively eliminated.

          To mitigate the impact on counties related to the loss of state  
          subvention funds, the Legislature passed AB 2530 (Nielsen),  








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          Chapter 391 of 2010, which allowed county officials to increase  
          the assessed values of Williamson Act contracted lands and  
          divert the resulting property tax revenues.  After practitioners  
          discovered technical issues with AB 2530, the Legislature  
          re-enacted the provisions in a budget trailer bill (SB 863  
          (Budget and Fiscal Review Committee), Chapter 722 of 2010, which  
          also appropriated $10 million to the subvention program.  In  
          March 2011, however, the Legislature repealed SB 863,  
          eliminating both the $10 million subvention payment and the  
          provisions that allowed counties to shorten Williamson Act  
          contracts.  In order to allow the eight counties that had  
          initiated a process to implement the program, however, the  
          Legislature reinstated the provisions without the appropriation  
          for subvention payments in AB 1265 (Nielsen), Chapter 90 of  
          2011.  

          Under current law, as enacted by AB 1265, counties are  
          authorized to reduce the duration of a Williamson Act contract  
          by ten percent and increase the assessed value by ten percent,  
          if the state's open space subventions are less than half of a  
          county's foregone property tax revenue.  The additional property  
          tax revenues are directed to the county.  The contract continues  
          to be automatically renewed each year, unless the contract is  
          non-renewed or cancelled.  If additional revenues do not occur,  
          the contracts are restored to the original duration.  The  
          program established by AB 1265 does not apply to contracts that  
          have been non-renewed, contracts with cities, open space or  
          agricultural easements, scenic restrictions, wildlife habitat  
          contracts, or contracts with atypical terms.  These provisions  
          are scheduled to sunset on January 1, 2015. 

          Proposed Law: SB 1353 would delete the January 1, 2015 sunset on  
          statutes enacted by AB 1265 that allow counties to shorten the  
          duration of Williamson Act contracts, increase the assessed  
          value on contracted lands, and divert the additional property  
          tax to counties. 

          Staff Comments: While these provisions allow for an increase in  
          the assessed value of the Williamson Act properties that would  
          be subject to the shorter duration, participating counties would  
          retain any increase in revenues to offset loss of subvention  
          funds.  As such, there would be no state General Fund impact  
          because the schools would receive the same amount of tax  
          revenues with or without the bill.  The only potential long term  








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          impact is that by implementing these provisions, some counties  
          and landowners may stay under contract, rather than  
          non-renewing.  Under non-renewal, the schools would receive an  
          increase in property tax revenues when the contract expires.   
          When the school share of the property tax increases upon  
          expiration of a contract, there is a corresponding reduction in  
          state General Fund obligations related to the minimum funding  
          guarantees in Proposition 98.  

          According to the Department of Conservation, 11 counties  
          currently participate in the program enacted by AB 1265.