BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 587 (Chau) - Mobilehomes: payments: nonpayment or late payments ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 30, 2016 |Policy Vote: T. & H. 10 - 0, | | | JUD. 6 - 1 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary: AB 587 would establish a three-year tax and penalty abatement program for owners of mobilehomes who are unable to properly register their ownership interest with the Department of Housing and Community Development (HCD) because of past due taxes and fees, as specified. Fiscal Impact: HCD administrative costs of approximately $360,000 annually for three years to process an estimated 10,000 titling and registration applications each year for the duration of the program. These costs would likely be offset by application fee revenues. (Mobilehome-Manufactured Home Revolving Fund) Unknown, potentially significant, foregone state revenues a AB 587 (Chau) Page 1 of ? result of the requirement that HCD waive specified past due charges, fees, and penalties if an applicant meets specified requirements. This impact would be partially mitigated to the extent a portion of these revenues would have otherwise remained uncollected in the absence of the abatement program. (General Fund, various mobilehome-related special funds) -----see staff comments----- Unknown significant foregone property tax revenues as a result of the specified limit on the amount of delinquent taxes that an applicant would pay to the county tax collector in exchange for a tax clearance or liability certificate. This impact would be partially mitigated to the extent a portion of these revenues would have otherwise remained uncollected in the absence of the abatement program. Staff notes that any impacts to the K-14 school share of the property tax revenues are generally backfilled by the State General Fund. (General Fund, local funds) -----see staff comments----- Unknown foregone local revenues as a result of the requirement that county tax collectors waive all property tax penalties and interest that would otherwise be owed by eligible participants in the abatement program. (local funds) Unknown reimbursable state-mandated local costs for county tax collectors to establish administrative procedures and issue tax clearance or liability certificates to eligible participants in the abatement program. (General Fund) Background: Existing law requires HCD to maintain a title registry of all mobilehomes and manufactured homes in the state. Owners of mobilehomes sold as new before July 1, 1980 are required to pay an annual vehicle license fee (VLF) to HCD in lieu of a local property tax, which is deposited into the General Fund, in addition to other annual fees. The VLF is calculated at a rate of .65 percent of the pre-1980 value depreciated according to a statutory schedule. Existing law specifies that failure to pay the VLF by the due date results in a 20 percent delinquency penalty, and nonpayment of the VLF, annual fees, and any penalties constitutes a lien on the mobilehome. Until the lien is paid, HCD is prohibited from issuing duplicate or new title or registration documents, and from amending existing title AB 587 (Chau) Page 2 of ? records for purpose of transferring any ownership interest in the mobilehome. Existing law requires the owner of any mobilehome or manufactured home sold after July 1, 1980 to pay the local property tax as personal property, imposed at a rate of 1 percent of the assessed value. Existing law specifies that failure to pay property taxes by the due date results in a 10 percent delinquency penalty and additional interest charges of 1.5 percent per month (18 percent per year), as specified. HCD is required to withhold registration or transfer of registration of any mobilehome or manufactured home that is subject to local property taxation until the applicant presents a tax clearance certificate or conditional tax clearance certificate issued by the county tax collector that indicates satisfaction of tax liability. A tax collector is required to issue a tax clearance certificate when he or she finds that no local property tax is due or is likely to become due, or that any applicable local property taxes have been paid or are to be paid in a manner not requiring the withholding of registration or transfer of registration of a mobilehome. Proposed Law: AB 587 would establish a three-year tax and penalty abatement program for owners of mobilehomes who are unable to properly register their ownership interest with HCD because of past due taxes and fees. Among other things, this bill would to the following: Revise a specified notice that park owners are required to provide to mobilehome owners to disclose change of ownership requirements, obligations for payment of property taxes or "in lieu" fees, and to direct owners to HCD and the local tax collector for questions regarding registration, titling, and taxes. Require HCD to waive all outstanding charges and release liens, upon application for registration or transfer of registration, if the applicant is not the current registered owner and all the following requirements are met: o The applicant demonstrates documented ownership and the date of acquisition of ownership interest. o The application is made prior to December 21, 2019. o The applicant pays any charges assessed by HCD AB 587 (Chau) Page 3 of ? during the period between the time the applicant took ownership interest or December 31, 2015, whichever is later, and the time the applicant applies for relief. o Any lien under the Property Tax Postponement Program has been satisfied. o The applicant has not previously applied for relief. Require HCD to waive the outstanding charges, fees or penalties, amend the title record, and issue a duplicate, substitute, or new certificate of title, registration card, or copy of a registration card, if the applicant meets the requirements of the abatement program and is subject to the VLF. Authorize HCD to establish a long-term repayment program of up to five years, for specified amounts owed, and to provide that any amounts owed constitutes a lien. Require HCD to issue a conditional transfer of title if the mobilehome is subject to local property taxation, and authorize a person with the conditional transfer document to apply to the county tax collector prior to January 1, 2020 to issue either a tax liability or tax clearance certificate. Require the county tax collector to issue a tax liability certificate if the person pays the taxes reasonably owed from the date on the conditional transfer of title, without penalties or interest, and not to exceed the amounts attributable one year prior to January 1, 2017. Upon issuance of a tax clearance or liability certificate, the applicant shall be listed as the owner of record for all local property tax purposes, and the home shall not be subject to lien or seizure for any taxes abated pursuant to the bill. Require HCD to amend the title record and issue a duplicate, substitute or new certificate of title to an owner who presents the department with a completed tax liability certificate, if the applicant meets all other requirements, as specified. Provide that the abatement program does not relieve any owner, other than the applicant, from tax liability, including penalties and interest arising from any non-payment prior to the sale, and authorizes the tax collector to seek payment from any owner other than the applicant. Delete a provision that prohibits a person from occupying a mobilehome that does not conform to HCD's registration requirements, but reinstates that prohibition beginning in 2020 provided HCD provides notice to the occupant of the registration requirements and any registration fees due. AB 587 (Chau) Page 4 of ? Staff Comments: HCD indicates that its mobilehome title registry current contains over a million records, even though there are only approximately 400,000 known mobilehome lots in the state. This simple fact underscores a fundamental problem of noncompliance with current titling and registration requirements, regardless of the cause for noncompliance, which may be due to a failure to properly document changes of ownership, failure to notify HCD when a mobilehome has been abandoned or removed, inability to properly register a mobilehome because of delinquent taxes or fees owed by a previous owner, or willfully ignoring legal requirements. Furthermore, HCD does not have sufficient resources to perform a full audit of the mobilehome registry to "scrub" the system of duplicative records and correct other inaccuracies, or to implement stronger inspection and enforcement measures to ensure compliance. While this bill is intended to provide a path to bring some mobilehome owners into compliance with registration requirements and tax obligations going forward, it is unlikely to be a permanent or comprehensive solution for HCD's Registration and Titling Program, and noncompliance issues are likely to persist. HCD indicates that neither the current number of active liens on mobilehomes, nor the amount of delinquent "in lieu" VLF revenues, penalties, and charges currently owed to the state, is known. As such, the potential foregone revenue impacts of the bill are unknown. Considering the pervasive noncompliance issues, the inaccuracy of HCD's mobilehome titling records, and the lack of enforcement, it seems unlikely that the state would be able to collect on the majority of these delinquent taxes and fees, regardless of whether AB 587 is signed into law. The current inability to collect delinquent "in lieu" taxes and other penalties and charges, and the unlikelihood that they will be collected in the future, would partially or fully offset any potential foregone revenue impacts to HCD noted above. The total amount of delinquent property taxes, penalties, and interest owed to counties is also unknown, but likely in the tens of millions. Riverside and San Bernardino Counties, both of which have a large number of mobilehome parks, report that there were nearly 11,000 mobilehomes in 2015 with delinquencies AB 587 (Chau) Page 5 of ? that total nearly $24 million. This bill would waive all penalties and interest, and cap the amount of property taxes that must be paid by abatement program participants in exchange for a tax clearance certificate, resulting in significant foregone property taxes and other charges. These losses would be partially mitigated to the extent amounts forgiven under the abatement program would never have been collected. While the net impacts are likely to be significant revenue losses, the bill would also bring some mobilehome owners into compliance, which could have an unknown positive impact on future "in lieu" VLF revenues and property tax collections. -- END --