BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:   April 29, 2015


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                              Brian Maienschein, Chair


          AB 654  
          (Brown) - As Amended April 22, 2015


          SUBJECT:  Redevelopment: revenues from property tax override  
          rates.


          SUMMARY:  Prohibits a county auditor from allocating revenues  
          derived from a property tax rate approved by voters in a city,  
          county, or special district, to pay for the State Water Project  
          to the Redevelopment Property Tax Trust Fund, except as  
          specified.  Specifically, this bill:  


          1)Finds and declares all of the following:


             a)   The California Constitution limits property-based tax  
               levies, with exceptions to these limits only when a local  
               jurisdiction obtains the approval of its voting electorate  
               to use additional property-based tax levies for specific  
               purposes approved by the voting electorate, in accordance  
               with applicable constitutional and statutory provisions;


             b)   With the enactment of Chapter 5 of the 2011-12 First  
               Extraordinary Session (Assembly Bill 26), the Legislature  
               intended that, upon dissolution of redevelopment agencies  
               in the State of California, property taxes that would have  








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               been allocated to redevelopment agencies are no longer  
               deemed tax increment;


             c)   It is the intent of the Legislature in enacting this act  
               to do all of the following:


               i)     If a redevelopment agency had previously pledged  
                 revenues derived from the imposition of a property tax  
                 rate, approved by the voters of a city, county, or city  
                 and county, or special district to make payments in  
                 support of the State Water Project and levied in addition  
                 to the property tax rate limited by subdivision (a) of  
                 Section 1 of Article XIII A of the California  
                 Constitution, to pay a portion of the debt service due on  
                 indebtedness incurred by the former redevelopment agency  
                 on an approved recognized obligation payment schedule  
                 (ROPS), then the successor agency shall continue to  
                 pledge those revenues, in a commensurate rate going  
                 forward.  For example, if revenues derived from a water  
                 project property tax rate approved by the voters of a  
                 city, county, city and county, or special district were  
                 pledged to pay up to 25% of the annual debt service for  
                 the indebtedness approved in a ROPS, the successor agency  
                 shall continue to pay up to 25% of the annual debt  
                 service on the indebtedness until maturity.  Any and all  
                 excess pledged revenues derived from the water project  
                 property tax rate that are not necessary to pay the debt  
                 service on the indebtedness shall be allocated and paid  
                 to the city, county, city and county, or special district  
                 whose voters approved the State Water Project-related  
                 property tax rate;


               ii)    Ensure that the use of revenues derived from the  
                 imposition of a property tax rate approved by the voters  
                 of a city, county, city and county, or special district  
                 to make payments in support of the State Water Project  








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                 and levied in addition to the property tax rate limited  
                 by subdivision (a) of Section 1 of Article XIII A of the  
                 California Constitution, is consistent with the use  
                 approved by the voters of a city, county, city and  
                 county, or special district once revenues from such  
                 property tax rates are not needed to pay approved  
                 indebtedness of a former redevelopment agency; and,


               iii)   Implement the allocation and distribution of  
                 voter-approved, property-based tax revenues for the State  
                 Water Project under the redevelopment dissolution process  
                 in a manner that would have been consistent with the  
                 allocation and distribution of those revenues had  
                 redevelopment agencies not been dissolved, in accordance  
                 with applicable constitutional provisions.


             d)   Declares the intent of the Legislature that this act not  
               affect any property tax allocations that occurred prior to  
               July 1 of an unspecified year.


          2)Requires the county auditor-controller, prior to allocating  
            moneys in each Redevelopment Property Tax Trust Fund (RPTTF),  
            pursuant to the specified formula in existing law, to  
            additionally deduct the revenues allocated as follows:

             a)   On January 2, 2016, and each January 2 and June 1  
               thereafter, to a city, county, or special district that  
               levies a property tax rate, approved by the voters of a  
               city, county, or special district to make payments in  
               support of the State Water Project and levied in addition  
               to the property tax rate limited by the California  
               Constitution, an amount of property tax revenues equal to  
               the amount of revenues derived from the imposition of that  
               tax rate that were allocated to the RPTTF for that fiscal  
               period.  Provides that this paragraph shall not apply to  
               the extent that revenues derived from the imposition of a  








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               property tax rate are not deposited into an RPTTF as  
               provided by 3) through 6) below.

          3)Allows a city, county, or special district that levies a  
            property tax rate, approved by the voters of a city, county,  
            or special district to make payments in support of the State  
            Water Project and levied in addition to the property tax rate  
            limited by the California Constitution, to make a request to  
            an oversight board to prohibit revenues derived from the  
            imposition of that property tax rate from being deposited into  
            an RPTTF.

          4)Provides, based on substantial evidence that a former RDA made  
            a pledge of revenues that specifically included revenues  
            derived from the imposition of a property tax rate, approved  
            by the voters of a city, county, or special district to make  
            payments in support of the State Water Project and levied in  
            addition to the property tax rate limited by the California  
            Constitution, that an oversight board may deny a request  
            pursuant to 3), above, in an amount not to exceed the amount  
            of revenues pledged by the former RDA.

          5)Provides, notwithstanding any other law, for the 2015-16  
            fiscal year and each fiscal year thereafter, except to the  
            extent an oversight board denies a request as provided in 4),  
            above, that any revenues derived from the imposition of a  
            property tax rate, approved by the voters of a city, county,  
            or special district to make payments in support of the State  
            Water Project and levied in addition to the property tax rate  
            limited by the California Constitution, shall not be allocated  
            to an RPTTF, and shall instead, be allocated to, and when  
            collected shall be paid into, the fund of the city, county, or  
            special district whose voters approved the tax.

          6)Provides, notwithstanding any other law, all allocations of  
            revenues derived from the imposition of a property tax rate,  
            approved by the voters of a city, county, or special district  
            to make payments in support of the State Water Project and  
            levied in addition to the property tax rate limited by the  








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            California Constitution, made by any county auditor-controller  
            prior to July 1, of an unspecified year, shall be deemed  
            correct and shall not be affected by this bill.  Provides that  
            a city, county, county auditor-controller, successor agency,  
            or affected taxing entity shall not be subject to any claim  
            for money, damages, or reallocated revenues based on any  
            allocation of such revenues prior to July 1, 2014.

          7)Provides that reimbursement to local agencies and school  
            districts shall be made, if the Commission on State Mandates  
            determines that this act contains costs mandated by the state.

          EXISTING LAW:  


          1)Dissolves RDAs and institutes a process for winding down their  
            activities.

          2)Defines "enforceable obligations."

          3)Requires successor agencies make payments due to enforceable  
            obligations, as specified.

          4)Requires successor agencies to prepare a ROPS, before each  
            six-month fiscal period, in accordance with specified  
            requirements, and requires the schedule to identify one or  
            more 
          of the following sources of payment:

             a)   Low- and Moderate-Income Housing Fund;

             b)   Bond proceeds;

             c)   Reserve balances;

             d)   Administrative cost allowance;

             e)   The RPTTF, as specified; and,









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             f)   Other revenue sources, including rents, concessions,  
               asset sale proceeds, interest earnings, and any other  
               revenues derived from the former redevelopment agency, as  
               approved by the oversight board.

          5)Requires each successor agency to have an oversight board of  
            seven members to approve certain actions of the successor  
            agency.

          6)Requires the Department of Finance (DOF) to review the actions  
            of an oversight board.

          7)Requires DOF to issue a finding of completion to the successor  
            agency, within five business days, once the following  
            conditions have been met and verified:

             a)   The successor agency has paid the full amount, as  
               determined during the due diligence reviews and the county  
               auditor-controller has reported those payments to DOF; 

             b)   The successor agency has paid the full amount as  
               determined during the July True-up process; or,

             c)   The successor agency has paid the full amount upon a  
               final judicial determination of the amounts due and  
               confirmation that those amounts have been paid by the  
               county auditor-controller.

          8)Allows the successor agency, upon receiving the finding of  
            completion, to:

             a)   Retain dissolved redevelopment agency assets;

             b)   Place loan agreements between the former redevelopment  
               agency and sponsoring entity on the ROPS, as an enforceable  
               obligation, provided the oversight board makes a finding  
               that the loan was for legitimate redevelopment purposes;  
               and,









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             c)   Utilize proceeds derived from bonds issued prior to  
               January 1, 2011, in a manner consistent with the original  
               bond covenants.

          9)Requires, after DOF issues a finding of completion, the  
            successor agency to prepare a long-range property management  
            plan that addresses the disposition and use of the real  
            properties of the former redevelopment agency, and requires  
            the report to be submitted to the oversight board and DOF for  
            approval no later than six months following the issuance to  
            the successor agency of the finding of completion.

          10)Limits property tax to 1%, except for specific bonded debt,  
            pursuant to the California Constitution.

          11)Allows a governing body, pursuant to Section 11652 of the  
            Water Code entitled "Contracts with State Agencies" to,  
            whenever necessary, levy upon all property in the state agency  
            not exempt from taxation, a tax or assessment sufficient to  
            provide for all payments under the contract then due or to  
            become due within the then current fiscal year or within the  
            following fiscal year before the time when money will be  
            available from the next general tax levy.

          FISCAL EFFECT:  This bill is keyed fiscal and contains a  
          state-mandated local program.


          COMMENTS:  


          1)Bill Summary.  This bill would authorize a city, county, or  
            special district that levies a property tax override rate  
            approved by the voters of that city, county, or special  
            district to make payments in support of the State Water  
            Project and levied in addition to the general property tax  
            rate, to make a request to an oversight board to prohibit  
            revenues derived from that property tax rate from being  
            deposited into the RPPTF.  The bill also authorizes an  








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            oversight board to deny the request, in certain circumstances,  
            and would prohibit any revenues, except if the oversight board  
            denies the request, derived from the imposition of that  
            property tax rate from being allocated to the RPPTF, and would  
            instead, require these revenues to be allocated to the fund of  
            the city, county or special district whose voters approved the  
            tax.


            This bill is sponsored by the San Bernardino Valley Municipal  
            Water District (known as Valley District).


          2)State Water Project and Burns-Porter Act of 1960.  According  
            to the Department of Water Resources (DWR), the California  
            State Water Project is a water storage and delivery system of  
            reservoirs, aqueducts, powerplants and pumping plants.  Its  
            main purpose is to store water and distribute it to 29 urban  
            and agricultural water suppliers in Northern California, the  
            San Francisco Bay Area, the San Joaquin Valley, the Central  
            Coast, and Southern California.  Of the contracted water  
            supply, 70% goes to urban users and 30% goes to agricultural  
            users.  The project is maintained and operated by DWR, makes  
            deliveries to two-thirds of California's population, and is  
            also operated to improve water quality in the Delta, control  
            Feather River flood waters, provide recreation and enhance  
            fish and wildlife.


            The Project includes 34 storage facilities, reservoirs and  
            lakes, 20 pumping plants, 


            four pumping-generating plants, five hydroelectric power  
            plants, and about 7,000 miles of open canals and pipelines.
            Local water agencies can levy ad valorem rates above the 1%  
            rate to pay their annual obligations for water deliveries from  
            the State Water Project.  State courts have concluded that  
            such costs were voter-approved debt because voters approved  








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            the construction, operation, and maintenance of the State  
            Water Project in 1960.  As a result, most water agencies that  
            have contracts with the State Water Project levy a  
            voter-approved debt rate.


          3)Author's Statement.  According to the author, "The measure  
            would remedy the situation in which the revenues derived from  
            voter-approved property tax overrides are being misallocated  
            in the course of the RDA dissolution process in the County of  
            San Bernardino.  Currently the San Bernardino County Auditor-  
            Controller is allocating the residual balances from each  
            former RDA's Redevelopment Property Tax Trust Fund to taxing  
            entities based on each agency's share of the 1% County General  
            Tax levy without taking into account any specific debt service  
            override tax.  This results in Valley District's Debt Service  
            Tax Override proceeds that are not needed for the payment of  
            approved former RDA expenses to be allocated out to all taxing  
            entities ignoring that a certain portion of that residual  
            balance was derived directly from Valley District's tax  
            override rate."


          4)Related Legislation.  AB 1009 (Garcia), pending in the  
            Assembly Appropriations Committee, authorizes a city or county  
            that levies a property tax rate, approved by the voters of a  
            city or county to make payments in support of pension programs  
            and levied in addition to the general property tax rate, to  
            make a request to an oversight board to prohibit revenues  
            derived from that property tax rate from being deposited into  
            a Redevelopment Property Tax Fund. 


            This bill takes the same approach as AB 1009, but instead,  
            deals with property tax override rates approved by voters in  
            support of the State Water Project.


          5)Arguments in Support.  According to the sponsor, "Prior to  








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            dissolution, $19.5 million (25%) of Valley District's property  
            taxes derived from the State Water Project tax rate set by the  
            Valley District board and Valley District's portion of the 1%  
            General Tax levy was being diverted to RDAs.  After almost 3  
            years of the RDA dissolution wind down process, Valley  
            District is now receiving all but $10 million of the property  
            taxes derived from its Debt Service Override Tax rate and its  
            portion of the 1% General Tax levy.  Valley District  
            management recently determined that some of this remaining $10  
            million in annual property tax revenue is being allocated to  
            other taxing entities.  Further, if this error is not  
            corrected the effect on Valley District's tax proceeds will  
            increase significantly as the wind down process matures."


          6)Arguments in Opposition.  None on file.


          7)Double-Referral.  This bill is scheduled to be heard in the  
            Housing and Community Development Committee on April 29, 2015,  
            and will be heard by this Committee pending referral.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          San Bernardino Valley Municipal Water District [SPONSOR]


          East Valley Water District












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          Opposition


          None on file




          Analysis Prepared by:Debbie Michel / L. GOV. / (916) 319-3958