BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 681


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          Date of Hearing:  April 20, 2015





                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION


                                 Philip Ting, Chair





          AB 681  
          (Ting) - As Amended April 13, 2015


          


          Majority vote.  Fiscal committee.


          SUBJECT:  State Board of Equalization:  surveys:  assessment  
          procedures and practices:  county assessor


          SUMMARY:  Makes specified changes to survey requirements  
          applicable to the Board of Equalization (BOE) in determining the  
          adequacy of the procedures and practices employed by the county  
          assessors in their valuation of property.  Specifically, this  
          bill:  


          1)Provides that the BOE shall proceed with the surveys of the  
            assessment procedures and practices in the 10 largest counties  
            as rapidly as feasible, and shall repeat or supplement each  








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            survey at least once in five years.


          2)Requires, commencing on or after January 1, 2016, and each of  
            the next four calendar years, to survey the assessment  
            procedures of one qualified county and conduct a sample of  
            assessments on the local assessment roll of another qualified  
            county.  For purposes of conducting one survey and one  
            assessment on two separate counties, a "qualified county or  
            city and county" means the eleventh to twentieth largest  
            counties.  


          3)Requires, commencing on or after January 1, 2016, and each of  
            the next four calendar years, to survey the assessment  
            procedures of three qualified counties and conduct a sample of  
            assessments on the local assessment roll of two other  
            qualified counties.  For purposes of conducting the three  
            surveys and two samples, a qualified county or city and  
            county" means the twenty-first to the fifty-eighth largest  
            counties.


          4)Requires that the size of the counties be determined based  
            upon the total value of locally assessed property located in  
            the counties on the lien date that falls within the 2016  
            calendar year and each of the next four calendar years.


          5)Provides that qualified counties shall be stratified and  
            selected at random by the board, in consultation with the  
            California Assessors' Association (CAA).


          6)Provides that changes to the survey requirements shall remain  
            in effect until January 1, 2021, and as of that date is  
            repealed.










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          7)Require the BOE, before preparing its written survey report,  
            to notify the former assessor if the survey reviews the former  
            assessor's procedures and practices, and meet with the former  
            assessor to discuss and confer on those matters that may be  
            included in the survey report.


          8)Provides that an addendum to the final survey report shall be  
            published to include a former assessor's written response to  
            the findings and recommendations in the survey report that  
            reviewed the former assessor's procedures and practices along  
            with the BOE's comments, if any.


          9)Requires the BOE to issue the final survey report within one  
            year after the date the BOE began the survey.


          EXISTING LAW:  


          1)Requires the BOE to make surveys in each county and city and  
            county to determine the adequacy of the procedures and  
            practices employed by the county assessor in the valuation of  
            property for the purposes of taxation.  [Government Code (GC)  
            Section 15640.]

          2)Provides a county assessor with the right to appeal appraisals  
            made within the county where differences have not been  
            resolved before completion of a field review.  (GC Section  
            15640.)

          3)Requires the BOE to conduct surveys of the assessment  
            procedures and practices in the several counties and cities  
            and counties as rapidly as feasible, and shall repeat or  
            supplement each survey at least once in five years.  (GC  
            15643.)  (Emphasis added.)

          4)Requires the BOE to prepare a written report setting forth its  








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            finding and recommendations upon completion of a survey of the  
            procedures and practices of a county assessor.  Before  
            preparing its written survey report, the BOE shall meet with  
            the assessor to discuss and confer on those matters which may  
            be included in the written survey report.  (GC Section 15645.)

          5)Requires the BOE to issue the final survey report within two  
            years after the date the board began the survey.  (GC Section  
            15645.)

          FISCAL EFFECT:  This bill does not impact revenues.


          COMMENTS:  


           1)Author's Statement  :  The author has provided the following  
            statement in support of this bill:


               AB 681 improves the efficiency of performance audits  
               conducted on every county assessor's office throughout the  
               State by allowing BOE to focus its energy on a larger  
               portion of the assessment roll in a shorter period of time.  
                Under a new three-tiered system, the BOE will be able to  
               reduce the time needed to complete a survey report by 50%  
               to a full year.  Performance audits are further improved by  
               providing former assessors with an opportunity to address  
               issues relating to the former assessor's procedures and  
               practices.  By reducing the time needed to finalize a  
               survey report and allowing former assessors to address  
               issues that may have occurred during their term, AB 681  
               will ensure performance audits reveal meaningful and timely  
               information that can immediately be incorporated into  
               existing assessment practices

           2)Background  .  The assessment practices survey program is one of  
            California's ways of promoting uniformity, fairness, and  
            integrity in the property tax assessment process.  The BOE  








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            periodically reviews the practices and procedures of every  
            county assessor's office.  Although local governments are  
            primarily responsible for assessing local property taxes,  
            assessment practices surveys fulfill the State's public policy  
            interest of addressing the inherent subjective nature of  
            assessing property, and the financial interest that comes from  
            state law requiring minimum funding for schools.  The BOE must  
            proceed with the surveys as rapidly as feasible, and must  
            repeat the survey at least once every five years. 

            Assessors are required to respond to the survey and provide an  
            explanation as to how they have implemented, intend to  
            implement, or the reasons for not implementing recommendations  
            made by the BOE.  A copy the response is then made available  
            to the Assembly, Senate, BOE, and the local county board of  
            supervisors.  Annual responses are required until all of the  
            issues expressed by the BOE have been resolved.


           3)Scope of Assessmen  t.  Under GC Sections 1564 and 15642, the  
            scope of assessment shall include the adequacy of the  
            procedures and practices employed by the assessor in the  
            valuation of property for tax purposes.  The survey shall  
            assess the practices as they relate to the uniform treatment  
            of property so that all property is treated equitably and no  
            class of property systematically undervalued or overvalued.   
            Additionally, the survey must show the volume of assessment  
            work, the responsibilities of the assessor, and the extent to  
            which the practices of the assessor is consistent with or  
            different from law and regulation.


           4)Current Length of Survey  .  The survey process, from the  
            initial field work to the publication process, takes on  
            average 24 months.  Quality control and the write-up take up  
            the most amount of time, 4.8 months and 3.9 months,  
            respectively.  On-site field work is generally completed in a  
            little over two months.  Over the last year, the BOE has been  
            working on improving the way in which surveys are conducted so  








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            as to complete them in a shorter period of time.  Last year,  
            in an effort to reduce time for the assessment surveys from  
            two years to 18 months, the BOE implemented the following  
            changes:  (a) reducing the size of the survey report, (b)  
            providing questionnaires to assessors prior to commencement of  
            field work on non-core assessment topics to determine if  
            further inquiry is required, (c) rearranging and having  
            simultaneous internal reviews of the report by different BOE  
            divisions and county-assessed properties divisions, and (d)  
            shortening review times where appropriate.  In general, it is  
            unclear to committee staff whether the current two-year  
            timeframe is an appropriate length of time for completing  
            audits of county assessment procedures and practices.  The  
            benefits of a speedy audit must be weighed against any  
            possible degradation in quality.  

           5)What Does this Bill Do  ?  This bill creates a three-tiered  
            survey program that focuses BOE's energy on the largest  
            portion of the assessment role.  The first tier, in general,  
            maintains existing law by requiring a survey of the assessment  
            procedures and practices and a sampling of assessments for two  
            of the ten largest counties.  The 10 largest counties will  
            receive a survey and a sampling within five years.  The second  
            tier consists of the next 10 largest counties (i.e. counties  
            11 through 20).  For tier two, a survey will be conducted for  
            one county and a sampling of the assessments will be conducted  
            on another county.  All of the tier two counties will be  
            either surveyed or assessed within five years.  For the  
            remaining 38 counties, three surveys and two samples will be  
            conducted on five separate counties every year.  In general,  
            the BOE should be able to either survey or sample all 38  
            counties in a little over seven years.  The counties shall be  
            stratified and selected at random by the BOE, in consultation  
            with the CAA.  Finally, the BOE is required to issue the final  
            survey report within one year after the date the survey began.


            This three-tiered system allows BOE to survey and sample  
            nearly all of the state's assessment roll within five years,  








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            focusing BOE's resources on the largest portion of the  
            assessment roll.  The biggest benefit is that the BOE is now  
            able to complete survey reports within one year instead of  
            two.  Unfortunately, because this bill expedites the  
            completion rate of survey and sample reports, it will take the  
            BOE a little over seven years to cycle through the bottom 38  
            counties.  


           6)Proposed Amendment  :  In order to provide BOE the appropriate  
            time needed to implement the modifications to the survey  
            program, the author has agreed to take the following amendment  
            in Committee:
             
           Government Code 15645 (c)(2)  The final survey report shall be  
          issued by the board in the following manner:

          (A) For any survey commenced on or after July 1, 2016, to June  
          30, 2017, within 15 months after the date the board began the  
          survey.

          (B) For any survey commenced on or July 1, 2017, within twelve  
          months after the date the board began the survey.

           7)Related Legislation  :  AB 2234 (Ting), of the 2013-14  
            Legislative Session, would have made specified changes to  
            survey requirements applicable to the BOE in determining the  
            adequacy of the procedures and practices employed by county  
            assessors in their valuation of property.  AB 2334 was held on  
            Assembly Appropriations Committee's Suspense File.


          REGISTERED SUPPORT / OPPOSITION:




          Support









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          None on file




          Opposition


          None on file




          Analysis Prepared by:Carlos Anguiano / REV. & TAX. / (916)  
          319-2098