BILL ANALYSIS                                                                                                                                                                                                    ”



                                                                       AB 681


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          ASSEMBLY THIRD READING


          AB  
          681 (Ting)


          As Amended  April 22, 2015


          Majority vote


           ------------------------------------------------------------------- 
          |Committee       |Votes |Ayes                |Noes                  |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Revenue &       |7-0   |Ting, Brough,       |                      |
          |Taxation        |      |Gipson,             |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |                |      |Roger HernŠndez,    |                      |
          |                |      |Mullin, Quirk,      |                      |
          |                |      |Wagner              |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Appropriations  |17-0  |Gomez, Bigelow,     |                      |
          |                |      |Bonta, Calderon,    |                      |
          |                |      |Chang, Daly,        |                      |
          |                |      |Eggman, Gallagher,  |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |                |      |Eduardo Garcia,     |                      |
          |                |      |Gordon, Holden,     |                      |
          |                |      |Jones, Quirk,       |                      |
          |                |      |Rendon, Wagner,     |                      |
          |                |      |Weber, Wood         |                      |
          |                |      |                    |                      |








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          |                |      |                    |                      |
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          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  
            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 21st  
            to the 58th 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.








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          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.


          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, except as follows:


             a)   For a survey commenced on or after July 1, 2016, to June  
               30, 2017, within 15 months after the date the board began the  
               survey; and,


             b)   For any survey commenced on or after July 1, 2017, within  
               12 months after the date the board began the survey.  


          FISCAL EFFECT:  According to the Assembly Appropriations  








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          Committee, annual General Fund costs of approximately $400,000 to  
          BOE to increase staffing needed to comply with the compressed  
          periods for issuing the final reports.


          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)Arguments in Support:  The BOE states that the "law requires the  
            BOE to conduct surveys of all 58 county assessor's offices every  
            five years.  This schedule requires the BOE to use the two full  
            years the law allows to publish the final reports.  While the  
            BOE has always met the two-year deadline, the agency supports  
            reducing the number of surveys to achieve the goal of publishing  
            surveys within one year."
          3)Arguments in Opposition:  None submitted.










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          4)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  
            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.


          5)Scope of Assessment.  Under Government Code 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.


          6)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  








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            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 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.  


          7)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 for  
            surveys commenced on or after July 1, 2017.








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




          Analysis Prepared by:                                               
                          Carlos Anguiano / REV. & TAX. / (916) 319-2098   
          FN: 0000668