BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
           ------------------------------------------------------------------ 
          |Bill No:  |AB 681                           |Hearing    |7/8/15   |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |Ting                             |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |4/22/15                          |Fiscal:    |Yes      |
           ------------------------------------------------------------------ 
           ----------------------------------------------------------------- 
          |Consultant|Grinnell                                              |
          |:         |                                                      |
           ----------------------------------------------------------------- 

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



          Changes BOE's process for surveying counties' assessment  
          practices.  


           Background and Existing Law

           In 1850, the Legislature first directed county assessors to tax  
          property; however, assessors in different counties often applied  
          different tax rates and methods of assessment.  The California  
          Constitution of 1879 created BOE to equalize rates and  
          assessment practices among counties.  BOE enacts rules and  
          regulations which generally bind county assessors.

          As part of its oversight role, BOE surveys each county assessor  
          to determine whether a county's practices and procedures are  
          adequate, as well as its general performance.  The results of  
          BOE's survey are published into public documents known as  
          "Assessment Practices Surveys."  BOE's survey:

                   Must include a review with respect to the uniformity  
                of treatment, of all classes of property to ensure that no  
                class receives a systematic overvaluation or  
                undervaluation,

                   May include a sampling from assessment rolls, so long  







          AB 681 (Ting) 4/22/15                                   Page 2  
          of ?
          
          
                as it's of adequate size and dispersion to determine  
                adequate representation of the several classes of property  
                within the county.  BOE assesses the property on its own,  
                and then compares its value to the assessor's.

          BOE staff can access and make copies of any of the assessor's  
          records, or audit any book or record provided by a taxpayer in  
          the survey.  Assessors have a right to appeal BOE appraisals  
          within his or her county where differences haven't been resolved  
          before a field review.  

          State law directs BOE to complete survey reports as rapidly as  
          possible, but requires them of all counties every five years.   
          BOE must sample assessments from the ten largest counties or  
          cities and counties in the state each year plus three other  
          counties selected at random, determined by assessed value of  
          property.  BOE must sample assessments from a county if it finds  
          that it has significant problems as a result of the last survey  
          instead of a large county selected at random.

          BOE sends the survey report to the assessor once complete,  
          setting forth specific findings and recommendations; however,  
          before preparing the survey report, BOE must meet with the  
          assessor to discuss matters included therein.  After receiving  
          the survey report, the assessor may file a written response with  
          BOE within 30 days, unless the BOE extends the period for good  
          cause, which is included in the final survey report.  Within a  
          year after receiving the final report, assessors must file a  
          report with the Board of Supervisors indicating the manner in  
          which the assessor implemented, intends to implement, or reasons  
          for not implementing recommendations in the final survey report.  
           The assessor's response is then sent to the Governor, the  
          Attorney General, BOE, the Senate, and the Assembly, as well as  
          any grand jury and assessment appeals board in the county.  The  
          survey report, the assessor's response, and any additional BOE  
          notes constitute the final report, which must be completed  
          within two years after BOE begins the survey.

          Assessors can only direct auditors to allocate supplement costs  
          of assessment of 5% when BOE certifies that the county's  
          assessment ratio exceeds 95% based on the most recent survey.   
          BOE may continue to certify following a survey that does not  
          include sampling if the board finds in the survey conducted  
          without sampling that there are no significant assessment  








          AB 681 (Ting) 4/22/15                                   Page 3  
          of ?
          
          
          problems, as defined by BOE.  The author wants to make several  
          changes to BOE's assessment survey process.  

           Proposed Law

           Assembly Bill 681 reforms BOE's assessment practices surveys by:

                 Requiring BOE to survey and sample assessments from the  
               ten largest counties by assessed value each year, and  
               sample assessments once every five years, instead of all  
               counties every five years,

                 Survey one county ranking in size from 11th to 20th by  
               assessed value each year, and sample assessments from  
               another county from that group each year too.  BOE must  
               stratify and select these counties at random in  
               consultation with the California Assessors Association.  

                 Survey three counties ranking in size from 21st to 58th  
               by assessed value each year, and sample assessments from  
               two others from that group too.  BOE must again stratify  
               and select these counties at random in consultation with  
               the California Assessors Association.

                 Deleting the requirement for BOE to sample assessments  
               from counties with significant assessment problems, as  
               determined by BOE's most recent survey.

          On January 1, 2021, AB 681's above changes to BOE's survey and  
          sampling selection process sunset, thereby restoring existing  
          law.

          AB 681 directs BOE to distinguish between surveys of former  
          assessors and current ones by notifying the former assessor if  
          the survey applies to that former assessor's assessment  
          practices, and meet and confer on matters in the survey report  
          at his or her request.  The bill also allows an addendum to the  
          final survey report to include a former assessor's written  
          response, and the board's comments, if any. 

          The bill also requires BOE to issue the final survey report  
          within one year of beginning the survey, except for surveys BOE  
          begins on or after July 1, 2016, to June 30, 2017, within 15  
          months, or any survey commenced on or after July 1, 2017, within  








          AB 681 (Ting) 4/22/15                                   Page 4  
          of ?
          
          
          12 months after the date the board began.


           

           

           State Revenue Impact

           According to BOE, AB 681 doesn't impact property tax revenues.


           Comments

           1.  Purpose of the bill  .  According to the author, "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.   Better, faster, cheaper  ?  Currently, BOE has 22 surveys in  
          the pipeline, after which, the timeline accelerates should AB  
          681 be enacted.  After the current 22 are finished, BOE would  
          have 15 months instead of two years to complete 2016 surveys,  
          and 12 months to finish reports on or after 2017.  To  
          compensate, BOE will be surveying fewer counties (58 to 30 over  
          five years), but sampling the same (26 to 25), because the  
          measure replaces the requirement to survey all counties every  
          five years with a statutory schedule.  Under the schedule, BOE  
          either samples or surveys each of the 11th through 20th largest  
          counties in a five year period, and then survey three and  
          samples two from the remaining counties over that same time.  As  
          such, BOE would only survey 47 of 58 counties every five years,  
          but would both survey and sample the counties with the  
          overwhelming share of the state's value, and do either for most  








          AB 681 (Ting) 4/22/15                                   Page 5  
          of ?
          
          
          of the rest.  

          3.   Technicals  .  BOE and Committee staff recommends the  
          following technical amendments:

                 On Page 3, Lines 22-23 and 37-38, strike out "2016 and  
               each of the next four calendar years" and insert "2015 and  
               every fifth calendar year thereafter."

                 On Page 4, before Line 1, insert: "(b)(3) If the board  
               finds that a county or city and county has 'significant  
               assessment problems,' as provided in Section 75.60 of the  
               Revenue and Taxation Code, a sample of assessments will be  
               conducted in that county or city and county."

                 On Page 6, before line 3, insert "(A) for any survey  
               commenced before July 1, 2016, within two years after the  
               date the board began the survey," and re-letter as  
               appropriate.:


           Assembly Actions

            Assembly Floor          79 - 0

          Assembly Appropriations  17 - 0
          Assembly Revenue and Taxation   7 - 0

           Support and  
          Opposition   


           Support  :  Board of Equalization, California Assessors  
          Association.

           Opposition  :  None received.



                                      -- END --

          










          AB 681 (Ting) 4/22/15                                   Page 6  
          of ?