BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 681


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          681 (Ting)


          As Amended  July 15, 2015


          Majority vote


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          |ASSEMBLY:  |79-0  |(June 2, 2015) |SENATE: |40-0  |(September 1,    |
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          Original Committee Reference:  REV. & TAX.




          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.  




          The Senate amendments:




          1)Provide that if the board finds that a county or city and  
            county has 'significant assessment problems,' as provided in  
            Revenue and Taxation Code Section 75.60, a sample of  








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            assessments will be conducted in that county or city and  
            county.




          2)Specify that a survey report is due within two years if the  
            survey commenced before July 1, 2016.




          3)Strike out "2016 and each of the next four calendar years" and  
            insert "2015 and every fifth calendar year thereafter."




          4)Make technical amendments.




          AS PASSED BY THE ASSEMBLY, this bill:  


          1)Provided 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)Required, 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.  










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


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            repealed.


          7)Required 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)Provided 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)Required the BOE to issue the final survey report within one  
            year after the date the BOE began the survey, except as  
            follows:








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             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 Senate Appropriations  
          Committee, the BOE indicates that it would require additional  
          staff to complete the proposed surveys and samples within one  
          year, as this bill requires.  These costs are estimated to be  
          $629,000 in 2016-17 and $571,000 annually thereafter (General  
          Fund).  This bill would not impact property tax 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  








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               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  
            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 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.


          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  








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            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.  


          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 for surveys commenced on or  
            after July 1, 2017.


            This three-tiered system allows BOE to survey and sample  








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            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:  
          0001723