BILL ANALYSIS Ó
AB 1009
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Date of Hearing: April 8, 2015
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Brian Maienschein, Chair
AB 1009
(Cristina Garcia) - As Introduced February 26, 2015
SUBJECT: Local government: redevelopment: revenues from
property tax override rates.
SUMMARY: Enacts provisions that would allow revenues from a
voter-approved pension property tax to be allocated to the city
or county whose voters approved the tax, in specified
conditions. 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 AB 26 X1 (Blumenfield), Chapter 5,
Statutes of 2011-12 First Extraordinary Session, the
Legislature intended that, upon dissolution of
redevelopment agency (RDAs) in the State of California,
property taxes that would have been allocated to RDAs are
no longer deemed tax increment.
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c) It is the intent of the Legislature in enacting this act
to do all of the following:
i) If an RDA 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 to make
payments in support of pension programs and levied in
addition to the property tax rate limited by the
California Constitution, to pay a portion of the debt
service due on indebtedness incurred by the former RDA 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 pension
tax rate approved by the voters of a city, county, or
city and county 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 pension property tax rate that are not necessary
to pay the debt service on the indebtedness shall be
allocated and paid to the city, county, or city and
county whose voters approved the pension 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, or city and county, to make payments
in support of pension programs and levied in addition to
the property tax rate limited by the California
Constitution, is consistent with the use approved by the
voters of a city, county, or city and county, once
revenues from such property tax rates are not needed to
pay approved indebtedness of a former RDA;
iii) Implement the allocation and distribution of
voter-approved, property-based tax revenues for pension
programs under the RDA dissolution process in a manner
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that would have been consistent with the allocation and
distribution of those revenues had RDAs not been
dissolved, in accordance with applicable constitutional
provisions; and,
iv) It is the intent of the Legislature that this act
not affect any property tax allocations that occurred
prior to July 1, 2015.
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 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 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
property tax rate are not deposited into a RPTTF as
provided by 3) through 6) below.
3)Allows 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
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 or county to make payments in support
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of pension programs 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 or county
to make payments in support of pension programs 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 or county 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 or county to make payments in
support of pension programs and levied in addition to the
property tax rate limited by the California Constitution, made
by any county auditor-controller prior to July 1, 2015, 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, 2015.
7)States that no inference shall be drawn from the enactment of
this act with respect to the use, distribution, or allocation
of revenues derived from the imposition of a property tax
rate, approved by the voters of a city, county, or city and
county to make payments in support
of pension programs and levied in addition to the property tax
rate limited by the California Constitution, as specified,
made by any county auditor-controller prior to July 1, 2014.
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8)Provides that the Legislature is aware of City of San Jose,
etc. v. Sharma et al., Court of Appeal Case No. C074539, which
is pending litigation. Declares the express intent of the
Legislature that no party in that pending litigation be in any
way prejudiced by the passage
of this bill. Exempts the City of San Jose Successor Agency
from the provisions of this bill, except for 2a) above.
States, furthermore, that this bill shall not be indicative of
any legislative intent concerning any issues before the courts
in that litigation, and that no provision in this bill shall
be relied upon in any way regarding the issues pending before
the courts in that litigation.
9)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.
10)Contains an urgency clause, with the facts constituting the
necessity as "in order to avoid underfunded pension programs
as a result of revenues derived from the imposition of a
property tax rate, approved by the voters of a city, county,
or city and county to make payments in support of pension
programs and levied in addition to the property tax rate
limited by the California Constitution, being allocated first
to successor agencies to make payments on the indebtedness
incurred by the dissolved RDAs, with remaining balances being
allocated in accordance with applicable constitutional and
statutory provisions, instead of being paid entirely into the
fund of the city, county, or city and county whose voters
approved the tax."
EXISTING LAW:
1)Dissolves RDAs and institutes a process for winding down their
activities.
2)Defines "enforceable obligations."
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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,
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;
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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,
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.
FISCAL EFFECT: This bill is keyed fiscal and contains a
state-mandated local program.
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COMMENTS:
1)Background on Voter-Approved Pension Property Tax Levies.
There are some cities throughout the state whose voters
historically approved a tax for pension obligations for city
staff, including 12 cities in Los Angeles County. Some
pension levies were approved as early as the 1920s, with some
cities amending and increasing their levy through the late
1970s. The amounts of the levies also vary by city and range
from 0.05% to 0.45%. These rates are levied in addition to
the 1% general property tax rate.
Under redevelopment law, redevelopment agencies created
project areas that captured incremental property tax growth
within the project areas. For older RDAs, agencies received
growth in property tax revenue collected under the 1% rate, as
well as additional rates levied to fund debt - such as pension
obligations. RDAs could then pass on to cities the portion of
tax increment that was intended by voters to be used for
pension obligations and other debts.
Under RDA dissolution, RDAs no longer pass on the tax
increment growth of pension tax revenues to cities. This is
because property tax increment is no longer allocated to RDAs.
Instead, a county auditor-controller deposits former RDA
property tax increment, including tax increment attributable
to pension taxes, into a trust fund. Revenues deposited to
the trust fund are first used to pay outstanding RDA
obligations. Remaining revenues are then distributed to the
other local governments whose jurisdiction overlaps with the
former RDA based on each local government's share of the 1%
property tax. As a result, some pension tax revenues that
RDAs previously passed on to cities are now being allocated to
other local governments, including schools.
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2)Bill Summary. This bill would authorize 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 would authorize an
oversight board to deny this request based on substantial
evidence that a former redevelopment agency made a pledge of
revenues that specifically included revenues derived from the
imposition of that property tax rate. This bill, for the
2015-16 fiscal year and each fiscal year thereafter, except to
the extent an oversight board denies a request, would prohibit
any revenues derived from the imposition of that property tax
rate from being allocated to an RPTTF, and would, instead,
require these revenues to be allocated to, and when collected
to be paid into, the fund of the city or county whose voters
approved the tax.
This bill would require all allocations of revenues derived
from the imposition of that property tax rate made by any
county auditor-controller prior to July 1, 2015, to be deemed
correct, and would prohibit any city, county, county
auditor-controller, successor agency, or affected taxing
entity from being subject to any claim, as specified. This
bill would require, to the extent that revenues derived from
the imposition of 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, are deposited into an RPTTF, the county-auditor
controller to allocate moneys from each RPTTF to a city or
county that levies a property tax as so described after
certain other allocations have been made.
This bill provides that the Legislature is aware of City of
San Jose, etc. v. Sharma et al., which is pending litigation,
and declares the express intent of the Legislature that no
party in that pending litigation be in any way prejudiced by
the passage of this bill. This bill also states, furthermore,
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that this bill shall not be indicative of any legislative
intent concerning any issues before the courts in that
litigation, and that no provision in this bill shall be relied
upon in any way regarding the issues pending before the courts
in that litigation.
This bill is author-sponsored.
3)Author's Statement. According to the author, "This measure
addresses the question of where voter approved pension tax
revenues go since the dissolution of RDAs. AB 1009 would
distribute these taxes through the RPTTF to the cities after
the pass through payments, enforceable obligations of the
former agency and the administrative costs of the cities are
paid. AB 1009 also creates a process for impacted cities to
request that the pension funds not be deposited directly into
the RPTTF."
4)Related Legislation. This bill is similar to AB 1450 (Garcia)
and SB 663 (Lara), both from 2014. SB 663 would have
required, for the 2014-15 fiscal year, and each year
thereafter, voter-approved pension property tax revenues to be
allocated to the fund of the city or county whose voters
approved the tax, rather than the revenues being allocated to
the RPTTF pursuant to the RDA dissolution process. SB 663 was
held in the Assembly Appropriations Committee.
AB 1450 was different from SB 663 in that it specifically
addresses the pending litigation in the City of San Jose, and
also clarified that a city or county could retain tax
increment revenues if it gets oversight board approval. AB
1450 was vetoed by the Governor, with the following message:
The process laid out in this measure would put the state back
on the hook, to the tune of $20 million dollars, for erstwhile
local decisions to allow property tax growth from voter
approved tax levies for pension obligations to be used by the
redevelopment agency for redevelopment activities. I
encourage the author and stakeholders to come up with a
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solution to this issue without impacting general fund dollars.
The Committee may wish to ask the author about plans to
address the Governor's concerns with the prior bill.
5)Arguments in Support. Supporters argue that this bill will
establish that pension-related tax levies should be allocated
to the impacted taxing entities to pay for their pension
obligations as voters approved and intended, and that this
bill is also necessary to prevent the ongoing loss of this
pension tax revenue, which today threatens municipal jobs and
services in impacted cities.
6)Arguments in Opposition. Opponents, including the cities of
Milpitas San Jose, and Sunnyvale, argue that this bill "would
authorize the County of Santa Clara's illegal practice of
withholding RPTTF revenues that are authorized for payment of
enforceable obligations and for distribution to affected
taxing entities", and that this bill "would overturn the
Sacramento Superior Court ruling on this issue that is
currently pending on an appeal by the County of Santa Clara."
7)Urgency Clause. This bill contains an urgency clause and
requires a two-thirds vote of each house.
REGISTERED SUPPORT / OPPOSITION:
Support
American Federation of State, County and Municipal Employees,
District Council 36
City of Bell, Compton, Huntington Park, and Montebello
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California Professional Firefighters
Independent Cities Association
Los Angeles County Police Chiefs Association
Santa Clara County Board of Supervisors
Opposition
Cities of Milpitas, San Jose, and Sunnyvale
Analysis Prepared by:Debbie Michel / L. GOV. / (916) 319-3958