BILL ANALYSIS                                                                                                                                                                                                    Ó



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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