BILL ANALYSIS Ó
AB 1009
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
1009 (Cristina Garcia) - As Introduced February 26, 2015
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Urgency: Yes State Mandated Local Program: YesReimbursable:
Yes
SUMMARY: This bill, an urgency measure, would prohibit a county
auditor from allocating revenues derived from specified
extraordinary property tax rates approved by voters to pay for
pension obligations (pension tax rates) to a Redevelopment
Property Tax Trust Fund (RPTTF), except as specified. These
funds would instead be allocated to the city or county whose
AB 1009
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voters approved the tax.
In addition, this bill requires that any allocations of revenues
derived from voter-approved pension tax rates that are made by
county auditors before July 1, 2015, must be deemed correct and
not affected by the bill's provisions. This bill also declares
that the Legislature is aware of pending litigation between the
City of San Jose and Santa Clara County, and expresses
legislative intent that no party in that litigation be
prejudiced by the passage of this act.
FISCAL EFFECT:
Significant General Fund costs, likely in the range of $10
million annually beginning in 2015-16, due to the diversion of
revenues from pension tax rates from the RPTTF to the city or
county that imposed the pension tax rate. Any amount of
property tax revenue diverted away from schools would typically
result in corresponding General Fund expenditures to meet the
minimum funding guarantees of Proposition 98.
An estimated $40 million in pension property tax revenues was
deposited into RPTTFs in 2012-13 following the dissolution of
redevelopment agencies (RDAs). These revenues are currently
distributed to local taxing entities pursuant to dissolution
statutes, after paying enforceable obligations of the former
RDA. This bill would instead allocate revenues derived from
pension tax rates to the cities and counties that imposed the
supplemental rate, except for specific amounts pledged by the
former RDA to pay obligations, as determined by an oversight
board. This diversion is likely to result in approximately
$10 million in reductions of property tax allocations to
schools.
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COMMENTS:
1)Purpose. 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."
2)Background. There are approximately 25 cities throughout the
state whose voters approved a tax for pension obligations for
city staff. Some pension levies were approved as early as the
1920s, with some cities amending and increasing their levy
through the late 1970s. The levies vary by city and range
from 0.05 percent to 0.45 percent. 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. In 17 cities, including 12 cities in Los Angeles
County, the tax increment from pension obligations was going
to an RDA. 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, 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
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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.
3)Litigation. The allocation of tax increment revenues
attributable to extraordinary property tax rates has been the
subject of litigation. A Los Angeles County trial court
decision in favor of the City of San Fernando found that tax
increment revenues generated by San Fernando's extraordinary
property tax rate are not required to be deposited into the
successor agency RPTTF. In a case that the City of San Jose
filed against Santa Clara County, a trial court ruled in favor
of the City, finding that tax increment revenues from the
County's extraordinary tax rate are included in the definition
of tax increment and should be deposited into the RPTTF to pay
for some of the successor agency's obligations. The county
appealed the decision and the case is now pending before the
appellate court. Considering the conflicting rulings on this
issue in the courts, the Committee may wish to consider
whether the Legislature should weigh in on one side of this
issue at this time.
4)Prior Legislation. This bill is substantially similar to SB
663 (Lara), and AB 1450 (Garcia) 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 this Committee.
AB 1450 was broader than SB 663 in that it also specifically
addressed 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 never heard in this Committee, but was vetoed by the
Governor. His veto message read, in part, ? I encourage the
author and stakeholders to come up with a solution to this
issue without impacting general fund dollars.
AB 1009
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Analysis Prepared by:Jennifer Swenson / APPR. / (916)
319-2081