BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1952


                                                                    Page  1





          Date of Hearing:  April 18, 2016


                     ASSEMBLY COMMITTEE ON REVENUE AND TAXATION


                           Sebastian Ridley-Thomas, Chair





          AB 1952  
          (Gordon) - As Introduced February 12, 2016


          2/3 vote.  Fiscal committee.


          SUBJECT:  Property tax postponement


          SUMMARY:  Increases the amount of funds authorized to be used by  
          the State Controller (Controller) to pay approved claims for the  
          postponement of property taxes under the Senior Citizens and  
          Disabled Citizens Property Tax Postponement Program (PTP  
          Program). Specifically, this bill:  


          1)Provides that the Controller, on June 30, 2018, and on June 30  
            each year thereafter, may retain moneys in the PTP fund in  
            excess of $15 million, instead of transferring the moneys to  
            the General Fund (GF), if needed to pay claims approved by the  
            Controller for the postponement of property taxes, as  
            specified.


          2)Authorizes the Director of the Department of Finance (DOF),  
            upon receiving the notification from the Controller, to  








                                                                    AB 1952


                                                                    Page  2





            authorize expenditures from the GF in an amount necessary to  
            pay all approved claims for the postponement of property  
            taxes, if there are insufficient moneys in the PTP fund.  


          3)Requires the DOF to notify the chairpersons of the fiscal  
            committees of each house of the Legislature and the  
            chairperson of the Joint Legislative Budget Committee in  
            writing, at least 30 days prior to the authorization of the  
            expenditures.


          4)Requires a county recorder to provide the county assessor with  
            a copy of the notice of lien which has been executed;


          5)Specifies the order in which a payment received by the  
            Controller shall be applied to reduce the amount of the  
            obligation secured by the lien against the real property, as  
            follows;


             a)   To any interest due on the loan;


             b)   To the principal property tax amount; and,


             c)   The remaining balance, if any, to administrative fees.


          6)Deletes the reference to the subordination of a lien for  
            postponed property taxes, as authorized by the PTP Law, from  
            the list of documents that may be recorded without  
            acknowledgment, certificate of acknowledgment, or further  
            proof. 


          7)Requires the county tax collector, upon receipt of the  








                                                                    AB 1952


                                                                    Page  3





            electronic fund transfer by the Controller with respect to a  
            payment of property taxes under the PTP Law, to enter the fact  
            that taxes on the property have been postponed in the  
            appropriate columns on the roll.  In the case of the secured  
            roll, the tax collector may enter this information in that  
            portion of the roll which has been designated for tax default  
            information, as specified.


          8)Requires the county auditor, treasurer, or disbursing officer,  
            with respect to a claimant whose property taxes are paid by a  
            lender from an impound, trust, or other type of account, to  
            refund a replicated payment, which is based on the electronic  
            fund transfer by the Controller, to the claimant, instead of  
            the Controller, as provided.  


          9)Revises the date, by which a blind or disabled claimant must  
            qualify as "blind" or "disabled," to the earlier of:  (i) the  
            time of application; or, (ii) February 10th, instead of  
            December 10th, of the fiscal year (FY) for which postponement  
            is claimed. 


          10)Updates statutory references to the PTP Program, deletes  
            obsolete references to certificates of eligibility and  
            postponement of mobile homes, and makes other minor, technical  
            changes.


          11)Imposes a state-mandated local program and provides that, if  
            the Commission on State Mandates determines that the bill  
            contains costs mandated by the state, reimbursement for the  
            costs mandated by the state shall be made as specified. 


          EXISTING LAW:  










                                                                    AB 1952


                                                                    Page  4





          1)Establishes the Senior Citizens and Disabled Citizens Property  
            Tax Postponement Law (or the PTP program), the Senior Citizens  
            Tenant-Stockholder Postponement Law, and the Senior Citizens  
            Possessory Interest Holder Postponement Law in the R&TC, all  
            of which allow the Controller to pay property taxes to county  
            tax collectors on behalf of individuals over the age of 62 or  
            disabled persons making less than $35,500.  (R&TC Sections  
            20581- 20641.)

          2)Establishes the Senior Citizens Homeowners and Renters  
            Property Tax Assistance Law, administered by the Franchise Tax  
            Board (FTB), which is a direct grant program to income  
            eligible senior citizens.  (R&TC Sections 20501 - 20564.)

          3)Establishes the County Deferred PTP for Senior and Disabled  
            Citizens, with participating counties, to pay property taxes  
            to county tax collectors on behalf of individuals over the age  
            of 62 or disabled persons making less than $35,500.  (R&TC  
            Sections 20800 - 20825.)

          4)Allows the Controller to start accepting new applications for  
            the PTP Program on July 1, 2016.

          5)Establishes the Senior Citizens and Disabled Citizens PTP Fund  
            ("PTP Fund") in the State Treasury and continuously  
            appropriates moneys in the PTP Fund to the Controller for  
            purposes of administering the PTP Program, including, but not  
            limited to, necessary administrative costs and disbursements  
            relating to the postponement of property taxes pursuant to the  
            PTP Law.

          6)Requires, on or after January 1, 2015, any loan repayments  
            relating to the PTP Program to be deposited into the PTP Fund.

          7)Requires the Controller, pursuant to the PTP Program, to do  
            both of the following:

             a)   On June 30, 2017, transfer any moneys in the fund in  
               excess of $20 million to the GF; and,








                                                                    AB 1952


                                                                    Page  5






             b)   On June 30, 2018, and on June 30 each year thereafter,  
               transfer any moneys in the fund in excess of $15 million to  
               the GF.

          8)Authorizes the Controller to secure repayment by recording a  
            lien against the claimant's property, which is satisfied when  
            the home is sold or refinanced. 

          FISCAL EFFECT:  Unknown


          COMMENTS:  


           1)Author's Statement  .  The author has provided the following  
            statement in support of this bill:

          "AB 1952 will help make the existing Property Tax Postponement  
            Program more sustainable and accessible for eligible  
            applicants.  By permitting the Department of Finance to  
            augment the budget or authorize additional funding for the PTP  
            program, this bill will ensure that the PTP program is able to  
            fulfill the purpose for which it was developed, and assist as  
            many qualified Californians as possible."

           2)PTP Program:  Background  .  California has several property tax  
            programs benefiting the elderly and disabled individuals,  
            including property tax assistance program and property tax  
            postponement.  The property tax assistance program, which is  
            administered by the Franchise Tax Board, was established in  
            1967 to provide direct property tax relief to seniors living  
            on a fixed income.  Unlike the assistance program that  
            provides a direct grant to qualifying seniors and disabled  
            individuals, the PTP program allows eligible homeowners to  
            defer payment of all or a portion of the property taxes on  
            their residences.  The program was enacted in 1977, after the  
            passage of a constitutional amendment authorizing the  
            postponement of property taxes (California Constitution  








                                                                    AB 1952


                                                                    Page  6





            Article XIII, Section 8), and is administered by the  
            Controller's Office.  The constitutional amendment was in  
            response to concerns that senior homeowners on fixed incomes  
            could lose their homes because of the inability to pay rising  
            property tax bills.  Originally designed for persons over 62  
            years of age, the program is now also available to eligible  
            blind and disabled persons, regardless of age.  



           3)Suspension and Subsequent Reinstatement of the PTP program  .   
            On February 20, 2009, the PTP Program was indefinitely  
            suspended as part of the budget reductions to the state's  
            General Fund programs [SBx3 8 (Ducheny), Chapter 4, Statutes  
            of 2009].  The funding for the program was eliminated and the  
            Controller was prohibited from accepting any new applications  
            after February 20, 2009.  However, in 2014, the Governor  
            signed AB 2231 (Gordon), Chapter 703, Statutes of 2014, which  
            reinstated a modified PTP program to provide property tax  
            deferment to seniors and disabled persons and to allow  
            income-eligible senior citizens and disabled persons to apply  
            to the Controller to defer payment of property taxes,  
            beginning on July 1, 2016.  



          AB 2231 tightened eligibility criteria and required the  
            Controller to transfer to the General Fund repayments in  
            excess of a total of $20 million.  AB 2231 also increased the  
            amount of equity required in the home from 20% to 40%, and  
            eliminated mobilehomes, manufactured homes, houseboats, and  
            floating homes from the definition of "residential dwelling."  
            Increasing the necessary equity in the home was thought to  
            help ensure that California is made whole in case of  
            foreclosure or a forced sale.  Additionally, AB 2231  
            modernized and streamlined payment methods by establishing the  
            Senior Citizens and Disabled Citizens PTP Fund within the  
            State Treasury, utilizing electronic fund transfer in place of  
            certificates and eliminating the impound account.  In 2015, SB  








                                                                    AB 1952


                                                                    Page  7





            801 (Senate Governance and Finance Committee), Chapter 391,  
            Statutes of 2015, made several technical changes to the PTP  
            program to ensure that it is implemented correctly.    
           4)The Implementation of the PTP Program  . The PTP program  
            operates on a "first-come, first-served basis," which is  
            determined by the postmark date.  All applications postmarked  
            after the cutoff date are denied.  According to the  
            Controller's office, if an applicant does not provide all the  
            required information or documentation, the Controller will  
            contact the applicant requesting that the additional  
            information be submitted within 30 days.  If the applicant  
            timely submits the requested information, he/she will maintain  
            his/her "place in line." In a case where the number of  
            applications received on one day exceeds the overall number of  
            applications that may be funded, the Controller will cut off  
            approvals as of the prior day.  As of April 1, 2016, the PTP  
            fund balance was $17,756,940.79, which reflects 18 months of  
            collection but does not factor in the Controller's  
            administrative costs. 


           5)Unresolved Funding Problems . Under existing law, all PTP loan  
            repayments must be deposited in the PTP Fund.  However, the  
            State Controller is required to transfer to the GF any amounts  
            in the PTP Fund in excess of $20 million as of June 30, 2017,  
            and any amounts in excess of $15 million as of each June 30  
            thereafter.  The State Controller's Office projects that by  
            Fiscal Year (FY) 2017-18, the PTP Fund will be exhausted and  
            the Program will be unable to fund program loans because the  
            reinstated program limits the annual amount that may remain in  
            the PTP Fund.  At that point, the PTP Program will no longer  
            be able to fund loans to qualified California homeowners in  
            need of assistance.  


           6)What Does This Bill Do  ?  The PTP Program was funded by an  
            annual GF appropriation to the Controller's Office to pay the  
            face amount of all certificates of eligibility for the  
            program. Administrative costs for the PTP program were paid  








                                                                    AB 1952


                                                                    Page  8





            through the Controller's operating budget as part of the  
            annual Budget Act.   As discussed, the PTP was permanently  
            suspended in 2009 and all funding was eliminated to address  
            severe GF shortfalls during the recession.  In 2014, AB 2231  
            reinstated the PTP program but deleted the previous program's  
            funding source - an annual GF appropriation. Instead, AB 2231  
            created the PTP Fund, an interest bearing fund, which is  
            continuously appropriated to the Controller to fund the PTP  
            program, including administrative costs and property tax  
            postponement disbursements.  The money in the PTP Fund comes  
            from collections on existing PTP accounts from the old  
            program; no GF money is currently appropriated to support the  
            reinstated PTP Program. 



          This bill allows the DOF to authorize expenditures from the GF  
            to pay the claims for postponement of property taxes approved  
            by the Controller when the PTP Fund does not have enough money  
            to make payments on behalf of eligible and approved claimants.  
             Although this bill requires the DOF to notify the Legislature  
            in writing at least 30 days prior to authorizing the GF  
            expenditures, it gives DOF full discretion to decide whether  
            or not to transfer moneys to the PTP Fund.  The language of  
            this bill states that DOF may authorize expenditures, thus  
            leaving the final decision regarding the transfer as well as  
            the amount of expenditures to DOF.   In essence, this bill  
            provides for a continuous appropriation from the GF to the PTP  
            Fund, but at the same time reserves the right of the Executive  
            Branch to refuse to transfer GF moneys to the PTP program.   
            The Committee may wish to consider whether the Legislature  
            should provide for a de facto appropriation of the PTP program  
            by removing the DOF's discretion to decide how and whether to  
            fund the PTP Program. 
           7)Double-referral  .  This bill was double-referred to the  
            Assembly Committee on Local Government.  This bill passed the  
            Assembly Committee on Local Government on a 9 - 0 vote on  
            April 6, 2016.  For additional discussion of this bill's  
            provisions, please refer to that committee's analysis.








                                                                    AB 1952


                                                                    Page  9







          


          REGISTERED SUPPORT / OPPOSITION:




          Support


          State Controller Betty Yee (Sponsor)


          California Association of Treasurers and Tax Collectors


          California Special Districts Association


          California State Association of Counties


          Rural County Representatives of California


          Santa Clara County Board of Supervisors




          Opposition


          None on file










                                                                    AB 1952


                                                                    Page  10







          Analysis Prepared by:Oksana Jaffe / REV. & TAX. / (916) 319-2098