BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 1952 (Gordon) - Property tax postponement
          
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          |Version: June 15, 2016          |Policy Vote: GOV. & F. 6 - 0    |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: August 1, 2016    |Consultant: Robert Ingenito     |
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          This bill meets the criteria for referral to the Suspense File.


          


          Bill  
          Summary:  AB 1952 would make changes to implement the revived  
          Property Tax Postponement program, including allowing the State  
          Controller to exclude administrative costs before shifting funds  
          above specified limits to the General Fund.


          Fiscal  
          Impact: An estimated transfer in the low millions of dollars  
          from the General Fund to the Property Tax Postponement (PTP)  
          Fund in 2018-19. Current projections of the Fund balance, based  
          on the last five years of data, show that in 2017-18, up to  
          3,000 applicants will be rejected because of insufficient funds.  
          This bill would permit DOF to transfer an amount from General  
          Fund necessary to support these claims.   










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          Background: The Senior Citizens and Disabled Citizens Property Tax  
          Postponement Law (PTP), allows the State 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 in income per year. The Controller secures  
          repayment by recording a lien against the claimant's property,  
          which is satisfied when the home is sold or refinanced.  As  
          liens are repaid out of sales proceeds, revenue flows back to  
          the Controller, who in turn uses these funds to pay property  
          taxes for new applicants.   
          Loans do not become due and payable if the claimant or the  
          claimant's spouse continues to occupy the home. However, the  
          Controller's lien is only paid off when proceeds remain after  
          previously filed liens have been satisfied; liens filed by  
          county tax collectors have "super priority" status, and  
          therefore must be satisfied before all others regardless of when  
          they're filed. 


          In 2009, due to budgetary constraints, and fewer funds flowing  
          back to the Controller as a result of diminishing sales prices,  
          the Legislature prohibited persons from filing new claims for  
          property tax postponement, and the Controller from accepting  
          applications (SBx3 8, Ducheny, 2009).  However, the Legislature  
          revived the program last year with both tightened eligibility  
          criteria, and a requirement for the Controller to transfer to  
          the General Fund repayments received above specified amounts (AB  
          2231, Gordon, 2014).                    




          Proposed Law:  
          This bill would, among other things, do the following:
                 Require the Controller to shift revenues derived from  
               PTP loan repayments when they exceed specified levels. 


                 If the Controller determines that there are insufficient  
               moneys in the fund to cover the costs of administering the  
               program, and to pay all approved claims for the  
               postponement of property taxes, the Director of Finance,  
               may authorize expenditures from the General Fund in an  
               amount necessary to cover the costs of administering this  








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               chapter and to pay those claims not sooner than 30 days  
               after providing written notification.  The Director of  
               Finance must notify the chairpersons of the fiscal  
               committees of each house of the Legislature, and the  
               Chairperson of the Joint Legislative Budget Committee, of  
               any expenditures.  


                 The Controller secures the PTP loan amount in a lien  
               recorded against the claimant's property, and increases it  
               to reflect interest accumulation.  When the Controller  
               receives repayments, she lowers the amount of the  
               obligation secured by the lien.  To clarify the accounting  
               treatment of repayments, the bill applies any payment first  
               to interest due, next to principal, and lastly to  
               administrative fees, to the extent a balance remains. 


                 Deletes from eligibility any residential dwelling  
               subject to a Property Assessed Clean Energy Bond, which are  
               financing programs that allow local governments to offer  
               loans to private property owners to cover the initial costs  
               of renewable energy, energy efficiency, water efficiency,  
               and other improvements to private property that offer  
               public benefits.  Property owners repay the loans through  
               voluntary assessments or parcel taxes, which are secured by  
               priority liens and appear annually on property tax bills  
               until the loans are repaid




          



          Staff  
          Comments: AB 2231 required the Controller to shift repayment  
          amounts above a specified level back to the General Fund,  
          leaving fewer funds to grant future PTP claims, but providing  
          more general resources for other state priorities.  AB 1952  
          makes two changes to reduce the number of claimants that may be  
          turned away in the future: first, authorizing the Director of  
          Finance to supplement funds to cover administrative costs and  








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          pay previously approved claims, and second, allowing the  
          Controller to deduct administrative costs before shifting funds  
          back to the General Fund. 
          The property tax postponement Program was entirely General  
          Fund-supported prior to its suspension. When the Program was  
          resuscitated in 2014, it was redesigned to be self-financing. As  
          noted previously, the annual repayments received from the  
          estates of persons no longer participating in Program are now  
          placed in the PTP Fund. The repayment revenues finance the  
          in-lieu payments to counties that replace, on a dollar-for  
          dollar basis, the property tax revenue lost due to  
          Program-authorized property tax postponements.


          Prior to its suspension in 2009, Program claims averaged around  
          $12 million annually, and repayments historically ranged between  
          $6 million and $10 million. Assuming participation rates in the  
          resuscitated Program match those of the prior Program, there  
          would be an annual General Fund cost exposure of between $2  
          million and $6 million. 




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