BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 1952 (Gordon) - Property tax postponement ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 15, 2016 |Policy Vote: GOV. & F. 6 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 1, 2016 |Consultant: Robert Ingenito | | | | ----------------------------------------------------------------- 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. AB 1952 (Gordon) Page 1 of ? 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 AB 1952 (Gordon) Page 2 of ? 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 AB 1952 (Gordon) Page 3 of ? 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. -- END --