BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1952 |Hearing |6/22/16 |
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|Author: |Gordon |Tax Levy: |No |
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|Version: |6/15/16 Amended |Fiscal: |Yes |
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|Consultant|Grinnell |
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Property tax postponement
Makes changes to implement the revived Property Tax Postponement
program, including allowing the Controller to exclude
administrative costs before shifting funds above specified
limits to the General Fund.
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.
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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
resuscitated the program last year by removing SBx3 8's
prohibition, albeit with tightened eligibility criteria, and a
requirement for the Controller to transfer to the General Fund
repayments received above specified amounts (AB 2231, Gordon,
2014). The Controller wants to clean up some parts of existing
law that need to be changed after AB 2231's enactment.
Proposed Law
Assembly Bill 1952 makes the following changes to the PTP
program:
Current law requires the Controller to shift revenues
derived from PTP loan repayments when they exceed specified
levels: $20 million as of June 30, 2017, and $15 million
for each June 30 thereafter. For purposes of calculating
the $15 million limit, the bill allows the Controller to
exclude from that calculation any funds used to pay
additional approved claims to postpone property taxes, as
well as the Controller's administrative costs.
The measure also provides that 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 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.
Once the Controller grants a PTP loan, she records a
lien with the county recorder in the county in which the
approved claimant lives. Current law assigns the county
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recorder the duty to send a copy of the lien to the tax
collector. The bill instead requires the Controller to
send the copy of the lien, and additionally requires her to
also send the lien to the assessor.
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
The bill also makes technical changes, such as granting
flexibility to the Controller regarding the form of PTP loan
payment, changing terminology, updating or deleting obsolete
references or dates, and conforms other parts of PTP statutes to
reflect the bill's changes.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "AB 1952 will
make the reestablished Property Tax Postponement Program more
sustainable and accessible for eligible applicants. Under the
existing program, the money in the PTP Revolving Fund comes from
collections on existing PTP loans; because the Fund relies on
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loan repayments, it will take time in the beginning to develop a
strong base. If PTP Fund does not have enough money to make
payments on behalf of eligible and approved claimants, the
Controller will be forced to reject loans to applicants that
would otherwise be eligible once the fund is depleted. By
permitting the Department of Finance to authorize additional
funding for the PTP program, this bill will ensure that the
Program is able to fulfill the purpose for which it was
developed, and assist as many qualified low income, disabled,
and senior Californians as possible."
2. Bringing it back . After several years of suspension, the
Controller will soon begin accepting applications for PTP after
the Legislature reenacted the program in 2014. Low-income
property owners will be able to apply for loans which will pay
for their property taxes, which if granted, eliminate the chance
the taxpayer will fall into default, delinquency, or be subject
to a tax sale. The program should be self-financing, as the
state's interest is safeguarded by a lien recorded against the
property, which is repaid, with interest, upon sale. The
Controller can then recycle these payments into future loans.
Prior to suspension, the Controller granted about $12 million
annually in claims, but repayments only ranged between $6 and
$10 million, potentially leading to General Fund costs. Because
of these risks, AB 2231 applied higher equity percentage
requirement of 40%, among other measures.
3. Balance . 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
pay previously approved claims, and second, allowing the
Controller to deduct administrative costs before shifting fund
back to the General Fund. The Committee may wish to consider
the balance between funding PTP, and providing resources for
other priorities.
4. Priorities . The Controller plans to begin accepting
applications for PTP loans this fall, and grant loans to
eligible applicants who are either disabled or over the age of
62 on a first-come, first-served basis. Loans are funded from
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repayments under the past program, which has a fund balance of
$17.7 million as of April 1, 2016, according to the Controller.
However, she may have to turn away qualified applicants if she
receives more requests for loaned funds than are available in
the account. While first-come, first-served allocation is fair,
efficient, and frequently used in state government, the
Legislature could always revise eligibility criteria to reflect
its goals for the program.
5. Related legislation . Earlier this year, the Committee
approved SB 909 (Beall), which allowed Special Needs Trusts to
apply for PTP on behalf of beneficiaries. The bill is currently
pending hearing in the Assembly Revenue and Taxation Committee.
Assembly Actions
Assembly Local Government 9-0
Assembly Revenue and Taxation 9-0
Assembly Appropriations 10-0
Assembly Floor 78-0
Support and
Opposition (6/16/16)
Support : State Controller Betty Yee, California Association of
County Treasurer-Tax Collectors, California Special Districts
Association, California State Association of Counties, League of
California Cities, Retired Public Employees Association, Rural
County Representatives of California, Santa Clara County Board
of Supervisors.
Opposition : None received.
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