BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 1952|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
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                                   THIRD READING 


          Bill No:  AB 1952
          Author:   Gordon (D), et al.
          Amended:  6/15/16 in Senate
          Vote:     27 

           SENATE GOVERNANCE & FIN. COMMITTEE:  6-0, 6/22/16
           AYES:  Hertzberg, Nguyen, Beall, Hernandez, Moorlach, Pavley
           NO VOTE RECORDED:  Lara

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 8/11/16
           AYES:  Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

           ASSEMBLY FLOOR:  78-0, 6/2/16 - See last page for vote

           SUBJECT:   Property tax postponement


          SOURCE:    State Controller Betty Yee


          DIGEST:  This bill allows the Director of Finance to authorize  
          expenditures to pay Property Tax Postponement (PTP) claims as  
          well as administrative costs under specified circumstances, and  
          makes other changes to the PTP program.


          ANALYSIS:  


          Existing law:


          1)Establishes the Senior Citizens and Disabled Citizens Property  








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            Tax Postponement Law (PTP), which allows the State Controller  
            to pay property taxes to county tax collectors on behalf of  
            individuals over the age of 62 or disabled persons with 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.


          2)Requires the Controller to shift revenues derived from PTP  
            loan repayments to the General Fund when they exceed specified  
            levels:  $20 million as of June 30, 2017, and $15 million for  
            each June 30th thereafter.  


          3)Directs the Controller, when granting a PTP loan, to record a  
            lien against the applicant's property with the county recorder  
            in the county in which the PTP applicant lives, and requires  
            the county recorder to send a copy of the lien to the tax  
            collector.


          4)Provides that the Controller increases the lien amount to  
            reflect interest accumulation, and decreases it by the amount  
            of any repayments.


          This bill:


          1)Allows the Controller to exclude any funds used to pay  
            additional approved claims to postpone property taxes, as well  
            as the Controller's administrative costs, for purposes of  
            determining whether to shift and calculating any repayment  
            amounts to the General Fund, 


          2)Permits the Director of Finance to authorize expenditures from  
            the General Fund in an amount necessary to pay additionally  
            approved claims to postpone property taxes, as well as the  
            Controller's administrative costs, if:


             a)   The Controller determines that there are insufficient  
               moneys in the fund to cover the costs of administering the  







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               program and pay all approved PTP claims, and


             b)   The Director of Finance receives a notification from the  
               Controller of that determination, and provides written  
               notification of the necessity of authorizing those  
               expenditures to the chairpersons of the fiscal committees  
               of each house of the Legislature and the Chairperson of the  
               Joint Legislative Budget Committee.


          1)Requires the Controller, instead of directing the county  
            recorder to send the a copy of the lien to the tax collector,  
            to send the copy of the lien, and additionally requires her to  
            also send a copy of the lien to the assessor.


          2)Substitutes a reference to "an electronic funds transfer" with  
            "payment," in several sections to accommodate other forms of  
            payment.  


          3)Clarifies the accounting treatment of repayments to apply any  
            repayment first to interest due, next to principal, and lastly  
            to administrative fees, to the extent a balance remains.


          4)Prohibits the Controller from granting a PTP loan to an  
            applicant owning a property 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.


          5)Makes technical and conforming changes to PTP law.  


          Background








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          PTP allows the Controller to make loans on behalf of  
          income-eligible seniors and disabled persons, secured by a lien  
          that is satisfied when the property 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.  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.  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 for uncollected property taxes 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 applicants from filing new claims for  
          property tax postponement, and the Controller from accepting  
          applications (SBx3 8, Ducheny, Chapter 4, Statues of the 2009-10  
          Third Extraordinary Session).  However, the Legislature  
          resuscitated the program in 2014 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,  
          Chapter 703, Statutes of 2014).  The Controller will soon begin  
          accepting applications for PTP, enabling low-income property  
          owners 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.   
          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.  Additionally, 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.  









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          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.  However, in doing so, this bill  
          may result in less funds for other state priorities.


          FISCAL EFFECT:   Appropriation:    Yes         Fiscal  
          Com.:YesLocal:   Yes


          SUPPORT:   (Verified8/12/16)


          State Controller Betty Yee (source)
          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:   (Verified8/12/16)


          None received


          ARGUMENTS IN SUPPORT:     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  
          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  







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          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."




          ASSEMBLY FLOOR:  78-0, 6/2/16
          AYES:  Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos,  
            Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh,  
            Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Williams, Wood, Rendon
          NO VOTE RECORDED:  Bigelow, Beth Gaines

          Prepared by:Colin Grinnell / GOV. & F. / (916) 651-4119
          8/15/16 19:36:11


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