BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1952| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1952 Author: Gordon (D), et al. Amended: 8/17/16 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. Senate Floor Amendments of 8/17/16: (1) Delete provisions in current law requiring the Controller to transfer property tax postponement loan repayments above specified thresholds to the General Fund, (2) Modify the bill's authorization for the Director of Finance to pay certain costs if the Controller notifies the Director that there are insufficient moneys in the Fund, (3) Correct a reference, (4) Resolve conflicts with SB 909 (Beall), and (5) Make other technical and conforming changes. AB 1952 Page 2 ANALYSIS: Existing law: 1)Establishes the Senior Citizens and Disabled Citizens Property 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 deposited in the Senior Citizens and Disabled Citizens Property Tax Postponement Fund, generally derived from PTP loan repayments, to the General Fund when fund amounts exceed specified levels: $20 million as of June 30, 2017, and $15 million for each June 30 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)Deletes the current requirement for the Controller to shift revenues deposited in the Senior Citizens and Disabled Citizens Property Tax Postponement Fund to the General Fund AB 1952 Page 3 when fund amounts exceed specified levels: $20 million as of June 30, 2017, and $15 million for each June 30 thereafter. 2)Permits, instead, the Director of Finance to authorize expenditures from the General Fund in an amount necessary to pay additionally approved claims to postpone property taxes, if: a) The Controller determines that there are insufficient moneys in the fund to pay all approved PTP claims for that fiscal year, and b) The Controller notifies the Director by April 1 of each year of the deficiency. 1)Limits the permission for the Director of Finance to authorize expenditures to pay claims to a period of within 60 days of receiving the notice of the deficiency from the Controller, and not sooner than 30 days after providing 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. 2)Deletes the requirement for the county recorder to send a copy of the lien to the tax collector, instead directing the Controller to do so, and additionally requiring her to also send a copy of the lien to the assessor. 3)Substitutes a reference to "an electronic funds transfer" with "payment," in several sections to accommodate other forms of payment. 4)Clarifies the accounting treatment of repayments to apply any repayment first to interest due, next to principal, and lastly AB 1952 Page 4 to administrative fees, to the extent a balance remains. 5)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. 6)Contains contingent enactment provisions that resolve conflicts with SB 909 (Beall). 7)Corrects references, and makes other technical and conforming changes to PTP law. Background 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. AB 1952 Page 5 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. 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) AB 1952 Page 6 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 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, AB 1952 Page 7 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 8/18/16 16:50:28 **** END ****