BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |AB 2476                          |Hearing    |6/29/16  |
          |          |                                 |Date:      |         |
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          |Author:   |Daly                             |Tax Levy:  |No       |
          |----------+---------------------------------+-----------+---------|
          |Version:  |5/27/16                          |Fiscal:    |Yes      |
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          |Consultant|Grinnell                                              |
          |:         |                                                      |
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                       Local governments:  parcel taxes:  notice



          Requires public agencies seeking voter approval of parcel taxes  
          to send specified information to nonresident landowners within  
          30 days of enacting the ordinance.


           Background 

           The California Constitution requires 2/3 voter approval when a  
          local agency wants to impose or increase a special tax  
          (Proposition 13, 1978).   The Legislature allowed school and  
          community college districts to impose qualified special taxes  
          that applied uniformly to all taxpayers or real property within  
          the district, and allowed districts to exempt persons over the  
          age of 65 from the tax (AB 1440, Hannigan, 1988).  Soon after,  
          the Legislature also allowed 15 types of local agencies to  
          impose similar taxes, but without a similar exemption (SB 158,  
          Committee on Local Government, 1991).  Subsequently, the  
          Legislature allowed school districts to also exempt persons  
          receiving Supplemental Security Income (SSI) regardless of age  
          (AB 385, Lieber, 2006), and then income-eligible persons  
          receiving Social Security Disability Insurance (SSDI) (SB 874,  
          Hancock, 2012).  

          Thus far, all qualified special taxes imposed by local agencies  
          have been parcel taxes, which are not assessed based on the  
          value of a property like ad valorem property taxes.  Instead,  







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          parcel taxes are generally measured a flat rate assessed per  
          parcel or per square foot of the parcel or its improvements,  
          regardless of its size.  Some include inflation adjustments.  As  
          such, they are basically a flat tax on property ownership.   
          Districts can use revenues in almost any way that serves local  
          needs, such as ongoing expenses, programs, or buildings.   
          Property tax law generally guides parcel tax collection, where  
          counties collect parcel taxes with property taxes, and then  
          remit funds to the agency imposing the tax.

          A local agency seeking to impose a parcel tax must first adopt a  
          resolution in a public meeting with 72 hours advance notice,  
          which includes the type of tax and rate to be levied, the method  
          of collection, and the date of the election.  Special taxes,  
          such as parcel taxes, are subject to additional accountability,  
          which requires local agencies to (SB 165, Alarcón, 2000):

                 Issue a statement indicating the specific purpose of the  
               tax, and a requirement that the proceeds be used only for  
               that purpose; 

                 Create an account in which to deposit proceeds; and, 

                 Publish an annual report that includes the amount of  
               funds collected and expended, along with the status of any  
               project required or authorized by the tax measure.  

          After the local agency has voted to place a parcel tax measure  
          on the ballot, the election must be held on "established  
          election dates," which means March, April, or November of an  
          even-numbered year, or March, June, or November in an  
          odd-numbered year.  A parcel tax measure levied by a local  
          agency requires approval by two-thirds of the qualified  
          electors, which Courts have interpreted  to mean the registered  
          voters voting in the election concerning the proposed tax in  
          Neilson v. City of California City (2005), 133 Cal. App.4th  
          1296, 1312.  As such, non-resident property owners who are not  
          registered voters are not included among the voters voting on a  
          proposed parcel tax.  However, renters and tenants who do not  
          own real property, and therefore do not directly pay the tax,  
          can vote on the ballot measure imposing the tax.  Seeking to  
          increase notification to nonresident landowners of upcoming  
          parcel tax elections, the California Association of Realtors  
          wants agencies seeking to impose parcel taxes to send specified  








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          information to nonresident landowners. 


           Proposed Law

           Assembly Bill 2476 requires a public agency to provide a notice  
          of the vote to enact a parcel tax to the owner of the parcel if  
          that owner does not reside in the jurisdiction of the public  
          agency seeking to impose the tax.  The bill requires that the  
          agency provide the notice within 30 days following the local  
          agency's vote to place the parcel tax measure on the ballot.   
          The notice must include, but is not limited to, the following  
          information:

                 The amount or rate of the proposed parcel tax in  
               sufficient detail to allow each property owner to calculate  
               the amount of the tax to be levied against the owner's  
               property;

                 The method and frequency for collecting the proposed  
               parcel tax, and the duration of time the parcel tax will be  
               imposed;

                 The date that the proposed parcel tax will be voted on;  
               and,

                 The telephone number and address of an individual,  
               office, or organization that interested persons may contact  
               to receive additional information about the proposed parcel  
               tax.  

          The bill provides that the notice must be accomplished through  
          prepaid postage mailing in United States Mail, which is deemed  
          given when deposited.  The measure requires the public agency to  
          send the notice to the name and address which appears on the  
          last equalized county or Board of Equalization assessment roll.   
          AB 2476 additionally requires the notice to be in at least  
          ten-point type, either with an envelope or postcard which  
          includes the name and return address of the sender and to  
          include the specified information listed above.

          The measure allows the agency levying the tax to recover its  
          costs, not to exceed the reasonable cost of preparing and  
          mailing the notice, from the proceeds of the parcel tax.  The  








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          bill states that because of this authority, the state need not  
          reimburse the agency for these mandated costs; however, should  
          the parcel tax measure be rejected by voters, AB 2472 states  
          that agencies can seek reimbursement through existing statutory  
          provisions if the Commission on State Mandates finds that the  
          bill contains state-mandated costs.


           State Revenue Impact

           No estimate.


           


          Comments

           1.  Purpose of the bill  .  According to the author, "Currently,  
          property owners are required to pay parcel taxes approved by  
          voters on a local ballot.  If a property owner is a resident of  
          the local jurisdiction that is seeking to enact a parcel tax,  
          they learn of that proposed parcel tax when they receive their  
          ballot pamphlets before an election.  In contrast, non-resident  
          property owners - who own parcels in the given community but  
          reside elsewhere - receive absolutely no notice of a pending  
          parcel tax vote.  AB 2476 seeks to provide a measure of fairness  
          and transparency by establishing a process for notifying  
          non-resident property owners.  Specifically, this bill would  
          require a local agency to inform property owners about the  
          amount of the proposed parcel tax, the period of time for which  
          the proposed tax would be collected, and the date on which the  
          proposed tax would be voted on by local residents.  AB 2476 also  
          provides that the local agency may recover the reasonable costs  
          of the notice from the proceeds of the parcel tax, including the  
          costs of preparation and postage."

          2.   Process  .  Local agencies, including school districts, enact  
          parcel taxes by first enacting an ordinance in a public meeting  
          where the agenda must be published 72 hours before the meeting,  
          and then submitting the ordinance to voters for approval.   
          However, nonresident landowners may not be paying attention to  
          local agency governing board hearings or elections, and can be  
          surprised when a new parcel tax appears on their property tax  








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          bill.  AB 2476 enacts a specific process for local agencies to  
          notify these potentially affected taxpayers, which while  
          providing potentially useful information, would subject parcel  
          taxes to a higher standard than other local agency actions.  The  
          bill only applies to parcel taxes, but not to other local agency  
          actions with potentially significant consequences, such as a  
          fire district changing fire response procedures or defensible  
          space requirements, or a school district seeking to issue a  
          facilities construction bond.  Determining who must receive  
          notice, and then printing and mailing them to taxpayers who may  
          be out of the state or the country, will be costly to these  
          agencies, so why should state law subject parcel taxes to  
          special requirements?  While some agencies are more transparent  
          than others, any citizen can keep track of a local agency's  
          agenda by checking its website or getting on its mailing list.   
          The Committee may wish to consider whether parcel taxes should  
          be subject to different notice and disclosure requirements than  
          other local agency actions, and if so, whether it justifies the  
          cost.  

          3.   Timing is everything  .  Local agencies must comply with AB  
          2476's requirements by sending a notice with specified  
          information to nonresident landowners within 30 days of enacting  
          the ordinance placing the measure on the ballot.  As such, the  
          bill compels agencies asking voters to approve a tax to send  
          specified information to affected non-voters, who while unable  
          to vote, may potentially be encouraged to politically engage in  
          the election where voters must approve the parcel tax.  However,  
          a notice specifying some details of a pending parcel tax is not  
          political in and of itself.  Postponing the notice requirement  
          until after the election would eliminate the measure's potential  
          political impact while accomplishing its goal of providing ample  
          taxpayer notification.  Additionally, an after-the-election  
          notice would allay concerns regarding additional costs to local  
          agencies resulting from having to prepare and mail notices  
          within the relatively short time period of 30 days, and ensure  
          that parcel tax proceeds exist to pay for the notice.    

          4.   Who  ?  AB 2476 requires agencies to send notices to "a  
          property owner, if that owner does not reside within the  
          jurisdictional boundaries of the taxing entity proposed to be  
          subject to the new tax, whose name and address appears on the  
          last equalized county assessment roll or the State Board of  
          Equalization assessment roll, as applicable."  Agencies won't  








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          likely know where a property owner resides based on the  
          information they have available.  While voter rolls may provide  
          an indication, a resident property owner isn't necessarily  
          registered to vote.  Determining residency is notoriously  
          difficult in income tax cases, having led to extensive and  
          costly disputes and litigation between taxpayers and the  
          Franchise Tax Board (FTB), and agencies tasked with delivering  
          these notices will likely have less information to do so than  
          FTB.  The Committee may wish to consider whether AB 2476's  
          notification requirement is feasible.

          5.   Parcel taxes in California  .  Between 1983 and November 2012,  
          voters approved 322 parcel taxes in 584 elections.  In response,  
          the Legislature required entities imposing parcel taxes to  
          report specified information to the State Controller, who must  
          add this information in her local government financial  
          transaction reports (AB 2109, Daly, 2014).  For many years,  
          little aggregate information existed regarding parcel taxes, but  
          a recent report from the Public Policy Institute of California  
          collected a great deal of revealing data regarding the way in  
          which local agencies use parcel taxes.  Cities placed 124 parcel  
          tax measures before voters between 2003 and 2012, with 54  
          receiving the required 2/3 vote, with almost all taxes imposed  
          by cities in the San Francisco Bay Area and Los Angeles County.   
          School districts placed 329 parcel tax measures before voters  
          during the same period, with 60% passing, mostly concentrated in  
          the Bay Area.  The report argues that the higher frequency of  
          parcel taxes in the Bay Area is partly explained by higher  
          income levels.  Special districts asked voters to enact parcel  
          taxes 238 times from 2003 to 2012, with 3 out of 4 winning.   
          PPIC argues that the use of the parcel tax is growing, and that  
          it has many advantages over other taxes: it has no deadweight  
          loss, and assigns taxes in line with benefits.  However, PPIC  
          cautions that the tax has a major shortcoming in that many large  
          parcels have little value, and are limited in their capacity to  
          support a parcel tax.  


           Assembly Actions

           Assembly Local Government                    5-0

          Assembly Appropriations                      18-0
          Assembly Floor                               71-4








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           Support and  
          Opposition   (6/23/16)


           Support  :  California Apartment Association, California  
          Association of Realtors, California Chamber of Commerce,  
          California Manufacturers and Technology Association, California  
          Taxpayers Association, Howard Jarvis Taxpayers Association,  
          KernTax, Western Manufactured Housing Communities Association,


           Opposition  :  Association of California Water Agencies,  
          California Professional Firefighters, California Special  
          Districts Association, San Bernardino County District Advocates  
          for Better Schools, San Francisco Unified School District.  



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