BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 2476 |Hearing |6/29/16 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Daly |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |5/27/16 |Fiscal: |Yes | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Grinnell | |: | | ----------------------------------------------------------------- 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, AB 2476 (Daly) 5/27/16 Page 2 of ? 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 AB 2476 (Daly) 5/27/16 Page 3 of ? 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 AB 2476 (Daly) 5/27/16 Page 4 of ? 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 AB 2476 (Daly) 5/27/16 Page 5 of ? 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 AB 2476 (Daly) 5/27/16 Page 6 of ? 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 AB 2476 (Daly) 5/27/16 Page 7 of ? 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. -- END --