BILL NUMBER: SCA 5 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 16, 2015
AMENDED IN SENATE JULY 8, 2015
AMENDED IN SENATE JUNE 9, 2015
INTRODUCED BY Senators Hancock and Mitchell
MARCH 26, 2015
A resolution to propose to the people of the State of California
an amendment to the Constitution of the State, by adding Section 3.1
to Article XIII thereof, by adding Sections 2.5 and 8.8 to Article
XIII A thereof, by adding Section 14 to Article XIII B thereof, and
by adding Sections 8.6 and 8.7 to Article XVI thereof, relating to
local government finance.
LEGISLATIVE COUNSEL'S DIGEST
SCA 5, as amended, Hancock. Local government finance.
The California Constitution provides that all property is taxable,
unless exempted by the California Constitution or by federal law.
The California Constitution authorizes the Legislature to classify
personal property for differential taxation or for exemption by means
of a statute approved by a 2/3 vote of the membership of each house.
This measure would exempt from taxation for each taxpayer
an amount up to $500,000 of tangible personal property used
exclusively for business purposes. This measure
would prohibit the Legislature from lowering this exemption amount or
from changing its application, but would authorize it to be
increased consistent with the authority described above. This measure
would provide that this provision shall become operative on January
1, 2019.
This measure, for owners of commercial and industrial property
subject to reassessment, who also operate a business or businesses on
that property, where the increase in assessed value as a result of
this measure exceeds 25% compared to the assessed value of the
property prior to the operation of this measure, would exempt that
portion of the assessed value that exceeds 25% as so described from
taxation for a period of 5 years if specified conditions are met.
The California Constitution generally limits ad valorem taxes on
real property to 1% of the full cash value of that property. For
purposes of this limitation, "full cash value" is defined as the
assessor's valuation of real property as shown on the 1975-76 tax
bill under "full cash value" or, thereafter, the appraised value of
that real property when purchased, newly constructed, or a change in
ownership has occurred.
This measure, commencing on the lien date for the 2018-19 fiscal
year, would require the full cash value of commercial and industrial
property, as defined, to be the fair market value of that property as
of the lien date. This measure, for the 2018-19 fiscal year, would
require only 50% of those properties that have not been reassessed at
fair market value, as specified, to be assessed at fair market
value, and by the 2019-20 fiscal year would require all other
properties that have not been brought to fair market value to be
assessed at fair market value. This measure would require owners of
property subject to reassessment as so described to pay only a
portion, as provided, of any increase in property tax due in the
first year and second years after initial reassessment to fair market
value.
This measure would establish the Local School and Community
College Property Tax Fund in the State Treasury, which would be
continuously appropriated for the support of school districts,
charter schools, schools operated by county offices of education, and
community college districts. The measure would require the
Controller to allocate 11% of the moneys in the fund to community
college districts based on an equal amount per unit of full-time
equivalent student receiving educational services, and 89% of the
moneys in the fund to school districts, charter schools, and county
offices of education. For school districts, charter schools, and
county offices of education, the measure would require the
Superintendent of Public Instruction to allocate the moneys based on
a formula that would include a base grant, a supplemental grant, and
a concentration grant, as specified. The measure would require moneys
from the fund to support the K-14 educational program for
instructional improvement and accountability, and would prohibit them
from being used to pay administrative costs. The measure would
require school districts, charter schools, and county offices of
education to demonstrate through their local control and
accountability plans that they are increasing or improving services
for unduplicated pupils in proportion to the increase in funds they
receive pursuant to those supplemental and concentration grant
allocations. The measure would prohibit moneys in the fund from being
subject to appropriation, reversion, or a transfer by the
Legislature, Governor, Director of Finance, or Controller for any
purpose other than those specified in the measure, or from being
loaned to the General Fund or any other fund of the state or any
local government fund. The measure would, among other things, provide
that moneys appropriated by the fund shall not be applied toward the
minimum funding requirements for school districts and community
college districts imposed by Section 8 of Article XVI of the
California Constitution, and that they shall not be considered for
purposes of calculations relating to the Budget Stabilization Account
or the Public School System Stabilization Account.
This measure, for each fiscal year beginning with the 2018-19
fiscal year to the 2020-21 fiscal year, inclusive, would require the
county assessor to make specified calculations to determine the total
"baseline assessed value" and the "incremental assessed percentage"
of commercial and industrial property, and to identify the "total
revised assessed value" of all commercial and industrial property in
the county as determined following the reassessment of commercial and
industrial property. This measure would require the county assessor
to make additional calculations using the total revised assessed
value and the incremental assessed value to determine the incremental
revenues available for distribution. This measure, beginning with
the 2018-19 fiscal year and for each fiscal year thereafter, would
require an amount equal to the reduction in revenues derived from the
taxes imposed pursuant to the Personal Income Tax Law and the
Corporation Tax Law for each county resulting from the higher
property taxes due to the reassessment of commercial and industrial
properties and the lower property taxes due to the exemptions
described above as estimated by the Franchise Tax Board, to be
transferred by each county auditor to the state General Fund and the
Mental Health Services Fund, as provided. This measure, beginning
with the 2018-19 fiscal year to the 2020-21 fiscal year, inclusive,
would require the county auditor, after transferring the amounts as
so described to the state General Fund and the Mental Health Services
Fund, to make specified determinations and calculations with respect
to the remaining incremental revenues, and to transfer specified
amounts to the Controller for deposit in the Local School and
Community College Property Tax Fund, for allocation and distribution,
as described above. This measure would require the balance of the
incremental revenues remaining after transferring the amounts as so
described to the Controller to be allocated among local agencies.
This measure would require the county auditor to report the
incremental revenues available for distribution and calculation made,
along with supporting documentation, to the Controller, and would
require the Controller to certify that the calculation was properly
made and to post the percentage figure for each county on the
Controller's Internet Web site. This measure, for the 2021-22 fiscal
year, would require the county assessor to perform the calculations
described above, and would require the county auditor to report the
resulting percentage to the Controller. This measure, for the 2021-22
fiscal year and each fiscal year thereafter, would require the
county auditor to make the determinations and calculation described
above, and to transfer the resulting property tax revenues to the
Controller for deposit in the Local School and Community College
Property Tax Fund, and would require the balance of the incremental
revenues to be allocated among local agencies.
This measure would require all local education agencies, community
colleges, counties, cities and counties, cities, and special
districts that receive funds from the new revenues generated by the
reassessment of commercial and industrial properties to publicly
disclose the amount of property tax revenues received, as specified,
and how those revenues were spent, and to publish online all public
disclosures, with a copy of each disclosure to the Controller. This
measure would require all annual public audits required of local
education agencies, community colleges, counties, cities and
counties, cities, and special districts that receive funds from the
new revenues generated by the reassessment of commercial and
industrial properties to disclose the amount of property tax revenues
received, as specified, and to confirm whether the use of those
revenues is consistent with the requirements of this measure.
This measure would authorize expenses incurred by local education
agencies to comply with these audit and disclosure requirements to be
paid with funding from the Local School and Community College
Property Tax Fund.
The California Constitution prohibits the annual appropriations
subject to limitation of any entity of state or local government from
exceeding its adjusted annual appropriations limit. The California
Constitution defines "appropriations subject to limitation" as any
authorization to expend during a fiscal year the proceeds of taxes
levied by or for that entity, and defines "proceeds of taxes" to
include all tax revenues and the proceeds to an entity of government
from specified sources.
This measure would prohibit proceeds of taxes, and appropriations
subject to limitation of each entity of government, from including
tax revenues generated by the reassessment of commercial and
industrial property under this measure.
The California Constitution requires the state, whenever the
Legislature or a state agency mandates a new program or higher level
of service on any local government, to provide a subvention of funds
to reimburse the local government, with specified exceptions.
This measure would exclude the duty to collect the tax revenues
generated by the reassessment of commercial and industrial property
under this measure from being considered a new program or higher
level of service mandated by the state. This measure would, however,
authorize the board of supervisors of a county or city and county to
direct the county auditor to allocate to the county or city and
county an amount equal to the actual direct administrative costs
associated with the implementation of the reassessment of commercial
and industrial property.
Vote: 2/3. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
WHEREAS, The majority of commercial and industrial properties are
assessed at or close to their actual market value, and their owners
are paying their share of property taxes to help support schools and
other local services. But many other commercial and industrial
properties currently are assessed far below their actual value; and
WHEREAS, According to a recent study by USC Dornsife researchers,
owners of these underassessed commercial and industrial properties
are avoiding over $9 billion in local property taxes that should be
going to support schools, community colleges, and other community
services such as public safety, fire protection, libraries, and
parks; and
WHEREAS, Proposition 13 was approved by voters in 1978 to protect
homeowners from skyrocketing property taxes. But since then,
under-assessment underassessment of commercial
and industrial properties has contributed to a tax shift that has
substantially increased the share of property taxes being paid by
owners of residential properties, including both homeowners and
residential rental property; and
WHEREAS, Since 1978 the residential share of assessed value
statewide has increased from 55% to 72% of the total while the
commercial, industrial, and agricultural share of assessed value has
decreased from 45% to just 28%; and
WHEREAS, The combination of Proposition 13 and the Williamson Act
have been effective tools in the preservation of agricultural land
and should be protected; and
WHEREAS, When homeowners sell their homes, the property is
reassessed to the full market value of the property based on the
sales price. But many large corporations and wealthy individuals are
able to take advantage of loopholes and complex stock manipulations
to avoid reassessment when a commercial or industrial property
changes hands. For example, in one widely publicized transaction, a
wealthy CEO was able to structure the purchase of a $200 million
hotel property in a way that prevented reassessment, avoiding more
than $1.1 million a year in local property taxes; and
WHEREAS, California's current system of taxing commercial and
industrial properties is an impediment to fair competition. It favors
under-assessed underassessed
businesses over other businesses competing for the same customers
that are assessed at their actual value. It allows owners of
under-assessed underassessed properties to
avoid paying their share of taxes to support the local public
services they benefit from just as much as the fully assessed
businesses that are paying their fair share; and
WHEREAS, The current system of taxing commercial and industrial
properties also creates perverse incentives that discourage owners
from investing in improvements in order to avoid reassessment, while
these same underassessed owners are being unfairly advantaged over
other commercial and industrial property owners, starting up or
expanding an existing business, who are assessed at the full market
value of their property; and
WHEREAS, The current system of assessing commercial and industrial
properties has had the unintended consequence of encouraging sprawl
and discouraging "smart growth," which is an inefficient use of
scarce resources such as energy, water, and land; and
WHEREAS, While the property tax on business equipment and fixtures
is an irritating burden for small businesses, particularly for those
attempting to start up or expand, it also provides revenues that
support local services. Because this measure eliminates the
under-assessment underassessment of commercial
and industrial properties and thereby provides other revenue to
support local services, it also can provide businesses with an
exemption of up to $500,000 for equipment and fixtures. A $500,000
exemption helps all businesses, and will eliminate the tax on
equipment and fixtures entirely for 90% of businesses whether they
own and operate their own small business or rent their place of
business; and
WHEREAS, If commercial and industrial properties pay their fair
share of taxes, more money will be available for our public schools,
which remain funded well below the national average. Because of the
unique interactions between property tax revenues and the Proposition
98 minimum funding guarantee, however, the best way to ensure that
all school districts benefit equally from these new property tax
revenues is to place them in a special fund outside Proposition 98
and distribute them based on enrollment, with more revenues going to
those districts that have higher proportions of low-income or English
learner students and foster youth; and
WHEREAS, If California were a country, it would have the eighth
largest economy in the world. California corporations are enjoying
record profits and many businesses are starting up, expanding, and
relocating here, even though some businesses do leave California. The
complaints of some businesses and their spokespersons about high
taxes are not an excuse for corporations and wealthy investors to
avoid paying their fair share of local property taxes as do other
businesses. Local communities are strengthened when everyone is
contributing to the common good by paying their share to support
schools, job training, public safety, fire protection, and other
local services; and
WHEREAS, Reforming commercial and industrial property assessments
to bring under-assessed underassessed
properties up to their full value will remove tax-induced
disincentives to investment in commercial and industrial property,
provide a level playing field for businesses to compete, and require
owners of under-assessed underassessed
properties to join with the majority of businesses already paying
their fair share to support local schools and other community
services; and
WHEREAS, Proposition 13 limits property tax rates to 1% of
assessed value. Requiring assessors to bring assessments of
under-assessed underassessed commercial and
industrial properties up to their actual market value will not affect
the 1% limitation on rates in any way. Property tax rates on
California businesses will continue to be among the lowest in the
country; now, therefore, be it
Resolved by the Senate, the Assembly concurring, That the
Legislature of the State of California at its 2015-16 Regular Session
commencing on the first day of December 2014, two-thirds of the
membership of each house concurring, hereby proposes to the people of
the State of California that the Constitution of the State be
amended as follows:
First-- That it is the intent of the people of the State of
California to do all of the following in this measure:
(a) Eliminate the inequities and impediments to economic growth
caused by current laws governing the assessment of commercial and
industrial properties, by requiring all commercial and industrial
properties to be assessed at their full market value and reducing the
property tax on business equipment and fixtures.
(b) Preserve in every way Proposition 13's protections for
homeowners and for rental residential properties. This measure only
affects the assessment of taxable commercial and industrial property.
(c) Make no change to existing laws affecting the taxation or
preservation of agricultural land.
(d) Make sure schools, community colleges, counties, cities and
counties, cities, and special districts are appropriately spending
any new revenues they receive from this measure by requiring that new
revenues and their expenditure be publicly disclosed and annually
audited and that all required disclosures and audits are easily
accessible online.
(e) Authorize the distribution among local governments of any new
revenues resulting from the implementation of this law in the same
manner as other property tax revenues.
(f) Ensure that the portion of any new revenues going to local
schools and community colleges is treated as new revenues that are in
addition to all other funding for schools and community colleges,
and is allocated in a manner that benefits all schools and community
colleges consistent with constitutional requirements. Accordingly,
these additional funds for schools and community colleges shall not
be considered funds of the State, shall not be subject to Proposition
98 or the Proposition 2 rainy day fund, and shall not be subject to
appropriation by the Legislature. The funds will be allocated to
school districts and community college districts based on enrollment.
School districts with higher proportions of low-income and English
learner students and foster youth will receive additional funds to
provide more or better services to those students.
(g) Assist small businesses, whether they own or rent their place
of business, by reducing the business tangible personal property tax
on equipment and fixtures for each business by exempting $500,000 of
that property from taxation. This would eliminate the tax on
equipment and fixtures for about 90 percent of all California
businesses. The Legislature would be prohibited from lowering this
exemption but would be authorized to increase it.
(h) Provide for the phase in of the assessment of
under-assessed underassessed commercial and
industrial properties to give county assessors time to effectively
implement the new law.
(i) Provide owners of under-assessed commercial and industrial
properties time to meet their obligations under the law by phasing in
assessment increases resulting from the initial implementation of
this law. Small business owners will be eligible for additional
assistance in complying with the law through an additional five-year
phase-in for small business owner-operators.
Second-- That Section 3.1 is added to Article XIII thereof, to
read:
SEC. 3.1. (a) For each taxpayer paying the tax on tangible
personal property used exclusively for business
purposes, an amount of up to five hundred thousand dollars ($500,000)
per taxpayer is exempt from taxation. Fixtures shall be
included as tangible personal property subject to this exemption, but
aircraft and vessels shall not be included. The Legislature shall
not lower this exemption amount or change its application but
otherwise may increase it consistent with the authority enumerated in
Section 2.
(b) (1) For owners of property subject to reassessment under
Section 2.5 of Article XIII A who operate a business or businesses on
that property, where the increase in assessed value as a result of
this measure exceeds 25 percent compared to the assessed value of the
property prior to the operation of this measure, that portion of the
assessed value that exceeds 25 percent compared to the assessed
value of the property prior to the operation of this measure shall be
exempt from taxation for a period of five years following the
reassessment of the property as a result of this measure, provided
that all of the following conditions are met:
(A) The owner uses a majority of the property for their own
business purpose.
(B) The total fair market value is less than three million dollars
($3,000,000) for the entire property, including land and buildings.
Property owners owning properties in a single county shall certify
under penalty of perjury that the aggregate fair market value of all
their properties in that county does not exceed three million dollars
($3,000,000) in order to qualify for this exemption. Property owners
owning properties in more than one county must certify under penalty
of perjury that the aggregate fair market value of all of their
properties statewide does not exceed three million dollars
($3,000,000) in order to qualify for this exemption.
(2) This exemption shall expire five years from its initial
application to a commercial or industrial property, at which time the
property owner shall be liable for the full amount of property taxes
levied on the property pursuant to the operation of this measure.
However, property owners who have realized a reduction in property
taxes as a result of the operation of this subdivision are not liable
for the property taxes exempted for the duration of the operation of
this exemption.
Third-- That Section 2.5 is added to Article XIII A thereof, to
read:
SEC. 2.5. (a) (1) This section shall not apply to residential
property as defined in this section, whether it is occupied by a
homeowner or a renter. Residential property as defined in this
section shall be assessed consistent with Section 2 of Article XIII
A. This section shall also not apply to real property used for
commercial agricultural production as defined in this section.
Property used for commercial agricultural production as defined in
this section shall be assessed consistent with Section 2 of Article
XIII A.
(2) Notwithstanding Section 2 of Article XIII A, for the lien date
for the 2018-19 fiscal year and each lien date thereafter, the "full
cash value" of commercial and industrial real property that is not
used for commercial agricultural production or is otherwise exempt
under the Constitution or a statute enacted pursuant to the authority
in Section 2 of Article XIII is the fair market value of that
property as of that date, except as provided in subdivisions (b) and
(c).
(b) (1) For the 2018-19 fiscal year only, the requirement that
those commercial and industrial properties subject to reassessment
under this section be assessed at fair market value shall apply only
to the 50 percent of such properties that have not been brought to
fair market value for any part of their property for the greatest
number of years prior to the 2018-19 lien date.
(2) For the 2019-20 and 2020-21 fiscal years only, the assessed
value of properties assessed at full market value pursuant to
paragraph (1) shall be increased by the rate of inflation, but not
more than 2 percent. In no event, however, shall the assessed
value of a property exceed the fair market value as of the
lien date during this period.
(3) Owners of property subject to this subdivision shall be
required to pay one-third of the amount of any increase in property
tax due and payable resulting from initial assessment to fair market
value in the first year upon receiving the new valuation required by
paragraph (1), two-thirds of the amount of any increase in property
tax due and payable in the second year, and the full amount of any
property tax due and payable in the third year after initial
reassessment to fair market value and in subsequent years thereafter.
The balance of the amounts due for the first and second years
following initial assessment to full market value are hereby
forgiven.
(c) (1) All other commercial and industrial properties subject to
reassessment under this section shall be assessed at fair market
value by the 2019-20 lien date.
(2) For the 2020-21 fiscal year only, the assessed value of
properties assessed at full market value pursuant to paragraph (1)
shall be increased by the rate of inflation, but not more than 2
percent. In no event, however, shall the assessed value of a
property exceed the fair market value as of the lien date during this
period.
(3) Owners of property subject to this subdivision shall be
required to pay one-half of the amount of any increase in property
tax due and payable resulting from initial assessment to fair market
value in the first year upon receiving the new valuation required by
paragraph (1) and the full amount of any property tax due and payable
in the year following initial reassessment and in subsequent years
thereafter. The balance of the amount due for the first year
following initial assessment to full market value are hereby
forgiven.
(d) For purposes of this section:
(1) "Commercial and industrial real property" means any real
property that is not residential property or not used for commercial
agricultural production.
(2) "Residential property" shall include both single-family and
multiunit structures, and the land on which such structures are
constructed, constructed or placed, that
are intended to be used and are used for long-term residential
occupancy, but shall exclude hotels, motels, and similar structures
that are used primarily for transient and nonpermanent residence.
(3) "Real property used for commercial agricultural production" is
real property that is used and zoned for producing commercial
agricultural commodities and is real property for which
either of the following applies:
(A) The real property is an unimproved parcel to which both of the
following apply:
(i) The parcel is used and zoned for producing commercial
agricultural commodities.
(ii) The
the parcel does not contain a single-family residence or a
multifamily residence that was subdivided in accordance with the
Subdivision Map Act (Division 2 (commencing with Section 66410) of
Title 7 of the Government Code), or any successor to that law, or
that was described and conveyed in one or more deeds separating the
parcel from all adjoining property.
(B) The parcel of real property contains only living improvements.
Improvements other than those intended and used for habitation shall
be considered commercial and industrial property for purposes of
this section.
(e) Notwithstanding subdivision (a), it is the intent of the
voters in this section to provide a transition to fair market value
as provided in subdivisions (b) and (c), for the purposes of ensuring
a reasonable workload and implementation period for county assessors
and taxpayers.
Fourth-- That Section 8.8 is added to Article XIII A thereof, to
read:
SEC. 8.8. (a) All local education agencies, community
colleges, counties, cities and counties, cities, and special
districts that receive funds from the new revenues generated by
Section 2.5 of Article XIII A shall publicly disclose each year,
including in their annual budgets, the amount of property tax
revenues they received for that fiscal year as the result of Section
2.5 of Article XIII A and how those revenues were spent.
(b) All annual public audits required of local education agencies,
community colleges, counties, cities and counties, cities, and
special districts that receive funds from the new revenues generated
by Section 2.5 of Article XIII A shall disclose the amount of
property tax revenues received for that fiscal year as the result of
Section 2.5 of Article XIII A and confirm whether the use of those
revenues is consistent with the requirements of this measure.
(c) All local education agencies, community colleges, counties,
cities and counties, cities, and special districts receiving new
revenues generated by Section 2.5 of Article XIII A shall publish
online all public disclosures required by this section, with a copy
of each disclosure to the Controller.
(d) Expenses incurred by local education agencies receiving new
revenues generated by Section 2.5 of Article XIII A to comply with
the audit and disclosure requirement of this section may be paid with
funding from the Local School and Community College Property Tax
Fund, and shall not be considered administrative costs for purposes
of subdivision (b) of Section 8.7 of Article XVI.
Fifth-- That Section 14 is added to Article XIII B thereof, to
read:
SEC. 14. (a) For purposes of this article, "proceeds of taxes"
shall not include the revenues generated by Section 2.5 of Article
XIII A.
(b) For purposes of this article, "appropriations subject to
limitation" of each entity of government shall not include
appropriations of revenues generated by Section 2.5 of Article XIII
A.
(c) The duty to collect the revenues generated by Section 2.5 of
Article XIII A shall not be considered a new program or higher level
of service mandated by the State for purposes of this article. The
board of supervisors of a county or city and county, upon the
adoption of a method identifying the actual direct administrative
costs identified in Section 75.60 of the Revenue and Taxation Code,
as that section read on July 1, 2015, that are associated with the
implementation of Section 2.5 of Article XIII A, may direct the
county auditor to allocate to the county or city and county, prior to
any allocation of property tax revenues, an amount equal to the
actual direct administrative costs, but not to exceed 3 percent of
the revenues that have been collected as a result of the
implementation of Section 2.5 of Article XIII A. The amount
determined to provide reimbursement for the actual direct
administrative costs of implementing Section 2.5 of Article XIII A
shall be deducted proportionately from the allocations to be provided
to cities, the county, and special districts, but not deducted from
the school share of any increased allocation. The board of
supervisors shall identify the ongoing costs of implementing Section
2.5 of Article XIII A annually.
Sixth-- That Section 8.6 is added to Article XVI thereof, to read:
SEC. 8.6. (a) For each fiscal year beginning with the 2018-19
fiscal year to the 2020-21 fiscal year, inclusive, county assessors
shall calculate the following:
(1) The total "baseline assessed value" of all commercial and
industrial property in the county subject to Section 2.5 of Article
XIII A. The total "baseline assessed value" shall be calculated as
follows:
(A) The county assessor shall identify the total assessed value of
commercial and industrial property as determined pursuant to Chapter
1 (commencing with Section 50) of Part 0.5 of Division 1 of the
Revenue and Taxation Code, as that chapter read on July 1, 2015, for
the 2017-18 fiscal year.
(B) The amount in subparagraph (A) shall be increased by the
amount for that fiscal year determined pursuant to Section 51 of the
Revenue and Taxation Code, as that section read on July 1, 2015.
(C) The county assessor shall add to the amount determined
pursuant to subparagraph (B) the incremental increase in assessed
value of commercial and industrial property resulting from the sale
or transfer of properties for purposes of the respective January 1
lien dates beginning with the 2018-19 fiscal year to the 2020-21
fiscal year, inclusive, provided the sale or transfer would have
triggered reassessment pursuant to Chapter 2 (commencing with Section
60) of Part 0.5 of Division 1 of the Revenue and Taxation Code, as
that chapter read on July 1, 2015.
(D) The county assessor shall add to the amount determined
pursuant to subparagraph (C) the incremental increase in assessed
value of commercial and industrial property resulting in new
construction for purposes of the respective January 1 lien dates
beginning with the 2018-19 fiscal year to the 2020-21 fiscal year,
inclusive, as determined pursuant to Chapter 3 (commencing with
Section 70) of Part 0.5 of Division 1 of the Revenue and Taxation
Code, as that chapter read on July 1, 2015.
(2) The county assessor shall identify the total "revised assessed
value" of all commercial and industrial property in the county as
determined following the reassessment required by Section 2.5 of
Article XIII A for each fiscal year beginning with the 2018-19 fiscal
year to the 2020-21 fiscal year, inclusive, except that for the
2018-19 and 2019-20 fiscal years, the amount of assessed value shall
be reduced to reflect the amounts actually due and payable pursuant
to subdivisions (b) and (c) of Section 2.5 of Article XIII A.
(3) For each fiscal year beginning with the 2018-19 fiscal year to
the 2020-21 fiscal year, inclusive, the county assessor shall
subtract the amount determined pursuant to subparagraph (D) of
paragraph (1) from the amount determined pursuant to paragraph (2).
(4) For each fiscal year beginning with the 2018-19 fiscal year to
the 2020-21 fiscal year, inclusive, the county assessor shall divide
the amount determined pursuant to paragraph (3) by the amount
determined pursuant to paragraph (2). The resulting percentage shall
be known as the "incremental assessed percentage" of commercial and
industrial property in the county subject to Section 2.5 of Article
XIII A.
(b) For each fiscal year beginning with the 2018-19 fiscal year to
the 2020-21 fiscal year, inclusive, county assessors shall multiply
the total revised assessed value by the incremental assessed
percentage and a tax rate of one percent to determine the incremental
revenues available for distribution as the result of Section 2.5 of
Article XIII A.
(c) For each fiscal year beginning with the 2018-19 fiscal year,
all of the following shall apply:
(1) An amount equal to the reduction in revenues derived from the
taxes imposed pursuant to the Personal Income Tax Law (Part 10
(commencing with Section 17001) of Division 2 of the Revenue and
Taxation Code) and the Corporation Tax Law (Part 11 (commencing with
Section 23001) of Division 2 of the Revenue and Taxation Code), as
those laws read on July 1, 2015, for each county resulting from the
higher property taxes due to the implementation of Section 2.5 of
Article XIII A and the lower property taxes due to the implementation
of Section 3.1 of Article XIII, as estimated by the Franchise Tax
Board each year for that fiscal year, shall be transferred by May 15
of each year beginning with the 2018-19 fiscal year and each fiscal
year thereafter by each county auditor to the Controller for deposit
in the General Fund and the Mental Health Services Fund,
respectively.
(2) An amount equal to the reduction in property taxes resulting
from the exemption provided pursuant to subdivision (a) of Section
3.1 of Article XIII shall be calculated by the county auditor
beginning with the 2019-20 fiscal year and each fiscal year
thereafter. For purposes of calculating the aggregate amount of
personal property taxes exempted under that subdivision for each
fiscal year, the auditor shall apply the average annual rate of
growth of tangible personal property used exclusively
for business purposes for the period from the 2012-13
fiscal year to the 2017-18 fiscal year, inclusive, to the total
tangible personal property used exclusively for
business purposes for the prior fiscal year and subtract the amount
of tangible personal property used exclusively for
business purposes not exempted for that fiscal year.
(3) An amount equal to the value of foregone property tax revenues
pursuant to subdivision (b) of Section 3.1 of Article XIII shall be
calculated by the county auditor.
(d) For each fiscal year beginning with the 2018-19 fiscal year to
the 2020-21 fiscal year, inclusive, the county auditor shall do the
following with the incremental revenues remaining after deducting
from those revenues the amounts determined pursuant to subdivision
(c):
(1)
Determine the combined weighted average tax rate in each county for
K-12 school districts, county offices of education, and community
college districts. The weighted average tax rate in each county for
K-12 school districts, county offices of education, and community
college districts shall be calculated by the county auditor by
averaging the effective combined tax rate for all of the K-12 school
districts, the county office of education, and all community college
districts in each tax rate area using weights for each tax rate area
determined by calculating the share of the total assessed value of
commercial and industrial property for each tax rate area of the
total assessed value of commercial and industrial property as
determined pursuant to Chapter 1 (commencing with Section 50) of Part
0.5 of Division 1 of the Revenue and Taxation Code, as that chapter
read on July 1, 2015, for the 2017-18 fiscal year for all tax rate
areas in the county.
(2) Multiply the incremental revenues remaining after deducting
the amounts determined pursuant to subdivision (c) by the combined
weighted average tax rate determined pursuant to paragraph (1).
One-half of the resulting amount of property tax revenue shall be
transferred by the county auditor to the Controller on February 1 of
each fiscal year and one-half of the resulting amount of property tax
revenue shall be transferred to the Controller on June 1 of each
fiscal year, and shall be deposited into the Local School and
Community College Property Tax Fund for allocation and distribution
as set forth in Section 8.7 of Article XVI.
(3) The balance of the incremental revenues remaining after
deducting the amounts determined pursuant to subdivision (c) and the
amount transferred pursuant to paragraph (2) shall be allocated to
local agencies pursuant to Chapter 6 (commencing with Section 95) of
Part 0.5 of Division 1 of the Revenue and Taxation Code, as that
chapter read on July 1, 2015.
(4) Report the incremental revenues available for distribution
determined pursuant to subdivision (b), the deductions attributable
to subdivision (c), and the combined weighted average tax rate in
each county for K-12 school districts, county offices of education,
and community college districts determined pursuant to paragraph (1),
along with supporting documentation, to the Controller who shall
certify that the calculation was properly calculated and post the
percentage figure for each county on the Controller's Internet Web
site.
(e) (1) For the 2021-22 fiscal year, the county assessor shall
perform the calculations specified in paragraphs (1) to (4),
inclusive, of subdivision (a) for that fiscal year. The county
auditor shall report the resulting percentage figure to the
Controller who shall certify that the calculation was properly
calculated and post the percentage figure for each county on the
Controller's Internet Web site.
(2) (A) For the 2021-22 fiscal year and each fiscal year
thereafter, the county auditor shall perform the calculation
specified in paragraph (2) of subdivision (d) using the result of the
calculation in paragraph (1) and the percentage determined in
paragraph (1) of subdivision (d) and shall transfer one-half of
the resulting amount of property tax revenue to the Controller
on February 1 of each fiscal year and transfer one-half of the
resulting amount of property tax revenue to the Controller on June 1
of each fiscal year, for deposit in the Local School and Community
College Property Tax Fund for allocation and distribution as set
forth in Section 8.7 of Article XVI.
(B) The balance of the incremental revenues remaining after
deducting the amounts determined pursuant to subdivision (c) and the
amount transferred pursuant to subparagraph (A) shall be allocated to
local agencies pursuant to Chapter 6 (commencing with Section 95) of
Part 0.5 of Division 1 of the Revenue and Taxation Code as that
chapter read on July 1, 2015.
(C) In making the calculation in subparagraph (A), the county
auditor shall calculate the amount of total revised assessed value as
if no exemption of property taxes were being provided pursuant to
subdivision (b) of Section 3.1 of Article XIII.
Seventh-- That Section 8.7 is added to Article XVI thereof, to
read:
SEC. 8.7. (a) The Local School and Community College Property
Tax Fund is hereby created in the State Treasury to be held in trust
for the purposes set forth below and is continuously appropriated for
the support of school districts, charter schools, schools operated
by county offices of education, and community college districts, as
follows:
(1) Eleven percent to community colleges. Each year the Controller
shall allocate the funds to each community college district based on
an equal amount per unit of full-time equivalent student receiving
educational services.
(2) Eighty-nine percent to school districts, charter schools, and
county offices of education for schools operated by the county
superintendent of schools.
(3) Each year the Controller shall allocate the funds to school
districts, charter schools, and county offices of education based on
the following formula, to be calculated annually by the
Superintendent of Public Instruction:
(A) A base grant based on an equal amount per enrolled student in
each school district or charter school, provided, however, that the
base grant shall be adjusted by grade span, as follows: no grade span
adjustment per enrolled student in grades kindergarten to grade 3,
inclusive; 1.5 percent more per enrolled student in grades 4 to 6,
inclusive; 4.5 percent more per enrolled student in grades 7 and 8;
and 21 percent more per enrolled student in grades 9 to 12,
inclusive. County offices of education shall receive a base grant per
student enrolled in schools operated by the county superintendent of
schools that is 33 percent more per enrolled student than the base
grant for school districts, but shall receive no grade span
adjustments to the base grant.
(B) A supplemental grant add-on for school districts and charter
schools equal to 20 percent of the base grant calculated pursuant to
subparagraph (A), multiplied by the percentage of unduplicated pupils
in that school district or charter school, and a supplemental grant
add-on for county offices of education equal to 35 percent of the
base grant calculated pursuant to subparagraph (A), multiplied by the
percentage of unduplicated pupils enrolled in schools operated by
the county superintendent of schools.
(C) A concentration grant add-on for school districts and charter
schools equal to 50 percent of the base grant calculated pursuant to
subparagraph (A), multiplied by the percentage of unduplicated pupils
in that school district or charter school in excess of 55 percent of
the total enrollment in that school district or charter school, and
a concentration grant add-on for county offices of education equal to
35 percent of the base grant calculated pursuant to subparagraph
(A), multiplied by the percentage of unduplicated pupils enrolled in
schools operated by the county superintendent of schools in excess of
50 percent of the total enrollment in those schools.
(D) An amount equal to 10.4 percent of the base grant per enrolled
student in kindergarten and grades 1 to 3, inclusive, for school
districts and charter schools that maintain an average class
enrollment of not more than 24 students for each schoolsite in
kindergarten and grades 1 to 3, inclusive, unless a collectively
bargained alternative annual average class enrollment for each
schoolsite in those grades is agreed to by the school district or
charter school.
(E) The Superintendent of Public Instruction shall subtract from
the total of the amounts computed pursuant to subparagraphs (A) to
(D), inclusive, the amount of property tax revenue received by a
basic aid school district or basic aid charter school that exceeds
the total amount of funding it would have been entitled to that
fiscal year pursuant to the local control funding formula established
pursuant to Article 2 (commencing with Section 42238) of Chapter 7
of Part 24 of Division 3 of Title 2 of the Education Code, as that
article read on July 1, 2015. For purposes of this section, a school
district or charter school that does not receive an apportionment of
state funds pursuant to the local control funding formula shall be
considered a basic aid school district or a basic aid charter school.
(F) For purposes of this section, enrollment shall be measured in
units of average daily attendance or its equivalent, and
"unduplicated pupil" shall mean a student who is classified as either
an English learner, eligible for a free or reduced-price meal, or a
foster youth, as defined in Section 42238.01 of the Education Code,
provided that a student may only be counted once for purposes of
making supplemental and concentration grant adjustments, regardless
of whether she or he falls within more than one of these student
subgroups. Students shall not be counted as enrolled in a school
operated by a county superintendent of schools if they are otherwise
counted as enrolled in a school district for purposes of calculating
that school district's local control funding formula allocation.
(b) Moneys in the Local School and Community College Property Tax
Fund are dedicated to the support of the K-14 educational program for
instructional improvement and accountability, and shall not be used
to pay administrative costs. School districts, charter schools, and
county offices of education shall demonstrate through their local
control and accountability plans that they are increasing or
improving services for unduplicated pupils in proportion to the
increase in funds allocated pursuant to subparagraphs (B) and (C) of
paragraph (3) of subdivision (a).
(c) Notwithstanding any other law, the moneys deposited in the
Local School and Community College Property Tax Fund shall not be
subject to appropriation, reversion, or transfer by the Legislature,
the Governor, the Director of Finance, or the Controller for any
purpose other than those specified in this section, nor shall such
revenues be loaned to the General Fund or any other fund of the State
or any local government fund.
(d) Moneys allocated to community college districts, county
offices of education, school districts, or charter schools from the
Local School and Community College Property Tax Fund shall
supplement, and shall not replace, other funding for education. Funds
deposited into the Local School and Community College Property Tax
Fund and allocated from the Local School and Community College
Property Tax Fund shall not be deemed to be part of "total
allocations to school districts and community college districts from
General Fund proceeds of taxes appropriated pursuant to Article XIII
B and allocated local proceeds of taxes" for purposes of paragraphs
(2) and (3) of subdivision (b) of Section 8 or for purposes of
Section 21. Revenues generated by Section 2.5 of Article XIII A shall
not be deemed to be "General Fund revenues which may be appropriated
pursuant to Article XIII B" for purposes of paragraph (1) of
subdivision (b) of Section 8, Section 20, or Section 21, nor shall
they be considered in the determination of "per capita General Fund
revenues" for purposes of subdivisions (b) and (e) of Section 8.
Eighth-- This measure shall become operative on January 1, 2018,
except that subdivision (a) of Section 3.1 of Article XIII shall
become operative on January 1, 2019.