BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 477 (Leyva) - Property tax postponement:  mobilehomes and  
          floating homes
          
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          |Version: April 29, 2015         |Policy Vote: GOV. & F. 7 - 0    |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: May 18, 2015      |Consultant: Mark McKenzie       |
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          This bill meets the criteria for referral to the Suspense File. 







          Bill  
          Summary:  SB 477 would authorize qualified mobilehome owners to  
          apply to the State Controller (SCO) to defer payment of property  
          taxes through the Senior Citizens and Disabled Citizens Property  
          Tax Postponement Program (PTP). 


          Fiscal  
          Impact:  
           Unknown expenditures for new PTP loans to mobilehome owners,  
            likely in the range of $150,000 to $200,000 in 2016-17 and  
            2017-18, decreasing to $75,000 to $125,000 in future years,  
            based on historical demand.  Staff assumes higher amounts in  
            the initial years due to pent up demand.  (General Fund*)







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           Unknown SCO administrative costs, potentially over $100,000 in  
            staff time, to process new loans for mobilehome owners.  In  
            addition, SCO administrative and legal staff spend a  
            disproportionate amount of time to recover debts owed for  
            mobilehome accounts, and there is a much higher default and  
            discharge rate for these loans. (General Fund*)

           Minor costs to the Department of Housing and Community  
            Development (HCD) to receive liens for postponed property  
            taxes, amend mobilehome permanent title records to reflect the  
            postponement, and coordinate with the SCO. (General Fund) 

           Likely reimbursable mandate costs for duties imposed on county  
            tax administration officials.  Staff notes that the previous  
            PTP program was deemed to have imposed reimbursable activities  
            on local agencies, resulting in annual General Fund  
            expenditures of up to $285,000 before the program was  
            suspended in 2009.  The amount attributable to county  
            officials' administration of mobilehome transactions is  
            unknown, but likely minor.

          *Staff notes that new loans and SCO administrative costs are  
          paid from the Senior Citizens and Disabled Citizens Property Tax  
          Postponement Fund, a continuously appropriated fund that is  
          General Fund-fungible.  See AB 2231 background.


          Background:  The PTP was originally enacted by Chapter 1242 of 1977 to  
          provide property tax relief to eligible senior citizens, and was  
          later expanded to include blind and disabled persons.  Under the  
          program, eligible persons could defer payment of property taxes  
          by requesting that the SCO pay the amount deferred to the  
          county.  The SCO recovers payment by securing a lien on the  
          property, ensuring repayment of deferred property taxes with  
          accrued interest upon sale of the home, when the title changed  
          hands, or when the homeowner died or moved.  The PTP was funded  
          by an annual General Fund allocation of $12.7 million  
          appropriated to the SCO to pay the face amount of all  
          certificates of eligibility for the program.  The PTP was  
          permanently suspended and all funding was eliminated by SBx3 8  
          (Ducheny), Chap. 4/2008-09 3rd Ex. Session, as a budget action  
          to address severe General Fund shortfalls during the recession.   
          Prior to suspension, the program was available to persons over  








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          the age of 62, as well as blind and disabled persons, with an  
          income of less than $35,500 per year and at least 20 percent  
          equity in their homes.   

          Not accounting for SCO administrative costs, the original PTP  
          was generally self-supporting, and in most years loan repayments  
          exceeded new loans disbursed.  The exception to this pattern was  
          during periods of economic recession.  For example, in the  
          2008-09 fiscal year, just prior to suspension, the loan  
          disbursements exceeded loan repayments by over $4 million.  


          Existing law, AB 2231 (Gordon), Chap 703/2014, re-enacted the  
          PTP program, with modifications that were intended to improve  
          the program's solvency over the long-term and better protect the  
          state's interests.  For instance, the program now requires  
          applicants to have a 40 percent equity stake in their homes,  
          rather than 20 percent, and requires a loan to be due and  
          payable when the taxpayer refinances the home or enters into a  
          reverse mortgage.  AB 2231 also deleted all provisions in the  
          PTP statutes pertaining to mobilehomes, except to wind down PTP  
          mobilehome activity by providing for repayment of existing loans  
          made prior to 2009.


          AB 2231 established the Senior Citizens and Disabled Citizens  
          Property Tax Postponement Fund (PTP Fund), transferring any  
          outstanding loan repayment amounts to the PTP Fund and  
          continuously appropriating revenues to the SCO to fund the  
          program, including administrative costs and property tax  
          postponement disbursements.  The PTP Fund has a cap of $20  
          million in 2016-17, which is lowered to $15 million in 2017-18  
          and each year thereafter.  Any amounts that exceed this cap are  
          transferred to the General Fund.  The fund currently has a  
          balance of about $7 million.




          Proposed Law:  
            SB 447 would restore provisions of law deleted by AB 2231,  
          thereby allowing eligible owners of mobilehomes to apply to the  
          SCO to defer payment of property taxes through the PTP.    
          Specifically, this bill would:








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           Authorize the SCO to accept new claims for property tax  
            postponement from mobilehome owners (including owners of  
            houseboats and floating homes), beginning on July 1, 2016.
           Specify the contents of a lien executed by the SCO that  
            secures all sums paid or owing for postponed property taxes.
           Require the SCO to transmit the notice of lien to HCD, and  
            require HCD to amend the permanent title record of the  
            mobilehome to reflect the property taxes are subject to  
            postponement, which attaches a lien to the mobilehome.  HCD  
            would be required to impose a moratorium on any amendments to  
            the title record for purposes of transferring ownership or  
            creating any security interests until the lien is released.
           Direct the SCO to reduce obligation amounts by the amount of  
            any payments received.
           Provide for the SCO to release the lien upon satisfaction of  
            all amounts it secures, directing the tax collector to remove  
            specified information required of PTP properties from the  
            secured roll, and transmitting release of the lien to the  
            mobilehome owner, who must send the release of lien to HCD  
            with a fee of $6.
           Make conforming changes to require that a mobilehome owner  
            must have a 40 percent equity share in the home to be eligible  
            for a PTP loan.
           Specify that houseboats and floating homes that have  
            delinquent property taxes at the time of application are not  
            eligible for a PTP loan.




          Related  
          Legislation:  AB 587 (Chau), pending in the Assembly  
          Appropriations Committee, would establish a tax abatement  
          program until 2019, allowing mobilehome owners to bring their  
          title into compliance without having to pay all of the past due  
          taxes and fees on the home, often accrued by a previous owner.  
          AB 999 (Daly), pending in the Assembly Appropriations Committee,  
          would establish due process requirements for mobilehome park  
          owners to dispose of an abandoned mobilehome without first being  
          required to pay any unpaid property taxes on the mobilehome. 












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          Staff  
          Comments:  The re-enacted program deliberately excluded  
          mobilehomes because they tend to depreciate in value over time,  
          there is a widespread failure to record changes of ownership  
          (which would trigger a loan repayment), and PTP loans for  
          mobilehomes have historically had higher default and loan  
          discharge rates.  Only about one percent (about $580,000) of  
          outstanding PTP loan balances is attributable to  
          detached/non-affixed mobilehomes (those not attached to a  
          permanent foundation).  Since 2008, 16 percent of the  
          outstanding mobilehome loan accounts have been discharged,  
          representing 35 percent of the outstanding mobilhome loan  
          proceeds.  By comparison, nine percent of the outstanding  
          single-family home PTP loan accounts have been discharged in the  
          same period, representing six percent of outstanding loan  
          proceeds for this group.  The SCO indicates that 67 of the 227  
          outstanding mobilehome PTP loans have gone to collection.  29 of  
          those accounts have been deemed uncollectable and discharged  
          thus far, and the SCO estimates that most of the remaining loans  
          will eventually be discharged.
          Prior to the suspension of the previous PTP in 2009, the SCO  
          authorized an average of 220 loans each year for  
          detached/un-affixed mobilhomes over three years, with an average  
          of $106,400 annually in loan proceeds over that period.  The  
          average loan amount for individual loans ranges from $400 to  
          $500.  Staff estimates that the restored program for mobilehome  
          owners is likely to experience increased demand in the first few  
          years, decreasing to historical average demand in the future.




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