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 ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 29, 2015 |Policy Vote: GOV. & F. 7 - 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: Yes | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 18, 2015 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- 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*) SB 477 (Leyva) Page 1 of ? 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 SB 477 (Leyva) Page 2 of ? 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: SB 477 (Leyva) Page 3 of ? 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. SB 477 (Leyva) Page 4 of ? 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. -- END --