BILL ANALYSIS Ó
SB 975
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Date of Hearing: June 15, 2016
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Susan Talamantes Eggman, Chair
SB
975 (Committee on Governance and Finance) - As Amended March 29,
2016
SENATE VOTE: 38-0
SUBJECT: Tax increment: property tax override rates.
SUMMARY: Prohibits property tax increment financing districts
from diverting property tax revenues that are derived from a
voter approved override property tax rate. Specifically, this
bill:
1)Prohibits, notwithstanding any other law, for the purpose of
any law authorizing the division of taxes levied upon taxable
property (tax increment financing), revenues from
voter-approved property tax rates outside the 1% limit on ad
valorem property taxes (property tax override rates) from
being divided into property tax increment revenues.
2)Prohibits, 1), above, from applying to the allocation of
property taxes, pursuant to specified statutes which govern
the dissolution of redevelopment agencies.
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FISCAL EFFECT: None
COMMENTS:
1)Bill Summary. This bill prohibits property tax increment
financing districts from diverting property tax revenues that
are derived from a voter-approved override property tax rate.
2)Author's Statement. According to the author, "Simulating
local economic development by building public projects
financed with property tax increment revenues can be a
sensible policy in many communities. However, this worthwhile
policy should not rely upon the diversion of tax revenues that
were never intended to be used for economic development
purposes. Senate Bill 975 upholds the trust of California
voters and taxpayers by ensuring that property tax revenues
derived from voter approved override rates will be used for
the purposes intended by the voters rather than for unrelated
economic development projects."
3)Property Tax Increment Financing Districts. Public officials
use tax increment financing districts to raise the capital
they need to invest in public work projects, like public
transit facilities, infill development, or clean water. This
concept recognizes that expanded public structures can boost
the value of nearby property. Higher property values produce
higher property tax revenues. Property tax increment
financing captures those property tax increment revenues. A
tax increment financing district may issue bonds and use bond
proceeds to finance project costs and repay bonds using the
increased property tax revenues beyond the initial base amount
of property tax revenues at the point the district was formed.
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When appropriately used, redevelopment provided a financing
mechanism for a variety of community development activities,
including infill development, infrastructure development,
economic development, military base reuse, and brownfield
cleanup. Tax increment financing is also used by other tax
increment financing districts, such as Infrastructure
Financing Districts (IFDs), Enhanced Infrastructure financing
Districts (EIFDs), and Community Revitalization and Investment
Authorities (CRIAs).
4)Voter Approved Property Tax Override Rates. Proposition 13
(1978) generally limited ad valorem property tax rates to 1%.
The 1% limit on property tax rates does not apply to ad
valorem property taxes or special assessments needed to pay
the interest and redemption charges on indebtedness approved
by voters before July 1, 1978. For example, in its 1982
decision in Carman v. Alvord, the California Supreme Court
ruled that property tax rates outside the base 1% ad valorem
rate (override rates) that are imposed to fund employee
pension systems approved by the voters before July 1, 1978,
are valid under Proposition 13. Subsequent amendments to the
Constitution created additional exceptions to the 1% maximum
rate, allowing local governments to levy override ad valorem
property tax rates to pay for voter-approved general
obligation bond indebtedness (Proposition 46 of 1986 and
Proposition 39 of 2000).
The California Constitution prohibits redevelopment agencies
(RDAs) from diverting revenues generated by property tax rates
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levied to finance bonds approved by voters after 1988
(Proposition 87, 1988). However, some revenues generated by
property tax override rates that had been approved by voters
before 1988 were divided into property tax increment revenues,
allocated to RDAs, and used by RDAs for economic development
projects that were unrelated to the purposes for which voters
originally approved the tax. Comingling property tax
increment revenues generated by the 1% maximum general
property tax rate with property tax increment revenues
generated by voter-approved override property taxes has
complicated the process of winding down RDAs' affairs.
5)Arguments in Support. Supporters argue that this bill helps
protect the intent and will of the voters to ensure that taxes
are used for the purposes for which they were approved.
6)Arguments in Opposition. None on file.
REGISTERED SUPPORT / OPPOSITION:
Support
California Economic Summit
California State Association of Counties
City of Santa Monica
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Howard Jarvis Taxpayers Association
League of California Cities
Santa Clara County Board of Supervisors
Opposition
None on file.
Analysis Prepared by:Misa Lennox / L. GOV. / (916)
319-3958