BILL ANALYSIS                                                                                                                                                                                                    



                                                          SB 537
                                                         Page 1

                       SENATE THIRD READING

           SB 537 (Hughes) - As Amended:  July 19, 1995

 SENATE VOTE:  21-10

ASSEMBLY ACTIONS:

 COMMITTEE:  L. GOV.    VOTE:  6-5 COMMITTEE:            VOTE:  

Ayes: Rainey, Sweeney, Cannella,
      Hannigan, W. Murray,
      Napolitano                

Nays: Brewer, Goldsmith, Granlund,
      Kuykendall, Margett

 DIGEST

 Existing law requires the county recorder, upon payment of proper  
fees and taxes, to accept for recordation any instrument, paper or  
notice that is authorized or required by law to be recorded.

 This bill:

1)  Permits a county board of supervisors to require a fee of up  
to $1 to be paid at the time of recording documents transferring  
title, and for the fees to be paid into a Real Estate Fraud  
Prosecution Trust Fund (Trust Fund).

2)  Requires the funds to be expended for purposes of deterring,  
investigating and prosecuting real estate fraud crimes, with 60%  
of funds to be distributed to district attorneys (DA) and 40% to  
enforcement agencies, except that 100% of funds are to be  
distributed to DAs in counties without enforcement agencies,  
subject to deduction of actual and necessary administrative costs.  


3)  Requires a Trust Fund Committee annually to determine  
allocation of funds to law enforcement agencies based on:   
application for proposed use; evidence of qualification for funds;  











                                                          SB 537
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and an accounting of, and accountability for, the previous year's  
expenditures of moneys.

4)  Subjects the DA to annual review and accountability of funds.

5) Permits a DA's office or law enforcement agency to receive  
   nonexpended funds from the previous year subject to review of  
   previous expenditures.

6)  Prohibits money collected pursuant to this section from being  
expended to offset a reduction in any other source of funds, and  
requires those funds to be spent in connection with prosecutions  
and investigations of fraud involving recorded documents.







































                                                          SB 537
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 FISCAL EFFECT

Unknown

 COMMENTS

1) A fee must be reasonable and related to the regulation or  
   service that generated the charge.  A special tax, on the other  
   hand, has a special purpose and requires a two-thirds vote.   
   Cal. Const. Art. XIIIA, ?4.  The relevant distinction is that a  
   "special tax" does not include "regulatory fees" which are  
   "reasonably commensurate with the cost of the regulatory  
   activity from those at whose instance the activity is  
   conducted." [ Mills  v. County of Trinity, 108 Cal. App. 3d 656,  
   662-663 (1980)]  

   Here, the maximum $1 fee is not being charged for the purpose  
   of covering administrative costs of recording a document  
   related to the transfer of title.  Rather, the maximum $1  
   charge goes to fraud prevention programs in counties.  A fee  
   that bears no relationship to the administration of document  
   filings is arguably a special tax requiring a two-thirds vote.

   However, the argument for the legality of this maximum $1 fee  
   is that it 
   is of a regulatory nature, the proceeds of which are directed  
   to regulating the activity (transferring title to property)  
   being conducted.  Recent amendments require funds to be spent  
   in connection with prosecutions and investigations involving  
   recorded documents.  This makes the fee a closer nexus to fraud  
   prevention activities.

3)  According to the Los Angeles DA's Office, the Los Angeles  
field office of the F.B.I. handled 1,152 cases of fraud in the  
fiscal year ending September, 1994, of which 905 involved losses  
over $100,000.  Despite this number, the DA's office has only  
three investigators assigned to its newly-created Real Estate  
Fraud Unit, with 16 open investigations.  Presumably due to the  
limited number of DAs assigned to prosecute fraud, only nine new  
cases have been filed by the unit since July 1994.  Many cases  
involve total losses from real estate fraud in the tens of  











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millions of dollars, and the total loss from fraud to victims  
overall is estimated at $183.8 million.

   Los Angeles County estimates up to $2 million could be raised  
   by a $1 fee on approximately two million anticipated document  
   recordings.


 Analysis prepared by:  Brad Taylor / algov / 445-6034



                                                                    
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