BILL NUMBER: AB 2318 ENROLLED
BILL TEXT
PASSED THE SENATE JUNE 25, 1998
PASSED THE ASSEMBLY JUNE 25, 1998
AMENDED IN SENATE JUNE 23, 1998
AMENDED IN SENATE JUNE 11, 1998
AMENDED IN ASSEMBLY APRIL 30, 1998
INTRODUCED BY Assembly Member Knox
FEBRUARY 19, 1998
An act to add Section 107.9 to the Revenue and Taxation Code,
relating to taxation, and declaring the urgency thereof, to take
effect immediately.
LEGISLATIVE COUNSEL'S DIGEST
AB 2318, Knox. Property taxation: airline property and
possessory interests.
Existing property tax law provides that all property is subject to
taxation at its full value, unless that property is otherwise
exempted from taxation in whole or in part pursuant to either state
or federal law.
This bill would specify that a certain, additional taxable
possessory interest is conferred upon an operator of certificated
aircraft at a publicly owned airport. This bill would also provide,
for the 1998-99 fiscal year and each fiscal year thereafter, that all
taxable real property rights of an operator of certificated aircraft
at a publicly owned airport, except as specified, shall be presumed
to be valued and assessed at full cash value only if the assessor
follows the applicable, specified income approach in determining the
assessed value of that property.
This bill would declare that it is to take effect immediately as
an urgency statute, but would become operative only if AB 1807 takes
effect on or before January 1, 1999.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 107.9 is added to the Revenue and Taxation
Code, to read:
107.9. (a) In addition to any taxable real property interests
that an operator of certificated aircraft has at a publicly owned
airport that are interests stated in a written agreement for
terminal, cargo, hangar, automobile parking lot, storage and
maintenance facilities and other buildings and the land thereunder
leased in whole or in part by an airline (hereafter the "excluded
possessory interests"), there exists an additional taxable possessory
interest conferred upon an operator of certificated aircraft at a
publicly owned airport.
(b) Notwithstanding any other provision of law relating to
valuation, for assessments for the 1998-99 fiscal year, and each
fiscal year thereafter, (1) regular assessments of all taxable real
property interests of the operator of certificated aircraft at a
publicly owned airport, other than the excluded possessory interests,
and (2) timely escape assessments upon the real property interests
governed by this section issued on or after April 1, 1998, pursuant
to Sections 531 and 531.2, shall be presumed to be valued and
assessed at full cash value for these interests only if the assessor
uses the following direct income approach in capitalizing net
economic rent:
(1) The economic rent shall be computed by using one-half of the
landing fee rate used to calculate the 1996-97 assessment for real
property interests, other than excluded possessory interests,
multiplied by the aggregate weight of landings by the operator for
the airport's fiscal year prior to the 1996 lien date. The one-half
of the landing fee rate used to compute the 1996-97 economic rent
shall be annually adjusted in accordance with the percentage change,
rounded to the nearest one-thousandth of 1 percent, from October of
the prior fiscal year to October of the current fiscal year in the
California Consumer Price Index for all items, as determined by the
California Department of Industrial Relations, except that in no
instance shall this adjusted rate exceed one-half of the airport's
actual landing fee rate for the last full fiscal year. The economic
rent shall also be adjusted in proportion to the increase or decrease
in the aggregate weight of landings by the operator for the last
full fiscal year at each airport in the taxing county. In the case
of a new operator, the economic rent shall be determined by reference
to a similarly situated operator.
(2) The expense ratio shall be the ratio used by each county for
the 1996 lien date.
(3) The capitalization rates shall not exceed, or be less than,
the rates used by each county for the 1996 lien date, except that
they shall be annually adjusted in proportion to the changes in the
"Going-in Cap Rate; All Types" as published by the Real Estate
Research Corporation, and, as so adjusted, shall be rounded to the
nearest one-half percent. If this information ceases to be published
by the Real Estate Research Corporation or the format significantly
changes, a publication or adjustment agreed to by the airlines and
the taxing counties shall be substituted.
(4) The term of possession for each operator shall be the term
used by each county to calculate the 1996-97 assessment, but shall
not exceed a maximum term of 20 years. Subject to paragraphs (1) to
(3), inclusive, of subdivision (b) of Section 61 as applied to
interests subject to this subdivision, changes of ownership and term
of possessions shall be determined as follows:
(A) In the case of the creation, renewal, extension or assignment
of an operating agreement or permit, without the concurrent creation,
renewal, extension or assignment of a terminal, hangar, or cargo
facility agreement, no change in ownership will be presumed to have
occurred and the term of possession shall be the term used by each
county for their 1996-97 assessments, not to exceed a maximum of 20
years.
(B) In the case of the creation, renewal, extension or assignment
of a terminal, hangar, or cargo facility agreement, a change in
ownership will be presumed to have occurred and the term of
possession shall be the actual term stated in the written terminal,
hangar, or cargo facility agreement, provided that the term shall not
be less than 10 years or exceed 15 years.
(C) In the case of any operator without a terminal, hangar, or
cargo facility agreement, the actual creation, renewal, extension or
assignment of a written operating agreement or permit shall
constitute a change in ownership and the actual term of the operating
agreement for that carrier will be used, provided that the term
shall not be less than 5 years or exceed more than 15 years.
(5) Nothing in this subdivision is intended to apply to the
determination of a term of possession for a possessory interest in an
excluded possessory interest.
(c) Notwithstanding subdivision (b), in a county in which 1995-96
landing fees were not used to calculate the 1996-97 assessment, the
county shall benefit from the presumption of correctness set forth in
subdivision (b) only if the assessor uses the following direct
income approach in capitalizing net economic rent:
(1) The calculations required in subdivision (b) are performed
using the assessment that would have been derived in the 1996-97
fiscal year had the assessor followed the methodology set forth in
subdivision (b) using actual airport data for the 1995-96 fiscal
year.
(2) If any portion of the airport's landing fee rate for the
1995-96 fiscal year was in dispute and resulted in the creation of an
escrow account for a portion of the landing fees paid, that portion
of the landing fee rate attributable to the escrowed funds shall not
be included in the calculations performed in paragraph (1). However,
if the dispute is resolved, in whole or in part, in favor of the
publicly owned airport and all or a portion of the escrowed funds are
released to the airport, the assessor shall, without regard to any
other statutorily imposed time limitation, be entitled to recalculate
the assessments required by this subdivision using an adjusted
landing fee rate that reflects a final decision on the disposition of
escrowed funds to produce escape assessments for all affected years.
(d) Value shall be determined as follows:
(1) Economic rent shall be calculated by applying the expense
ratio described in paragraph (2) of subdivision (b) to reduce gross
income determined pursuant to paragraph (1) of subdivision (b) or (c)
and paragraph (2) of subdivision (c) to arrive at an amount that
shall be deemed to be equivalent to economic rent.
(2) Economic rent, as so determined, shall be capitalized for the
term provided for in paragraph (4) of subdivision (b) at the
capitalization rate determined in accordance with paragraph (3) of
subdivision (b).
(e) Assessments under this section shall not exceed the factored
base year value established under Article XIIIA of the California
Constitution. However, adjustments made in aggregate landing weights
under this section are deemed to be a valid basis for adjusting the
base year value to the extent of the percentage change in landed
weights for purposes of Article XIIIA of the California Constitution.
Pursuant to Section 65.1, adjustments in aggregate landing weights
shall not be considered a change in ownership or a basis for applying
a new term of possession in the airlines' preexisting real property
interest.
SEC. 2. This act shall become operative only if Assembly Bill 1807
becomes effective on or before January 1, 1999, and in that event
shall become operative on the later of the effective date of this act
and the effective date of Assembly Bill 1807.
SEC. 3. This act is an urgency statute necessary for the immediate
preservation of the public peace, health, or safety within the
meaning of Article IV of the California Constitution and shall go
into immediate effect. The facts constituting the necessity are:
This measure is necessary to provide guidance and clarification
that is essential to the fair and efficient taxation of airline
industry property and possessory interests in publicly owned airports
in the current year, and to clarify the status of prior-year
property tax payments that have funded essential services provided by
local governments and schools.