BILL NUMBER: AB 1661 CHAPTERED 07/12/99 CHAPTER 84 FILED WITH SECRETARY OF STATE JULY 12, 1999 APPROVED BY GOVERNOR JULY 12, 1999 PASSED THE ASSEMBLY JUNE 16, 1999 PASSED THE SENATE JUNE 15, 1999 AMENDED IN SENATE JUNE 15, 1999 INTRODUCED BY Assembly Members Torlakson, Nakano, Jackson, Florez, Longville, and Reyes and Senators Peace, Dunn, Karnette, Rainey, Chesbro, Schiff, Costa, McPherson, and Ortiz MARCH 11, 1999 An act to amend Section 41204.1 of the Education Code, to amend Section 63041 of, and to add Sections 63025.2, 63035.5, and 63041.5 to, the Government Code, and to add Section 97.43 to the Revenue and Taxation Code, relating to local government relief, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1661, Torlakson. Local government relief. Existing law establishes the California Infrastructure and Economic Development Bank in the Trade and Commerce Agency with specified authority, including the authority to make loans to sponsors in connection with the financing of a project and the authority to engage the services of private consultants to render professional and technical assistance. This bill would provide that nothing in these authorizations regarding the bank shall be construed to extend or limit the authority of the bank with respect to personal services contracts beyond provisions that are otherwise specified for state agencies using personal services contracts. Existing law requires the bank to establish criteria, priorities, and guidelines for the selection of projects to receive assistance from the bank. Existing law also requires the legislative body of a sponsor to make certain findings, by resolution, prior to submitting a project to the bank for consideration. This bill would add a requirement that a finding be made that the project is consistent with the criteria, priorities, and guidelines established by the bank. The bill would also provide that from the funds appropriated in Item 2920-111-0001 of the Budget Act of 1999, $425,000,000 shall be available for financial assistance, including, but not limited to, leveraged revolving fund loans, to local government sponsors for public development facilities. The bill would further prohibit the bank from making any single loan in excess of 10% of the combined amount of this appropriation and an appropriation made to the bank in the Budget Act of 1998 unless approved by the board of directors of the bank and the Director of Finance provides notice to the Joint Legislative Budget Committee. Existing law requires the bank, not later than November 1 of each year, to submit a report of specified activities to the Governor and the Joint Legislative Budget Committee. This bill would require this report to be submitted on a quarterly basis during the 1999-2000 fiscal year and the 2000-01 fiscal year. Existing property tax law requires the county auditor, in each fiscal year, to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures, and generally requires that each jurisdiction be allocated an amount equal to the total of the amount of revenue allocated to that jurisdiction in the prior fiscal year, subject to certain modifications, and that jurisdiction's portion of the annual tax increment, as defined. Existing property tax law also reduces the amounts of ad valorem property tax revenue that would otherwise be annually allocated to the county, cities, and special districts pursuant to these general allocation requirements by requiring, for purposes of determining property tax revenue allocations in each county for the 1992-93 and 1993-94 fiscal years, that the amounts of property tax revenue deemed allocated in the prior fiscal year to the county, cities, and special districts be reduced in accordance with certain formulas. It requires that the revenues not allocated to the county, cities, and special districts as a result of these reductions be transferred to the Educational Revenue Augmentation Fund in that county for allocation to school districts, community college districts, and the county office of education. This bill would, for the 2000-01 fiscal year and each fiscal year thereafter, modify these reduction and transfer provisions by limiting the total reduction and transfer amount for all the local agencies in each county to the corresponding total amount for the 1999-2000 fiscal year. This bill would require that the revenues not allocated to the county's Educational Revenue Augmentation Fund as a result of this limitation be instead allocated among the local agencies in the county, as provided. By imposing new duties in the annual allocation of ad valorem property tax revenues, this bill would impose a state-mandated local program. This bill would also provide that the moneys appropriated pursuant to a specified line item in the Budget Act of 1999 be allocated (1) 1/2 to counties, and then among the local agencies in each county, in accordance with specified requirements and formulas applied to reduction and transfer amounts implemented for the 1998-99 fiscal year, and (2) 1/2 among the cities and the counties in accordance with the relative populations of the cities and unincorporated areas of counties. By providing for state revenues to be allocated in specified amounts to specified recipients, this bill would make an appropriation. Existing property tax law requires a county auditor to annually calculate the property tax administrative cost shares attributable, as provided, to the local jurisdictions in the county and the county' s Educational Revenue Augmentation Fund. Existing law also provides for a county's recovery of those cost shares, except for those cost shares calculated with respect to school entities or a county's Educational Revenue Augmentation Fund. This bill would, for the 2000-01 fiscal year and each fiscal year thereafter, require the Legislature to subvene an amount sufficient to reimburse counties for the property tax administrative cost shares calculated for school entities as defined by a specified provision, and would establish procedures to be followed in allocating this amount from the General Fund among the counties in each subject fiscal year. This bill would state the intent of the Legislature with respect to the impact upon certain legal claims and future measures of certain of the provisions of this bill. This bill would also provide that certain of its provisions shall not become operative unless an amendment to the California Constitution, meeting certain requirements, is approved by the statewide electorate during the 2000 calendar year. This bill would also state the intent of the Legislature, and would require the Director of Finance to make certain adjustments, with respect to ensuring that the modifications required by this bill and earlier acts to property tax revenue allocations do not have a net fiscal impact on school districts or community college districts, or upon the state's obligation under the California Constitution to provide funding to those districts. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. This bill would declare that it is to take effect immediately as an urgency statute. Appropriation: yes. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 41204.1 of the Education Code is amended to read: 41204.1. (a) (1) Pursuant to paragraph (2) of subdivision (b) of Section 41204, the Director of Finance shall annually adjust "the percentage of General Fund revenues appropriated for school districts and community college districts, respectively, in the 1986-87 fiscal year" for purposes of applying paragraph (1) of subdivision (b) of Section 8 of Article XVI of the California Constitution, to reflect those property tax revenue allocation modifications, required by the amendments made to Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code by the qualifying provisions, in a manner that ensures that those modifications will have no net fiscal impact upon the amounts that are otherwise required to be applied by the state for the support of school districts and community college districts pursuant to Section 8 of Article XVI of the California Constitution. (2) For purposes of this section, "qualifying provisions" means all of the following: (A) The amendments made to Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code during the 1991-92 Regular Session and the 1993-94 Regular Session. (B) The amendments made to Sections 97.2 and 97.3 of the Revenue and Taxation Code by Chapter 1111 of the Statutes of 1996. (C) Section 97.43 of the Revenue and Taxation Code. (b) Notwithstanding any other provision of law, for the 2000-01 fiscal year and each fiscal year thereafter, the percentage of "General Fund revenues appropriated for school districts and community college districts, respectively, in fiscal year 1986-87," for purposes of paragraph (1) of subdivision (b) of Section 8 of Article XVI of the California Constitution, shall be deemed to be the percentage of General Fund revenues that would have been appropriated for those entities if the amendments made to Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code during the 1991-92 Regular Session, the amendments made to that same chapter during the 1993-94 Regular Session, and Section 97.43 of the Revenue and Taxation Code, had been operative for the 1986-87 fiscal year. (c) In no event shall the recalculations pursuant to subdivisions (a) and (b) result in a percentage that exceeds the "percentage of General Fund revenues appropriated for school districts and community college districts, respectively, in fiscal year 1986-87," for purposes of paragraph (1) of subdivision (b) of Section 8 of Article XVI of the California Constitution prior to the amendments made to Chapter 6 (commencing with Section 95) of Part 0.5 of Division 1 of the Revenue and Taxation Code during the 1991-92 Regular Session. (d) It is the intent of the Legislature to ensure both of the following: (1) That the changes required by the qualifying provisions in the allocations of ad valorem property tax revenues do not have a net fiscal impact upon school districts, as defined in accordance with Section 41302.5, or community college districts. (2) That the changes required by the qualifying provisions in the allocations of ad valorem property tax revenues do not have a net fiscal impact upon the amounts of revenue otherwise required to be applied by the state for the support of school districts and community college districts pursuant to Section 8 of Article XVI of the California Constitution. SEC. 2. Section 63025.2 is added to the Government Code, to read: 63025.2. Nothing in Section 63025.1 shall be construed to extend or limit the authority of the bank that is otherwise provided in Section 19130. SEC. 3. Section 63035.5 is added to the Government Code, to read: 63035.5. The report required by Section 63035 shall be submitted to the Governor and the Joint Legislative Budget Committee on a quarterly basis during the 1999-2000 fiscal year and the 2000-01 fiscal year. SEC. 4. Section 63041 of the Government Code is amended to read: 63041. (a) Prior to submitting a project to the bank for consideration, the legislative body or bodies of the sponsor or sponsors of the project shall find, by resolution, each of the following: (1) The project is consistent with the general plan of both the city and county, or city and county in the case of San Francisco, or only the county for projects in unincorporated areas in which the project is located. (2) The proposed financing is appropriate for the specific project. (3) The project facilitates effective and efficient use of existing and future public resources so as to promote both economic development and conservation of natural resources. The project develops and enhances public infrastructure in a manner that will attract, create, and sustain long-term employment opportunities. (4) The project is consistent with the criteria, priorities, and guidelines for the selection of projects adopted pursuant to Section 63040. (b) Upon the adoption of the resolution in subdivision (a) by the legislative body, the legislative body shall transmit the resolution to the executive director of the infrastructure bank. SEC. 5. Section 63041.5 is added to the Government Code, to read: 63041.5. (a) It is the intent of the Legislature to provide a one-time appropriation for financial assistance to local government to meet capital outlay and infrastructure needs. (b) From the funds appropriated in Item 2920-111-0001 of the Budget Act of 1999, the sum of four hundred twenty-five million dollars ($425,000,000) shall be available for financial assistance, including, but not limited to, leveraged revolving fund loans, to local government sponsors for public development facilities, as specified in subdivision (q) of Section 63010 of the Government Code. (c) From the funds appropriated in Item 2920-111-0001 of the Budget Act of 1999 and in Item 2920-111-0001 of the Budget Act of 1998 (Chapter 324 of the Statutes of 1998), the California Infrastructure and Economic Development Bank shall make no single loan in excess of 10 percent of the combined amount of these appropriations to the bank unless approved by unanimous consent of the membership of the Board of Directors of the California Infrastructure and Economic Development Bank and the Director of Finance provides a 30-day written notice to the Chairperson and Vice-Chairperson of the Joint Legislative Budget Committee. SEC. 6. Section 97.43 is added to the Revenue and Taxation Code, to read: 97.43. (a) Notwithstanding any other provision of this article, for purposes of ad valorem property tax revenue allocations for the 2000-01 fiscal year and each fiscal year thereafter, the total amount of ad valorem property tax revenue allocated to the county's Educational Revenue Augmentation Fund shall not exceed the total amount of revenues allocated to that fund for the 1999-2000 fiscal year. (b) In the 2000-01 fiscal year and each fiscal year thereafter, any amount of ad valorem property tax revenue that is not allocated to a county's Educational Revenue Augmentation Fund as a result of the limit established by subdivision (a) shall instead be allocated among the local agencies in the county in accordance with each local agency's proportionate share of the total amount of ad valorem property tax revenues that would be required to be allocated to the county's Educational Revenue Augmentation Fund in the absence of this section. SEC. 7. For purposes of allocating one-half of the moneys appropriated by Item 9210-118-0001 of the Budget Act of 1999, all of the following apply: (a) A county is prohibited from receiving any portion of the moneys unless the county complies with all of the following: (1) No later than October 1, 1999, the county auditor reports to the Controller and the Director of Finance the total amount of ad valorem property tax revenue allocated from the county's Educational Revenue Augmentation Fund to school districts, community college districts, and county superintendents of schools for the 1998-99 fiscal year. (2) The county board of supervisors adopts an ordinance or resolution that specifies each amount of ad valorem property tax revenue shifted from a local agency within the county to the county's Educational Revenue Augmentation Fund for the 1998-99 fiscal year, and the chairperson of the county board of supervisors reports those revenue shift amounts to the Controller and the Director of Finance in a manner that identifies the revenue shift amount for each local agency in the county. (3) The county board of supervisors adopts an ordinance or resolution pursuant to which the county agrees to both of the following: (A) The county will allocate its share of the appropriated moneys subject to this section in accordance with subdivision (d). (B) The county will not, in connection with either paragraphs (1) or (2) of this subdivision or subdivision (d), make any claim for reimbursement of state-mandated local costs. No later than December 1, 1999, the county board of supervisors shall transmit the ordinance or resolution adopted pursuant to this paragraph to the Director of Finance. The Controller shall promulgate guidelines for the making of reports as required by this subdivision. (b) For each county that complies with all of the conditions set forth in subdivision (a), the Controller shall do both of the following: (1) Perform the following calculations: (A) Divide the amount reported by the county auditor in accordance with paragraph (1) of subdivision (a) by the total of all of the amounts reported by counties in accordance with paragraph (1) of subdivision (a). (B) Divide the amount appropriated by Item 9210-118-0001 of the Budget Act of 1999 by two. (C) Multiply the amount determined in accordance with subparagraph (A) by the amount determined in accordance with subparagraph (B). For purposes of performing these calculations, the Controller shall review the information submitted by the county. If, consistent with information available from any other reliable source, the Controller determines that the information may be inaccurate, the Controller may request the Director of Finance to review the amount reported by the county in accordance with paragraph (1) of subdivision (a). The Director of Finance may direct the Controller to adjust the amount reported to the Controller by the county in accordance with paragraph (1) of subdivision (a). The Controller shall inform the county of any adjustment that is so made. (2) No later than February 1, 2000, the Controller shall, from the appropriated revenues subject to this section, allocate to the county the amount determined for that county pursuant to paragraph (1). (c) In each county that receives revenue in accordance with subdivision (b), the county auditor shall allocate that revenue to those local agencies among the county, and cities and special districts in the county, that contributed a positive amount to the county's Educational Revenue Augmentation Fund for the 1998-99 fiscal year. The allocation share for each recipient local agency shall be determined pursuant to the following calculations: (1) Divide the amount of revenue shifted for the 1998-99 fiscal year from the local agency to the county's Educational Revenue Augmentation Fund by the total amount of revenue shifted for the 1998-99 fiscal year to the county's Educational Revenue Augmentation Fund by all local agencies in the county contributing a positive amount to that fund. (2) Multiply the ratio determined pursuant to paragraph (1) by the amount of revenues allocated to the county pursuant to paragraph (2) of subdivision (b). SEC. 8. For purposes of allocating one-half of the moneys appropriated by Item 9210-118-0001 of the 1999 Budget Act, all of the following apply: (a) The Department of Finance shall, no later than August 1, 1999, provide to the Controller its estimate, as of January 1, 1999, of the population of each city in the state and the unincorporated area of each county in the state. (b) The Controller shall, no later than October 1, 1999, allocate the appropriated moneys subject to this section among the cities and counties in the state in accordance with each city and each county's proportionate share of the combined total of the population estimates provided by the Department of Finance in accordance with subdivision (a). (c) The City and County of San Francisco is deemed to be a city. SEC. 9. For the 2000-01 fiscal year and each fiscal year thereafter, the Legislature shall provide an annual subvention consistent with both of the following: (a) For each fiscal year, a county is not eligible to receive a subvention allocation unless the auditor of that county, no later than October 1 in that fiscal year, reports to the Department of Finance the property tax administrative cost shares, determined for the immediately preceding fiscal year in accordance with Section 95.3 of the Revenue and Taxation Code, for school entities as defined in subdivision (f) of Section 95 of the Revenue and Taxation Code. The Department of Finance may, consistent with information available from the Controller or any other reliable source, including information with respect to county fiscal relief pursuant to Section 95.31 of the Revenue and Taxation Code, adjust the amount of any administrative cost share that is so reported by a county auditor. The department shall notify the relevant auditor of any adjustment that is so made. The department shall, no later than January 1 in the fiscal year, notify the Controller of the total amount for each county of the administrative cost shares reported and, if applicable, adjusted in accordance with this subdivision. (b) No later than February 1 in the fiscal year, the Controller shall, from the General Fund, allocate to each county an amount equal to the total amount determined for that county in accordance with subdivision (a). SEC. 10. The Legislature hereby finds and declares both of the following: (a) None of the fiscal relief provided by this act should be construed to determine or otherwise affect any legal issue raised by an action in which a county, city, or special district, or any representative thereof, alleges that a state-mandated local program includes any state law requirement to shift ad valorem property tax revenues from local agencies in a county to an Educational Revenue Augmentation Fund. (b) The Legislature does not intend that this act exemplify or limit the nature of any future act that affects state or local government finance. SEC. 11. (a) Sections 1, 6, and 9 of this act shall not become operative unless an amendment to the California Constitution is placed on the ballot by the Legislature and is approved by the statewide electorate during the 2000 calendar year, to do both of the following: (1) Specifically reference Sections 1, 6, and 9 of this act and state that those provisions shall not become operative unless the amendment is approved by the statewide electorate during the 2000 calendar year. (2) Make a substantive legal change with respect to any, or any combination, of the following: (A) The taxing powers of one or more classes of local governments. (B) The manner in which state government revenues are subvened or otherwise allocated to local governments. (C) The allocation in each county of ad valorem property tax revenues, local sales tax revenues, or any other local tax revenues. SEC. 12. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because this act provides for offsetting savings to local agencies or school districts that result in no net costs to the local agencies or school districts, within the meaning of Section 17556 of the Government Code. SEC. 13. 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 Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to provide in a timely manner that measure of fiscal relief that will allow local governments to begin to address longstanding needs with respect to essential public services and public facilities, it is necessary that this act take effect immediately.