BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
50 (Nava)
Hearing Date: 08/27/2009 Amended: 06/24/2009
Consultant: Mark McKenzie Policy Vote: GO 10-0; Rev&Tax
8-0
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BILL SUMMARY: AB 50, an urgency measure, would provide
disaster-related fiscal assistance and tax relief to affected
persons and jurisdictions for losses sustained as a result of
wildfires that occurred in Santa Barbara County in 2008 and
2009. This bill would also include the wildfires that commenced
in Southern California in October of 2007 to the list of
disasters that are eligible for full reimbursement of local
agency costs under the California Disaster Assistance Act
(CDAA).
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Property tax reimbursement $2,811 Special*
Homeowner's exemption $26 annually until homes are
rebuiltGeneral
Disaster loss carryover$17 (FY 2008-09) General
(see staff comments)
CDAA: state assumption of $5,500 payable over several
fiscal years General
local share of disaster costs
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*Special Fund For Economic Uncertainties (NOTE: this fund is
continuously appropriated, so requiring an allocation for this
purpose constitutes an appropriation)
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STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED.
On November 14, 2008, Governor Arnold Schwarzenegger proclaimed
a state of emergency declaring the wildfires that occurred in
Santa Barbara County to be a state disaster. On November 18,
2008, President George W. Bush proclaimed a federal disaster for
the wildfires that occurred in Los Angeles, Orange, Riverside,
and Santa Barbara Counties. On May 5, 2009, Governor Arnold
Schwarzenegger proclaimed a state of emergency declaring the
wildfires that occurred in Santa Barbara County to be a state
disaster. As of June 19, 2009, President Barack Obama had not
proclaimed a federal disaster for this wildfire.
Property Tax Reimbursement
Current law provides for a downward reassessment of properties
affected by a disaster. Taxpayers are entitled to a refund of
any "excess" property tax paid on the property. Taxpayers whose
property is damaged are also allowed to defer payment of the
next installment of property taxes pending receipt of a
corrected tax bill for the reassessed property. For previous
disasters, the Legislature has acted to provide one-year state
reimbursement of property tax losses to local governments
resulting from reductions in assessed values of damaged or
destroyed properties.
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AB 50 (Nava)
AB 50 would provide for state reimbursement to backfill any
local government property tax revenue losses from assessment
reductions in Santa Barbara County as a result of wildfires that
commenced in November of 2008 and May of 2009. The state would
hold local governments harmless for wildfire-related 2008-09
property tax losses, based initially on an estimate of loss,
followed by a corrective adjustment based on the actual property
tax loss. Staff notes that based on total projected reductions
in assessed value reported by county officials, this bill would
result in state allocations of approximately $2,811,195 to Santa
Barbara County.
Homeowners' Exemption
Current law exempts from the property tax the first $7,000 of
the assessed value of an owner-occupied principal place of
residence. However, properties that become vacant or are under
construction on the January 1 lien date are not eligible for
this homeowners' exemption for the upcoming tax year. Local
jurisdictions are reimbursed by the state for property tax
losses due to the homeowners' exemption.
AB 50 would provide that any dwelling that qualified for the
exemption prior to the Governor's disaster proclamations that
was damaged or destroyed as a result of the 2008 and 2009
wildfires in Santa Barbara County may not be denied the
exemption solely on the basis that the dwelling was temporarily
damaged or destroyed or was being reconstructed by the owner.
The Board of Equalization estimates that this provision would
likely result in a minor revenue loss of approximately $26,384
ongoing, but this amount would decline over time as homes are
rebuilt and occupied.
Carry Forward of Casualty Loss Deduction
Current law allows nonbusiness taxpayers to deduct uninsured
losses, less $100, to the extent the loss exceeds 10% of
adjusted gross income. Business taxpayers may deduct losses
against income; a portion of losses may be carried forward to
offset future years' tax liabilities for up to 10 years.
Taxpayers may either claim the losses as an itemized deduction
in the year the loss occurs, or in the preceding year by filing
an amended return for the prior year. For previous disasters,
legislation has allowed both business and non business taxpayers
to carry forward 100% of their excess losses for 5 years, and a
portion of losses for another 10 years.
AB 50 would apply the special disaster loss carryover treatment
for losses sustained as a result of the 2008 and 2009 wildfires
in Santa Barbara County. The Franchise Tax Board (FTB)
estimates a total revenue loss of approximately $17,000 in
2008-09 due to losses sustained in that county. To the extent
that these deductions would have been claimed in later years had
they not been taken on an amended tax returns for the previous
tax year, there is a minor revenue gain in those later years.
Taxpayers that choose to file an amended return to report the
casualty loss immediately will have a higher tax liability in
subsequent tax years.
California Disaster Assistance Act (CDAA)
The California Disaster Assistance Act requires the state to pay
75 percent of the non federal share of costs for any state
declared emergency. Chapter 739/2006 (AB 2140, Hancock)
prohibits the state share for any eligible project from
exceeding 75 percent of
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AB 50 (Nava)
total state eligible costs unless the local agency is located
within a city, county, or city and county that has adopted a
local hazard mitigation plan as part of the safety element of
its general plan. Where the local agency has complied, the
Legislature may provide for a state share of local costs that
exceed 75 percent of total state eligible costs.
AB 50 would require the state to cover up to 100% of the
non-federal share of costs associated with the wildfires that
occurred in Southern California commencing on October 20, 2007,
as specified in agreements for federal assistance between this
state and the United States. This provision would provide
relief to the Counties of Los Angeles, Orange, Riverside, San
Bernardino, Santa Barbara, Ventura, and San Diego. Total costs
related to these wildfires are estimated at approximately $88
million. Of that amount, the federal share is $66 million (75
percent). Under this bill, the state would pay its share of
$16.5 million (18.75 percent) and assume the local share of $5.5
million (6.75 percent).
Payment of local shares of cost is made with a Budget Act
appropriation to the California Emergency Management Agency
(CalEMA). Because the state attempts to reimburse all claims
received in the budget year, and does not control when claims
are submitted, the amount appropriated rarely matches the amount
ultimately required in any given year. When claims exceed the
budget appropriation, a supplemental appropriation may be made.
Staff notes that the CDAA provisions in AB 50 were included in
SB 1537 (Kehoe) from last year. That bill also specified,
however, that it would only become effective if SB 1764 (Kehoe)
was also signed into law. SB 1764 would have required a local
agency to obtain certification from the Director of Forestry and
Fire Protection that the local agency provides adequate fire
protection in a state responsibility area within its
jurisdiction in order to qualify for additional state assistance
under the CDAA. The Governor vetoed SB 1764 thereby nullifying
the changes proposed by SB 1537, as well.
AB 50 also deletes provisions in current law that require the
inclusion of certain elements in a local hazard mitigation plan,
including an initial earthquake performance evaluation of public
facilities that are potentially hazardous, and a plan to reduce
the potential risk from private and government facilities in the
event of a disaster. These changes are necessary to ensure that
state statute is consistent with the federal requirements for
hazard mitigation plans. A majority of the counties and cities
in California, including all of the counties covered by this
proposal, have completed HMPs as per the federal guidelines.
Staff notes that this provision was included in SB 1764 (Kehoe),
which was vetoed last year without objection to this provision.
PROPOSED AMENDMENTS would require counties, as a condition of
eligibility for reimbursement of property tax losses associated
with downward reassessments of properties affected by a fire
disaster occurring after January 1, 2010, to demonstrate that
the county: (1) provides adequate structural fire protection for
each state responsibility area in its jurisdiction; (2) was in
compliance with specified requirements to take preventive
measures in very high fire hazard severity zones; and (3) has
implemented a fire risk reduction public education program.