BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Dave Cox, Chair
BILL NO: AB 308 HEARING: 6/30/10
AUTHOR: Cook FISCAL: Yes
VERSION: 6/23/10 CONSULTANT:
Weinberger
PROPERTY TAX ALLOCATION
FROM PUBLIC UTILITY PROPERTY (URGENCY)
Background and Existing Law
The California Constitution requires the State Board of
Equalization (BOE) to assess public utilities for property
tax purposes. The BOE assesses utility property as a unit,
instead of assessing the individual value of separate
properties owned by the utility. State law allocates the
property tax revenues from state-assessed public utilities
differently than the property tax revenues from
locally-assessed properties.
Until 1988-89, state law allocated property tax revenues
from all state-assessed property on a situs basis among tax
rate areas. The complexity and administrative cost of
tracking property holdings and allocating property tax
revenues among thousands of small geographic locations led
the Legislature to create the current countywide method for
allocating unitary property tax revenues (AB 2890,
Hannigan, 1986).
Under the countywide method, the BOE allocates the unitary
assessed value of utility property among the counties based
on the amount of property within each county. County
auditors allocate the property tax revenues from unitary
properties using a formula based on the amount of unitary
revenues received by the county's taxing jurisdictions in
1987-88. For years after 1987-88, each taxing jurisdiction
receives up to 102% of its prior year unitary property tax
revenues. The county auditor allocates the remaining
property tax revenue from the county's unitary roll to all
taxing jurisdictions in proportion to their shares of
property tax revenues derived from locally-assessed
property.
In other words, this unitary tax allocation method creates
a countywide pool of property tax revenues generated by
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growth in the value of state-assessed properties. Each
local taxing agency gets a share of the countywide pool,
regardless of whether any state-assessed property is within
that agency's boundaries.
To direct a greater share of property tax revenues to local
agencies in which some state-assessed facilities are
located, the Legislature has created some exceptions to
this countywide unitary tax allocation method for:
An electrical power plant in the City of Chula
Vista (San Diego County) (AB 1108, Peace, 1993).
An electrical power plant in the City of Escondido
(San Diego County) (AB 2558, Plescia, 2004).
A PG&E education and training center in the City of
Livermore (Alameda County) (SB 53, Lockyer, 1991).
A PacBell computer center in the City of Fairfield
(Solano County) (AB 454, Klehs, 1987).
The Legislature also created an exception to the countywide
unitary tax allocation method for all newly constructed
public-utility-owned large-scale electrical generation,
substation, and transmission facilities. That exception
allocates a greater share of unitary property tax revenues
to the city or county in which a qualified electrical
facility is located (SB 1317, Torlakson, 2006).
After the Legislature deregulated California's electric
utility industry in 1996, regulated public utilities sold
many of their electric generating facilities to unregulated
private companies. Unregulated private companies also
began building new electric generation facilities.
Regulations adopted by the BOE in 1999 made county
assessors responsible for assessing electric facilities
owned by unregulated private companies. County auditors
allocated property tax revenues from those locally-assessed
facilities, on a situs-basis, to the local jurisdictions in
which the facilities were located. In 2002, the
Legislature transferred the responsibility for assessing
electric facilities owned by unregulated private companies
back to the BOE and retained the situs-based allocation of
property tax revenues from those facilities (AB 81, Migden,
2002).
Formed in 1990, the Inland Valley Development Agency (IVDA)
is a joint powers authority comprised of the County of San
Bernardino and the cities of Colton, Loma Linda, and San
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Bernardino. The IVDA is responsible for redeveloping the
non-aviation portion of the former Norton Air Force Base
and surrounding properties. Southern California Edison's
(SCE's) Mountainview power plant is located in the City of
Redlands (San Bernardino County) within an IVDA
redevelopment project area. Until this year, an
unregulated subsidiary of SCE owned the Mountainview power
plant. In March 2010, SCE took ownership of the plant.
Because it is now owned by a regulated utility company, the
plant's property tax revenues will be allocated using the
2006 Torlakson allocation method rather than under the 2002
Migden allocation method. Because this change reduces
property tax revenues that the IVDA and other local
agencies receive from the Mountainview power plant, IVDA
officials want the county auditor to continue to allocate
property tax revenues from the plant using the Migden
bill's allocation method.
Proposed Law
If utility-owned state-assessed unitary property was
constructed by a wholly owned subsidiary of a utility
before January 1, 2007 and placed in service by the utility
on or after January 1, 2007, and the property is located in
a redevelopment project area of a joint powers authority
comprised of cities and a county that adopts a resolution
stating that the property is subject to a redevelopment
plan, and the joint powers authority transmits a copy of
the resolution stating that the property is subject to a
redevelopment plan to the State Board of Equalization and
the county auditor before January 1, 2011, then , for
2010-11 and following fiscal years, Assembly Bill 308
requires that property tax revenues from that utility-owned
state-assessed unitary property must be allocated under
requirements enacted by AB 81 (Migden, 2002).
Specifically, AB 308 requires property tax revenues from
utility-owned state-assessed unitary property that meets
the specified conditions to be allocated entirely to the
county in which the facility is located and to the tax rate
area in the county in which the property is located. The
revenues must be allocated among the jurisdictions in that
tax rate area in the same percentage shares as tax revenues
from locally-assessed property are allocated to those
jurisdictions, subject to any allocation of property tax
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increment revenues and subject to other specified
modifications or adjustments.
The bill allows the State Board of Equalization to amend
the tax rolls for the 2010-11 fiscal year to provide the
property tax allocations that the bill requires.
Comments
1. Protecting local revenues . Legislators approved
various exceptions to the countywide allocation method for
unitary property tax revenues to provide a greater share of
property taxes to jurisdictions that have large power
plants. However, when a power plant's ownership transfers
from an unregulated company to a regulated utility, state
law has the opposite effect. As the result of a corporate
transaction between SCE and a subsidiary, the IVDA will
lose property tax revenues that it receives from a large
power plant in one of its redevelopment project areas.
Those revenues are vital to financing the IVDA's
redevelopment activities. AB 308 avoids pulling the rug
out from under the IVDA by protecting the current
allocation of property tax revenues from SCE's Mountainview
power plant.
2. Future winners and losers . Property tax allocation is
a zero-sum game; every reallocation of property tax
revenues produces winners and losers. AB 308's exception
to the Torlakson bill's modified property tax allocation
method will leave some local governments in San Bernardino
County with higher future revenues, and others with lower
future revenues, than they would have received under
current law. The Inland Valley Development Agency wins
under AB 308. However, the bill also results in lower
future allocations to some school districts and special
districts with territories that do not encompass SCE's
Mountainview power plant.
3. Precedent ? AB 308's provisions apply narrowly to
Southern California Edison's power plant in Redlands.
However, by creating an exception to the complex unitary
tax allocation method that currently applies to all
qualified electrical facility property, the bill may invite
further exceptions. Earlier this year, by a vote of 3-2,
the Committee passed SB 1398 (DeSaulnier), which creates an
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exception to the Torlakson bill's allocation method for a
proposed power plant in Oakley (Contra Costa County). The
Committee may wish to consider whether the precedent set by
AB 308 and SB 1398 will encourage other communities to ask
the Legislature to enact unique property tax allocation
methods for revenues from other state-assessed property,
creating an even more confusing patchwork of tax allocation
statutes.
4. Back to the future ? In response to the complexity and
cost of allocating unitary property tax revenues on a situs
basis to local governments in which state-assessed property
is located, the 1986 Hannigan bill created a simpler
countywide allocation method. To provide added revenues to
communities in which large electric facilities are built,
the 2006 Torlakson legislation created a hybrid method for
allocating some unitary property tax revenues through the
countywide pool and some revenues on a situs basis to the
city or county in which the electrical facility was
located. AB 308 restores the situs allocation method for
unitary property tax revenues from some state-assessed
utility property. The Committee may wish to consider
whether this shift back to situs-based allocation of
unitary property tax revenues will erode the cost savings
and simplicity achieved by the Hannigan bill.
5. Mandate . Legislative Counsel says that AB 308 creates
a new state mandated local program by changing the manner
in which San Bernardino County officials allocate property
tax revenues. The Committee may wish to consider amending
AB 308 to require the IVDA to pay for the County's
increased administrative costs.
6. Two-thirds vote . Proposition 1A (2004) requires
approval by a 2/3 vote in each house of the Legislature for
any change in the pro rata shares in which ad valorem
property tax revenues are allocated among agencies in a
county. AB 308 is subject to that constitutional
requirement, which is why the bill requires a 2/3 vote on
the Senate Floor.
7. Urgency clause . Regular statutes take effect on the
January 1 following their enactment; bills passed in 2010
take effect on January 1, 2011. The California
Constitution allows bills with urgency clauses to take
effect immediately if they're needed for the public peace,
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health, and safety. AB 308 contains an urgency clause so
that the BOE and San Bernardino County Auditor can
implement the bill's requirements for allocating property
taxes from the Mountainview power plant this year.
8. Special legislation . The California Constitution
prohibits special legislation when a general law can apply
(Article IV, 16). AB 308 contains findings and
declarations explaining the need for legislation that
applies only to the Inland Valley Development Agency.
9. Gut and amend . As introduced, AB 308 required county
elections officials to prepare a special runoff ballot for
special absentee voters. The Committee never heard that
version of the bill. The June 9 amendments deleted the
bill's contents and inserted the language relating to
property tax allocations from public utility property.
Assembly Actions
Not relevant to the June 23, 2010 version of the bill.
Support and Opposition (6/24/10)
Support : Inland Valley Development Agency, San Bernardino
City Unified School District, San Bernardino Community
College District, San Bernardino County Supervisor Neil
Derry, San Bernardino County Supervisor Josie Gonzalez,
Stater Bros. Markets
Opposition : Unknown.