BILL ANALYSIS
AB 1332
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Date of Hearing: May 28, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 1332 (Salas) - As Amended: May 14, 2009
Policy Committee: Revenue and
Taxation Vote: 6-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill (a) expands the property tax exemption currently
provided to operators of family housing on military bases to
include non-family housing, such as bachelor quarters and
barracks, and (b) strengthens existing-law requirements that all
property tax savings be used for the benefit of residents.
Specifically, the bill:
1)Enumerates specific projects that can be used to benefit
residents, including community improvements such as child care
centers and recreation centers, and housing improvements, such
as new construction and/or renovations.
2) Requires the private contractor expend its estimated
lifetime property tax savings at the time of the original
construction, or make expenditures each year in which the
exclusion is provided. Provides that, in the latter case,
the benefits for each assessment year must be provided
within the time period the county assessor may make an
escape assessment (usually around four or five years).
3) Provides that any expenditure of property tax savings
shall be in addition to any contractual obligation that the
private contractor assumed for the construction,
renovation, rehabilitation, replacement, management, or
maintenance of the military housing.
FISCAL EFFECT
Annual property tax reduction of about $1 million beginning in
AB 1332
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2010-11. About a $380,000 loss would accrue to school districts
and, under Proposition 98, potentially be backfilled by the GF.
COMMENTS
1)Background. Public land, such as military bases and parks, is
generally exempt from property taxation. However,
privately-leased and/or operated housing and other facilities
located on public land may be taxed as a "possessory interest"
if the person's possession or use of the property is
independent, durable, and exclusive.
Under the Military Housing Privatization Initiative (MHPI),
Congress authorized the privatization of military housing by
turning over base housing allowances to developers in exchange
for the construction, maintenance, and management of housing.
In 2004, California passed Chapter 853 (SB 451, Ducheny),
which exempts private contractors' interests in such military
base housing from property taxation, provided that (1) the
property is family housing, and (2) any reduction in property
taxes is used solely for the benefit of the residents of the
military housing through property improvements. Existing law
does not contain an explicit timeframe for contractors to make
improvements.
In 2003, the United States Congress authorized the Department
of the Navy to undertake up to three pilot projects for the
privatization of unaccompanied housing. The Navy's first pilot
project, Pacific Beacon LLC in San Diego, began in 2007. It
privatizes 258 navy -owned units and provides for the
construction of 941 apartments as housing for unaccompanied
shipboard sailors.
2)Rationale. This bill is sponsored by San Diego County. Its
purpose is to ensure that the private contractor's interest in
bachelor housing is also eligible for exemption from the
property tax. It is also intended to ensure that property tax
savings from the exemption are passed through to residents, in
the form of community or housing improvements, in a timely
manner.
3)Related legislation. AB 1344 (Fletcher), introduced in the
current legislative session, also expands the property tax
exemption to non-family housing, but differs with respect to
when property tax savings must be spent for the residents'
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benefit. That measure specified that such savings may benefit
"current or future residents" under a contract between the
private contractor and the military. AB 1344 was held on
suspense by the Assembly Revenue and Taxation Committee.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081