BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1662 (Portantino)
Hearing Date: 08/12/2010 Amended: 04/07/2010
Consultant: Mark McKenzie Policy Vote: Rev&Tax
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BILL SUMMARY: AB 1662, 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 Los Angeles and Monterey Counties in
2009, and as a result of severe winter storms that commenced in
January of 2010 in the Counties of Calaveras, Imperial, Los
Angeles, Orange, Riverside, San Bernardino, San Francisco, and
Siskiyou. This bill would also include these 2010 severe winter
storms 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 2010-11 2011-12 2012-13 Fund
Property tax reimbursement less than $500 General*
Homeowner's exemption minor costs, likely less than $10
annually General
until homes are rebuilt
Disaster loss carry forward $17 (FY 2009-10) General
(see staff comments)
CDAA: state assumption of up to $2,750 (see staff
comments) General
local share of disaster costs
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*Special Fund For Economic Uncertainties (NOTE: existing law
continuously appropriates moneys from this fund for
disaster-related allocations, so adding an allocation for the
disasters specified in the bill constitutes an appropriation)
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STAFF COMMENTS: SUSPENSE FILE.
On August 28, 2009, Governor Arnold Schwarzenegger proclaimed a
state of emergency declaring the wildfires that occurred in Los
Angeles and Monterey Counties to be a state disaster. President
Obama did not declare either of these fires to be a federal
disaster. The Governor also proclaimed a state of emergency in
January 2010 declaring the severe storms, flooding, mudslides,
and mudflows that occurred in the Counties of Calaveras,
Imperial, Los Angeles, Orange, Riverside, San Bernardino, San
Francisco, and Siskiyou to be a state disaster. In March of
2010, President Obama proclaimed a federal disaster due to the
winter storms, flooding, and debris and mudflows that occurred
in the Counties of Calaveras, Imperial, Los Angeles, Riverside,
San Bernardino, and Siskiyou from January 17, 2010 through
February 6, 2010.
Page 2, AB 1662 (Portantino)
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 some
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.
AB 1662 would provide for state reimbursement to backfill any
local government property tax revenue losses from assessment
reductions in Los Angeles and Monterey Counties as a result of
wildfires that commenced on August 26th and 27th of 2009,
respectively. The bill would also provide reimbursement for
assessment reductions in the Counties of Calaveras, Imperial,
Los Angeles, Orange, Riverside, San Bernardino, San Francisco,
and Siskiyou as a result of severe winter storms that commenced
in January 2010. The state would hold local governments
harmless for disaster-related 2009-10 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, and reviews of published
materials, the Board of Equalization estimates that this bill
would result in state allocations of less than $500,000 to local
jurisdictions in affected counties.
Staff notes that any allocations from the Special Fund for
Economic Uncertainties have a direct impact on the budget
deficit, which is currently projected to be over $19 billion for
the budget year. Staff suggests an amendment to condition
reimbursements to local governments for losses from assessment
reductions resulting from fire disasters that occur after
January 1, 2011 upon a county demonstrating the following: (1)
provision of adequate structural fire protection services in
state responsibility areas; (2) compliance with existing fire
prevention requirements in very high fire hazard severity zones;
and (3) the county has a fire risk reduction public education
program if it has land designated as a very high fire hazard
severity zone within its jurisdiction.
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 1662 would provide that any dwelling that qualified for the
exemption prior to the Governor's disaster proclamation that was
damaged or destroyed as a result of the 2009 wildfires in Los
Angeles and Monterey Counties, and the 2010 severe winter storms
in the Counties of Calaveras, Imperial, Los Angeles, Orange,
Riverside, San Bernardino, San Francisco, and Siskiyou, 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. Staff estimates that this provision would likely
result in a minor revenue loss of less than $10,000 ongoing, but
this amount would decline over time as homes are rebuilt and
occupied.
Page 3, AB 1662 (Portantino)
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 1662 would apply the special disaster loss carryover
treatment for losses sustained as a result of the 2009 wildfires
in Los Angeles and Monterey Counties, and the 2010 severe winter
storms in the Counties of Calaveras, Imperial, Los Angeles,
Orange, Riverside, San Bernardino, San Francisco, and Siskiyou.
The Franchise Tax Board (FTB) estimates a total revenue loss of
approximately $17,000 in 2009-10 due to losses sustained in
those counties. 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. AB 2140 (Hancock), Chapter 739 of 2006,
prohibits the state share for any eligible project from
exceeding 75 percent of 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 1662 would require the state to cover up to 100% of the
non-federal share of costs associated with the severe winter
storms, flooding, and debris and mud flows that occurred in
Northern, Central, and Southern California from January 17, 2010
through February 6, 2010, as specified in agreements for federal
assistance between this state and the United States. This
provision would provide relief to the Counties of Calaveras,
Imperial, Los Angeles, Riverside, San Bernardino, and Siskiyou.
The current state share of costs for the severe winter storms is
approximately $8 million. If the specified counties were to
adopt a local hazard mitigation plan, which is a condition in
current law for state assumption of local costs, the total state
costs would increase to approximately $10.75 million. Staff
notes that, according to the California Emergency Management
Agency (CalEMA), none of these counties have adopted a local
hazard mitigation plan.
Payment of local shares of cost is made with a Budget Act
appropriation to 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.