BILL ANALYSIS
AB 1718
Page 1
ASSEMBLY THIRD READING
AB 1718 (Blumenfield)
As Amended May 28, 2010
Majority vote
JUDICIARY APPROPRIATIONS 17-0
(vote not relevant)
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| | |Ayes:|Fuentes, Conway, Ammiano, |
| | | | |
| | | |Bradford, Charles |
| | | |Calderon, Coto, |
| | | |Davis, Monning, Ruskin, |
| | | |Harkey, |
| | | |Miller, Nielsen, Norby, |
| | | |Skinner, |
| | | |Solorio, Torlakson, |
| | | |Torrico |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Revises the Senior Citizens and Disabled Citizens
Property Tax Postponement (PTP) Law, allows the State Controller
(Controller) to accept applications for property tax
postponement under that law, and authorizes county tax
collectors to cancel any delinquent penalties and interest owed
by qualifying seniors or disabled citizens (claimants) for
fiscal years (FY) 2009-10 and 2010-11, as specified.
Specifically, this bill :
1)Repeals Government Code (GC) Section 16180 that continuously
allocates funds to the Controller to pay certificates of
eligibility for the postponement of property taxes and,
instead, creates the Senior Citizens and Disabled Citizens PTP
Fund (Fund) in the State Treasury.
2)Creates a PTP Participating Local Agency Trust Account
(Account) in the Fund and authorizes counties to make 10-year
deposits, secured by PTP loan repayments, into the Account.
Provides that the deposits will earn an annual interest rate
that is the higher of 5% or the rate on 10-year treasury notes
plus 2% and that the principal and interest would be paid at
maturity (i.e., the end of the 10-year period).
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3)Appropriates moneys in the Fund continuously to the Controller
to make property tax payments on behalf of claimants and to
pay administrative costs of the PTP program. Specifies that
all expenses incurred in administering the revised PTP Law
must be paid solely from the Fund, and no liability or
obligation shall be imposed upon the state.
4)Limits the maximum annual aggregate amount deposited into the
Account to $30 million.
5)Requires that any PTP loan made on or after January 1, 2010,
bear interest equal to the higher of 7% or the rate on 10-year
treasury notes, plus 4%. Specifies that the principal and
interest are due when the claimant sells the home, passes
away, or on June 30 following the 10-year period from the time
of the first postponement loan, whichever is earlier.
6)Requires that all repayment amounts owed by claimants for PTP
loans made after January 1, 2010, be deposited into the Fund
and all repayment amounts owed for PTP loans made before
December 31, 2009, be placed into an impound account or
transferred to the General Fund (GF), as applicable.
7)Repeals the Controller's authority to issue a certificate of
eligibility to a claimant, or to make payments directly to a
lender, mortgage company, escrow company, or county tax
collector for the property taxes owed on behalf of a qualified
claimant. Requires, instead, the Controller to issue, on
behalf of a qualified claimant, a PTP payment to the county
tax collector, upon receipt of a specified verification from
the SC.
8)Requires a county tax collector to accept PTP payments issued
by the Controller to pay property tax, special assessment, or
other charge or user fee appearing on the county tax bill.
9)Reduces the maximum amount of household income for eligible
claimants from $39,000 to $35,500, revises the definition of
household income to exclude losses or other noncash expenses,
and changes the filing date for the program.
10)Modifies the definition of "residential dwelling" to exclude
any residential dwelling in which the owners do not have
equity of at least 30% of the full value of the property or at
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least 30% of the fair market value as determined by the
Controller on the date of the initial application.
11)Requires the Controller to secure a high-priority lien upon
the real property, possessory interest, or mobilehome for
which property taxes have been postponed. Specifies that the
lien shall have the same priority as a county property tax
lien pursuant to Revenue and Taxation Code (R&TC) Section
2192.1.
12)Imposes a five-year moratorium on foreclosures by lenders for
PTP program participants for non-payment of property taxes.
13)Allows the Controller to assess an annual fee of $75 to all
claimant accounts for which property taxes are deferred on or
after January 1, 2010.
14)Makes conforming changes to related provisions of the PTP
Law.
15)Reauthorizes, by repealing the suspension of the PTP program,
eligible claimants to file PTP applications and allows the
Controller to accept those applications.
16)Authorizes tax collectors to cancel any delinquent penalties
and interest owed by the claimant for FYs 2009-10 and 2010-11,
if a postponement claim is filed in a timely manner.
FISCAL EFFECT : Since the funding for the revised PTP program is
expected to come from county deposits, this bill would result
only in moderate costs to the GF. The Controller's Office
indicates that it would require an additional three positions,
at about $278,000 per year, to administer a fully operational
PTP program. Ongoing costs would be covered by PTP fees and net
interest earnings to the Fund. However, initial start up costs
not covered by the fees and earnings - potentially in the range
of $100,000 in FY 2010-11 and $150,000 in FY 2011-12 - would be
from the GF. In addition, the provision allowing county tax
collectors to cancel delinquent penalties and interest would
result in unknown, probably modest, costs to the state, since a
portion of the local revenues offset the state's obligation for
K-12 schools under Proposition 98.
COMMENTS : This bill is intended to restore a version of the PTP
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program that relies on county investments to fund the PTP loans
to qualified claimants. It is designed to help seniors and
disabled individuals as well as to alleviate the negative impact
of the program suspension on local government revenues.
The PTP Law. California has several property tax programs
benefiting the elderly and disabled individuals, including
property tax reappraisal relief, property tax assistance, and
PTP. Unlike the property tax assistance program that refunds a
percentage of property taxes paid, the PTP program allows
eligible homeowners to defer payment of all or a portion of the
property taxes on their residences. The program was enacted in
1977, after the passage of a constitutional amendment
authorizing the postponement of property taxes (California
Constitution, Article 13, Section 8) and is administered by the
Controller's Office. The constitutional amendment was in
response to concerns that senior homeowners on fixed incomes
could lose their homes because of the inability to pay rising
property tax bills. Originally designed for persons over 62
years of age, the program is now also available to eligible
blind and disabled persons, regardless of age. The claimants
must also meet other criteria, including having 20% equity in
their homes and annual household income of $39,000 or less.
Claimants are required to file applications annually with the
Controller's Office, between May 15th and December 10th of each
calendar year for the FY beginning July 1 of that year. The
Controller may grant a reasonable extension for filing, but no
later than the end of the FY for which postponement is claimed.
Once the application has been approved, the Controller sends two
certificates of eligibility beginning in November for that FY.
Certificates are made out in the name of the claimant and the
county tax collector, and may be used to postpone all or part of
the property taxes on the home. The term "property taxes"
includes everything on the claimants' secured property tax bill,
including special assessment, charges, and user fees, in
addition to ad valorem taxes. However, special assessments
levied independently of the county tax bill are not eligible for
postponement.
The PTP program is a loan program from the state to eligible
property owners. Each year, the state imposes interest on the
amount it pays to the county on behalf of the taxpayer. The
loan is secured by the property and is repaid, with interest,
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when the taxpayer dies, sells the home, moves, or allows a
"senior lien" to become delinquent. There is no maximum amount
of postponed property taxes that can be accumulated under the
program. Over the last 30 years, the PTP program has provided
assistance to more than 200,000 homeowners. Nearly every county
has at least one program participant, and most counties have
several dozen participants. Los Angeles County accounts for 21%
of program participants. San Diego, San Bernardino, Riverside
and Orange counties have 28%, and the nine San Francisco - Bay
Area counties have about 19% of the program participants.
On February 20, 2009, the PTP program was indefinitely suspended
as part of the budget reductions to the state's GF programs. [SB
x3 8 (Ducheny), Chapter 4, Statutes of 2009]. The funding for
the program was eliminated and the Controller was prohibited
from accepting any new applications after February 20, 2009.
Consequently, the Controller's Office notified the counties and
each claimant who was approved for postponement in FY 2008-09
that their application could not be accepted. Most applications
submitted by claimants in FY 2008-09 were processed before the
suspension became effective.
The Impact of the Suspension on Program Participants and
Counties. For more than 30 years, the PTP program helped
thousands of low and moderate income elderly, blind and disabled
individuals to remain in their homes. Historically, the loan
repayments, with few exceptions, have equaled or exceeded the
annual program expenditures and administrative costs. The
Controller's Office reports that, over the long-term, the
program is self-supporting, and that the program, since the year
2000, has collected $35 million more in PTP loan repayments than
it disbursed in PTP loans. The program allows participants to
remain in their homes, reduces county property tax default rates
and increases county tax collection revenues.
According to the survey conducted by the Controller's Office,
the program suspension has had a direct negative impact not only
on the program participants but also on the counties. The
program participants expressed fear of losing their homes to tax
default sales and foreclosures by lenders because of the failure
to pay property taxes directly or through an impound account
initiated by the lender. They are also concerned with becoming
homeless or dependent on family members and not being able to
afford basic necessities. Many claimants have been in the
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program for over 20 years and have been counting on the loan
program to pay their property taxes. More than 50% of the
program participants are 75 years of age or older, and 208
claimants approved for FY 2008-09 are older than 90 years of
age.
Furthermore, the counties have also been negatively impacted by
the program suspension. The county tax collectors reported a
decrease in revenue due to higher delinquencies rates, an
increase in related workload, including the number of properties
that the counties are forced to sell as tax-defaulted, and an
increased strain on county services by displaced homeowners.
The proposed PTP Program. Under existing law, until February
20, 2009, the PTP program received only GF moneys. This bill
would revise the financing mechanism for the PTP program by
establishing a continuously appropriated special fund that would
allow the property tax deferral program to be self-financing and
not reliant on an annual GF appropriation. It is anticipated
that this locally funded PTP program will attract a sufficient
amount of 10-year deposits by counties, but the amount of money
that would be invested by counties is uncertain.
Analysis Prepared by : Oksana G. Jaffe / REV. & TAX. / (916)
319-2098
FN: 0004569