BILL ANALYSIS
AB 1718
Page 1
Date of Hearing: May 28, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1718 (Monning) - As Introduced: January 13, 2010
Policy Committee: Revenue and
Taxation Vote: NA
Urgency: Yes State Mandated Local Program:
No Reimbursable:
SUMMARY
As proposed to be amended, this bill establishes a voluntary,
county-funded, version of the Senior Citizens and Disabled
Citizens Property Tax Postponement program (PTP), which was
suspended indefinitely in the 2009-10 Budget. The program would
provide up to a 10 year postponement of property taxes for
qualified senior citizens or disabled citizens.
FISCAL EFFECT
1)Funding for the property tax postponement loans would come
from county deposits into the Senior Citizen's and Disabled
Citizens Property Tax Postponement Fund, as well as net
interest earnings to the fund (that is, the difference between
the rate charged on the postponement loans and the rate paid
on deposits by participating counties). The bill requires that
funding for the program comes from non-GF sources, except for
initial administrative costs.
2)The State 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
2010-11 and $150,000 in 2011-12 - would be from the GF.
3)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
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under Proposition 98.
4)Potential future cost pressures to the GF if the program does
not attract sufficient new local investments to sustain an
extension of local property tax postponement loans that will
come due beginning in 10 years.
SUMMARY (Continued)
Specifically, the bill:
1)Creates a new fund - the Senior Citizens and Disabled Citizens
Property Tax Postponement Fund - in the state treasury.
2)Authorizes counties to make 10-year time deposits, secured by
property tax postponement loan repayments, into the fund. The
deposits would earn an annual interest rate that is the higher
of 5% or the rate on 10-year treasury notes plus 2%. The
principal and interest would be paid at the end of the 10-year
period.
3)Authorizes the Controller to use proceeds from the fund to
make annual property tax postponement loans to qualifying
seniors and disabled citizens, which would bear interest equal
to the higher of 7% or the rate on 10-year treasury notes,
plus 4%. The principal and interest would be due either when
the taxpayer sells the home, passes away, or the June 30
following the conclusion of the 10 years from the time of the
first postponement loan.
4)Provides that the loans will be secured by a high-priority
lien on the taxpayer's home, which would be enforced by the
Controller in the event of future property tax defaults.
5)Makes modifications to the qualifications for the postponement
loan program, including a reduction in the maximum household
income for eligible claimants and an increase in the amount of
equity that a homeowner must have in the residence from 20% to
30% of the home's market value.
6)Authorizes county tax collectors to cancel any delinquent
penalties and interest owed by claimants for the 2009-10 and
2010-11 fiscal years.
7)Imposes a five-year moratorium on foreclosures by lenders for
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PTP program participants for non-payment of property taxes.
COMMENTS
1)Purpose . This bill is intended to restore a version of the PTP
that relies on county investments to fund the PTP loans to
qualified homeowners. It is designed to help seniors and
disabled individuals as well as to alleviate the negative
impact of the program suspension on delinquency rates and
local government revenues.
2)Background . The PTP program, first implemented in 1977, allows
eligible homeowners - those 62 years of age or older, or blind
or disabled - to defer payment of property taxes until they
move, sell the residence, or pass away. The program was
available to persons with household income of $39,000 or less
and with at least 20% equity in their home. Historically, the
program has been supported by the GF and by repayments of
postponement loans. However, in response to the severe budget
shortfall, the 2009-10 budget adopted governor's proposal to
suspend indefinitely the PTP program, and receipts from past
loans are being deposited into the GF.
3)Uncertain funding stream . The locally funded PTP program will
depends on attracting a sufficient amount of 10-year time
deposits by counties into the Senior Citizens and Disabled
Citizens Property Tax Postponement Fund. Given the liquidity
needs of most pooled investment funds, the amount of money
invested by counties under these terms is uncertain.
4)Amendments . The amendments delete the contents of the bill
relating to court fees, replace them with the PTP provisions,
and make Assemblymember Blumenfield the author.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081