BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1718|
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THIRD READING
Bill No: AB 1718
Author: Blumenfield (D)
Amended: 8/9/10 in Senate
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 3-0, 6/23/10
AYES: Wolk, Alquist, Padilla
NO VOTE RECORDED: Walters, Ashburn
SENATE BANKING, FINANCE, AND INS. COMM : 10-0, 6/30/10
AYES: Calderon, Cogdill, Correa, Florez, Kehoe, Liu,
Lowenthal, Padilla, Price, Runner
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 76-0, 6/2/10 - See last page for vote
SUBJECT : Taxation: property tax postponement
SOURCE : Author
DIGEST : This bill establishes the County Deferred
Property Tax Program for Senior Citizens and Disabled
Citizens, authorizes a county to elect to participate in
the program by adopting a resolution indicating the
county's intention to participate in and administer the
program, and specifies that the requirements of a county or
county officials set forth in the bill are conditioned upon
the county's passage of the resolution.
CONTINUED
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ANALYSIS : The Senior Citizens and Disabled Citizens
Property Tax Postponement Law (PTP), until February 20,
2009, authorized a claimant, as defined, to file a claim
with the Controller to postpone the payment of ad valorem
property taxes, where household income, as defined, did not
exceed specified amounts. Existing law authorized the
Controller, upon approval of the claim, to either make
payment directly to specified entities, or to issue the
claimant a certificate of eligibility that constituted a
written promise of the state to pay the amount specified on
the certificate, as provided. Existing law required these
payments to be made out of a specified funds appropriated
to the Controller, as specified, and also required repaid
property tax postponement payments be transferred, as
specified, to the General Fund.
This bill establishes the County Deferred Property Tax
Program for Senior Citizens and Disabled Citizens,
authorizes a county to elect to participate in the program
by adopting a resolution indicating the county's intention
to participate in and administer the program, and specifies
that the requirements of a county or county officials set
forth in the bill are conditioned upon the county's passage
of the above-described resolution.
This bill authorizes a claimant, as defined, upon verifying
a county's participation in the program, to apply, within a
specified filing period, to the county to participate in
the program. The bill requires the county treasurer, or
another appropriate county official, to review the
claimant's application for program participation, as
specified, and, if the claimant is eligible, and if there
are sufficient funds within the county's Property Tax
Deferral Fund, which this bill would require a
participating county to establish within its treasury, to
(1) defer property taxes on the claimant's residential
dwelling for that fiscal year, (2) issue a subvention
payment to that county's general fund, equivalent to the
amount of the deferred property taxes, from the county's
Property Tax Deferral Fund, and (3) apportion that
subvention payment in the same manner as if the property
taxes had been paid. The bill authorizes the county
treasurer of a participating county, if he or she makes a
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specified determination, upon the adoption of a specified
resolution by that county's board of supervisors, to
deposit specified funds in the county treasury for the
purpose of investment of those funds in the county's
Property Tax Deferral Fund.
This bill requires the amount of property taxes deferred,
plus any interest accrued thereon, to be secured by a
county property tax lien, as specified. The bill also
requires the lien to be evidenced by a notice of lien, and
various county officials to process and record the notice
of lien, as specified. The bill requires a participating
county to charge a claimant a specified adjusted rate of
interest on the amount owed for the deferment of property
taxes. The bill requires the amount secured by the lien to
be increased to reflect the accrual of interest on the
property taxes deferred, or decreased by the amount of any
payment made to reduce the amount secured by the lien. The
bill provides procedures for the release of the lien if the
obligation is paid in full or otherwise discharged, and
would require all amounts owed by a claimant under the
program to become due immediately under specified
circumstances.
This bill authorizes a participating county to charge a fee
to the claimant to cover the actual costs of administering
the program, and would require the fee proceeds to be
deposited in an account within the county's Property Tax
Deferral Fund, to be used exclusively for those
administration costs. The bill specifies that costs to
foreclose on a residential dwelling for which property
taxes have been deferred under the program are
administrative costs.
The bill prohibits a mortgagee, trustee, or other person
authorized to take sale on the real property for which
property taxes are deferred due to the failure to pay
property taxes from filing a notice of default based solely
on the failure to pay property taxes if the mortgagor or
trustor provided the mortgagee, trustee, or other person
authorized to take sale, evidence of the mortgagor's or
trustor's participation in the Senior Citizens and Disabled
Citizens Property Tax Postponement Program during the
2008-09 fiscal year. The bill would require the Controller
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to provide written notice to individuals that participated
in the program during 2008, 2009, or the 2008-09 FY for use
as written confirmation of that participation.
This bill is intended to restore a version of the PTP
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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
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.
SUPPORT : (Verified 8/17/10)
State Controller
California State Association of Counties
Howard Jarvis Taxpayers Association
Urban Counties Caucus
OPPOSITION : (Verified 8/17/10)
California Land Title Association
California Bankers Association
California Financial Services Association
ARGUMENTS IN SUPPORT : The California State Association
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of Counties (CSAC), along with county assessors,
auditor-controllers, and treasurer-tax collectors, has been
working with Assemblymember Blumenfield, the State
Controller's Office, and the State Treasurer's Office to
identify program improvements and a new financing
mechanism, which will allow the Senior Citizens Property
Tax Postponement Program to be fully self-funded, while
continuing to allow eligible Californians to utilize the
program. CSAC observes that the original program had a
minimal start-up cost, and, in most years, generated
revenue for the state General Fund. CSAC is committed to
help this bill's author develop a workable program that
does not result in a cost to the General Fund.
The Urban Counties Caucus supports the effort to reinstate
the discontinued property tax postponement program. "This
program was eliminated last year because the program failed
to pay for itself in 2007-08 and 2008-09 mostly due to the
housing crisis. However, in most years this program pays
for itself and often generates revenue for the General
Fund."
The Howard Jarvis Taxpayers Association (HJTA) has long
been in favor of the Senior Citizens Property Tax
Postponement Program. In a declining economy, ensuring
that seniors on fixed incomes are able to stay in their
homes is of prime importance to HJTA.
ARGUMENTS IN OPPOSITION : The California Land Title
Association (CLTA) asks whether it is sound public policy
to give property tax postponement liens a superpriority
over other liens, such as child support liens.
"California's 'first in time, first in right' law creates a
fair procedure where liens for lenders, general creditors,
judgment creditors, and custodial parents, etc., protect
themselves by quickly recording a lien with the county
recorder's office in which the affected real property is
located. This recordation process creates 'constructive
notice' to the world that the recording party wishes to
protect their interest from all competing creditors and
they do so according to the recordation date of their
liens. Even custodial parents owed child support are
required to record an 'abstract of support' lien on real
property and wait for reimbursement behind other previously
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recorded liens, or other tax liens which are granted a
'superpriority' status. Thus, superpriority status of
liens is very rarely created in California law so as not to
disrupt this predictable and orderly process." CLTA
believes that the judgment lien status given to loans under
the now-discontinued property tax postponement program was
appropriate, because existing Revenue and Taxation Code
Section 20605 prohibits a lender from requiring a borrower
to pay into an impound account to cover taxes. If a lender
cannot charge for taxes through an impound account, then
their security interest in the property must trump that of
the Controller's lien, as set forth in existing law. Under
current law, a lender's security interest in real property
for which it has provided a loan is protected by a deed of
trust recorded against the property, which, for all
practical purposes, is superior to all other recorded liens
on the real property.
The California Bankers Association and the California
Financial Services Association state, "With respect to the
AB 1718's creation and recordation of a super lien for the
payment of delinquent property taxes, the measure creates a
violation of the terms of the mortgage or deed of trust.
The measure futher limits the ability of a lender/servicer
from enforcing performance of the contract by precluding
the commencement of non-judicial foreclosure through the
filing of a notice of default for five years. AB 1718
creates [an] ex post facto law and impairs the obligation
of the mortgage contract in violation of the state and
federal constitutions.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Blakeslee, Block, Blumenfield, Bradford,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,
Huber, Huffman, Jeffries, Jones, Knight, Logue, Bonnie
Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande,
Niello, Nielsen, Norby, V. Manuel Perez, Portantino,
Ruskin, Salas, Saldana, Silva, Skinner, Smyth, Solorio,
Swanson, Torlakson, Torres, Torrico, Tran, Villines,
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Yamada, John A. Perez
NO VOTE RECORDED: Tom Berryhill, Lieu, Audra Strickland
DLW:nl 8/17/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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