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: 8/31/10 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
SENATE REVENUE & TAXATION COMMITTEE : 3-2, 8/25/10
AYES: Wolk, Alquist, Padilla
NOES: Walters, Ashburn
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 6-2, 8/26/10
AYES: Calderon, Florez, Kehoe, Lowenthal, Padilla, Price
NOES: Cogdill, Runner
NO VOTE RECORDED: Correa, Liu, Vacancy
ASSEMBLY FLOOR : 76-0, 6/2/10 - See last page for vote
SUBJECT : Taxation: property tax postponement
SOURCE : Author
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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.
Senate Floor Amendments of 8/31/10 strike the urgency
clause, correct errors, remove inconsistencies, and clarify
the intended application of the bill.
Senate Floor Amendments of 8/19/10 corrects errors, remove
inconsistencies, and clarify the intended application of
the bill. When heard by the Senate Revenue and Taxation
Committee and Senate Banking, Finance and Insurance
Committee, this bill reauthorized and recast the Senior
Citizens and Disabled Citizens Property Tax Postponement
Program, and shifted funding for that program from the
General Fund to a newly-created Senior Citizens and
Disabled Citizens Property Tax Postponement Fund,
administered by the State Controller, and funded by
counties that voluntarily opted in to the program. The
bill was significantly amended on August 9, 2010, in the
Senate Appropriations Committee. The August 9 amendments
shifted the bill from one run by the State Controller,
using moneys put up by counties for a ten year period, knot
a county-run program with a less prescriptive county
funding source. The August 9 amendments also altered the
following: eligibility requirements for the program,
county obligations under the program, lenders' ability to
foreclose on and to establish impound accounts for program
participants, and the way in which property liens are
established to ensure payment of property taxes deferred
under the program. The amendments, correct internal
inconsistencies created by the August 9 amendments, and
clarify the ways in which the author intends the county-run
tax deferment program to work. The amendments do not
address all outstanding issues, nor do they remove
opposition to the August 9 amendments by the financial
trade associations listed above.
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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,
authorize 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 specify
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. Under the program, a
participating county would be authorized to defer a
claimant's property taxes for taxes due on or before
February 20, 2010 and prospectively as provided in the
bill.
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
county tax collector 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 allow 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, in an amount equivalent
to the amount of the deferred property taxes, from the
county's Property Tax Deferral Fund, (3) direct the county
auditor to apportion that subvention payment in the same
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manner as if the property taxes had been paid, and (4)
provide a letter or other written confirmation to the
claimant, noting the relevant fiscal year of participation,
for use as written confirmation of program participation.
The bill authorizes the county treasurer of a participating
county, if he or she makes a 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 would require 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, as specified. The bill provides procedures
for the release of the lien if the obligation is paid in
full or otherwise discharged, and requires all amounts owed
by a claimant under the program to become due immediately
under specified circumstances.
This bill authorizes a participating county to charge an
application fee to the claimant to offset the actual costs
of administering the program, and requires 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.
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
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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 8/19/10 - as of previous version of
the bill)
State Controller
California State Association of Counties
Howard Jarvis Taxpayers Association
Urban Counties Caucus
OPPOSITION : (Verified 8/19/10 - as of previous version
of the bill)
California Bankers Association
California Financial Services Association
California Land Title Association
California Taxpayers Association
ARGUMENTS IN SUPPORT : The California State Association
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
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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
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
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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,
Yamada, John A. Perez
NO VOTE RECORDED: Tom Berryhill, Lieu, Audra Strickland
DLW:nl 8/31/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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