BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
BILL NO: AB 2530 HEARING: 8/24/10
AUTHOR: Nielsen FISCAL: No
VERSION: 8/19/10 CONSULTANT: Detwiler
WILLIAMSON ACT
Background and Existing Law
Landowners and local officials can cooperate to conserve
agricultural and open space land under a three-part scheme:
Voluntary contracts that restrict land uses under
the Williamson Act. These contracts run for 10 years
(or 20 years in the case of the Farmland Security
Zone) and automatically renew each year for an
additional year.
Reduced property tax assessments for those
contracted lands.
State subventions to replace the forgone property
tax revenues.
About 16.6 million acres are under Williamson Act
contracts. In 2007, when 15.6 million acres were eligible
for state subventions, local officials claimed $37.7
million in direct General Fund payments. When the
Governor's 2003-04 Budget proposed ending the state
subventions, the Legislative Analyst's Office recommended a
ten-year phase-out. The first cuts came in 2008-09 when a
Budget trailer bill reduced the state subventions by 10%
(AB 1389, Assembly Budget Committee, 2008). The
Legislature's 2009-10 Budget reduced the subventions to
$27.8 million. However, Governor Schwarzenegger
essentially eliminated the subventions by cutting the
appropriation to $1,000.
On March 3, 2010, the Senate Local Government Committee
held an oversight hearing on the Williamson Act. Counties,
landowners, and conservation groups urged legislators to
find other revenues to replace the State General Fund to
pay for the state subventions to counties. Without
subventions, counties told legislators that they are
unlikely to continue participation in the Williamson Act.
Since the Committee's March hearing, agricultural groups
have been meeting with county officials and others to find
ways of preventing counties and landowners from terminating
AB 2530 -- 8/19/10 -- Page 2
their Williamson Act contracts until the state can resume
subvention payments.
Proposed Law
Assembly Bill 2530 creates a temporary program that
counties can use when the state's open space subventions
are less than a specified level. AB 2530 also creates more
revenues for the counties that use the temporary program.
I. Shorter contracts and revaluations . If a county
determines that the state's open space subventions are less
than half of the county's actual foregone general fund
property tax revenue, AB 2530 provides that the terms of
its 10-year Williamson Act contracts must be nine years and
terms of its 20-year Farmland Security Zone contracts must
be 18 years. After the initial year, one year must be
added to these contracts on their renewal dates, unless the
contracts are nonrenewed under existing law. If additional
revenues do not occur, two additional years must be added
to the contracts on their next anniversary date to restore
them to their full 10-year and 20-year terms.
In a county where this temporary program applies, the
county assessor must revalue the contracted property to
reflect the contracts' nine-year or 18-year terms. The
county assessor's increased valuation of the property must
be 10% of the difference between the value that reflects
the property's restricted use and the property's fair
market value. If a property's fair market value is lower
than its restricted value, there is no revaluation.
Landowners can nonrenew their Williamson Act contracts
instead of accepting a shorter contract. In that
situation, the county assessor will not revalue the
property.
Counties must give timely written notice to Williamson Act
landowners of:
Hearings to adopt or rescind the contract and
revaluation provisions.
Decisions regarding the contract and revaluation
provisions.
The right to prevent contract amendments through
nonrenewal.
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A county cannot modify or revalue a contract unless the
landowner gets 90 days notice of the opportunity for
nonrenewal and the landowner fails to nonrenew. A
landowner's failure to nonrenew is implied consent to the
contract and revaluation provisions for that year.
The temporary program created by AB 2530 does not apply to:
Contracts that have been nonrenewed.
Contracts with cities.
Open space or agricultural easements.
Scenic restrictions.
Wildlife habitat contracts.
II. Increased revenues . AB 2530 requires that the
increased revenues generated by properties that are subject
to the bill's contract and revaluation provisions must be
paid to the county's general fund either in proportion to
the percentage of the statewide average of general fund
property tax dollars received by county governments that
fiscal year or a maximum of 20%, whichever is greater.
III. Automatic termination . The provisions of AB 2530
automatically terminate on January 1, 2017, unless the
Legislature extends them.
Comments
Proposed author's amendments . Assembly Member Nielsen has
learned that the August 19 amendments do not accomplish his
intent. He has proposed additional amendments (RN
10-23546), but the legislative rules preclude the Senate
Local Government Committee from amending AB 2530 before the
August 24 hearing. The proposed author's amendments would
require:
? That new Williamson Act contracts which are signed
when the temporary program is in effect must be for either
nine or 18 years.
? A county to record a notice of the affected
properties' parcel numbers.
? A county to separately display the additional
amount of property tax revenue on the taxpayer's annual
bill.
? That the increase in valuation can't exceed 10%.
? The increased property tax revenues to be
exclusively allocated to the county, replacing the current
AB 2530 -- 8/19/10 -- Page 4
bill's allocation formulas.
? Conforming changes and drafting improvements.
If the Senate grants the Committee's request to waive the
appropriate rules, the Committee may vote on August 24 to
return AB 2530 to the Senate Floor and that the Senate
adopt the proposed author's amendments on the Floor.
1. A bridge to somewhere . Governor Schwarzenegger's
near-elimination of the state's open space subventions in
2010-11 threatens the Williamson Act's future. If counties
can't afford the property tax breaks that landowners enjoy,
they'll nonrenew the contracts and let them wind down over
the next nine (or 18) years. That's the end of the 45-year
old effort which affects about half of California's
farmland; nearly one-third of all private real estate. To
avoid that dismal legacy, landowners, conservation groups,
and public officials have been searching for a temporary
fix to restore enough of the subventions to keep counties
from abandoning the program. Just as the current statute
has three aspects --- voluntary contracts, mandatory
reassessments, replacement revenues --- AB 2530's temporary
program offers a parallel, three-part response. Under the
bill, counties shorten the contracts, property valuations
edge up, and the counties get more revenue. Landowners
continue to benefit from preferential tax valuations. The
public interest is served by keeping farms and ranches
undeveloped and in open space. AB 2530 creates a bridge
over which public officials, conservation groups, and
landowners can travel until California's economic and
fiscal conditions improve.
2. Missing pieces . AB 2530 isn't enough. Even if all 53
participating counties use the bill's temporary program,
even if Williamson Act landowners continue with their
contracts, and even if county assessors can quickly revalue
millions of acres of contracted lands, the resulting
revenues won't replace the state subventions. To keep
counties from abandoning their Williamson Act contracts,
legislators and the Governor need to restore some of the
state's open space subvention payments. How much are state
officials ready to put in the 2010-11 Budget? How much
money is enough to keep counties in the game?
3. Shorter is better . AB 2530 puts a January 1, 2017
sunset clause on its temporary program. That gives the
executive and legislative branches six years to come up
with a long-term solution for financing the state's open
AB 2530 -- 8/19/10 -- Page 5
space subvention program. Many current legislators will
not be in office by 2017 and the sense of urgency may
diminish over the next six years. According to Parkinson's
Law: Work expands so as to fill the time available for its
completion. The Committee may wish to consider a shorter,
three-year sunset clause --- January 1, 2014 --- to keep
policy advisors and decision-makers focused on solving the
subvention problem.
4. Other alternatives ? Innovative when enacted in 1965,
the Williamson Act may not be the best way to protect farms
and ranches in the 21st Century. The Legislative Analyst's
Office remains skeptical of the Act's benefits. Others say
that the Act needs significant improvements and legislators
must do even more to effectively preserve agricultural
land. With decades of improvements in state land use laws
and local practices, California could move away from the
property tax features of the Williamson Act and learn from
the other states which deliver circuit breaker income tax
relief to property owners who are committed to protecting
farms, ranches, and habitats as open space. Propping up
the Williamson Act's subvention program with AB 2530 may
divert legislators from the serious work of improving the
state's open space conservation laws.
5. For example . How would an amended version of AB 2530
work? In Glenn County, for example, the assessed valuation
of the Williamson Act contracted land is $3,081,035 lower
than those properties' unrestricted values (i.e., their
"full cash value" under Proposition 13). Because the
County government receives about 18% of the property tax
revenues, it misses out on $554,586 in property tax
revenues. If Glenn County participates in the temporary
program created by AB 2530 and shortens the term of the
existing Williamson Act contracts, the county assessor will
increase the value of the contracted properties by up to
10% which will raise the Williamson Act landowners'
property tax bills. As proposed to be amended, AB 2530
allocates the additional $308,104 to the County government.
That's about 56% of Glenn County's foregone revenue.
6. What we heard . After reviewing the presentations and
written materials from the recent oversight hearing, the
Committee's staff reached eight findings:
County officials, conservation groups, and
landowners generally support the Williamson Act's
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voluntary contracts, the use-value property tax
assessments, and the state subventions to county
governments.
Governor Schwarzenegger's near-elimination of the
state subventions in 2009-10 makes it tough for
counties to remain in Williamson Act contracts.
Unless the Legislature restores the subventions in
2010-11 --- wholly or partially --- more counties will
follow Imperial County's example and nonrenew their
Williamson Act contracts.
If contract nonrenewals spread, it may be
impossible to replace Williamson Act contracts on
millions of acres of agricultural and open space land.
Legislators want to explore other revenue sources
to replace the State General Funds to pay for the
state subventions to counties.
Some legislators want to consider statutory changes
to the Williamson Act that will focus attention on
farm and ranch land of statewide importance.
Some legislators worry about landowners who
transfer or sell their water rights from Williamson
Act contracted land, making the property less
productive.
Some legislators want to explore other long-term
ways to preserve agricultural and open space lands,
possibly income tax relief for the landowners as an
alternative to use-value property tax relief.
7. Legislative history . When the Senate Local Government
Committee passed AB 2530 on June 16, the bill would have
allowed county boards of supervisors to assign topics to
their Williamson Act advisory boards. The August 19
amendments deleted those contents and substituted new
language regarding the Williamson Act's contracts and
subventions. Following Senate Rule 29.10, the Senate Rules
Committee re-referred the rewritten bill to the Senate
Local Government Committee. The Committee will hear the
bill on August 24.
Assembly Actions
Not relevant to the August 19, 2010 version of the bill
Support and Opposition (8/23/10)
AB 2530 -- 8/19/10 -- Page 7
Support : California Farm Bureau Federation, Resource
Landowners Coalition, The Nature Conservancy.
Opposition : Unknown.