BILL ANALYSIS
AB 2663
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Date of Hearing: April 28, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2663 (Lowenthal) - As Amended: April 22, 2010
Policy Committee: Local
GovernmentVote:8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires the state to delay the transfer, borrowing,
or suspension of various local funds from cities and counties
that have fiscal years coinciding with the federal government
until their fiscal years commence on October 1. The bill applies
to:
1)The borrowing, transfer, or suspension of property tax
revenues, allocated in accordance with subdivision (a) of
Section 1 of Article XIII A of the California Constitution
(relating to local property taxes).
2)The borrowing, transfer, or suspension of revenues from the
Highway Users Tax Account (relating to excise taxes
apportioned for local streets and roads).
3)The borrowing, transfer, or suspension of revenues from the
Transportation Investment Fund (TIF) allocated pursuant to
subdivision (b) of Section 1 of Article XIX B of the
California Constitution (Proposition 42 funds relating to
sales taxes on motor vehicle fuels).
4)The borrowing, transfer, or suspension of funds allocated to a
redevelopment agency pursuant to subdivision of Section 16 of
Article XVI of the California Constitution.
FISCAL EFFECT
1)No impacts in 2010-11, since the bill would not take effect
until January 1, 2011. In future years, the impacts would
depend on the extent and timing of borrowing and transfers
AB 2663
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from local governments included in the state budget.
a) As an illustration, the five cities that currently use a
federal fiscal year account for about 2% of total property
tax payments and population in California. If the state
were to suspend $1 billion from all local sources on July
1, this bill would result in the delay of $20 million in
payments, translating into $250,000 in interest costs.
2)This bill could result in potentially larger revenue delays to
the state (ranging into the millions of dollars) unless it is
amended to clarify that delayed payments are due within the
state's fiscal year.
3)Minor administrative costs to the state to determine the
amount of borrowed funds that would be delayed, and set up
alternative payment schedules for the local agencies involved.
COMMENTS
1)Background . In recent years, the state has relied on
borrowing, suspensions and transfers from multiple sources,
including local governments, to address its major budget
shortfalls. The 2009-10 budget includes, for example, includes
transfers of property tax increment revenues from
redevelopment agencies and a loan of property taxes from
cities, counties, and special districts.
According to the author, there are five local governments in
California that operate on a federal fiscal year - the cities
of Long Beach, Huntington Beach, Inglewood, El Segundo and
South Lake Tahoe. The federal fiscal year runs from October 1
through September 30, three months later than the fiscal year
period used by the state and most local governments.
2)Rationale . This bill is intended to provide relief to local
governments that use a federal fiscal year. The author notes
that "for the five cities on the federal fiscal year, the
state's borrowing comes at the end of their budget cycles -
when they are least able to adapt to borrowing, placing an
undue financial burden on those cities." The bill would allow
these local governments to delay the payments to the state the
beginning of their following fiscal year, when they are in a
better position to plan and accommodate it.
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3)Clarifying amendments needed . The bill is silent on the
question of when the delayed portion of the amount suspended,
loaned, or transferred is due. This omission could be
significant when, for example, transfers are scheduled on a
monthly or quarterly basis. Absent amendments clarifying that
any payments that are delayed until October 1 must be made (in
addition to regularly scheduled payments) prior the June 30
conclusion of the state's fiscal year, the bill could have
much larger impacts on the state.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081