BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
996 (Lowenthal)
Hearing Date: 05/17/2010 Amended: 05/12/2010
Consultant: Mark McKenzie Policy Vote: Rev&Tax 5-0
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BILL SUMMARY: SB 996 would refund property taxes previously
paid on specified low-income housing rental properties that were
granted a "welfare exemption" from property taxation pursuant to
recent special legislation.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Property tax refund $210 General
(state impact)
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Staff notes that the total property tax refund would be
$510,234. In Los Angeles County, 41.1% of local property taxes
are allocated to schools and this bill would require school
entities to refund about $209,706. The General Fund would
backfill this amount pursuant to Proposition 98.
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Existing law provides for an unlimited property tax exemption
("welfare exemption") for projects owned and operated by a
nonprofit organization, subject to the following conditions:
the nonprofit receives low-income housing tax credits or
government financing for the property; the property is subject
to legal restrictions limiting its use to low-income housing
purposes; savings are used to maintain affordability or reduce
rents of units occupied by low-income tenants. Partial and
limited welfare exemptions are also authorized under certain
conditions related to the percentage of units serving low-income
households, and restrictions on the use of savings related to
the exemption.
The Long Beach Affordable Housing Coalition (LBAHC) purchased 12
affordable housing developments in 2004 that had been created in
pursuant to a consent decree to mitigate housing that was
demolished to build the Century Freeway (I-105) in Los Angeles
County. The "Century Freeway Housing Program" was a state run
program under the Department of Housing and Community
Development until 1995, when it was privatized and transferred
to the nonprofit Century Housing Coalition. These properties
had always qualified for a property tax exemption until
purchased by LBAHC in 2004. LBAHC did not qualify for the
"welfare exemption" because the properties were purchased with
conventional financing, rather than government financing, and
LBAHC does not receive low-income housing tax credits on the
properties. The enactment of SB 1284 (Lowenthal), Chapter 524
of 2008, cancelled any outstanding tax debt imposed on these
consent decree rental housing projects between January 1, 2002
and January 1, 2009, as specified. That bill was limited to
cancellations of outstanding tax because at the time it was
understood that no taxes had been paid on the properties
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SB 996 (Lowenthal)
while the issue of welfare exemption eligibility was being
pursued. However, some property tax payments had been made by
financiers of the projects on behalf of the nonprofit
organization owner to avoid the sale of the projects for tax
delinquency. LBAHC lender is now demanding a refund of the
property taxes it paid prior to the application of retroactive
eligibility for the welfare exemption.
SB 996 would provide for the refund of any tax, interest, or
penalty that has been paid on the LBAHC properties.
The Los Angeles County Assessor's Office estimates these parcels
have a total assessed value of $16,772,000. The L.A. County Tax
Collector indicates that $637,793 in property taxes have been
paid on the properties. This bill would require local agencies
to refund the property taxes paid, not including the amounts
collected to pay for debt service tax rates in excess of the
general one percent levy. Assuming an average countywide tax
rate of 1.25 percent, the total amount that would be refunded as
a result of this bill is approximately $510,234. As indicated
above, approximately 209,706 of this amount would be refunded by
schools, which the General Fund would be obligated to backfill.