BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1250|
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THIRD READING
Bill No: SB 1250
Author: Ducheny (D)
Amended: 6/2/10
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 5-0, 4/14/10
AYES: Wolk, Walters, Alquist, Ashburn, Padilla
SENATE APPROPRIATIONS COMMITTEE : 10-0, 5/27/10
AYES: Kehoe, Alquist, Corbett, Denham, Leno, Price,
Walters, Wolk, Wyland, Yee
NO VOTE RECORDED: Cox
SUBJECT : Property tax: military housing
SOURCE : County of San Diego
DIGEST : This bill expands the property tax exemption
currently provided to private operators of family housing
on military bases to include non-family housing.
ANALYSIS : Current law generally prohibits the taxation
of property owned by the federal government and other
public land, but imposes a "possessory interest" tax on
federally-owned property used by a private interest, such
as a private lease of public land, if the private use meets
three tests of independence, durability, and exclusivity.
Under the federal Military Housing Privatization
Initiative, which was enacted in 1996, the federal
government began privatizing military housing. The
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authorization was initially limited to agreements between
the military and private developers for ownership,
maintenance, and operation of family housing via a 50-year
lease. In response, the Legislature enacted SB 451
(Ducheny), Chapter 853, Statutes of 2004, which specified
that a private developer's interest in military family
housing is not "independent" for purposes of imposing a
possessory interest tax, and therefore exempt from the
property tax. This exemption does not apply to
unaccompanied housing for single enlisted service members.
In 2003, Congress authorized the Department of the Navy to
undertake up to three pilot projects for the privatization
of unaccompanied housing, such as bachelor enlisted
quarters, barracks, and dormitories. The Navy selected a
private developer for a public-private venture to provide
housing for single military personnel at Naval Station San
Diego. This project, Pacific Beacon LLC, privatized 258
units of Navy-owned unaccompanied housing units and
provides for the construction of 941 apartments at Naval
Station San Diego, which the LLC will own, operate, and
manage for 50 years. Construction broke ground in January
2007 and was substantially completed in March 2009.
This bill specifies that there is no independent possession
of land or improvements that are due to a contract that
includes a lease for the development of housing solely for
active duty military personnel, or their dependents, or
both, thereby exempting both family and unaccompanied
housing projects from property tax.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
The Senate Appropriations Committee staff notes that San
Diego County has asked the Board of Equalization (BOE)
for a legal opinion of whether the Pacific Beacon project
constitutes a possessory interest under existing law.
BOE recently opined that the arrangement between Pacific
Beacon and the government does not result in the creation
of a taxable possessory interest, so any assessments on
the property will be cancelled and the project will be
exempt from future property taxation. However, to the
extent this bill exempts future "bachelor housing"
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developments on military bases from property tax, this
bill creates future General Fund impacts.
SUPPORT : (Verified 6/1/10)
County of San Diego (source)
Clark Realty Capitol
San Diego County Assessor
San Diego Regional Chamber of Commerce
DLW:mw 6/2/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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