BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1398|
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THIRD READING
Bill No: SB 1398
Author: DeSaulnier (D)
Amended: 6/1/10
Vote: 27
SENATE LOCAL GOVERNMENT COMMITTEE : 3-2, 4/19/10
AYES: Kehoe, DeSaulnier, Price
NOES: Cox, Aanestad
SENATE APPROPRIATIONS COMMITTEE : 7-3, 5/27/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Yee
NOES: Denham, Walters, Wyland
NO VOTE RECORDED: Cox
SUBJECT : Property tax revenue allocations: public
utilities: qualified
property
SOURCE : City of Oakley
DIGEST : This bill creates a new method for allocating
unitary property tax revenues from new public
utility-owned, state-assessed qualified property.
ANALYSIS : The California Constitution requires the State
Board of Equalization (BOE) to assess public utilities for
property tax purposes. The BOE assesses utility property
as a unit, instead of assessing the individual value of
separate properties owned by the utility. State law
allocates the property tax revenues from state-assessed
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public utilities differently than the property tax revenues
from locally-assessed properties.
Until 1988-89, state law allocated property tax revenues
from all state-assessed property on a situs basis among tax
rate areas. The complexity and administrative cost of
tracking property holdings and allocating property tax
revenues among thousands of small geographic locations led
the Legislature to create the current countywide method for
allocating unitary property tax revenues (AB 2890
[Hannigan], Chapter 1457, Statutes of 1986).
Under the countywide method, the BOE allocates the unitary
assessed value of utility property among the counties based
on the amount of property within each county. County
auditors allocate the property tax revenues from unitary
properties using a formula based on the amount of unitary
revenues received by the county's taxing jurisdictions in
1987-88. For years after 1987-88, each taxing jurisdiction
receives up to 102% of its prior year unitary property tax
revenues. The county auditor allocates the remaining
property tax revenue from the county's unitary roll to all
taxing jurisdictions in proportion to their shares of
property tax revenues derived from locally-assessed
property.
This bill creates a new method for allocating unitary
property tax revenues from new public utility-owned,
state-assessed "qualified property."
This bill defines "qualified property" as all plant and
associated equipment, including substation facilities and
fee-owned land and easements, placed in service by a public
utility in the Oakley Redevelopment Project Area on or
after January 1, 2011 and related to:
A. Electrical substation facilities that either operate at
50,000 volts or more or have a transformer with a
high-side voltage of 50,000 volts or more.
B. Electric generation facilities that have a nameplate
generating capacity of 50 megawatts or more.
C. Electric transmission line facilities of 200,000 volts
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or more.
This bill's unitary property tax allocation method differs
from the countywide allocation method that applies
generally to revenues from utilities' state-assessed
property and from the 2006 Torlakson bill's modified method
for allocating revenues from qualified electrical facility
property in three significant ways:
I. Non-debt service allocation . Generally, under the
countywide unitary tax allocation method, property taxes
from the non-debt service portion of the tax applied to
state-assessed property goes into a countywide pool and
is allocated by a formula that:
A. Establishes a unitary tax base for any
jurisdiction which had state assessed property
within its boundaries in the 1987-88 fiscal year.
B. Annually increases each local agency's unitary
base by up to two percent (provided that revenues
are sufficient).
C. Allocates the remaining revenues to all agencies
in the county in proportion to the entity's share
of non-unitary property tax revenues.
The modified method for allocating revenues from
qualified electrical facility property allocates revenues
to a county, school entities, and non-enterprise special
districts in proportion to the revenues they received
from the utility in the prior year under the countywide
allocation method. Of the remaining revenues 90 percent
go to the city or county in which the electrical facility
is built and 10 percent go to the local government that
provides water service to the qualified electrical
facility property.
This bill requires the revenue from the property tax
assessed on public utility-owned, state-assessed
qualified property to be allocated entirely to the county
in which the qualified property is located. The county
auditor then allocates the property tax revenues derived
from the non-debt-service portion of the property tax on
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qualified property as follows:
A. Allocate to the county in which the qualified
property is located and to all of the school
entities located in that county, the amount of
property tax revenues that would have otherwise
been allocated to county and school entities had
the bill not been enacted.
B. Allocate to the East Contra Costa Fire
Protection District, an amount equal to two percent
of the property tax revenues.
C. Allocate to the redevelopment agency governing
the project area in which the qualified property is
located, the balance of the property tax revenues,
which shall be included in that redevelopment
agency's tax increment for the year.
II. Debt service allocation . Generally, unitary property
tax revenues from the debt-service rate that applies to
state-assessed properties are allocated to each taxing
jurisdiction that levies a rate in excess of one percent
for voter-approved debt service in proportion to the
percentage of total property tax revenues each
jurisdiction received from taxes on state-assessed
property in the prior year. Under the modified
allocation method for qualified electrical facilities,
revenues from the debt-service rate are allocated using
the general method, except that school entities receive
an amount equivalent to the same percentage of property
tax revenues they received from the utility in the prior
fiscal year.
This bill allocates revenues from the debt-service rate
in two steps:
A. The revenues go to taxing jurisdictions in those
Contra Costa County tax rate areas in which the
qualified electrical facility is located in an
amount equivalent to the BOE's current-year
assessed value of the qualified property multiplied
by any override rate adopted by the local agency
for the year.
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B. The balance of the revenues are allocated
pursuant to the general allocation statute.
III. Property valuation . Generally, the BOE annually
reassesses state-assessed property at its current market
value on January 1 of each year. The modified
allocation method for qualified electrical facilities
excludes from the definition of qualified property any
additions, modifications, reconductoring, or equivalent
replacements to the plant and associated equipment made
after the plant and associated equipment are placed in
service.
This bill includes, in the definition of qualified
property, any additions, modifications, reconductoring,
or equivalent replacements to the plant and associated
equipment made after the plant and associated equipment
are placed into service.
Additionally, this bill requires a public utility to
provide the BOE with a description of the qualified
property in the form prescribed by the BOE so that separate
valuation can be determined. The BOE must transmit to the
Contra Costa County auditor the information necessary to
identify the qualified property and the corresponding
assessed value data necessary to make the property tax
revenue allocations required by the bill. This bill
requires the county auditor to make any necessary pro rata
reductions in the allocations of property tax revenues
attributable to the qualified property to jurisdictions
other than those receiving an allocation under the bill's
provisions. The Oakley Redevelopment Agency shall
reimburse the county auditor for the actual and reasonable
costs incurred by the county auditor to administer this
section.
This bill contains legislative declarations to support its
special provisions applying to the Oakley Redevelopment
Agency.
Background
The Legislature has created some exceptions to this
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countywide unitary tax allocation method. When the City of
Chula Vista (San Diego County) was willing to accept a
proposed electrical power plant, legislators directed that
the resulting property tax revenues would be allocated to
schools and the county government under the unitary tax
method, but the share that would have gone to all cities in
San Diego County under the unitary tax method would instead
go just to Chula Vista. This exception would have lasted
for 10 years and then it would have sunsetted and the
regular unitary tax method would have applied (AB 1108
[Peace], Chapter 1045, Statutes of 1993). The Legislature
approved similar exceptions for an electrical power plant
in the City of Escondido (AB 2558 [Plescia], Chapter 640,
Statutes of 2004), a PG&E education and training center in
the City of Livermore (SB 53 [Lockyer], Chapter 465,
Statutes of 1991), and a PacBell computer center in the
City of Fairfield, (AB 454 [Klehs], Chapter 921, Statutes
of 1987).
The Legislature also created an exception to the countywide
unitary tax allocation method for all newly constructed
public-utility-owned large-scale electrical generation,
substation, and transmission facilities. That exception
allocates a greater share of unitary property tax revenues
to the city or county in which a qualified electrical
facility is located (SB 1317 [Torlakson], Chapter 872,
Statutes of 2006).
The California Energy Commission is considering a proposal
to construct a 600 megawatt power plant to be located
within a redevelopment project area in the City of Oakley
(Contra Costa County). Oakley officials say that the
modified allocation method created by the Torlakson bill
allocates insufficient revenues to their redevelopment
project area. They want the Legislature to create an
exception to that modified allocation method to send more
unitary property tax revenues from the proposed Oakley
power plant on a site basis to the Oakley Redevelopment
Agency.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee analysis:
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Property tax allocation annual
gain of about $4,000 to Oakley
Local
RDA and corresponding loss to other
local entities
SUPPORT : (Verified 6/1/10)
City of Oakley (source)
Contra Costa Building and Construction Trades Council
Diablo Water District
Ironhouse Sanitary District
Oakley Chamber of Commerce
Oakley Redevelopment Agency
OPPOSITION : (Verified 6/1/10)
California Special Districts Association
AGB:do 6/1/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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