BILL ANALYSIS
SB 1398
Page 1
Date of Hearing: June 30, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 1398 (DeSaulnier) - As Amended: June 1, 2010
SENATE VOTE : 30-3
SUBJECT : Property tax revenue allocations: public utilities:
qualified property.
SUMMARY : Revises property tax formulas to allocate property tax
revenues from a new public utility power plant in Contra Costa
County to the Oakley Redevelopment Agency. Specifically, this
bill :
1)Defines "qualified property" to mean both of the following:
a) 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
the following:
i) Electrical substation facilities that meet either of
the following conditions:
(1) The high-side voltage of the facility's
transformer is 50,000 volts or more; or,
(2) The substation facilities are operated at
50,000 volts or more.
ii) Electric generation facilities that have a nameplate
generating capacity
of 50 megawatts or more; and,
iii) Electric transmission line facilities of 200,000
volts or more.
b) Any additions, modifications, reconductoring, or
equivalent replacements to the plant and associated
equipment made after the plant and associated equipment are
placed into service.
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2)Provides, notwithstanding any other law, that all of the
following shall apply, for the fiscal year (FY) 2011-12 and
each FY thereafter:
a) The revenue from the property tax assessed on qualified
property, which is owned by a public utility and assessed
by the Board of Equalization (BOE), shall be allocated
entirely within the county in which the qualified property
is located.
b) Provides that the county auditor shall allocate the
non-debt service portion of the property tax revenues as
follows:
i) First, 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 the county and
school entities or districts had this section not been
enacted;
ii) Second, to the East Contra Costa Fire Protection
District, an amount equal to 2%
of the property tax revenues; and,
iii) Third, 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.
c) Provides that the property tax revenues allocated to the
redevelopment agency shall not be construed as either
revenues or tax increment for purposes of pass-through
agreements to other affected jurisdictions, or for the
purposes of the requirement in existing law to set aside
20% of redevelopment funds for low- and moderate-income
housing.
d) Allocates revenues from the debt-service rate in two
steps:
i) Provides that 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
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value of the qualified property multiplied by any
override rate adopted by the local agency for the year;
and,
ii) Provides that the balance of the revenues shall be
allocated pursuant to the general allocation statute.
3)Provides that a public utility shall provide to BOE a
description of the qualified property in the form prescribed
by BOE so that separate valuation can be determined.
4)Provides that BOE shall transmit to the auditor of Contra
Costa County the information necessary to identify the
qualified property and the corresponding assessed value data
necessary to make the property tax revenue allocations as
required under this bill.
5)States that the Legislature finds and declares that a special
law is necessary in order to ensure that the Oakley
Redevelopment Agency receives sufficient tax increment.
6)Provides that reimbursement to local agencies and school
districts shall be made, if the Commission on State Mandates
determines that this act contains costs mandated by the state.
EXISTING LAW :
1)Provides for the following allocation formula pursuant to SB
1317 (Torlakson), Chapter 872, Statutes of 2006, for qualified
public utility-owned electrical facilities built after January
1, 2007, and meeting specified conditions:
a) Counties, K-14 schools, and non-enterprise special
districts receive the same percentage of these property tax
revenues as they received in the previous year;
b) The city in which the electrical facility is located
receives 90% of the remaining property tax revenues;
c) The city or water districts that provide water service
to the electrical facilities receive the remaining 10% of
the property tax revenues; and,
d) The other entities that would have previously received a
share of the property tax revenues do not receive any of
the revenues.
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2)Authorizes redevelopment agencies to utilize tax increment
financing to fund projects in a redevelopment area.
3)Requires redevelopment agencies to make payments to affected
taxing entities to alleviate the financial burden or detriment
that the affected taxing entities may incur as a result of the
redevelopment plan.
4)Establishes a fixed mathematical formula for the amount of tax
increment that redevelopment agencies must pay affected taxing
entities during the life of the redevelopment plan.
5)Requires not less than 20% of all property tax increment
allocated to a redevelopment agency to be used by the agency
for purposes of increasing, improving, and preserving the
community's supply of low- and moderate-income housing
available at affordable housing cost to persons and families
of low or moderate income, lower-income households, very low-
income households, and extremely low-income households.
FISCAL EFFECT : According to the Senate Appropriations
Committee, this bill will result in an annual gain of $2,500,000
to $3,000,000 for the Oakley Redevelopment Agency, with a
corresponding loss to other local entities, beginning in the FY
2010-2011 and ongoing.
COMMENTS :
1)In recent years, there has been a trend of moving toward
situs-based allocation for certain new major projects assessed
by the state. Prior to this point, incremental growth
revenues from state-assessed properties were distributed to
nearly all governmental agencies and school entities in the
county in proportion to each entity's share of the county's
total ad valorem property tax revenues in the prior year.
Under the countywide system, all entities received a share in
the revenues, regardless of whether any of the value growth
occurred within its jurisdictional boundaries.
2)AB 81 (Migden), Chapter 57, Statutes of 2002, was enacted to
change the revenue allocation of power plants divested by
public utilities and sold to private operators, as well as
those newly constructed by merchant power plant owners, to
provide for situs-based revenue allocation. In 2005, San
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Diego Gas and Electric sought and received special revenue
allocations for a proposed new power plant to be constructed
in the City of Escondido
[AB 2558 (Plescia), Chapter 640, Statutes of 2004]. In 2006,
the Legislature 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 result is that SB 1317 compensates a community that
accepts an energy project with a bigger share of future
unitary property tax revenues. However, the SB 1317 formula
only provides compensation for cities or counties, not
redevelopment agencies.
3)SB 1398 revises property tax allocation formulas to allow
property tax revenues from a new public utility power plant
proposed to be built in Contra Costa County to be allocated to
the Oakley Redevelopment Agency. Currently the California
Energy Commission (CEC) is considering a proposal to construct
a 600 megawatt power plant to be located within a
redevelopment project area in the City of Oakley, in East
Contra Costa County. The powerplant is slated to use General
Electric's (GE) latest technology, be powered by natural gas,
and will eventually be owned by PG & E at commercial
operation.
4)According to the author, current law creates a disincentive
for the City of Oakley to support
a new power generating facility within its boundaries. The
author notes that the residents
of Oakley will be the most impacted if a power plant is built
within their community and without the financial incentive
that can be used to reduce blight in the community and provide
the necessary services to the facility. The author notes that
the SB 1317 allocation method will apportion insufficient
revenues to their redevelopment project area.
5)Under the existing SB 1317 method of modified unitary property
tax allocation, the City
of Oakley will receive augmented future unitary property tax
revenues from the proposed power plant within its borders.
The City could share some or all of the revenues from the new
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power plant with the Oakley Redevelopment Agency, making it
unnecessary for a bill
to enact statutory changes to the property tax allocation
formula. The Committee may wish to ask the author why a bill
is necessary, when a transfer of funds from the City to the
Redevelopment Agency may be sufficient.
6)Amendments taken by the author as suggested by the Senate
Appropriations Committee
hold school districts in Contra Costa County harmless, and also
require the Oakley Redevelopment Agency to reimburse the
county auditor for the actual and reasonable costs incurred by
the county auditor for implementing the bill. Additionally
the author amended the bill to allocate 2% of the property tax
revenues, after distribution to all school entities, to the
East Contra Costa Fire Protection District, since that is the
district that will provide services to the new power plant.
In addition to the amendments requested by the Senate
Appropriations Committee, the author also added in language
that says that property tax revenues allocated to the
redevelopment agency under the provisions of this bill shall
not be counted as property tax revenues or property tax
increment for the purposes of the requirement that
redevelopment agencies must set aside 20% for the agency's
low-mod housing fund, and for purposes of all pass-through
agreements.
7)California Rural Legal Assistance Foundation (CRLA) and
Western Center on Law & Poverty (Western Center) state that
the primary objective of the Community Redevelopment law and
its predecessor statutes has been the eradication of blight
and the redevelopment
of distressed communities, with one of the major components of
this goal being the preservation and protection of the supply
of affordable housing. CRLA and Western Center object to any
measure that reduces or eliminates the long-standing policy
commitment and statutory requirements to develop affordable
housing with a portion of tax increment revenue, and therefore
have an "Oppose unless Amended" position on SB 1398.
8)Under existing law, a local jurisdiction hosting a power
generation facility is able to capture additional property tax
revenues to assist in providing local community services to
their residents. Cities, counties, and special districts
provide various services to their residents; however,
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redevelopment agencies do not provide services. The Committee
may wish to ask the author why additional compensation is
needed by the redevelopment agency when no new services are
being provided to residents by the redevelopment agency.
9)This bill creates winners and losers - the Oakley
Redevelopment Agency would receive increased revenues under
the bill's provisions; however, several special districts in
the area would lose revenue. The Committee may wish to
consider whether it is prudent to get in the middle of a local
issue by taking sides, thus picking winners and losers.
10)This bill changes the pro rata shares in which ad valorem
property tax revenues are allocated among local agencies in a
county, and therefore, requires a two-thirds vote of the
membership of each house of the Legislature (Proposition 1A,
2004).
11)Support Arguments : Supporters argue that SB 1398 will remedy
on oversight in existing law regarding property tax allocation
revenue for public utilities. Supporters state that existing
law does not recognize that some power generating facilities
are sited within redevelopment project areas. The City of
Oakley notes that the power generation facility, if approved
by the CEC, will provide substantial jobs during the
construction phase of the facility, but will not necessarily
provide significant annual revenues to the hosting
jurisdiction if SB 1398 does not pass.
Opposition Arguments : The California Special Districts
Association (CSDA) writes that "supporters of SB 1398 argue
that not listing redevelopment agencies in SB 1317 was 'an
omission' - an assertion that is factually incorrect." CSDA
states that redevelopment agencies were specifically not
included in SB 1317 due to the incentive allocation of
property tax revenues that the siting city would receive from
the new power facility - in this case, the City of Oakley.
Additionally, CSDA writes that the "inclusion of redevelopment
agencies sets an unfortunate precedent and will ultimately
result in reducing or otherwise eliminating property tax
allocations to special districts as provided for in SB 1317."
REGISTERED SUPPORT / OPPOSITION :
Support
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City of Oakley [CO-SPONSOR]
Oakley Redevelopment Agency [CO-SPONSOR]
Contra Costa Building and Construction Trades Council
Diablo Water District
Ironhouse Sanitary District
Oakley Chamber of Commerce
Opposition
California Rural Legal Assistance Foundation (unless amended)
California Special Districts Association
Department of Finance
Howard Jarvis Taxpayers Association
Western Center on Law & Poverty (unless amended)
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958