BILL ANALYSIS
SB 1398
Page 1
SENATE THIRD READING
SB 1398 (DeSaulnier)
As Amended August 17, 2010
2/3 vote
SENATE VOTE :30-3
LOCAL GOVERNMENT 5-0 APPROPRIATIONS 12-4
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|Ayes:|Smyth, Caballero, |Ayes:|Fuentes, Bradford, |
| |Arambula, Coto, | |Huffman, Coto, Davis, De |
| |Solorio | |Leon, Gatto, Hall, |
| | | |Skinner, Solorio, |
| | | |Torlakson, Torrico |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Harkey, Miller, Nielsen, |
| | | |Norby |
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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
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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.
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 revenues or
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tax increment for purposes of specified types of
pass-through agreements to other affected jurisdictions.
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
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 no reimbursement is required because the bill
provides for reimbursement to a local agency in the form of
additional revenues that are sufficient in amount to fund the
new duties established in this measure.
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
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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.
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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)No direct effect on state costs or revenues, since the bill
does not impact property taxes going to school districts.
2)The bill redirects about $2.7 million of property taxes within
the county, and reduces funds that would otherwise be
available for low income housing. Of this total, $500,000
would be from the City of Oakley (where the redevelopment
agency is located) and $2.2 million from various water,
sanitary, park, hospital, and other special districts within
Contra Costa County.
3)The bill contains a provision stating that it will reimburse
the county for mandated costs determined by the Commission on
State Mandates. These costs would be for the added property
tax computations required of the County Auditor. However,
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actual state reimbursements are unlikely, since the bill
requires the redevelopment agency to reimburse the county for
reasonable expenses related to the reallocations.
COMMENTS : 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.
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 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.
This bill 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
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owned by PG & E at commercial operation.
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.
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 power
plant with the Oakley Redevelopment Agency, making it
unnecessary for a bill to enact statutory changes to the
property tax allocation formula. The Legislature 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.
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 specified pass-through agreements.
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
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their residents. Cities, counties, and special districts
provide various services to their residents; however,
redevelopment agencies do not provide services. The Legislature
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.
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 Legislature 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.
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).
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."
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Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0006078