BILL ANALYSIS �
AB 68
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Date of Hearing: March 23, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 68 (Beall) - As Introduced: December 14, 2010
SUBJECT : Tax Equity Allocation formula: County of Santa Clara.
SUMMARY : Modifies property tax allocations for several Tax
Equity Allocation cities in Santa Clara County. Specifically,
this bill :
1)Deletes, beginning in the 2012-13 fiscal year, the requirement
that the Santa Clara County auditor reduce the amount of
property tax revenues allocated to the cities of Cupertino,
Los Altos Hills, Monte Sereno, and Saratoga by the Educational
Revenue Augmentation Fund (ERAF) reimbursement amount, and
commensurately increase the amount of property tax revenues
allocated to the county ERAF.
2)States that the Legislature finds and declares that a special
law is necessary because of the unique fiscal pressures being
experienced by several cities in the County of Santa Clara.
3)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)Requires the auditor of each county with qualifying cities, as
defined, to make certain property tax revenue allocations to
those cities in accordance with a specified Tax Equity
Allocation (TEA) formula established in statute and to make
corresponding reductions in the amount of property tax revenue
that is allocated to the county.
2)Requires the auditor of Santa Clara County, for the 2006-07
fiscal year and for each fiscal year thereafter, to reduce the
amount of property tax revenue allocated to the county ERAF,
as specified.
FISCAL EFFECT : Unknown
COMMENTS :
AB 68
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1)About 30 cities that never levied a property tax before
Proposition 13 are called no property-tax cities, and about 60
cities that levied only low property tax rates are known as
low property-tax cities. Counties must shift some of their
own property tax revenues to these no/low cities in the form
of TEA payments.
2)In most counties, TEA payments to the no/low cities are equal
to 7% of the property tax revenues generated within their city
limits. However, an exception required Santa Clara County to
allocate no more than 55% of the TEA funding that the four
no/low cities in the county would otherwise be qualified to
receive. The 55% limit was the product of an agreement in
1989, reached through intense negotiations between Santa Clara
County and the cities of Cupertino, Los Altos Hills, Monte
Sereno and Saratoga.
3)One of the results of the agreement was that these four cities
argued that the limit on their TEA payments kept them from
adequately funding city services. AB 117 (Cohn), Chapter 342,
Statutes of 2006, partially resolved this problem by
eliminating the 55% TEA cap, which saved the county $4.2
million in property taxes. The elimination of the 55% limit
allowed the four cities to receive the full 7% of the property
tax generated within city limits. In exchange, the cities
provided additional services that reduced county costs. This
agreement to remove the 55% TEA cap was supported by the Santa
Clara County Board
of Supervisors.
1)However, provisions included in AB 117 required the four
cities to fund ERAF at the county rate, which was higher than
the city rate. According to the author and sponsor, these
cities in Santa Clara County are the only cities in the state
forced to suffer this inequity. To achieve this, AB 68
deletes the requirement that the Santa Clara County auditor
reduce the amount of property tax revenues allocated to the
cities of Cupertino, Los Altos Hills, Monte Sereno, and
Saratoga by the ERAF reimbursement amount, and commensurately
increase the amount of property tax revenues allocated to the
county ERAF.
2)This bill is substantially similar to AB 1827 (Beall, 2008),
which was held in the Assembly Appropriations Committee.
AB 68
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3)Support Arguments: Supporters argue that these four cities in
Santa Clara County are the only cities in the state forced to
suffer this inequity. No other no/low property tax cities are
treated in this manner. The Legislature may wish to consider
whether it is appropriate to continue this treatment, or
whether it makes more sense to treat no/low property tax
cities in a similar manner.
Opposition Arguments: By deleting the requirement that the
Santa Clara County auditor reduce the amount of property tax
revenues allocated to the four cities, there will be an
increase in General Fund expenditures to backfill the local
property taxes shifted from schools to those four cities.
Recognizing the dire financial situation that the state is in,
it may not be feasible for the state to take on additional
fiscal pressure at this time.
REGISTERED SUPPORT / OPPOSITION :
Support
City of Cupertino �SPONSOR]
Cities of Monte Sereno and Saratoga
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958