BILL ANALYSIS �
AB 504
Page 1
Date of Hearing: April 4, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 504 (Williams) - As Introduced: February 15, 2011
Majority vote.
SUBJECT : School districts: County of Santa Barbara: special
taxes.
SUMMARY : Authorizes any newly unified school district in the
County of Santa Barbara (SB) to continue the collection of the
parcel taxes originally imposed and collected in the predecessor
school districts. Specifically, this bill :
1)Provides that, when any school district in the County of SB is
merged with one or more school districts so as to form a
single district, the newly merged district may do both of the
following:
a) Continue to impose any qualified special taxes imposed
in any of the predecessor school districts, provided that
the revenues derived from those taxes remain segregated on
a geographical basis conforming to the former boundaries of
the school districts prior to unification.
b) Impose a new special tax, provided that the revenues
derived from the imposition of the new tax are segregated
on a geographical basis conforming to the former boundaries
of the school districts prior to unification.
2)Declares that a special law is needed to allow school
districts in the County of SB that have merged to form a
unified school district to continue to impose qualified
special taxes that used to be imposed in any of the
predecessor school districts in order to provide critical
program support in the unified school district in areas such
as music, art, mathematics, and technology.
EXISTING EDUCATION LAW :
1)States the intent of the Legislature that local educational
needs and concerns serve as the basis for future
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reorganizations of districts in each county.
2)Establishes a process whereby locally developed reorganization
petitions dealing with the creation of one or more new school
districts, where the governing boards of the affected school
districts consent to the petition, where the county
superintendent of schools with jurisdiction over the affected
school districts grants approval to the county committee and
the county committee chooses to accept that authority, and
where the county committee enters into an agreement to share
the costs of complying with the requirements of the
California Environmental Quality Act (CEQA) on behalf of any
or all affected school districts (eligible petitions), are
reviewed by the county committee in public hearing. For all
such petitions that it approves, the county committee is
required to notify the county superintendent of schools who is
required to call for an election at which the petition is put
to a vote of the affected electorate; an eligible petition
that is disapproved by the county committee is required to be
transmitted to the State Board of Education (SBE) for hearing.
3)Establishes a process whereby locally developed reorganization
petitions dealing with a transfer of territory are reviewed by
the county committee on school district organization for
approval or disapproval in a public hearing, and allows for
the county committee decision on a petition dealing with a
transfer of territory to be appealed to the SBE for review and
consideration.
4)Establishes a process whereby locally developed reorganization
petitions dealing with all other district organizational
issues are reviewed by the county committee in public hearing
and submitted with a recommendation to the SBE, and requires
the SBE to hear such petitions in public hearing, receive a
recommendation from the California Department of Education
(CDE) staff, and formally approve or disapprove those
petitions.
5)Requires the return of petitions approved, as described in
paragraph (3) and (4) above, to the local jurisdiction, where
the county superintendent of schools is required to call for
an election at which the petition is put to a vote of the
affected electorate.
6)Makes provisions for determining the disposition of personnel,
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property, funds, record, obligations, bonded indebtedness, and
for determining revenue limit funding for districts that
reorganize.
EXISTING TAX LAW :
1)Authorizes cities, counties, and special districts to impose a
general tax for general governmental purposes with the
approval of a majority of the voters.
2)Prohibits special purpose districts and agencies, including
schools districts, from levying a general tax.
3)Authorizes cities, counties, and special districts to impose a
special tax for specified purposes with the approval of
two-thirds of the voters.
4)Does not allow cities, counties, or special districts to
impose an ad valorem tax on real property or a transactions
tax or sales tax on the sale of real property within that
city, county, or special district.
5)Authorizes school districts to impose qualified special taxes,
in accordance with specified procedures, including the
approval of two-thirds of the voters in the district.
6)Provides that "qualified special taxes" must apply uniformly
to all taxpayers or all real property within the school
district and do not include special taxes imposed on a
particular class of property or taxpayers.
7)Authorizes a school district to exempt from a "qualified
special tax" person 65 years of age or older or persons
receiving Supplemental Security Income for a disability,
regardless of age.
8)Allows property-related fees and charges to be imposed or
increased upon the approval of a majority of the property
owners of the property subject to the fee or charge or, at the
option of the local agency, a two-thirds vote of the
electorate residing in the affected area.
9)Allows school districts to create Community Facilities
Districts and assess Mello-Roos Special Taxes for school
facilities, and maintenance services for elementary and
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secondary school sites and structures. Requires schools to
give priority attendance access to students residing in
community facilities districts.
FISCAL EFFECT : Unknown, but Committee staff estimates no
revenue impact on the General Fund.
COMMENTS :
1)Author's Statement . The author states that, "Assembly Bill
504 is clarifying legislation that allows Santa Barbara School
Districts to maintain existing parcel tax revenue allotments
once the existing districts unify. It will also allow the
voters to extend the current parcel taxes when they expire or
pass new parcel taxes that support programs in the schools
serving the grade levels in which the taxpayers reside."
2)Arguments in Support . The proponents argue that this bill is
necessary to preserve the intent of the local SB area voters
who passed the two parcel tax measures in 2008, if the SB
school districts decide to merge. They assert that the school
districts cannot afford to lose the parcel tax funding,
especially, as they face epic budget cuts. Finally, the
proponents reiterate that AB 504 will ensure that the existing
parcel tax revenues will be segregated and used only for the
purposes approved by the voters, so that local residents, who
live outside the current SB elementary school district but
within the current SB High School district, will only pay high
school parcel taxes following unification.
3)Background . Prior to 1970, the state's K-12 schools largely
relied on local property taxes levied at different rates and
yielding different amounts per pupil in more than 1,000
schools districts in California. State court rulings in the
Serrano v. Priest equalization cases forced the state to
revise basic school finance and established the revenue limit
system. �Serrano v. Priest (1971) 5 Cal.3d 584; Serrano v.
Priest (1976) 18 Cal.3d 728; Serrano v. Priest (1977) 20 Cal.
3d 25)]. In order to conform to the court's decision and
reduce the differences in per-pupil amounts, California
created the revenue limit system that combines local property
tax revenues with state general aid and allows the state to
control the two revenue sources on a per pupil basis. The
state does not fund basic aid districts, where local property
taxes met or exceeded the revenue limit. In 1978, Proposition
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13 limited both the tax rates and assessments, thus,
significantly reducing property tax revenues, eliminating the
ability of school districts to levy an incremental ad valorem
tax on real property and forcing the state to replace the lost
revenues in district revenue limits. School districts still
have limited authority to generate local revenues from
qualified special taxes, but most school funding is either
received from the state or federal governments, or controlled
by the state through revenue limits required to equalize
per-pupil funding.
4)What is a "qualified special tax"? Under existing law, a
school district may impose a qualified special tax within that
district; however, the special tax must apply uniformly to all
taxpayers (other than persons over the age of 65) or real
property within the district and must be approved by a
two-thirds vote of the qualified electors of the district.
While Proposition 13 did not define the term "special tax",
the courts, over time, have opined that a tax is a "special
tax" whenever expenditure of its revenues is limited to
specific purposes, i.e. - the proceeds of the tax are
earmarked or dedicated in some manner to a specific project or
projects. In contrast, a tax is a "general tax" only when its
revenues are placed into the General Fund and are available
for expenditure for any and all governmental purposes. �Bay
Area Cellular Telephone Co. v. City of Union City (2008) 162
Cal. App.4th 686; Howard Jarvis Taxpayers Assn. v. City of
Roseville (2003) 106 Cal.App.4th 1178]. School districts and
special districts are prohibited from imposing general taxes
(Proposition 218) and thus, by definition, any tax levied by a
school district or community school district is considered to
be a special tax subject to a two-thirds voter approval.
Furthermore, school districts are not allowed to impose a
special tax that is imposed on a particular class of property
or taxpayers. Therefore, thus far, school districts have only
imposed "qualified special taxes", under Government Code
Section 50079, in the form of a parcel tax.
5)Parcel Tax. A parcel tax is a flat fee imposed by a city,
county, or special district on each parcel, residential as
well as commercial, rather than on the assessed value of
property located within the local entity's jurisdiction.
Because the same dollar amount of tax is assessed on each
parcel of property, whether the parcel is one acre or 100
acres, parcel taxes are generally regressive, which means
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owners of smaller parcels of land pay a larger percentage of
tax as compared to owners of larger parcels of land.
Some districts levy a rate at a fixed amount per square foot of
taxable land, and many include an annual inflation adjustment.
Existing law does not prescribe a maximum rate of tax nor
does it limit the period within which the qualified special
tax may be imposed. Therefore, the rate of tax varies
significantly among different school districts. For example,
EdSource reports that, in 2008, 21 school parcel tax
propositions were placed on the November 4, 2008 ballot in 21
school districts. Seventeen of those parcel tax propositions
were approved, ranging from $23 per parcel in SB County to
$193 per parcel in Marin County, with terms as short as three
years, and as long as nine years. A number of school
districts have adopted permanent parcel taxes.
Existing law does not limit how the special tax proceeds may be
spent, and therefore, a local school board can specify in the
ballot measure how the funds will be used. Generally, local
parcel taxes provide secure funding for teacher salaries,
books, materials and supplies, computers, and art, music and
sports programs.
As a special tax, a parcel tax levied by a school district
requires approval at an election of at least two-thirds of the
qualified electors of such district. Courts have interpreted
the phrase "qualified electors of such district" to mean the
registered voters voting in the election concerning the
proposed tax. �Neilson v. City of California City (2005) 133
Cal. App.4th 1296, 1312]. Generally, nonresident landowners
are not registered voters and are not included among the
voters voting on the proposed parcel tax. On the other hand,
some registered voters who do not own land within the
district's boundaries are able to vote on the parcel tax even
though they will not be paying that tax (at least not
directly).
In 2006, the California voters rejected Proposition 88 that
would have amended the California Constitution to levy an
annual $50 real property tax on most parcels with the funds
allocated to specified K-12 education programs.
6)The Need for Special Legislation: The SB School Districts'
Dilemma . SB School Districts are comprised of non-coterminous
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elementary and high school districts. The high school
district includes the territory of four separate "feeder"
elementary districts, in addition to the SB Elementary School
district. According to the author, the SB School Districts
have made more than $20 million in budget cuts over the last
three years, and, recently, have decided to unify their
elementary and secondary districts in order to save $6 million
annually. In fact, since 2004, those school districts have
already acted as unified and have been governed by a single
board of education and administration, even though they have
maintained separate revenue sources from two distinct parcel
tax measures, Measure I and Measure H, respectively. Both
measures were passed by the voters in 2008, with over 70%
approval, resulting in an annual revenue gain for the
districts of approximately $1.7 million. The amount of parcel
tax imposed by the SB High School District is $23 per year
(Measure H) and the amount of tax imposed by the SB elementary
school district is $27 per year (Measure I). Both measures
provide for a senior exemption, whereby, an exemption from the
parcel tax is granted to any parcel owned by a senior citizen
65 years of age or older, provided that the parcel is used
solely for owner-occupied, single-family residential purposes.
The revenues generated from the imposition of the parcel
taxes have allowed the districts to maintain a reduced junior
high school math class size and elementary art and music
classes.
While existing law allows non-coterminous school districts to
merge, it does not expressly authorize the newly-created
district to either continue the collection of the already
approved parcel taxes, or utilize the revenues generated by
those special taxes. In contrast, in the case of bonded
indebtedness, Education Code Section 35578 specifically
provides that a new district may sell unsold bonds and use the
funds, but only for the purposes for which the bonds were
authorized initially. Furthermore, Education Code Section
35561 states that the funds derived from bonds issued by the
former district may only be used in that district's territory,
unless the new district assumes the bonded indebtedness, in
which case the money can be used for any purpose for which the
bonds were originally issued.
If the SB school districts were to unify, it is doubtful that
the newly created district will be able to continue collecting
the parcel taxes originally approved by the voters in two
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separate school districts. There is no express statutory
authorization for a new unified district to continue the
imposition and collection of the voter approved parcel taxes
once the former districts are merged out of existence. As
pointed out by the proponents of this bill, while the
unification of the SB school districts would generate
approximately $6 million in savings, it will essentially
terminate another source of revenue for the schools - the
parcel taxes originally approved by the voters in the former
school districts.
7)The Proposed Solution . According to the author, the purpose
of this bill is to allow the two existing parcel tax measures,
which have been separately approved for each school district,
to continue after unification. The high school parcel tax is
restricted to being used for junior and senior high school
purposes only, while the elementary school parcel tax is
restricted only to elementary school uses. AB 504 would
authorize a newly unified SB school district to continue the
collection of the parcel taxes to ensure that the unification
does not result in a loss of the revenue stream used to
support various school programs. This bill would permit the
continuation of parcel taxes following unification only if the
revenues derived from those taxes are segregated on a
geographical basis conforming to the boundaries of the former
school districts. Thus, AB 504 is intended to ensure that the
revenues generated by the parcel taxes are allocated and used
in the way that the voters intended. In this way, the
residents of the high school district who reside in separate
elementary "feeder" districts do not have to pay for SB
elementary schools. Following unification, there will be
different amounts of taxes paid depending on area of
residence. A lesser amount will be paid by those who live in
areas served by grades 7-12 only. It is a continuation of
status quo in all respects except one - there will be one
district instead of two. Absent this special legislation, the
continuation of the voter-approved parcel taxes will be
uncertain and subject to litigation.
8)Segregation of New Tax Revenues ? AB 504 would authorize a
newly created unified school district to impose a new
"qualified special" tax, but would require that the revenue
from the new tax be segregated as well. There is no general
legal requirement to segregate those revenues derived from a
newly imposed parcel tax; nor is there any clear policy reason
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for this segregation. It seems that the voters should be able
to decide how to use the revenues when they vote on the new
tax. This Committee may wish to consider amending this bill
to delete this restriction on the usage of future revenues.
9)Special Legislation . This bill has a limited application and
is special legislation. A question could be raised as to
whether the proposed statute would violate subdivision (b) of
Section 16 of Article IV of the California Constitution, which
makes invalid any local or special statute in any case in
which a general statute can be made applicable. Courts have
held that a statute does not violate that constitutional
provision when its limited application is founded on natural,
intrinsic, or constitutional distinctions that reasonably
justify differential treatment �see Lelande v. Lowery (1945)
26 Cal.2d 224, 232]. Courts have also stated that, in
determining whether "a general statute can be made
applicable", the issue is not whether the Legislature could
conceivably enact a similar statute affecting every locality,
but whether there is a rational relationship between the
purpose of the enactment and the singling out of a single
local entity affected by the statute. City of Malibu v.
California Coastal Commission (2004), 121 Cal. App. 4th 989,
995; White v. State of California (2001) 88 Cal. App. 4th 298,
305.
Regardless of whether courts would uphold this legislation as
valid, it is unclear to the Committee staff why the provisions
of this bill are limited only to the SB school districts.
Conceivably, other school districts may find themselves in the
same predicament if they decide to merge. Thus, this
Committee may wish to consider amending this bill to extend
its application to any school district that is in any manner
merged with one or more school districts, as specified.
10)Suggested amendments . This Committee's staff and the staff
of the Assembly Education Committee recommend the following
amendments to this bill:
AMENDMENT 1
On page 2, line 2, strike out "in the County of Santa Barbara"
AMENDMENT 2
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On page 2, line 7, strike out "predecessor school district"
and insert:
"former district" as defined in Section 35516 of the Education
Code
AMENDMENT 3
On page 2, strike out lines 14 to 16, inclusive, and insert:
50075).
AMENDMENT 4
On page 2, between lines 16 and 17, insert:
SEC. 2. Section 35560 of the Education Code is amended to
read:
35560. When a school district is reorganized and when the
allocation of funds, property, and obligations is not fixed by
terms, conditions, or recommendations as provided by law, the
funds, property, and obligations of a former district, except
for bonded indebtedness, shall be allocated as follows:
(a) The real property and personal property and fixtures
normally situated thereat shall be the property of the
district in which the real property is located.
(b) All other property, funds, and obligations, except bonded
indebtedness, shall be divided pro rata among the districts in
which the territory of the former district is included. The
basis for the division and allocation shall be the assessed
valuation of the part of the former district which is included
within each of the districts.
(c) Any qualified special taxes may continue to be imposed
pursuant to Section 50079.2 of the Government Code.
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AMENDMENT 5
On page 2, line 17, strike out "SEC. 2" and insert "SEC. 3"
REGISTERED SUPPORT / OPPOSITION :
Support
J. Brian Sarvis, Superintendent, Santa Barbara School Districts
Santa Barbara Teachers Association
Santa Barbara County Education Office
Santa Barbara Education Foundation
Janet Wolf, Second District Supervisor, the Santa Barbara County
Board of Supervisors
Hope School District
Goleta Union School District
Montecito Union School District
Office of the Auditor-Controller, County of Santa Barbara
Margaret Connell, Mayor, City of Goleta
Cold Spring School District
Salud Carbajal, First District Supervisor, the Santa Barbara
County Board of Supervisors
Santa Barbara School Districts
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098