BILL ANALYSIS �
AB 504
Page 1
Date of Hearing: May 2, 2011
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Henry T. Perea, Chair
AB 504 (Williams) - As Amended: April 14, 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 former 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 unified district may do all of the
following:
a) Continue to impose any qualified special taxes imposed
in any former school district, as defined by Education Code
Section 35516, 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 new special taxes pursuant to the procedures
established in Government Code (GC) Article 3.5 (commencing
with Section 50075).
c) Allow a segregation of revenues derived from the
imposition of the new special taxes 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 former
school districts, as defined by EC Section 35516, in order to
provide critical program support in the unified school
district in areas such as music, art, mathematics, and
AB 504
Page 2
technology.
EXISTING EDUCATION LAW :
1)States the intent of the Legislature that local educational
needs and concerns serve as the basis for future
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
AB 504
Page 3
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,
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
AB 504
Page 4
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
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 their elementary and high school districts unify. AB 504
would also allow the unified Santa Barbara School District to
continue to levy future parcel taxes as they do now so that
residents are allowed to continue paying for the schools which
serve their community.'
'The author wishes to stress that the proposed legislation is a
continuation of the status quo in all respects except one.
Now there will be one district instead of two. The
justification for applying this legislation to a single local
entity is based upon the unique configuration of the Santa
Barbara School Districts, who are one of only a handful of
districts statewide that are made up on non-coterminous
districts, and the only known such district that is seeking to
unify with existing separate outstanding parcel taxes in
place."
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
AB 504
Page 5
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
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
AB 504
Page 6
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
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.
Parcel taxes are flexible ways of raising revenues at the
local level, but are subject to certain requirements. Parcel
tax elections must be held on "established election dates",
which means in March, April, or November of an even-numbered
year, or March, June, or November in an odd-numbered year.
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.
According to EdSource, between 1983 through November 2010,
voters approved 289 parcel taxes in 542 elections, with 92% of
proposals received at least a majority vote from the
electorate during that time. Districts have increasingly
turned to parcel taxes in recent years as a result of fiscal
stress: in 2010, 38 districts placed parcel taxes on the
ballot, compared to 31 in 2009, and 13 in 2006. The median
district levying a parcel tax had about 3,180 students of whom
15% qualified for free/reduced-price meals and 9% were English
learners. EdSource also discusses some of the recent trends
for districts imposing parcel taxes:
AB 504
Page 7
Although all districts can propose a parcel tax to their
community, they are relatively rare in most of the state.
Between 2001 and June 2009, out of roughly 980 California
school districts, 132 conducted parcel tax elections and 83
districts passed them. Only seven of those districts were
located in Southern California, while 66 were within the
nine-county San Francisco Bay Area. The districts that had
successful elections generally serve fewer low-income students
than the typical California school district. They are also
disproportionately small, with 66 (80%) of them serving fewer
than 10,000 students. In 2008-09, those districts that had
parcel taxes reported total revenues of about $250 million,
according to Ed-Data
Interestingly, school districts in some areas of the state
seek to levy parcel taxes more so than other areas. According
to EdSource, only seven districts in Southern California
imposed the tax, but 66 did in the San Francisco Bay Area.
Districts imposing the tax generally serve fewer low-income
students than the typical California school district, and are
disproportionately smaller, with 66 (80%) of them serving
fewer than 10,000 students.
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.
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)"Qualified Electors. " 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.
AB 504
Page 8
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).
7)The Need for Special Legislation: The SB School Districts'
Dilemma . SB School Districts are comprised of non-coterminous
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,
AB 504
Page 9
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
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.
8)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.
AB 504
Page 10
9)Segregation of New Tax Revenues ? AB 504 would authorize a
newly created unified school district to impose new "qualified
special" taxes, but would allow the revenue from the new taxes
to be segregated on a geographical basis conforming to the
former boundaries of the school districts prior to
unification. Currently, there is no general legal requirement
to segregate those revenues derived from a newly imposed
parcel tax; nor is there any clear policy reason for this
segregation. Since the voters may decide how to use the
revenues when they vote on the new tax, this authorization
seems to be a restatement of existing law.
10) 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.
11)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, between lines 20 and 21, insert:
SEC. 2. Section 35560 of the Education Code is amended to read:
35560. When a school district is reorganized and when the
AB 504
Page 11
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.
AMENDMENT 2
On page 2, line 21, strike out "SEC. 2" and insert "SEC. 3"
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098