BILL ANALYSIS �
AB 504
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 504 (Williams)
As Amended July 6, 2011
Majority vote
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|ASSEMBLY: |75-0 |(May 26, 2011) |SENATE: |36-0 |(July 14, |
| | | | | |2011) |
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Original Committee Reference: REV. & TAX.
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.
The Senate amendments authorize the Santa Barbara Unified School
District to impose a new parcel tax within the boundaries of the
former Santa Barbara Elementary School District, provided that
specified conditions are met.
AS PASSED BY THE ASSEMBLY , this bill:
1)Provided that, when any school district in the County of SB
was 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
(EC) 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 a new special tax pursuant to the procedures
established in Government Code (GC) Article 3.5 (commencing
with Section 50075); and,
c) Allows a segregation of revenues derived from the
imposition of the new tax on a geographical basis
conforming to the former boundaries of the school districts
prior to unification.
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2)Declared that a special law was 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
technology.
FISCAL EFFECT : Unknown, but the Assembly Revenue and Taxation
Committee staff estimates no revenue impact on the General Fund.
COMMENTS :
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."
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
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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.
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.
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
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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. 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.
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
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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
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
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districts.
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. Furthermore, AB
504 would authorize a newly created unified school district to
impose new "qualified special" taxes within the boundaries of
the former elementary school district.
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
FN: 0001581