BILL ANALYSIS �
AB 866
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Date of Hearing: May 4, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 866 (Yamada) - As Amended: April 6, 2011
SUBJECT : Local government finance: property tax revenue
allocations: county of the 28th class
SUMMARY : Enacts property tax relief provisions for Yolo County.
Specifically, this bill :
1)Defines "county equity amount" to mean the amount, as
calculated by the auditor, equal to 5.6738 % of the amount of
ad valorem property tax revenues allocated to a qualified city
in the immediately preceding fiscal year.
2)Defines "qualified city" to mean the city that is located
within the boundaries of a qualified county that incorporated
on January 1, 1987.
3)Defines "qualified county" to mean a county of the 28th class.
4)Requires, for the 2012-13 fiscal year (FY) and for each FY
thereafter, that the auditor of a qualified county shall do
both of the following:
a) Increase the total amount of ad valorem property tax
revenue that is otherwise required to be allocated to that
county by the county equity amount; and,
b) Decrease the total amount of ad valorem property tax
revenue that is otherwise required to be allocated to the
county Educational Revenue Augmentation Fund (ERAF) by the
county equity amount.
5)Requires, if there is not enough ad valorem property tax
revenue that is otherwise required to be allocated to a county
ERAF for the auditor to complete the allocation reduction
required by 4b) above, the auditor to additionally reduce the
total amount of ad valorem property tax revenue that is
otherwise required to be allocated to all school districts in
the county for that FY by an amount equal to the difference
between the county equity amount and the amount of ad valorem
property tax revenue that is otherwise required to be
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allocated to the county ERAF for that fiscal year.
6)Requires that the reduction for each school district in the
county shall be the percentage share of the total reduction
that is equal to the proportion that the total amount of ad
valorem property tax revenue that is otherwise required to be
allocated to the school district bears to the total amount of
ad valorem property tax revenue that is otherwise required to
be allocated to all school districts in a county.
7)Defines "school districts" in the bill's provisions to exclude
any districts that are excess tax school entities.
8)Provides that any reduction in the amount of ad valorem
property tax revenues deposited in the county's ERAF as a
result of 4b) above shall be applied exclusively to reduce the
amounts that are allocated from that fund to school districts
and county offices of education, and shall not be applied to
reduce the amounts of ad valorem property tax revenues that
are otherwise required to be allocated from that fund to
community college districts.
9)Provides, for the 2012-13 FY and for each FY thereafter, that
ad valorem property tax revenue allocations made pursuant to
basic revenue allocations contained in the Revenue & Taxation
Code shall not incorporate the allocation adjustments made by
the provisions of the bill.
10)Finds and declares that a special law is necessary because of
the unique fiscal pressures being encountered by the county of
the 28th class in providing vital public services.
11)States that reimbursement to local agencies and school
districts shall be made if the Commission on State Mandates
determines that this bill contains costs mandated by the
state.
EXISTING LAW :
1)Limits the maximum amount of ad valorem tax on real property
to 1% of the full cash value of the property with counties
collecting the tax revenues and then apportioning it to
cities, the county, special districts, redevelopment, and
school districts in the county.
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2)Requires the county auditor in each fiscal year to allocate
property tax revenues to local jurisdictions in accordance
with specified formulas and procedures, and generally requires
each jurisdiction be allocated an amount equal to the total
amount of revenue allocated to that jurisdiction in the prior
fiscal year, subject to certain modifications and that
jurisdiction's portion of the annual tax increment.
FISCAL EFFECT : Unknown
COMMENTS :
1)When the voters passed Proposition 13 in 1978 to limit
property taxes, they also directed the Legislature to allocate
property tax revenues to local governments. For 1978-79,
legislators gave counties, cities, special districts, and
schools shares of the remaining property tax revenues in
proportion to what they received in the past. Starting in
1979-80, legislators gave local governments their historic
proportional shares of property taxes, plus some of the school
districts' property tax revenues. Acknowledging the loss of
local property tax revenues, legislators allowed cities to
levy a wider range of local taxes and slightly expanded
counties' taxing powers. The Legislature increased local
officials' ability to raise revenues with special taxes and
benefit assessments. Legislators realigned counties' health,
welfare, and trial court programs, and supplied more revenue
by boosting vehicle license fees and by providing more direct
state funding.
2)Starting in the mid-1980s, the Legislature required counties
to shift some of their property tax revenues to the no- and
low-property tax cities, those municipalities that had never
received property taxes or had received only relatively low
levels of property tax revenues. To balance the state budget
for 1992-93 and then again in 1993-94, the Legislature
permanently shifted property tax revenues from counties,
cities, and special districts to each
county's ERAF to benefit schools and the state General Fund.
The state has mitigated about two-thirds of the ERAF shift
through the Proposition 172 one-half cent sales tax measure,
trial court funding, the Citizens' Option for Public Safety
(COPS) Program and other measures.
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3)According to the author, Yolo County seeks to be relieved of
the obligation under the ERAF statutes to shift property tax
funds that are not in the county's possession. When the City
of West Sacramento incorporated in 1987, Yolo County transferred
AB 8 bailout funds that it had been spending within the city
limits to the new city. According to Yolo County, the sponsor
of this bill, there was no way that Yolo County could have
known that the state would administratively decide not to
reclaim the AB 8 bailout funds from newly incorporated cities,
like West Sacramento, when the state reclaimed these funds
with the ERAF shifts. The state instead assessed the County,
which no longer retained those funds.
The author argues that discontinuing the ERAF obligation to
shift funds not in the County's possession is even more
important this year because the County's financial situation
is further eroded by the state's decision to immediately
terminate subventions for Williamson Act contracts. The
sponsor notes that 60% of Yolo County land is in Williamson
Act contracts, and the elimination of state subventions in the
2009-10 FY cost Yolo County $1.3 million. To make matters
worse, Yolo County has a very low sales tax base.
4)There are major differences in the percentages of property
taxes that are currently allocated to cities, counties,
special districts and school districts within counties across
the state, for various reasons. Part of the difference in
percentages from jurisdiction to jurisdiction can be explained
by the determination of the AB 8 formula, which was to some
extent based on each local government's share of property tax
collections before Proposition 13 was enacted. Although
differences in allocation are due to a variety of complex
factors, representatives of counties with below-average
allocations have long advocated for state relief, normally
involving a reallocation of property taxes from schools to
county governments. Previously, several bills have been
proposed to provide relief to "low wealth" counties, generally
defined as counties in which the countywide share of property
taxes is below the statewide average. For example, AB 2682
(Daucher, 2006) and AB 405 (Duvall, 2007) would have required
that schools' share of tax increment revenue available upon
the expiration of redevelopment areas be reallocated to
counties. SB 1909 (Machado, 2003) would have established an
11% floor for property taxes allocated to county governments,
AB 866
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but the bill was vetoed by the Governor.
5)Yolo County has supported and sponsored, over the last 15
years, a number of bills to address the county's low property
tax problems. Most recently, SB 85 (Cogdill), Chapter 5,
Statutes of 2010, contained provisions that provided property
tax relief to Yolo County, the county with the second lowest
share of combined countywide and less than countywide property
tax shares as of 2006-07. SB 85 increased the countywide
property tax allocation (and reduced school districts'
allocation) by $100,000 in 2011-12 and $200,000 in 2012-13 and
thereafter for Yolo County.
6)In February 2009, as part of the state budget package, SB 8 X3
(Ducheny), Chapter 4, Statutes of 2009-10 Third Extraordinary
Session, contained property tax relief provisions
for Orange County, the county with the lowest share of property
taxes allocated to county government in the 2006-07 year. SB
8 X3 increased property tax revenue allocations to
Orange County by $35 million annually in 2009-10 and 2010-11 and
by $50 million annually thereafter. The additional funds for
Orange County are diverted from property tax revenues
currently allocated to local K-12 school districts and the
County Office of Education in Orange County.
7)Support arguments: This bill defines the "county equity
amount" to be the amount of ERAF associated with AB 8 bailout
funds that were shifted from Yolo County to the City of West
Sacramento when it incorporated in 1987. Under the present
ERAF formula, Yolo County has been paying ERAF on funds it has
not had since 1987.
Opposition arguments: While this bill will make future
corrections for a problem that was not anticipated by the
County when it transferred funds to the newly incorporated
city of West Sacramento in 1987, it does however, create the
need by the state to backfill the losses to schools in that
County.
REGISTERED SUPPORT / OPPOSITION :
Support
Yolo County �SPONSOR]
AB 866
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Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958