BILL ANALYSIS �
AB 1191
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Date of Hearing: January 11, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1191 (Huber) - As Amended: January 4, 2012
SUBJECT : Local government finance.
SUMMARY : Creates a process for cities and counties to seek
reimbursement for lost revenues due to legislation in 2004 that
enacted the "Triple Flip" and the "Vehicle License Fee (VLF)
Swap." Specifically, this bill :
1)Requires, for the 2012-13 fiscal year and for each fiscal year
thereafter, the county auditor to calculate, for the county
and each city in that county, the difference between the
countywide adjustment amount for that fiscal year and the in
lieu local sales and use tax revenues actually received by the
county and each city in that county, if there is not enough
property tax otherwise required to be allocated under the
provisions of the "Triple Flip," and provides the following:
a) Requires the county auditor to submit a claim to the
Controller for the total amount of the difference, as
calculated in 1) above;
b) Requires the Controller, upon appropriation by the
Legislature, to deposit the amount of the claim into the
Sales and Use Tax Compensation Fund (SUTCF); and,
c) Requires the county auditor, within 30 days of the date
that the Controller deposits the amount of the claim into
the SUTCF, to allocate to the county and to each city in
that county the amount of the difference that was
calculated by the county auditor.
2)Requires, for the 2012-13 fiscal year and for each fiscal year
thereafter, the county auditor to allocate to the Vehicle
License Fee Property Tax Compensation Fund (VLFPTCF), any
remaining property tax revenue that is not required to be
allocated to any elementary, high school, or unified school
district under provisions of the "VLF Swap" if the auditor is
unable to complete reductions due to the VLF Swap as
specified, in an amount equal to the reduction required by
law, and provides the following:
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a) Requires the county auditor to submit a claim to the
Controller, if, after making the allocation as required in
2) above, there is still not enough property tax revenue to
complete the reduction specified in the VLF Swap
provisions;
b) Requires the Controller, upon appropriation by the
Legislature, to deposit the amount of the claim into the
VLFPTCF; and,
c) Requires the auditor, within 30 days of the date the
Controller deposits the amount of the claim into the
VLFPTCF, to allocate that amount among the cities and
county in accordance with specified provisions.
3)Provides that reimbursement to local agencies and school
districts shall be made if the Commission on State Mandates
determines that provisions of this bill contain costs mandated
by the state.
4)Makes findings and declarations about the economic conditions
unforeseen by either the state or local governments in some
counties, including Amador and Mono, which have caused all
school districts within these counties to become basic aid
districts, thus eliminating the ability to backfill cities and
counties for the loss of VLF revenues or local sales and use
tax revenue.
5)Specifies that it is the intent of the Legislature in enacting
this bill to address the unintended and detrimental situation
that resulted from the Triple Flip and the VLF Swap.
EXISTING LAW :
1)Requires a county auditor, in each fiscal year, to allocate
property tax revenue to local jurisdictions in accordance with
specified formulas and procedures.
2)Requires a county auditor to decrease, for the fiscal
adjustment period, as defined, the amount of ad valorem
property tax revenue allocated to a county's Educational
Revenue Augmentation Fund (ERAF) by the countywide adjustment
amount, and instead, allocate this amount to the Sales and Use
Tax Compensation Fund in the county (known as the Triple
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Flip), and provides the following:
a) Requires the county auditor to allocate moneys from the
SUTCF to cities and counties to reimburse these entities
for local tax revenue losses resulting from the Triple
Flip;
b) Requires the county auditor to allocate one-half of the
amount in each January during the fiscal adjustment period
and the balance of that amount in each May during the
fiscal adjustment period;
c) Provides that if there is an insufficient amount of
moneys in a county's SUTCF in specified circumstances, that
the county auditor must transfer from the county ERAF an
amount sufficient to make the full amount of specified
transfers.
3)Provides that provisions of the Triple flip shall not be
construed to do any of the following:
a) Reduce any allocations of excess, additional, or
remaining funds that would otherwise have been allocated to
cities, counties or special districts as specified, if the
Triple Flip had not been enacted;
b) Require an increased ad valorem property revenue
allocation to a community redevelopment agency; and,
c) Alter the manner in which ad valorem property tax
revenue growth from fiscal year to fiscal year is
determined or allocated in a county.
4)Defines the "fiscal adjustment period" contained in the
provisions of the Triple Flip to mean the period beginning
with the 2004-05 fiscal year and continuing through the fiscal
year in which the Director of Finance notifies the State Board
of Equalization that the bond obligations have been satisfied.
5)Requires an annual license fee for vehicles registered in
California.
6)Establishes a Vehicle License Fee (VLF) in lieu of ad valorem
property tax upon vehicles known as the "VLF Swap" as follows:
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a) Requires, beginning with the 2004-05 fiscal year and
each fiscal year thereafter, that each city and county
receive a vehicle license fee adjustment amount (VLFAA), as
defined from the VLFPTCF that exists in each county
treasury;
b) Requires that these amounts be funded from property tax
revenues otherwise required to be allocated to educational
entities; and,
c) Requires the auditor to allocate moneys in the VLFPTCF
according to the following:
i) Each city in the county shall receive its vehicle
license fee adjustment amount;
ii) Each county shall receive its vehicle license fee
adjustment amount; and,
iii) Requires the auditor to allocate one-half of the
amount on or before January 31st of each fiscal year, and
the other one-half on or before May 31st of each fiscal
year.
7)Provides that the VLF Swap statute shall not be construed to
do any of the following:
a) Reduce any allocations of excess, additional, or
remaining funds that would otherwise have been allocated to
county superintendents of schools, cities, and counties as
specified had the VLF Swap not been enacted;
b) Require an increased property tax revenue allocation or
increased tax increment allocation to a community
redevelopment agency;
c) Alter the manner in which property tax revenue growth
from fiscal year to fiscal year is otherwise determined or
allocated in a county; and,
d) Reduce property tax equity allocations for certain
cities, as specified.
FISCAL EFFECT : Unknown
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COMMENTS :
1)In March of 2004 voters approved Proposition 57, the
California Economic Recovery Bond Act, which allowed the state
to purchase bonds to help reduce the state budget deficit.
Prior to this, the Legislature enacted what was known as the
"Triple Flip" - an exchange of
revenues generated from the 0.25% of the Bradley-Burns local
sales tax that previously went to cities and counties. That
sales tax revenue was pledged to pay off bond debt related to
the Economic Recovery Bonds (ERBs). Instead, the revenue loss
to cities and counties was replaced from ERAF in the form of
property tax revenues. Finally, the last part of the swap
occurred when the state's General Fund was used to backfill
the loss to the County ERAF in order to protect the
minimum-funding guarantee of Proposition 98.
These changes stemming from the Triple Flip will remain in
effect until the State Director of Finance notifies the Board
of Equalization that the state's bond obligations have been
satisfied.
2)Another flip occurred during the 2004-05 fiscal year with the
swapping of the discretionary vehicle license fee from cities
and counties to the State of California, in return for funds
from each county's ERAF. However, this swap, known as the
"VLF Swap" is not like the Triple Flip in that it is a
permanent exchange. Provisions in the VLF Swap legislation
provided that if the ERAF in any county is insufficient to
satisfy the VLF for property tax swap, any additional amounts
required will be drawn from the non-basic aid schools share of
the property tax, which will then be replenished by the state
General Fund.
3)Basic aid school districts are those districts that receive
100% of their funding from local property taxes. Because of
the fluctuations in local property tax revenues and
enrollment, school districts can be basic aid one year and
non-basic aid the next. The State Department of Education
certifies which school districts are on basic aid.
Provisions in both the Triple Flip and the VLF Swap hold
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harmless those basic aid counties, meaning that there would be
no redistribution from school property tax funds to other
local agencies for their losses.
4)This bill sets up a process for affected cities and counties
to seek reimbursement for lost revenues due to legislation in
2004 that enacted the Triple Flip and the VLF Swap. The
county auditor in the affected county would be required to
calculate the lost revenue from the swaps and then submit a
claim to the Controller for that amount. The Controller would
then, upon appropriation by the Legislature, deposit the
amount of the claim in the proper fund and the county auditor
would then allocate to the county and each city in that county
the reimbursement amount. This bill does not contain language
that actually appropriates funds to cities and counties;
instead, it sets up a new process for that reimbursement and
allows the Legislature to appropriate the funds in a separate
manner.
Because the bond debt related to the issuance of the Economic
Recovery Bonds will at some point in the future be paid off,
thus "unwinding" the Triple Flip and the resulting lost
revenue experienced by jurisdictions in basic aid counties,
the Committee may wish to consider the addition of a trigger
or sunset clause that deletes the new reimbursement process
once the unwinding is complete. Because the VLF Swap is
permanent, no such provisions are needed for that section of
the bill.
5)According to the author, the current economic conditions were
not contemplated by the state or local governments back in
2004, and because of this, two counties, Amador and Mono, will
experience a unique condition in which all school districts
within these counties have
become basic aid school districts. Because state law explicitly
prohibits moving property tax revenues from basic aid schools
for both the VLF Swap and the Triple Flip, there is no legally
available revenue source from which to backfill cities and
counties for the loss of VLF or local sales tax revenue. The
author believes that this bill creates a process to address
and remedy these unintended consequences to ensure that cities
and counties are treated equitably under the provisions of the
Triple Flip and the VLF Swap.
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6)According to the sponsors, all school entities in Mono County
will become basic aid in
2009-10, and therefore, no reimbursement for the Triple Flip or
VLF swap will be made because there are no sources from which
to provide such reimbursement. The sponsors estimate the loss
for the Town of Mammoth Lakes at roughly $1 million. Amador
County is in a similar situation as it has also been certified
as basic aid. Amador County estimates its cumulative loss at
approximately $1.4 million.
7)Governor Brown's proposed 2012-13 fiscal year budget released
January 5, 2012 includes $4.4 million to the counties of
Amador and Mono and the cities therein for shortfalls in
2010-11 associated with the Triple Flip and VLF Swap.
8)Support argument: Supporters argue that the process contained
in this bill will remedy a loophole that was not only
unanticipated, but was also not part of the agreement that was
made back in 2004 in which local governments swapped funds and
were promised to be kept whole from such swaps.
Opposition argument: While the goals of setting up a
reimbursement process that makes certain local governments
whole due to unforeseen losses stemming from the Triple Flip
and VLF Swap are laudable, this in no way guarantees that the
Legislature will take action each fiscal year to appropriate
these funds, especially in tight budgetary times.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Association of Counties �CO-SPONSOR]
Regional Council of Rural Counties �CO-SPONSOR]
Amador County Board of Supervisors
Cities of Ione, Jackson, and Sutter Creek
Mono County Board of Supervisors
Town of Mammoth Lakes
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
AB 1191
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