BILL ANALYSIS �
AB 1350
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Date of Hearing: April 27, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1350 (Lara) - As Introduced: February 18, 2011
SUBJECT : Property taxation: override rates: validation by
auditor.
SUMMARY : Establishes new duties for county auditors, beginning
January 1, 2012, to verify that property tax rates imposed,
increased or extended by a jurisdiction for specified purposes
do not exceed rates authorized by existing law. Specifically,
this bill :
1)Requires a county auditor, prior to the collection of a
property tax imposed for specified purposes, to verify that a
property tax rate imposed, increased or extended by a
jurisdiction, on or after January 1, 2012, does not exceed the
maximum rate authorized by existing law.
2)Requires a jurisdiction to provide the county auditor with all
necessary documentation to verify the imposed property tax
rate.
3)Requires jurisdictions to reimburse the county auditor for
costs incurred by the county auditor to administer the
verification.
4)States that no reimbursement is required by the bill because
the bill provides for reimbursement to a local agency in the
form of additional revenues that are sufficient to fund the
new duties of the bill.
EXISTING LAW :
1)Limits property tax to 1% except for specific bonded debt
approved by two-thirds of the voters after July 1, 1978, and
voter indebtedness approved by voters before July 1, 1978.
2)Prohibits local agencies from adopting new extraordinary
rates, and caps existing rates at the 1982-83 or 1983-84
level, except for rates supporting general obligation bonds,
water contracts, and lease purchases.
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3)Requires the City of Bell to pay the County of Los Angeles a
specified amount to refund property taxes collected in fiscal
years (FYs) 2007-08, 2008-09, and 2009-10 that exceed maximum
allowable statutory rates.
FISCAL EFFECT : Unknown
COMMENTS :
1)Last year, an audit conducted by the State Controller
determined that officials in the City
of Bell (Los Angeles County), during the three fiscal years
between 2007 and 2010, levied an extraordinary property tax
rate to pay the City's pension obligations that exceeded the
rate allowed under state law. For over two decades, since the
passage of AB 13 (Roos), Chapter 112, Statutes of 1985, which
limited extraordinary property tax rates, the City of Bell
levied an extraordinary tax rate of 0.187554% to pay for the
City's pension obligations. In 2007, city officials began
raising this extraordinary property tax rate above the limit
imposed by state law, levying rates of 0.237554% in 2007-08,
0.257554% in 2008-09, and 0.277554% in 2009-10. As a result,
property owners in the City paid approximately $2.9 million in
excessive property taxes during those three years.
The illegal increase in rates and subsequent overpayment was
brought to light in a letter from State Controller John Chiang
to the Auditor-Controller of the County of Los Angeles dated
August 13, 2010. The letter noted that the City Council of
Bell passed a resolution in 2007 to increase, illegally, the
level of tax being assessed to pay the City of Bell's pension
obligations, and that those increased rates were assessed by
the Los Angeles County Auditor-Controller's office.
The Legislature responded by passing AB 900 (De Leon), Chapter
223, Statutes of 2010, which required the City of Bell to pay
the County of Los Angeles an amount equal to the amount of
excess ad valorem property tax collected in FYs 2007-08,
2008-09, and 2009-10, including interest calculated at the
average rate earned by the City on its idle funds during those
years. AB 900 additionally required the County to refund the
amount it received from the City of Bell to any property
taxpayers of the City who overpaid, in a manner generally
consistent with the County's tax refund practices.
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2)This bill requires a county auditor, beginning January 1,
2012, for any jurisdiction that imposes, extends or increases
specified property tax rates, to verify that a property tax
rate imposed by a jurisdiction does not exceed the maximum
statutory rate. Those jurisdictions would then be required to
provide the county auditor with all necessary documentation to
verify the imposed rate, and would be held responsible for
funding the reimbursement of the county auditor for the actual
and reasonable costs to do such a verification.
3)The City of Bell overcharged residents by increasing the
already levied extraordinary tax rate used to pay for the
City's pension obligations. According to the State
Controller's Office, the City of Maywood recently was found to
have done the same thing in the 2009-10 year. This bill
additionally captures property taxes levied for other purposes
like payments to the state under contracts for the sale,
delivery, or use of water, and payments pursuant to
lease-purchase programs under specified conditions. The
Committee may wish to ask the author why other property taxes
should fall under the new verification provisions contained in
this bill - have there also been problems with illegal rate
increases with those levied taxes?
4)Support arguments: According to the author, this bill
provides a necessary "check" over public assets and public
funds. While local jurisdiction may pass, by resolution, an
increased tax rate like the City of Bell did, there is no
mechanism in place to verify that the tax they are voting on
is legitimate or legal because current law does not require
county auditors to verify that the tax rate imposed does not
exceed the authorized amount in current law.
Opposition arguments: This bill creates additional workload
for auditors to verify that tax rates levied by local
jurisdictions do not exceed legal rates. While this is a
laudable goal, the Committee may wish to consider whether the
bill creates the expectation that auditors under the
provisions of the bill will somehow be responsible if a local
government within the county's jurisdiction imposes an illegal
rate, but it is not caught be the county auditor.
REGISTERED SUPPORT / OPPOSITION :
AB 1350
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Support
None on file
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958