BILL ANALYSIS �
AB 1676
Page 1
Date of Hearing: March 21, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1676 (Alejo) - As Amended: March 15, 2012
SUBJECT : Local government finance: property tax revenue
allocations: County of San Benito.
SUMMARY : Addresses past property tax apportionment factors in
San Benito County. Specifically, this bill :
1)Deems as correct the property tax apportionment factors
applied in allocating property tax revenues in the County of
San Benito for each fiscal year (FY) through FY 2000-01,
inclusive.
2)Specifies that for FY 2001-02 and each FY thereafter, property
tax apportionment factors applied in allocating property tax
revenues in the County of San Benito shall be determined on
the basis of property tax apportionment factors for prior FYs
that have been fully corrected or adjusted, pursuant to the
review and recommendation of the Controller.
3)Finds and declares that a special law is necessary because of
the uniquely severe fiscal difficulties being suffered by the
County of San Benito.
EXISTING LAW :
1)Requires each county's auditor to allocate property tax
revenue to local governments in accordance with specified
formulas and procedures.
2)Requires, generally, that each jurisdiction be allocated an
amount equal to the total received in the previous year plus
its percentage of the property tax increment, as defined by
law.
3)Provides for the computation of apportionment factors based on
property tax allocations that are applied to actual property
tax revenues in each county in order to determine actual
amounts of revenue received by each jurisdiction.
FISCAL EFFECT : Unknown
AB 1676
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COMMENTS :
1)In 1992-93 and 1993-94, in response to serious budgetary
shortfalls, the Legislature and Governor permanently
redirected over $3 billion of property taxes from cities,
counties, and special districts to schools and community
college districts. Under Proposition 98, these redirected
funds reduce the state's funding obligation for K-14 school
districts by a commensurate amount.
The property tax shift is accomplished through contributions
that cities, counties, and special districts deposit into the
Education Revenue Augmentation Fund (ERAF), the proceeds of
which then are transferred to school districts within the
county. These contributions grow over time in line with the
property tax growth rate in each local jurisdiction. Property
tax allocations and annual contributions to ERAF are made by
the county auditor.
2)This bill is sponsored by the County of San Benito to rectify
a local taxation problem. Following an audit by the State
Controller's Office, it was determined that San Benito County
underfunded ERAF for the fiscal years between July 1, 1993 and
June 30, 2001. The State Controller's Office and the County
of San Benito have had different interpretations of several
sections in the Revenue & Taxation Code and their
applicability to ERAF between the years of 1993 and 2001.
This bill will deem correct the amounts of property tax
allocated by San Benito County prior to and including FY
2000-01. According to the State Controller's Office, San
Benito County has been using the correct formulas and
calculations from FY 2001-02 onward, so there is no dispute
past that point. According to the State Controller's Office's
audit findings, the amount that was underfunded between 1993
and 2001 was $3.854 million in San Benito County.
3)The State Controller's office regularly audits apportionment
and allocation by counties of property tax revenues in
accordance with a statutory schedule contained in the
Government Code - some counties undergo annual audits, some
are on three-year schedules, and those with small populations,
like San Benito County, are on a five-year cycle. San Benito
County was audited by the Controller's office in 1998, 2005,
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and 2009. In the 1998 audit, the State Controller's Office
determined that ERAF was underfunded by $514,016. The county
did not reimburse ERAF for this amount. In a subsequent audit
issued on July 28, 2005, the same amount had grown to
$3,929,689 because San Benito County did not make the
adjustments suggested by the Controller and the amount of
property tax not re-allocated grew to significant levels.
In 2004, the Governor signed SB 1096 (Senate Budget and Fiscal
Review Committee, Chapter 211, Statutes of 2004), which
contained provisions in the Revenue & Taxation Code (Section
96.81) that forgave county property tax allocation errors and
deemed correct any misapplication of apportionment factors for
any State Controller's audit conducted between July 1, 1993
and June 30, 2001. According to the 2005 San Benito County
audit, Revenue & Taxation Code Section 96.81 forgave the
initial amount of $514,016, but the difference of $3,415,673
must be returned to ERAF.
4)There is a precedent for deeming correct those property tax
apportionment factors used in a county's calculations, and the
net effect is that it holds the local government harmless for
the erroneous calculation. Similar bills in the past have
required that the mistake or miscalculation is rectified on a
going-forward basis, but in this case, San Benito County has
already corrected their calculations. For instance, AB 1615
(Longville), Chapter 604, Statutes of 2000, dealt with a
situation in which the State Controller found that Riverside
County's property tax calculation methodology was deficient.
Riverside County disputed this interpretation in its response
to the original audit report from the Controller. After
receiving the same finding in a subsequent report, Riverside
County appealed through the established channels in the
Controller's Office. The end result of that process was an
agreement by Riverside County to create a new methodology
based on the state's interpretation of the statute.
Another bill, AB 1339 (V. Manuel Perez, 2009-10) was sponsored
by the County of Imperial to rectify a local taxation problem.
Following an audit by the State Controller's Office, it was
determined that an error in the property tax calculation had
given the Imperial County Free Library additional funds which
potentially would need to be paid back because the county
inadvertently left the library out of the ERAF cost shift.
The calculation was corrected and the library moved forward
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with a substantially smaller revenue stream. This bill
allowed the prior calculation to stand and forgave over
$950,000 that was owed. AB 1339 died in the Senate
Appropriations Committee.
5)Support argument : This bill deems correct those property tax
apportionment factors used by San Benito County that were
previously disputed by the State Controller's audit findings
and therefore holds San Benito County harmless. This bill
would bring closure to the long standing dispute and grant
legislative relief for San Benito County.
Opposition argument : Because entities within San Benito
County and the county itself underfunded ERAF between 1993 and
2001, the state backfilled that loss to schools. The Committee
may wish to discuss under what circumstances legislative
relief should be granted to local agencies for a consistent
application in the future.
REGISTERED SUPPORT / OPPOSITION :
Support
County of San Benito �SPONSOR]
Advocacy, Inc.
California State Association of Counties
County of San Benito: Administrative Offices, Assessor's
Office, County Counsel's Office
City of San Juan Bautista
Regional Council of Rural Counties
San Benito County Water District
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958