BILL ANALYSIS �
AB 1816
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Date of Hearing: April 11, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1816 (Beall) - As Introduced: February 21, 2012
SUBJECT : Tax equity allocation formula: County of Santa Clara.
SUMMARY : Modifies property tax allocations for several Tax
Equity Allocation cities in Santa Clara County. Specifically,
this bill :
1)Provides, beginning in the 2013-14 fiscal year, the following
to apply in Santa Clara County:
a) Requires the Santa Clara County Auditor to reduce the
amount of property tax revenues allocated to the cities of
Cupertino, Los Altos Hills, Monte Sereno, and Saratoga by
the following percentages of the Educational Revenue
Augmentation Fund (ERAF) reimbursement amount and
commensurately requires the Auditor to increase by the same
percentages the amount of property tax revenues allocated
to the county ERAF:
i) For the first fiscal year in which qualifying cities
receive an allocation, 80%;
ii) For the second fiscal year in which qualifying
cities receive an allocation, 60%;
iii) For the third fiscal year in which qualifying cities
receive an allocation, 40%;
iv) For the fourth fiscal year in which qualifying
cities receive an allocation, 20%; and,
v) For the fifth fiscal year in which qualifying cities
receive an allocation, and for each fiscal year
thereafter, zero percent.
b) Prohibits the Santa Clara County Auditor from reducing
the amounts allocated to the county ERAF in any fiscal year
in which the amount of moneys required to be applied by the
state for the support of school districts and community
college districts is determined to meet Test I of
AB 1816
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Proposition 98.
2)Makes findings and declarations that a special law is
necessary because of the unique fiscal pressures being
experienced by qualifying cities in the County of Santa Clara.
3)Provides that reimbursement to local agencies and school
districts shall be made if the Commission on State Mandates
determines that the bill's provisions contain a mandate.
EXISTING LAW :
1)Requires the auditor of each county with qualifying cities, as
defined, to make certain property tax revenue allocations to
those cities in accordance with a specified Tax Equity
Allocation (TEA) formula established in statute and to make
corresponding reductions in the amount of property tax revenue
that is allocated to the county.
2)Requires the auditor of Santa Clara County, for the 2006-07
fiscal year and for each fiscal year thereafter, to reduce the
amount of property tax revenue allocated to the county ERAF,
as specified.
FISCAL EFFECT : Unknown. This bill is keyed fiscal.
COMMENTS :
1)About 30 cities that never levied a property tax before
Proposition 13 are called no property-tax cities, and about 60
cities that levied only low property tax rates are known as
low property-tax cities. When Proposition 13 passed in 1978,
it froze property taxes at their current levels, which created
significant problems for cities that at that time had low
property tax rates, because they could not raise those rates
to meet their community needs. In Santa Clara County, four
cities were significantly below the average rate: Los Altos
Hills, Cupertino, Saratoga, and Monte Sereno.
2)Section 98 of the Revenue & Taxation Code was passed to
correct this situation, giving qualified cities what is
referred to as TEA. If the county accepted trial court
funding, it also had to provide at least 7% of the property
tax to its cities. Impacts to ERAF created by the shift were
backfilled by the state.
AB 1816
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3)According to the author, Santa Clara County told its TEA
cities that the amount of revenues the County would receive
from trial court funding would not offset the amount it would
lose by bringing its TEA cities up to 7%. Legislation was
then enacted which limited the four TEA cities in Santa Clara
County to just 55% of what other TEA cities in the state
received. The author notes that the four TEA cities in the
Santa Clara County were the only cities in the state
disadvantaged by this legislation.
AB 117 (Cohn), Chapter 342, Statutes of 2006, repealed the 55%
limit in the County of Santa Clara on TEA funding for the
county's four no/low property tax cities. The author notes
that the state, however, "required the cities to continue to
remit the County's ERAF rate on these funds so that the bill
would have no effect on the state budget and would avoid the
Appropriations Committee."
4)The author writes that "the ERAF rate that the County was
remitting was 47.7% compared to the rate for the four separate
cities, which ranged from 7.53% to 17.05%. Due to this
difference, approximately $1.955 million in property tax
dollars is not vesting to these cities. They are being treated
differently than the other TEA cities adjusted with Section 98
of the Revenue & Taxation Code."
5)Previous legislative attempts to rectify the situation include
AB 1827 (Beall, 2008) and
AB 68 (Beall, 2010), both of which failed passage in the
Assembly Appropriations Committee. Those bills would have
required the auditor of Santa Clara County to redirect
$2 million in property taxes collected within Santa Clara County
from school districts to the cities of Cupertino, Los Altos
Hills, Monte Sereno, and Saratoga.
6)AB 1816 takes a slightly different approach. Instead of
redirecting the full amount to the four cities in Santa Clara
County, this bill instead takes an incremental approach,
beginning in the 2013-14 fiscal year, by requiring the Auditor
to reduce the amount of property tax revenues required to be
allocated to the county ERAF by a specified percentage of the
ERAF reimbursement amount - 80% in the first fiscal year, 60%
in the second year, 40% in the third year, 20% in the fourth
year, and zero percent in the fifth year and each fiscal year
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thereafter. However, in any fiscal year in which the amount
of moneys required to be applied by the state for the support
of school districts and community college districts is
determined pursuant to Test 1 of Proposition 98, the bill
prohibits the Santa Clara County auditor from reducing the
amounts allocated to ERAF.
7)Support arguments : Supporters argue that these four cities in
Santa Clara County are the only cities in the state forced to
suffer this inequity.
Opposition arguments : This bill will result in increased
General Fund expenditures to backfill local property taxes
shifted from school districts to four specified cities in
Santa Clara County.
REGISTERED SUPPORT / OPPOSITION :
Support
Cities of Cupertino, Los Altos Hills, Monte Sereno, and Saratoga
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958