BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 499 HEARING: 4/6/11
AUTHOR: Huff FISCAL: Yes
VERSION: 2/17/11 TAX LEVY: No
CONSULTANT: Detwiler
REDEVELOPMENT AGENCIES' PROPERTY TAX ALLOCATIONS
Adjusts redevelopment agencies' SERAF payments to reflect
tax increment limits.
Background and Existing Law
Community redevelopment agencies use property tax increment
revenues to repay their debts: tax allocation bonds,
contracts with property owners and builders, and advances
and loans from their underlying cities and counties. Local
officials must set a limit on the amount of property tax
increment revenues that the redevelopment agency can
receive from its older redevelopment project areas.
To cope with its Budget problems, the Legislature shifted
redevelopment revenues to the Supplemental Education
Revenue Augmentation Fund (SERAF): $1.7 billion in 2009-10,
and $350 million in 2010-11. The SERAF money goes to
school districts that serve redevelopment project areas
through mechanisms that offset State General Fund costs.
The State Director of Finance determines each redevelopment
agency's proportional share of the SERAF shifts. The
Director of Finance must notify local officials of their
SERAF amounts by November 15, 2009 and 2010; redevelopment
officials must pay their proportional shares by May 10,
2010 and 2011 (AB 26xxxx, Assembly Budget Committee, 2009).
Nine redevelopment agencies (CSU Channel Islands, Hercules,
Maywood, Monrovia, Parlier, Pittsburg, Placentia, Richmond,
Walnut) failed to make their full SERAF payments on May 10,
2010, resulting in a $41,021,627 shortfall to the State
General Fund. Recognizing an unusual fiscal situation, the
Legislature allowed Richmond to spread its SERAF payments
over 30 years (SB 863, Senate Budget & Fiscal Review
Committee, 2010).
SB 499 -- 2/17/11 -- Page 2
The City of Walnut (Los Angeles County) set up its
redevelopment agency in 1979, and established the
3,700-acre Walnut Improvement Area in 1981. Walnut will
continue to receive property tax increment revenues until
2032. The project area's frozen base assessed valuation is
$44.9 million; by 2008-09, the total assessed valuation had
grown to $2.4 billion. In 2008-09, the project area
generated about $28 million in property tax revenues.
Because of the project area's tax increment limit, Walnut
received $4 million as property tax increment revenues.
The rest of the money went to the underlying local
agencies, including school districts and the County of Los
Angeles.
Using the full amount of property tax increment revenues
and not the retained amount, state officials calculated
Walnut's share of the SERAF 2009-10 payments at $4,842,161;
Walnut paid $1,622,009. By May 10, 2011, Walnut officials
owe a second SERAF payment of $996,056; they intend to pay
$333,617. Walnut officials say that the state should
compute its SERAF obligations based on what it actually
receives, not on the amount that the project area
generates.
Proposed Law
Senate Bill 499 requires that calculations of a
redevelopment agency's payments calculated on property tax
increment revenues must be based on the lesser of either :
The property tax increment revenues allocated and
paid to the agency, or
The amount of taxes actually received by the agency
pursuant to limits in the redevelopment plan.
SB 499 notes that redevelopment plans may limit the amount
of property tax increment revenues. The bill contains a
legislative finding that its provisions are declaratory of
existing law.
State Revenue Impact
No estimate.
SB 499 -- 2/17/11 -- Page 3
Comments
1. Purpose of the bill . Walnut didn't make its full May
2010 SERAF payment because the $4,000,000 that it received
in property tax increment revenues is less than its bill
for $4,842,161. Because state officials don't recognize
the property tax increment limit that affects Walnut's
redevelopment project area, they overstated the
proportional share of the SERAF shift payments. Walnut
wants fair treatment in light of its unusual fiscal
situation. Walnut shouldn't have to pay a SERAF bill for
money that it doesn't get. Local officials are willing to
pay, but only their fair shares. SB 499 recognizes fiscal
reality when computing SERAF payments.
2. Somebody's going to pay for this . Property tax
allocation -- including property tax increment revenues and
SERAF payments -- are a zero-sum game; for every winner,
there must be a loser. When the 2009-10 SERAF payments
came up $41 million short, part of the reason was that
Walnut paid $3,220,152 less than state officials
calculated. SB 499 acknowledges the fiscal reality that
Walnut doesn't get as much property tax increment revenue
as state officials believed. But who's going to make-up
the $3,220,152 difference? Legislators have at least three
options:
First, because SB 499 says that its provisions are
declaratory of existing law, the bill results in a
$3.2 million loss to the State General Fund.
Second, the Committee may wish to consider adding
an urgency clause to SB 499. If the bill takes effect
before the second and final SERAF payments are due on
May 10, 2011, state officials could proportionally
increase the amounts owed by the other redevelopment
agencies' amounts to make up Walnut's difference.
Third, the Committee may wish to consider amending
SB 499 and allowing Walnut to pay-off its SERAF
obligations over the next 20 years, until property tax
increment revenues stop flowing to its project area in
2032.
3. Litigation and legislation ? Either of two pending
decisions could render SB 499 moot. Redevelopment
officials sued the state over the SERAF payments,
challenging the budget scheme's constitutionality. If they
prevail, Walnut may not owe SERAF after all. Further, the
SB 499 -- 2/17/11 -- Page 4
Legislature is considering AB 101 (Assembly Budget
Committee) and Senate Bill 77 (Senate Budget & Fiscal
Review Committee) which dissolve redevelopment agencies on
July 1, 2011, turning over their assets and obligations to
successor agencies. If redevelopment agencies go away,
must Walnut's successor agency may need to pay SERAF.
4. Not just Walnut ? While SB 499 benefits Walnut, the
measure is a uniform statewide bill that applies to all
redevelopment agencies. Walnut officials say that about 20
other redevelopment agencies with older project areas may
be approaching their self-imposed limits on property tax
increment revenues: Alhambra, Baldwin Park, Brea, Big Bear
Lake, Buena Park, Cathedral City, Clovis, Downey,
Huntington Park, Lake Elsinore, Fontana, Irwindale,
Ontario, Perris, Pomona, Rancho Cucamonga, Rancho Mirage,
and Santa Rosa.
Support and Opposition (3/31/11)
Support : City of Walnut.
Opposition : Unknown.