BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 536 (DeSaulnier)
Hearing Date: 05/02/2011 Amended: 04/12/2011
Consultant: Mark McKenzie Policy Vote: G&F 9-0
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BILL SUMMARY: SB 536, an urgency measure, would revise property
tax allocation formulas to allow the property tax revenues from
a public utility power plant in Contra Costa County to be
allocated to the Oakley Redevelopment Agency (Oakley RDA) at the
expense of other local entities in the county.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Property tax allocationannual gain of $2,500-$3,000 to Oakley
RDA Local and corresponding loss to
other local entities
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STAFF COMMENTS:
Current law generally provides that property that is assessed by
a County Assessor is allocated to the jurisdictions (schools,
city, county, and special district) in which the property is
physically located. Property owned by utilities is generally
assessed by the Board of Equalization as a unit and allocated to
all jurisdictions in a county based on each jurisdiction's
proportionate share of the county's total property tax revenue.
Under this countywide system, all schools, cities, and special
districts in a county receive a share in the property tax
revenues, regardless of whether any state-assessed property is
located within its boundaries. Recognizing that the area around
a power plant bears most of the burden of that facility, the
Legislature enacted SB 1317 (Torlakson), Chapter 872 of 2006),
creating an exception to the countywide unitary tax allocation
method for all newly constructed public-utility-owned large
scale electrical generation, substation, and transmission
facilities. This exception allows the city or county in which a
qualified electrical facility is located to receive most of the
property tax revenues attributable to the facility; the county,
schools, and non-enterprise special districts receive their
share of the property tax revenues, while other local entities
receive none of the revenues.
The California Energy Commission is considering a proposal to
construct a 600 megawatt power plant that would be located
within a redevelopment project area in the City of Oakley
SB 536 (DeSaulnier)
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(Contra Costa County). This bill would create an exception to
the modified allocation method created by SB 1317 to send more
unitary property tax revenues from the proposed power plant on a
situs basis to the Oakley RDA.
SB 536 would create an exception to the formulas for allocating
property tax revenues for public-utility-owned large scale
electrical generation, substation, and transmission facilities
placed in service in the Oakley Redevelopment Project Area on or
after January 1, 2011. Specifically, this bill would require
the property tax revenue derived from specified new electrical
facilities to be allocated entirely to the county in which the
facilities are located, and require the county auditor to
allocate the non-debt-service property tax revenues as follows:
First, the county and school entities and districts that are
located in the county will receive the same amount of property
tax revenues that would have otherwise been allocated to the
county and those school districts. (these entities are held
harmless)
Second, 2 percent of the property tax revenues would be
allocated to the East Contra Costa Fire Protection District.
Third, regional park districts would receive the same amount
of property tax revenues allocated to that district in
2010-11.
The balance of the property tax revenues attributable to the
utility property would be allocated to the redevelopment
agency (RDA) in which the property is located.
All other entities in the county that would have otherwise
received a share of the public utility's property tax under
the countywide method will receive no share of the property
tax revenue derived from the qualified property.
The amount of property tax revenues dedicated to debt-service
would first go to taxing jurisdictions in those Contra Costa
County tax rate areas in which the facility is located in an
amount equal to the BOE's current year value of the property
multiplied by a specified override rate, with the balance
being allocated pursuant to general allocation formulas.
This bill would not change the amount of property tax revenues
ultimately derived from the Oakley power plant, but would change
the distribution of those revenues. Property tax revenue
allocation is a zero sum game and changing allocation formulas
creates winners and losers. The clear winner would be the
Oakley RDA, which would capture a large share of the property
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tax revenues attributable to the electrical facilities at the
expense of other local agencies in Contra Costa County. There
is no net state impact because the bill requires the county
auditor to allocate property tax revenues to all K-12 schools in
the county in an amount that they would have received in the
absence of this bill prior to making the allocation to the RDA.
Typically, any growth in property tax beyond the frozen base of
property tax revenues within a redevelopment area is considered
tax increment that goes directly to the redevelopment agency
instead of going to schools and other local governments.
Existing law requires a redevelopment agency to make
pass-through payments to schools and other local governments to
mitigate the long-term fiscal impacts of property tax increment
financing. Existing law also requires that 20 percent of a
redevelopment agency's tax increment revenues be deposited into
a separate account and used to increase, improve, and preserve
the supply of affordable housing in the redevelopment area.
Staff notes that SB 536 would exclude any property tax revenues
derived from the power plant from the definition of "tax
increment" for purposes of the Community Redevelopment Law.
This would exempt those revenues from the extensive statutory
requirements and restrictions that usually apply to
redevelopment agency's tax increment revenues, such as
pass-through payments to schools and other local governments and
the requirement to spend 20 percent of its additional revenues
for affordable housing. This creates a new precedent and
provides the Oakley Redevelopment Agency with significant
discretionary revenues that it could spend without restrictions.
In order to mitigate the impact of exempting the new revenues
from the requirement to set aside 20 percent of tax increment
for affordable housing purposes, SB 536 would require the Oakley
Redevelopment Agency to develop one new housing unit for each 40
jobs created on real property within the redevelopment project
area, and require the new housing to meet specified requirements
that would apply to housing funded with redevelopment tax
increment revenues. The bill would also specify a procedure to
determine the number of jobs created in the specified project
area.
Since school property tax revenues derived from the new power
plant would be the same under this bill as they would be under
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current law, there is no net General Fund cost related to the
impact on schools. If the bill were to include provisions that
ensured the schools are made whole and provisions requiring the
new property tax revenues to be included in the definition of
tax increment for purposes of pass-through payments, the schools
would receive a net gain in property tax revenues above current
law. Staff notes, however, that the bill could be amended to
specify that all new tax revenues are to be included as tax
increment and that the new revenues are exempt from statutory
requirements to make pass-through payments to schools to
eliminate the possibility of "double payments" to schools.
Staff notes that this bill would impose new duties upon county
auditors with respect to the allocation of property tax revenues
derived from state-assessed property resulting in a
state-mandated local program. The bill includes a provision,
however, that requires the Oakley RDA to reimburse the county
auditor for any costs for revising formulas for the allocation
of property taxes as a result of this bill. Staff notes that
pursuant to Proposition 1A, which was passed by the voters in
November 2004, this bill requires approval by a 2/3 vote in each
house of the Legislature because it changes the pro rata shares
in which ad valorem property tax revenues are allocated among
local agencies.