BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 536|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: SB 536
Author: DeSaulnier (D)
Amended: 4/12/11
Vote: 27 - Urgency
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 4/6/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe, La Malfa, Liu
SENATE APPROPRIATIONS COMMITTEE : 8-0, 5/2/11
AYES: Kehoe, Alquist, Emmerson, Lieu, Pavley, Price,
Runner, Steinberg
NO VOTE RECORDED: Walters
SUBJECT : Property tax revenue allocations: public
utilities: qualified
property
SOURCE : City of Oakley
DIGEST : This bill revises 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 (RDA) at the expense of
other local entities in the county.
ANALYSIS : The California Constitution requires the Board
of Equalization (BOE) to assess public utilities for
property tax purposes. The BOE assesses a regulated
utility's property as a unit, instead of assessing the
CONTINUED
SB 536
Page
2
individual value of separate properties owned by the
utility. State law allocates the property tax revenues
from state-assessed public utilities differently than the
property tax revenues from locally-assessed properties.
Until 1988-89, state law allocated property tax revenues
from all state-assessed property on a situs basis among tax
rate areas. The complexity and administrative cost of
tracking property holdings and allocating property tax
revenues among thousands of small geographic locations led
the Legislature to create the current countywide method for
allocating unitary property tax revenues (AB 2890,
Hannigan,1986).
This bill creates a new method for allocating unitary
property tax revenues from new public utility-owned,
state-assessed, "qualified property."
This bill defines "qualified property" as all plant and
associated equipment, including substation facilities and
fee-owned land and easements, placed in service by a public
utility in the Oakley Redevelopment Project Area on or
after January 1, 2011 and related to:
Electrical substation facilities that either operate at
50,000 volts or more or have a transformer with a
high-side voltage of 50,000 volts or more.
Electric generation facilities that have a nameplate
generating capacity of 50 megawatts or more.
Electric transmission line facilities of 200,000 volts or
more.
This bill's unitary property tax allocation method differs
from the countywide allocation method that applies
generally to revenues from utilities' state-assessed
property and from the 2006 Torlakson bill's modified method
for allocating revenues from qualified electrical facility
property in three significant ways:
1. Non-debt service allocation . Generally, under the
countywide unitary tax allocation method, property tax
revenues from the non-debt service portion of the tax
CONTINUED
SB 536
Page
3
applied to state-assessed property go into a countywide
pool which is then allocated by a formula that:
Establishes a unitary tax base for any
jurisdiction which had state assessed property within
its boundaries in the 1987-88 fiscal year.
Annually increases each local agency's unitary
base by up to two percent (provided that there are
sufficient revenues).
Allocates the remaining revenues to all local
agencies in the county in proportion to each agency's
share of non-unitary property tax revenues.
The modified method for allocating revenues from
qualified electrical facility property allocates
revenues to a county, school entities, and
non-enterprise special districts in proportion to the
revenues they received from the utility in the prior
year under the countywide allocation method. Of the
remaining revenues, 90 percent goes to the city or
county where the electrical facility is built and 10
percent goes to the local government that provides water
service to the qualified electrical facility property.
This bill requires the revenues from the property tax
assessed on public utility-owned, state-assessed
qualified property to be allocated entirely to the
county in which the qualified property is located. The
county auditor then allocates the property tax revenues
derived from the non-debt-service portion of the
property tax on qualified property as follows:
First, allocate to the county in which the
qualified property is located and to all of the
school entities located in that county, the amount of
property tax revenues that would have otherwise been
allocated to the county and school entities or
districts had the bill not been enacted.
Second, allocate to the East Contra Costa Fire
Protection District an amount equal to two percent of
the property tax revenues.
CONTINUED
SB 536
Page
4
Third, allocate to any regional park district an
amount of property tax revenues equal to the amount
of property tax revenues allocated to that special
district in 2010-11.
Fourth, allocate to the RDA governing the project
area in which the qualified property is located, the
balance of the property tax revenues.
2. Debt service allocation . Generally, unitary property
tax revenues from the debt-service rate that applies to
state-assessed properties are allocated to each taxing
jurisdiction that levies a rate in excess of one percent
for voter-approved debt service in proportion to the
percentage of total property tax revenues each
jurisdiction received from taxes on state-assessed
property in the prior year. Under the modified
allocation method for qualified electrical facilities,
revenues from the debt-service rate are allocated using
the general method, except that school entities receive
an amount equivalent to the same percentage of property
tax revenues they received from the utility in the prior
fiscal year.
This bill allocates revenues from the debt-service rate
in two steps:
First, the revenues go to taxing jurisdictions in
those Contra Costa County tax rate areas in which the
qualified electrical facility is located in an amount
equivalent to the BOE's current-year assessed value
of the qualified property multiplied by any override
rate adopted by the local agency for the year.
Second, the balance of the revenues are allocated
pursuant to the general allocation statute.
3. Property valuation . Generally, the BOE annually
reassesses state-assessed property at its current market
value on January 1. The modified allocation method for
qualified electrical facilities excludes from the
definition of qualified property any additions,
modifications, reconductoring, or equivalent
CONTINUED
SB 536
Page
5
replacements to the plant and associated equipment made
after the plant and associated equipment are placed in
service.
This bill includes, in the definition of "qualified
property," any additions, modifications, reconductoring,
or equivalent replacements to the plant and associated
equipment made after the plant and associated equipment
are placed into service.
4. Affordable housing . This bill requires the Oakley RDA,
once the qualified property is placed in service, to
develop one new housing unit for each 40 jobs created on
real property within the specified redevelopment project
area. All of the new housing units:
Must be affordable to, and occupied by,
"extremely low income persons," as defined in
statute.
Must comply with the requirements of the
Community Redevelopment Law, with specified
exceptions.
Must be completed and occupied no later than 10
years after a specified date.
May be located anywhere within the City of
Oakley. The number of units required is not affected
by whether the units are within a project area.
May be used to satisfy the City of Oakley's
regional housing needs allocation.
To determine the number of jobs created in the
specified project area, this bill requires the RDA to
determine the number of full and part time jobs
existing in the specified redevelopment project area
six months before the approval of an agency's
five-year implementation plan. The agency must use
data from a state or federal agency in making the
determination. The number of housing units that the
agency must develop is 1/40th of the number of jobs
calculated and must be included in the first
CONTINUED
SB 536
Page
6
applicable implementation plan. For each subsequent
implementation plan, the number of additional units
must be based on any increase in the number of jobs
since the prior calculation.
5. Other provisions . This bill also requires a public
utility to provide the BOE with a description of the
qualified property in the form prescribed by the BOE so
that the BOE can determine the separate valuation. The
BOE must transmit to the Contra Costa County auditor the
information necessary to identify the qualified property
and the corresponding assessed value data necessary to
make the property tax revenue allocations required by
the bill.
This bill requires the county auditor to make any
necessary pro rata reductions in the allocations of
property tax revenues attributable to the qualified
property to jurisdictions other than those receiving an
allocation under the bill's provisions. This bill
requires the Oakley RDA to reimburse the county
auditor's actual and reasonable costs for administering
the property tax allocation requirements.
This bill contains legislative declarations to support
its special provisions applying to the Oakley RDA.
Comments
Under the countywide method, the BOE allocates the unitary
assessed value of utility property among the counties based
on the amount of property within each county. County
auditors allocate the property tax revenues from unitary
properties using a formula based on the amount of unitary
revenues received by the county's taxing jurisdictions in
1987-88. For years after 1987-88, each taxing jurisdiction
receives up to 102 percent of its prior year unitary
property tax revenues. The county auditor allocates the
remaining property tax revenue from the county's unitary
roll to all taxing jurisdictions in proportion to their
shares of property tax revenues derived from
locally-assessed property.
In other words, this unitary tax allocation method creates
CONTINUED
SB 536
Page
7
a countywide pool of property tax revenues generated by
growth in the value of state-assessed properties. Each
local taxing agency gets a share of the countywide pool,
regardless of whether any state-assessed property is within
that agency's boundaries.
The Legislature has created some exceptions to this
countywide unitary tax allocation method. When the City of
Chula Vista (San Diego County) was willing to accept a
proposed electrical power plant, legislators directed that
the resulting property tax revenues would be allocated to
schools and the county government under the unitary tax
method, but the share that would have gone to all cities in
San Diego County under the unitary tax method would instead
go just to Chula Vista (AB 1108 �Peace], Chapter 1045,
Statutes of 1993). The Legislature approved similar
exceptions for an electrical power plant in the City of
Escondido (AB 2558 �Plescia], Chapter 640, Statutes of
2004), a PG&E education and training center in the City of
Livermore (SB 53, Lockyer, 1991), and a PacBell computer
center in the City of Fairfield (AB 454, Klehs, 1987).
The Legislature also created an exception to the countywide
unitary tax allocation method for all newly constructed
public-utility-owned, large-scale electrical generation,
substation, and transmission facilities. That exception
allocates a greater share of unitary property tax revenues
to the city or county in which a qualified electrical
facility is located (SB 1317 �Torlakson], Chapter 872,
Statutes of 2006).
The Community Redevelopment Law allows local officials to
set up redevelopment agencies, adopt redevelopment plans,
and finance redevelopment activities using property tax
increment revenues. When an RDA adopts a redevelopment
plan for a project area and selects a base year, the agency
"freezes" the amount of property tax revenues that schools
and other local governments receive from the property in
that area. In future years, as the project area's assessed
valuation grows above the frozen base, the resulting
property tax revenues - the property tax increment - go to
the RDA instead of going to the schools and the other
underlying local governments. State law requires
redevelopment officials to make pass-through payments to
CONTINUED
SB 536
Page
8
schools and other local governments to mitigate the
long-term fiscal effects of property tax increment
financing (AB 1290 �Isenberg], Chapter 942, Statutes of
1993). State law also requires redevelopment officials to
set aside 20 percent of an agency's property tax increment
revenues to increase, improve, and preserve the supply of
affordable housing (AB 3674, Montoya, 1976).
The California Energy Commission is considering a proposal
to construct a 600 megawatt power plant within a
redevelopment project area in the City of Oakley (Contra
Costa County). Oakley officials say that the modified
allocation method created by the 2006 Torlakson bill does
not allocate enough revenue to their redevelopment project
area. They want the Legislature to create an exception to
that modified allocation method to send more unitary
property tax revenues from the proposed power plant to the
Oakley RDA.
Recognizing the need to rapidly expand the state's
electrical generating capacity, and the impact that new
generating facilities have on local communities, the 2006
Torlakson bill compensates communities that accept those
energy projects with bigger shares of future unitary
property tax revenues. However, that law compensates only
cities or counties, not redevelopment agencies. SB 536
expands that modified allocation method by providing the
Oakley RDA with a similar augmentation of future unitary
property tax revenues from a power plant built within its
boundaries. This bill's allocation of property tax
revenues from Oakley's power plant may generate over $2
million of additional revenue per year over the life of the
power plant for the Agency. These revenues will help to
fund the Agency's activities and mitigate the power plant's
impact within the redevelopment project area.
Prior and Related Legislation
SB 1398 (DeSaulnier), 2009-10 Session, died while awaiting
a concurrence vote on the Senate Floor.
SB 1317 (Torlakson), Chapter 872, Statutes of 2006.
Governor Brown's 2011-12 State Budget proposal calls for
CONTINUED
SB 536
Page
9
eliminating redevelopment agencies. AB 101 (Assembly
Budget Committee) and SB 77 (Senate Budget and Fiscal
Review Committee) contain the implementing language.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Property tax allocation annual gain of $2,500-$3,000
to Oakley RDA Local
& corresponding loss to other local
entities
SUPPORT : (Verified 5/3/11)
City of Oakley (source)
California Rural Legal Assistance Foundation
Oakley Redevelopment Agency
Western Center on Law and Poverty
OPPOSITION : (Verified 5/3/11)
Department of Finance
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT : According to the author's office,
" SB 536 is a district bill for the City of Oakley that
will provide greater financial benefits to the Oakley
Redevelopment Agency to host a power generating facility.
This bill adds the Oakley Redevelopment Agency to the
current definition of where power generating facilities can
be located for the purpose of capturing additional property
tax revenues, and will provide the Agency with additional
resources to meaningfully address revitalization within the
Project Area."
ARGUMENTS IN OPPOSITION : The Department of Finance
states that "The property tax allocation formulas contained
in existing law were enacted in 2006 (SB 1317 �Torlakson],
CONTINUED
SB 536
Page
10
Chapter 872, Statutes of 2006), in a statewide compromise
negotiated among power plant operators and their
surrounding special districts. An exception to existing
law redirecting additional property tax revenues to the
Oakley RDA, to the detriment of other Contra Costa County
special districts, would establish an undesirable
precedent for subsequent exemptions elsewhere and is
contrary to previous agreements."
AGB:mw 5/4/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED