BILL ANALYSIS �
SB 536
Page 1
SENATE THIRD READING
SB 536 (DeSaulnier)
As Amended September 2, 2011
2/3 vote. Urgency
SENATE VOTE :35-0
LOCAL GOVERNMENT 6-1 APPROPRIATIONS 16-1
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|Ayes:|Smyth, Alejo, Bradford, |Ayes:|Fuentes, Harkey, |
| |Campos, Gordon, Hueso | |Blumenfield, Bradford, |
| | | |Charles Calderon, Campos, |
| | | |Davis, Donnelly, Gatto, |
| | | |Hall, Hill, Lara, |
| | | |Mitchell, Nielsen, |
| | | |Solorio, Wagner |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Norby |Nays:|Norby |
| | | | |
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SUMMARY : Revises property tax formulas to allocate property tax
revenues from a proposed public utility power plant in Contra
Costa County to benefit the City of Oakley. Specifically, this
bill :
1)Defines "qualified property" to mean both of the following:
a) All plant and associated equipment, including substation
facilities and fee-owned land and easements, placed in
service by a public utility in the City of Oakley on or
after January 1, 2011, and related to the following:
i) Electrical substation facilities that meet either of
the following conditions:
(1) The high-side voltage of the facility's
transformer is 50,000 volts or more; or,
(2) The substation facilities are operated at
50,000 volts or more.
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ii) Electric generation facilities that have a nameplate
generating capacity
of 50 megawatts or more; and,
iii) Electric transmission line facilities of 200,000
volts or more.
b) Any additions, modifications, reconductoring, or
equivalent replacements to the plant and associated
equipment made after the plant and associated equipment are
placed into service.
2)Provides, notwithstanding any other law, that all of the
following shall apply, for the fiscal year (FY) 2011-12 and
each FY thereafter:
a) The revenue from the property tax assessed on qualified
property, which is owned by a public utility and assessed
by the Board of Equalization (BOE), shall be allocated
entirely within the county in which the qualified property
is located;
b) Provides that the county auditor shall allocate the
non-debt service portion of the property tax revenues as
follows:
i) First, 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 this section not been enacted;
ii) Second, to the East Contra Costa Fire Protection
District, an amount equal to 2%
of the property tax revenues;
iii) Third, to the City of Oakley, the balance of the
property tax revenues.
c) Allocates revenues from the debt-service rate in two
steps:
i) Provides that the revenues go to taxing
jurisdictions in those Contra Costa County tax rate areas
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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;
and,
ii) Provides that the balance of the revenues shall be
allocated pursuant to the general allocation statute.
3)Provides that a public utility shall provide to BOE a
description of the qualified property in the form prescribed
by BOE so that separate valuation can be determined.
4)Provides that BOE shall transmit to the auditor of Contra
Costa County the information necessary to identify the
qualified property and the corresponding assessed value data
necessary to make the property tax revenue allocations as
required under this bill.
5)States that the City of Oakley shall develop one new housing
unit for each 40 jobs created on real property within the
project area that was, on September 1, 2010, owned by the
DuPont Corporation, commonly and formerly known as the DuPont
Antioch Plant, and provides that the housing obligation shall
begin upon placing the qualified property in service.
6)Provides that units newly developed shall:
a) Be affordable to, and occupied by, extremely-low income
persons;
b) Comply with the requirements of the Community
Redevelopment Law, except as otherwise provided in the
bill;
c) Be completed and occupied no later than 10 years, after
determination by the City of Oakley;
d) Be located anywhere within the City of Oakley; and,
e) Be used to satisfy the City of Oakley's regional housing
needs allocation (RHNA).
7)Provides that the City of Oakley, by January 1, 2014, and by
January 1 each five years thereafter, shall determine the
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number of jobs, full and part-time, existing in the area.
8)Provides that the City of Oakley shall use data from a state
or federal agency in making the determination of the number of
jobs existing in the area.
9)States that the number of units required to be developed under
the provisions of this bill shall be one-fortieth of the
number of jobs calculated and shall be included in the City of
Oakley's first applicable implementation plan.
10)Provides that for each subsequent implementation plan, the
number of additional units shall be based on the increase, if
any, in the number of jobs since the prior calculation.
11)States that the Legislature finds and declares that a special
law is necessary in order to ensure that the City of Oakley
has sufficient affordable housing and receives sufficient
funding to repay loans, or moneys advanced to, or indebtedness
incurred by the City of Oakley.
12)Provides that no reimbursement is required because the bill
provides for reimbursement to a local agency in the form of
additional revenues that are sufficient in amount to fund the
new duties established in this measure.
13)States that this bill is an urgency statute necessary for the
immediate preservation of the public peace, health, or safety
in order to ensure that the City of Oakley has sufficient
affordable housing and receives sufficient funding to repay
loans, or moneys advanced to, or indebtedness incurred by, the
City of Oakley to finance or refinance redevelopment projects.
EXISTING LAW :
1)Provides for the following allocation formula pursuant to SB
1317 (Torlakson), Chapter 872, Statutes of 2006, for qualified
public utility-owned electrical facilities built after January
1, 2007, and meeting specified conditions:
a) Counties, K-14 schools, and non-enterprise special
districts receive the same percentage of these property tax
revenues as they received in the previous year;
b) The city in which the electrical facility is located
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receives 90% of the remaining property tax revenues;
c) The city or water districts that provide water service
to the electrical facilities receive the remaining 10% of
the property tax revenues; and,
d) The other entities that would have previously received a
share of the property tax revenues do not receive any of
the revenues.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, 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. The City of
Oakley would gain annually $2.7 million at the expense of other
local governments in Contra Costa County. Of this total, $2.2
million would be from various Contra Costa water, park, hospital
and other special districts.
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 and prior to making the allocation
to the City of Oakley.
COMMENTS : In recent years, there has been a trend of moving
toward situs-based allocation for certain new major projects
assessed by the state. Prior to this point, incremental growth
revenues from state-assessed properties were distributed to
nearly all governmental agencies and school entities in the
county in proportion to each entity's share of the county's
total ad valorem property tax revenues in the prior year. Under
the countywide system, all entities received a share in the
revenues, regardless of whether any of the value growth occurred
within its jurisdictional boundaries.
AB 81 (Migden), Chapter 57, Statutes of 2002, was enacted to
change the revenue allocation of power plants divested by public
utilities and sold to private operators, as well as those newly
constructed by merchant power plant owners, to provide for
situs-based revenue allocation. In 2005, San Diego Gas and
Electric sought and received special revenue allocations for a
proposed new power plant to be constructed in the City of
Escondido �AB 2558 (Plescia), Chapter 640, Statutes of 2004].
In 2006, the Legislature created an exception to the countywide
unitary tax allocation method for all newly constructed
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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)].The result is that SB 1317
compensates a community that accepts an energy project with a
bigger share of future unitary property tax revenues.
According to the author, current law creates a disincentive for
the City of Oakley to support a new power generating facility
within its boundaries. The author notes that the residents of
Oakley will be the most impacted if a power plant is built
within their community and without the financial incentive that
can be used to reduce blight in the community and provide the
necessary services to the facility. The author notes that the
SB 1317 (Torlakson) allocation method will apportion
insufficient revenues to the City of Oakley.
This bill revises property tax allocation formulas to allow
property tax revenues from a new public utility power plant
proposed to be built in Contra Costa County to be allocated to
the City of Oakley. The California Public Utilities Commission
(PUC) recently considered a proposal to construct a 600 megawatt
power plant to be located the City of Oakley, in East Contra
Costa County. The power plant is slated to use General
Electric's latest technology, be powered by natural gas, and
will eventually be owned by Pacific Gas and Electric (PG&E) at
commercial operation.
The project was initially denied by the Public Utilities
Commission (PUC) in July 2010, although the PUC did give PG&E
permission to resubmit the Oakley project at a later date under
specific conditions. However, in December of 2010, the
resubmitted project was approved, with an extension to the
delivery date of the project from June 2014 to June 2016. In
May 2011, the PUC voted to dismiss a request for rehearing for
the project by the Division of Ratepayer Advocates and
environmental groups like Californians for Renewable Energy,
Communities for a Better Environmental, Sierra Club, and The
Utility Reform Network (TURN).
Previous versions of this bill revised property tax revenue
allocations to benefit Oakley's Redevelopment Agency.
Amendments taken on September 2, 2011 strike the allocation to
the Oakley RDA and instead allocate property tax revenues to the
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City of Oakley. This partially addresses the concerns raised by
the Department of Finance that "the provisions and protections
afforded property tax allocations by Proposition 1A did not
extend to RDAs." Department of Finance noted that "the property
tax shift from special districts to an RDA arising from �prior
versions of the bill] could violate Article XIII, Section 25.5
of the California Constitution."
Additionally, the Department of Finance, in opposition, writes
that "the property tax allocation formulas contained in existing
law were enacted in 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."
This bill changes the pro rata shares in which ad valorem
property tax revenues are allocated among local agencies in a
county, and therefore, requires a two-thirds vote of the
membership of each house of the Legislature (Proposition 1A of
2004). This bill is also an urgency statute, which requires a
two-thirds vote of the membership of each house.
A substantially similar bill, SB 1398 (DeSaulnier), was heard by
the Assembly Local Government Committee last year. SB 1398
ultimately died after passing the Assembly Floor because of
timing.
Support arguments: Supporters argue that this bill will remedy
on oversight in existing law regarding property tax allocation
revenue for public utilities. The City of Oakley notes that the
power generation facility will provide substantial jobs during
the construction phase of the facility, but will not necessarily
provide significant annual revenues to the hosting jurisdiction
if this bill does not pass.
Opposition arguments: The Howard Jarvis Taxpayers Association
(HJTA) believes that this bill "establishes a dangerous trend of
reducing or eliminating property tax allocations to other local
districts." HJTA is concerned that the exemption from the
requirement to make pass-through payments will force struggling
special districts and other local government entities to pass
the loss of revenues onto their customers. Additionally, HJTA
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believes that "government has a role to play in job creation,
but it is not to pick winners and losers in the private sector."
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
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