BILL ANALYSIS �
AB 920
Page 1
Date of Hearing: April 17, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 920 (Ting) - As Amended: April 9, 2013
SUBJECT : Property taxation: tax bill information: interest on
refunds.
SUMMARY : Requires new information to be included on each county
tax bill that provides a comprehensive account of all services
funded by local governments. Specifically, this bill :
1)Requires that each county tax bill, by the tax rate area where
a property is located in, contain the following information:
a) The percentage of the general ad valorem property tax
allocated to each local government jurisdiction including
the county, any city, and special district including school
districts, beginning in the 2014-2015 fiscal year; and,
b) A comprehensive account of all the services funded by
local governments, including but, not limited to, services
provided by the county, any city, and special district
including school districts, beginning in the 2015-2016
fiscal year.
2)Eliminates the requirement that counties pay interest on
property tax refunds at the greater of 3% per annum or the
"county pool apportioned rate," and instead, requires payment
only at the "county pool apportioned rate," as specified.
3)Provides that if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement to local agencies and school districts for those
costs shall be made pursuant to current law governing state
mandated local costs.
4)Makes findings and declarations.
EXISTING LAW :
1)Requires the following information to be included on each
county tax bill, whether mailed or electronically transmitted
or included in a separate statement accompanying the bill:
AB 920
Page 2
a) Value of locally assessed property;
b) Tax rate of a maximum 1% amount of ad valorem tax
imposed on real property;
c) Rate or dollar amount of taxes levied in excess of the
1% limitation to pay for voter approved indebtedness
incurred before July 1, 1978, or bonded indebtedness for
the acquisition of improvement of real property;
d) Amount of any special taxes and special assessments
levied;
e) Amount of any tax rate reduction;
f) Amount of any exemptions;
g) Total taxes due and payable on the property covered by
the bill;
h) Instructions on tendering payment, including the name
and mailing address of the tax collector;
i) Any special purpose parcel tax;
j) Information on the taxpayer right to an informal
assessment review if the taxpayer disagrees with the
assessed value on the tax bill and contacts the assessor's
office;
aa) Information on the taxpayer right to file an application
for reduction in assessment for the following year if the
taxpayer and assessor are unable to agree on a proper
assessed value pursuant to the informal assessment review;
and,
bb) Address of the clerk of the county board of equalization
or the assessment appeals board.
2)Requires the payment of interest on property tax refunds at
the greater of 3% per annum or the county pool apportioned
rate.
FISCAL EFFECT : Unknown
AB 920
Page 3
COMMENTS :
1)This bill makes several changes to current law. Beginning
with the 2014-2015 fiscal year this bill requires information
that provides, by percentage, how the 1% ad valorem property
tax rate is allocated to each local government jurisdiction
including the county, any city, and any special district
including a school district. Beginning with the 2015-2016
fiscal year, this bill requires a comprehensive account of all
the services funded by local governments including the county,
any city, and any special district including a school
district. Additionally, the bill lowers the interest rate
ceiling for property tax refunds. This bill is
author-sponsored.
According to the author, "California property tax bills are
complex and often confusing to the taxpayer. Many taxpayers
are unaware that all revenue from property taxes is kept
exclusively at the local level for vital services such as
education, police, fire protection, parks and recreation, and
so much more. This bill would increase transparency and
provide more information to taxpayers about the important
services, such as schools and public safety, funded by
property tax revenue."
2)When property owners pay property tax bills to the county
treasurer -tax collector, the funds are transferred to the
county auditor for distribution. According to the Legislative
Analyst's report entitled, Understanding California's Property
Taxes ,"ad valorem property taxes, the 1% rate and
voter-approved debt rates, account for nearly 90% of the
revenue collected from property tax bills in California -
roughly $43 billion in 2010-2011. On a typical property tax
bill, however, the 1% rate is listed at the general tax levy
or countywide rate with no indication as to which local
governments receive the revenue or for what purpose the funds
are used. In general, county auditors allocate revenue from
the 1% rate to a variety of local governments within the
county pursuant to a series of complex state statutes. More
than 4,000 local governments receive revenue from the 1%
rate."
The allocation system defined in current law, commonly
referred to as AB 8, was established by AB 8 (Greene), Chapter
AB 920
Page 4
282, Statutes of 1979. Each county is divided into tax rate
areas, geographical areas within a county served by the same
local governments, county, city, schools, and special
districts. The number of tax rate areas vary - some counties
may have thousands of tax rate areas. Auditors allocate
revenue to local governments, as directed by existing law, by
tax rate area.
3)The author points to a Contra Costa Grand Jury Report which
concludes that property tax bills give inadequate information
and do not inform the taxpayer on how the 1% countywide tax
dollar is spent. As a result of the Grand Jury Report in
2003, Contra Costa developed an online tool that allows
taxpayers to use their tax rate area to see by percentage
where their property taxes are allocated. Other counties like
Santa Clara post a tax rate book online where taxpayers can
see where their money is allocated by each of the 813 tax
rates areas. The author argues that these online tools and
information provided in various formats in numerous counties
are not sufficient, difficult to access, and should be made on
the tax bill itself to maximize transparency - which is the
purpose of this bill.
4)The California State Association of Counties (CSAC),
California Association of County Treasurers and Tax
Collectors, and the State Association of County Auditors each
express support for the concept of providing transparency to
taxpayers, however, also express concerns over the fiscal and
practical requirements in this bill.
The Committee may wish to ask the county auditors and tax
collectors to discuss at greater length what the practical
implications of the bill will be.
5)CSAC argues, "Over the years the state has shifted, flipped,
swapped, and reallocated property tax revenues for a variety
of reasons and county auditors have implemented those
provisions as directed by state law. The significant
complexity of the statute makes it difficult to accurately
reflect property tax allocations in a manner that is
meaningful for citizens."
The Committee may wish to consider if the transparency the
author would like to accomplish for the taxpayers will be
accomplished by this bill. The County Auditors question if
AB 920
Page 5
the intent of the bill is achievable due to the complexity of
the local property tax system. There are a number of complex
financial transactions that the auditors are required to do
following the AB 8 process. For example, the complex
distribution required as a result of the dissolution of
redevelopment agencies, allocation to successor agencies, and
the use of the Educational Revenue Augmentation Fund (ERAF) to
meet minimum funding levels or as reimbursement to localities
for the loss of other revenue sources pose inherent challenges
to providing transparency to taxpayers as to the exact
allocation of property tax.
6)The Committee may wish to consider how the auditor will be
able to accurately determine the list of services this bill
requires to be included on a county tax bill, and if it is
appropriate to task a county auditor with this requirement.
For example, when the auditor allocates the specified share of
property tax dollars to the county, it goes into the general
fund which the county then designates toward programs and
services. This bill would require that the auditor obtain
from each locality a comprehensive list of services provided
by local government funds through their individual budget
processes.
7)The following changes are requested by the concerned entities:
a) The California Association of County Treasurers and Tax
Collectors propose amendments "to instead authorize the tax
collectors to provide a website on the tax bill data
already compiled by the Board of Equalization or the County
Auditor-Controller regarding the distribution of tax
dollars within the County."
b) CSAC suggests that "the state consider a longer-term
approach to simplify and improve the transparency of the
property tax system. Such an effort would require input
from a variety of stakeholders, statutory changes, and an
ability to adjust the local processes involved with
administering the property tax system."
8)This bill is keyed a state mandate, which means the state
could be required to reimburse local agencies and school
districts for implementing the bill's provisions if the
Commission on State Mandates determines that the bill contains
AB 920
Page 6
costs mandated by the state.
The State Association of County Auditors anticipates a
significant fiscal impact to accomplish the intent of this
bill. The Auditors state, "Counties would need to purchase
entirely new computer systems that could provide the level of
detail required; or invest in their existing systems to make
necessary improvements in order to comply. For Los Angeles
County, a rough estimate would be around $10 million for
modifications and $50 - $60 million for a new system."
9)The second portion of the bill lowers the interest rate floor
for property tax refunds. Under current law, counties must
pay interest on property tax refunds at the greater of 3% per
year or the "county pool apportioned rate". The statute
defines the county pool apportioned rate as "the annualized
rate of interest earned on the total amount of pooled idle
funds from all accounts held by the county treasurer, in
excess of the county treasurer's administrative costs with
respect to that amount" as of a particular date. This bill
would remove the 3% floor and simply peg the refund interest
rate to the county pool apportioned rate, allowing the
counties to save money on tax refund interest rate payments.
Supporters may argue that with the current economic situation,
a county's pool apportioned rate may be or will drop to less
than 3%. If the pool rate drops below 3%, as it does often in
a down economy, the county pays more in interest than the
interest that the county can earn.
The California Taxpayers Association opposes the lowering of
the floor on the tax refund interest rate, stating that
"Sacramento, for example, charges taxpayers an annualized
interest rate of approximately 9 percent on underpayments, but
under this bill, would only pay taxpayers a rate of less than
3 percent on overpayments. Such a policy unfairly
disadvantages taxpayers."
This provision is substantially similar to a provision
included in AB 1957 (Gordon, 2012), which failed passage in
this Committee. However, AB 1957 contained a number of other
provisions that garnered greater opposition.
10)Support arguments : Supporters argue that this bill provides
local governments with another tool for greater fiscal
AB 920
Page 7
oversight and improves transparency and accountability by
providing more information to taxpayers about the important
services funded by property tax revenue. Additionally, the
provision lowering the interest rate floor on property tax
refunds would benefit counties by saving money.
Opposition arguments : Opponents may argue that this bill will
not provide taxpayers with an accurate picture of local
government finance, and poses financial and logistical
challenges in terms of implementation. Additionally, the
provision lowering the interest rate floor on property tax
refunds would harm tax payers by imposing a double standard
that is unfair to taxpayers.
11)This bill is double-referred to the Revenue and Taxation
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
CALPIRG
Concerns
California Association of County Treasurers and Tax Collectors
California State Association of Counties
State Association of County Auditors
Opposition
CalTax
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958