BILL ANALYSIS �
AB 920
Page 1
Date of Hearing: May 15, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 920 (Ting) - As Amended: May 7, 2013
Policy Committee: Local
GovernmentVote:7-0
Revenue and Taxation 6-2
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill establishes the Property Tax Transparency and
Accountability Program that would require three participating
counties to include on each county tax bill a comprehensive
account of revenues and services funded by local governments for
each tax rate area. This bill also eliminates the requirement
that counties pay interest on property tax refunds at a minimum
of 3% per year. Specifically, this bill:
1)Requires each participating county to include in each county
tax bill, the following information:
a) Beginning with the 2014-15 fiscal year (FY), information
that indicates the percentage of the general ad valorem
property tax allocated to each local government
jurisdiction, including the county, city, special district,
and school district in the tax rate area (TRA) in which the
property is located.
b) Beginning with the 2015-16 FY, a comprehensive account
of all the services funded by local governments, including
services provided by the county, city, special district and
any school district in the TRA in which the property is
located.
2)Requires, upon the cessation of the pilot program, each of the
participating counties to provide a report to the Legislature
regarding the implementation of the pilot program, including
any required technology upgrades, workload adjustments, tax
bill designs, costs, and any recommendations regarding how a
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county can best increase transparency about the use of general
ad valorem property tax revenues by local governments.
3)Eliminates the requirement that counties pay interest on
property tax refunds at the greater of 3% per year or the
county pool apportioned rate, and instead, requires payment
only at the county pool apportioned rate.
FISCAL EFFECT
This bill is keyed a state reimbursable mandate. The bill is
silent about how the three pilot counties will be selected.
Once counties are identified either in the legislation or by an
agency administering the pilot program, there will be
substantial reimbursable costs, perhaps in the millions of
dollars, depending on the information technology upgrades and
changes necessary to implement this bill.
COMMENTS
1)Purpose . According to the author, California property tax
bills are complex and often confusing to the taxpayer. The
author contends many taxpayers are unaware that all revenue
from property taxes is kept exclusively at the local level for
vital services such as education and police and fire
protection. The author argues it is critical that they be
provided a receipt for their payment informing them of the
local government services funded by their payment, similar to
any other receipt they receive when conducting a financial
transaction. The author contends disclosure will increase
transparency and provide more information to taxpayers about
the important services, such as schools and public safety,
funded by property tax revenue.
Currently, any taxpayer owed a refund for property tax
overpayment receives payment with interest calculated at the
greater of three-percent or at the county pool apportioned
rate. The county pool apportioned rate is the interest earned
on the pooled idle funds held and invested by the county
treasurer. The economic downturn has contributed to a fall in
many counties' pool rates, resulting in property tax refunds
include interest earned at a rate higher than the county is
earning. The author argues this loss of local government
revenue redirects money away from schools and other important
services.
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2)Support . According to the proponents, including the
California Professional Firefighters, AFSCME and CALPIRG,
property taxes are the most important revenue stream for local
governments and AB 920 will promote transparency and mutual
understanding of the money that funds schools and other
important local services. Currently, it is impossible for
taxpayers to discern from their property tax bill what revenue
is kept at the local level for important services such as
schools, police and fire. They state the disclosure required
in the bill will help taxpayers understand their often complex
and confusing property tax bills.
3)Concerns . The California State Association of Counties
(CSAC), the California Association of County Treasurers and
Tax Collectors, and the State Association of County Auditors
express support for the concept of providing transparency to
taxpayers, but express concerns over the fiscal and practical
requirements in this bill. CSAC notes 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. They note the
significant complexity of the statute makes it difficult to
accurately reflect property tax allocations in a manner that
is meaningful for citizens.
4)Opposition . Opponents, including CalTax, object to the
provisions that reduce the interest rate paid by county tax
collectors and treasurers on property tax refunds owed to
taxpayers. They understand counties' desire to reduce their
interest costs, but this proposal sets up a disparity between
the interest rate that counties charge taxpayers for
underpayments and the rate at which they pay taxpayers for
overpayments. They argue interest is supposed to be
compensation for the use of money, not a revenue-raising
function or an additional penalty on taxpayers.
5)Background . When property owners pay property tax bills to
the county treasurer-tax collector, the funds are transferred
to the county auditor for distribution. On a typical property
tax bill, however, the 1% rate established by Proposition 13
is listed as a 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 are required by a series of complex state statutes to
allocate revenue from the 1% rate to a variety of local
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governments within the county pursuant to a series of complex
state statutes.
The allocation system in current law was established by AB 8
(Greene), Chapter 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 hundreds, even thousands of tax
rate areas. Auditors allocate revenue to local governments,
as directed by existing law, by tax rate area.
6)Refunds . Under current law, counties must pay property tax
refunds with interest calculated at the greater of 3% per year
or at the county pool apportioned rate, the interest earned on
pooled idle funds held and invested by the county treasurer.
In 2012, the pool rate for all 58 counties was below 3%,
ranging from .0045% in Plumas County to 2.58% in Tulare
County. Despite the low rates for refunds, penalties and
interest can be very high for individuals that do not pay
certain taxes on time. For example, the taxes on the
supplemental roll become delinquent on December 10 for the
first installment. If the taxes due are not paid before they
become delinquent, a penalty of 10% will be imposed plus costs
and penalties accruing at a rate of 1.5% per month.
7)Prior legislation . AB 1957 (Gordon) of 2012, among its other
provisions, allowed counties to pay interest on refunds at the
county pool apportioned rate. This bill failed in Assembly
Local Government Committee.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081