BILL ANALYSIS �
AB 2109
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Date of Hearing: April 28, 2014
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Raul Bocanegra, Chair
AB 2109 (Daly) - As Amended: March 24, 2014
Majority vote. Fiscal committee
SUBJECT : Parcel taxes: reports
SUMMARY : Requires the State Board of Equalization (BOE) to
annually report to the Governor certain information on locally
assessed parcel taxes, as provided. Specifically, this bill :
1)Provides that the annual BOE report required to be submitted
to the Governor shall also include information relating to the
imposition of each locally assessed parcel such as:
a) The type and rate of parcel tax imposed;
b) The number of parcels subject to the parcel tax;
c) The number of parcels exempt from the parcel tax;
d) The sunset date of the parcel tax, if any;
e) The amount of revenue received from the parcel tax; and,
f) Any other information and suggestions deemed proper by
the BOE.
2)Requires BOE to utilize existing funds and resources in
providing this additional information regarding the locally
assessed parcel taxes.
3)Requires the tax auditor of each county to provide to the BOE
any information relating to the locally assessed parcel taxes,
as specified.
4)States that BOE shall adopt regulations to prescribe the
format by which the tax auditor shall report the required
information to the BOE.
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5)Provides that, if the Commission on State Mandates determines
that this bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to Part 7
(commencing with Section 17500) of Division 4 of Title 2 of
the Government Code (GC).
EXISTING LAW :
1)Authorizes cities, counties, and special districts to impose a
general tax for general governmental purposes with the
approval of a majority of the voters. Prohibits special
purpose districts and agencies, including schools districts,
from levying a general tax.
2)Authorizes cities, counties, and special districts to impose a
special tax for specified purposes with the approval of
two-thirds of the voters. Does not allow cities, counties, or
special districts to impose an ad valorem tax on real
property, or a transactions tax or sales tax on the sale of
real property within that city, county, or special district.
3)Authorizes school districts to impose qualified special taxes,
in accordance with specified procedures, including the
approval of two-thirds of the voters in the district.
Provides that "qualified special taxes" must apply uniformly
to all taxpayers or all real property within the school
district and do not include special taxes imposed on a
particular class of property or taxpayers.
4)Requires the local agency's chief fiscal officer to file an
annual report with the agency's governing body detailing the
amount of special tax revenue the agency has collected and
expended. [The Local Agency Special Tax and Bond
Accountability Act (Article 3.5 (commencing with Section
50075) of the GC)].
5)Requires the local agency to apply the tax proceeds only to
those specific purposes for which the tax was levied and
requires that the proceeds be deposited in a special account.
(GC Section 50075.1).
6)Requires the State Controller's Office (SCO) to compile and
publish information about local agencies' finances, including
their revenue sources, based on financial information provided
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by counties, cities, and special districts to the SCO.
FISCAL EFFECT : According to the BOE staff, this bill will not
impact state or local revenues.
COMMENTS :
1)The Author's Statement . According to the author, "This bill
seeks to provide transparency on parcel taxes, especially
since over the past several decades, such taxes have become an
increasingly popular option of cities, counties and special
districts looking to raise revenue for various programs."
2)What Does this Bill Do ? Existing law requires BOE to
annually report to the Governor the assessed value of
state-assessed and locally assessed real and personal property
in each county and incorporated city or town. This bill would
add to the annual report specified information on each locally
assessed parcel tax, including, but not limited to, the parcel
tax type and rate, number of parcels subject to and exempt
from the tax, sunset date, and amount of revenue received from
the parcel tax. Each county auditor would be required to
provide any information to BOE necessary to comply with the
requirements in this bill. The auditors would then report
this information to the BOE in a format prescribed by BOE
regulations. This bill is sponsored by the California
Taxpayers Association.
3)Arguments in Support . The proponents argue that in an era
where resources are scarce but demand for public services is
high, this bill "will provide valuable information for state
and local lawmakers in determining how many past parcel taxes
have been levied, how much revenue has been generated by those
taxes, and what programs have benefited from the revenue."
The proponents also assert that a detailed report on locally
imposed parcel taxes would "help inform voters, who are asked
to decide on upward of thirty or so local parcel tax measures
throughout various parts of the state during each election."
Finally, it would benefit businesses when they make "long-term
business planning, expansion and relocation decisions."
4)Concerns Expressed by Local Governments . While the California
State Association of Counties (CSAC) and the State Association
of County Auditors do not formally oppose this bill, they have
expressed concerns about this bill for fiscal reasons. The
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CSAC states that "this bill would impose a clear state mandate
without an appropriation." The State Association of County
Auditors has also identified several issues "that may cause
the mandate to be difficult and costly to comply with." Since
this bill contains no definition of "parcel tax," county
auditors will not be sure how to comply with the reporting
requirements. Further, reporting a rate of tax would require
"vast system modifications to accommodate all the potential
measurements, or require county staff to personally review
each resolution to ensure the 'rate' utilized per parcel."
Third, counties "have no means of reporting 'the number of
parcels exempt from the parcel tax,' as such information would
have to be generated from the levying agency." Next, the
county auditors "would not have any knowledge regarding the
sunset date of the parcel tax" because levying agencies are
the ones required to certify that the assessment or parcel tax
is valid. Finally, the State Association of County Auditors
notes that not all counties would be able to comply with the
requirements of this bill. Consequently, the auditors
recommend that the levying agencies report the parcel tax
information directly to the BOE.
5)Parcel Taxes: Background . In 1978, Proposition 13 limited
both the tax rates and assessments, thus significantly
reducing property tax revenues, eliminating the ability of
local governments and special districts to levy an incremental
ad valorem tax on real property and forcing the state to
replace the lost revenues in district revenue limits.
Proposition 13 also restricted the ability of local
governments and special districts to levy non-ad valorem taxes
by requiring voter approval for the imposition of local taxes.
Under existing law, cities, counties and special districts may,
by a two-thirds vote of the qualified electors in that
jurisdiction, impose special taxes, except ad valorem taxes on
real property or a transaction tax or sales tax on the sale of
real property within that jurisdiction. While Proposition 13
did not define the term "special tax", the courts, over time,
have opined that a tax is a "special tax" whenever expenditure
of its revenues is limited to specific purposes, i.e. the
proceeds of the tax are earmarked or dedicated in some manner
to a specific project or projects. In contrast, a tax is a
"general tax" only when its revenues are placed into the
General Fund and are available for expenditure for any and all
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governmental purposes. [Bay Area Cellular Telephone Co. v.
City of Union City (2008) 162 Cal. App.4th 686; Howard Jarvis
Taxpayers Assn. v. City of Roseville (2003) 106 Cal.App.4th
1178.] Since school districts are prohibited from imposing
general taxes, any tax levied by a school district, by
definition, is considered to be a special tax subject to a
two-thirds voter approval.
The California Constitution specifies that only two types of
taxes may be imposed upon a parcel of property: an ad valorem
property tax and a special tax receiving two-thirds voter
approval pursuant to Section 4 of Article XIIIA. The
Legislature allowed school districts and 15 other types of
local agencies to impose "qualified" special taxes that
applied uniformly to all taxpayers or real property within the
district. A parcel tax is a special tax and may not be based
on the property's value. It is a flat fee imposed by a city,
county, or special district on each parcel, residential as
well as commercial, rather than on the assessed value of
property, located within the local entity's jurisdiction.
Because the same dollar amount of tax is assessed on each
parcel of property, whether the parcel is one acre or 100
acres, parcel taxes are generally regressive, which means
owners of smaller parcels of land pay a larger percentage of
tax compared to owners of larger parcels of land. Existing
law does not limit how the special tax proceeds may be spent
and, therefore, a local government or a special district can
specify in the ballot measure how the funds will be used.
Districts can use revenues in almost any way that serves local
needs, such as ongoing expenses, programs, or buildings.
Generally, local parcel taxes provide secure funding for
schools, among other purposes. Counties collect parcel taxes
with property taxes, and then remit funds to the district
imposing the tax. Property tax law generally guides parcel
tax collection.
6)The Oversight of Locally Imposed Parcel Taxes . Existing law
requires the State Controller's Office (SCO) to compile and
publish on its Web site annual reports summarizing local
agencies' finances, including their revenue sources. These
reports are based on the financial data submitted to the SCO
by the counties, cities and special districts and detail the
aggregate amount of various taxes collected by each local
government or special district, including the county
allocation of ad valorem taxes on real property,
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voter-approved taxes, property assessments, and special
assessments. This information is not independently verified
by the SCO and appears to include parcel tax revenues under
the heading of "other taxes."
Under existing law, the BOE does not collect, nor does it have
direct access to, information regarding locally imposed
special taxes. The BOE is only required to review county
assessors' valuation procedures. It appears that SCO, rather
than the BOE, is better equipped to receive and process
additional information from local governments regarding their
parcel tax revenues. The Committee may wish to consider
whether the SCO, instead of the BOE, should be required to
include specified information regarding the locally imposed
parcel taxes in its annual reports of local government
finances.
7)Increased Transparency vs. Administrative Costs . The purpose
of this bill is to increase transparency and oversight of
locally imposed parcel taxes. The sponsor states that many
taxpayers should understand how the taxes are assessed,
collected, and how the funds are used.<1> Unlike taxes
imposed by the state, local taxes must be affirmatively
approved by the voters themselves based on the information
contained in the ordinance or resolution presented to them.
As such, it seems that the taxpayers' lack of knowledge would
not be due to the lack of transparency. Even taxpayers who
did not vote on the tax measure (because they were not
qualified voters, for example) still had access to the
information about the purpose, rate, and type of the tax
proposed to be levied. Furthermore, as noted by the BOE staff
in its analysis of this bill, counties publicly provide
contact information for each agency imposing the charge, often
on the annual property tax bill, so that "owners can contact
the levying local agency directly with any questions."
Generally, counties provide this information "to minimize the
workload impact and resultant costs that they would otherwise
incur to redirect inquiring property owners."
However, what is less readily available to the public is the
information regarding the amount of parcel tax revenue
collected and the way the funds are used by the levying
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<1> The Other Property Tax, an Overview of Parcel Taxes in
California, Policy Brief, California Taxpayers Association,
March 2013, p.3.
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agency. As noted by the Legislative Analyst Office (LAO) in
its report Understanding California's Property Taxes, the LAO
was unable to locate any information on the statewide amount
of parcel tax revenue collected by cities, counties, and
special districts.<2> While Committee staff appreciates the
need for transparency, the question remains as to what
constitutes the most effective and convenient way of providing
the information. Should it be included in an annual report to
the Governor? Would the convenience of having this
information summarized in one report outweigh the
administrative burdens of collecting and organizing it on a
statewide basis? The Committee may wish to consider whether
it would be more efficient to require each levying local
agency to create its own local report and publish it on its
Web site, instead of requiring BOE to collect this information
from local governments, summarize it and then include it in
its annual report for the Governor.
8)The BOE Implementation Concerns : The BOE staff notes several
implementation concerns with this bill, including, but not
limited to, following issues:
a) The definition of "parcel tax" is needed . While the
term "parcel tax" is commonly used, it is not defined in
the Revenue and Tax Code. Generally, property tax bills
include numerous other charges, assessments, and fees.
Taxpayers may view these other charges as "parcel taxes."
This bill should expressly state that those assessments and
charges should not be included in the report. Furthermore,
this bill should expressly exclude Mello Roos special taxes
for community facility districts, which may also be imposed
on parcels. In order to provide clarity, the BOE staff
suggests the following definition for this term:
"Parcel tax" means a tax levied by a local agency upon any
--------------------------
<2> "Recent election reports and financial data suggest that
parcel taxes represent a significant and growing source of
revenue for some local governments. Specifically, between 2001
and 2012, local voters approved about 180 parcel tax measures to
fund cities, counties, and special districts, and about 135
measures to fund K-12 districts. The most recent K-12 financial
data (2009-2010) indicate that schools received about $350
million from this source. We were not able to locate
information on the statewide amount of parcel tax revenue
collected by cities, counties, and special districts."
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parcel of property identified using the assessor's parcel
number system or upon any person as an incident of property
ownership pursuant to Section 4 of Article XIIIA of the
California Constitution that is collected via the annual
property tax bill.
b) The phrase "tax type" needs clarification . This phrase
may be interpreted to mean the purpose for which a special
tax is levied, instead of the way the tax is calculated,
i.e. whether it is a flat rate type, street frontage, room
count or square footage. It may be beneficial to clarify
what the phrase "tax type" means. It may also be advisable
to collect other basic data such as the name and contact
information for each levying local agency, a description of
the parcel tax, the reasons for parcel tax exemption and
the statutory authority for the imposition of the tax.
c) Reporting should be limited to parcel taxes invoiced on
the annual property tax bill . County auditors have very
limited information about locally imposed parcel taxes
because they do not certify the validity of local parcel
taxes nor do they monitor the actual imposition of those
taxes. Their source of parcel tax information is the
annual property tax bills. However, a special tax does not
need to be collected via the annual property tax bill and
local agencies may use other collection methods, such as
directly billing the property owner or contracting with a
third party collector. The BOE staff suggests an amendment
to specify that the BOE "should not be required to report
the information for any county if the auditor of that
county did not provide the information to the board as
required by this bill."
9)Double Referral . This bill was double-referred to the
Assembly Committee on Local Government and passed out of that
Committee on a 9-0 vote.
10)Related Legislation . AB 892 (Daly) was substantially similar
to this bill. AB 892 was held in the Assembly Appropriations
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
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California Taxpayers Association [SPONSOR]
Acclamation Insurance Management Services
Allied Managed Care
Apartment Association of Greater Los Angeles
Building Owners and Managers Association of California
California Apartment Association
California Asian Pacific Chamber of Commerce
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Chapter of American Fence Association
California Fence Contractors' Association
California Grocers Association
California Hotel & Lodging Association
California Manufacturers & Technology Association
California Retailers Association
Coalition of Small and Disabled Veteran Business
Engineering Contractors Association
Flasher Barricade Association
International Council of Shopping Centers
Marin Builders Association
NAIOP of California, the Commercial Real Estate Development
Association
National Federation of Independent Business
Orange County Taxpayers Association
Santa Barbara Rental Property Association
Simi Valley Chamber of Commerce
West Coast Lumber & Building Material Association
Western Manufactured Housing Communities Association
Opposition
None on file
Concerns
California State Association of Counties
State Association of County Auditors
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098
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