BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 2231 (Gordon) - State Controller: property tax postponement.
Amended: August 4, 2014 Policy Vote: G&F 7-0
Urgency: Yes Mandate: Yes
Hearing Date: August 4, 2014
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2231, an urgency measure, would re-enact a
modified version of the Senior Citizens and Disabled Citizens
Property Tax Postponement Program (PTP), and allow
income-eligible senior citizens and disabled persons to apply to
the State Controller (SCO) to defer payment of property taxes,
as specified, beginning on July 1, 2016.
Fiscal Impact:
SCO administrative costs of approximately $3.64 million
(37.2 PY) in 2015-16, $3.49 million (37.2 PY) in 2016-17,
$3.32 million (35.5 PY) in 2017-18, and $3.11 million (33.8
PY) ongoing. Costs in the first three years include IT
improvements to the PTP accounting system and associated
databases. (General Fund)
Unknown General Fund costs, likely in the range of $10
million annually, to disburse new property tax loan claims,
beginning in 2016-17. Eventually loan payments and
accumulated interest would likely fully offset program
expenditures.
Likely reimbursable mandate costs for duties imposed on
county tax administration officials. Staff notes that the
previous PTP program was deemed to have imposed reimbursable
activities on local agencies, resulting in annual General
Fund expenditures of up to $285,000 before the program was
suspended in 2009.
Background: The PTP was originally enacted by Chapter 1242 of
1977 to provide property tax relief to eligible senior citizens,
and was later expanded to include blind and disabled persons.
Under the program, senior citizens could defer payment of
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property taxes by requesting that the State Controller (SCO) pay
the amount deferred to the county. The SCO recovers payment by
securing a lien on the property, ensuring repayment of deferred
property taxes with accrued interest upon sale of the home, when
the title changed hands, or when the homeowner died or moved.
The PTP was funded by an annual General Fund allocation of $12.7
million appropriated to the SCO to pay the face amount of all
certificates of eligibility for the program. The PTP was
permanently suspended and all funding was eliminated by SBx3 8
(Ducheny), Chap. 4/2008-09 3rd Ex. Session, as a budget action
to address severe General Fund shortfalls during the recession.
Prior to suspension, the program was available to persons over
the age of 62, as well as blind and disabled persons, with an
income of less than $39,000 per year and at least 20 percent
equity in their homes.
Not accounting for SCO administrative costs, the original PTP
was generally self-supporting, and in most years loan repayments
exceeded new loans disbursed. The exception to this pattern was
during periods of economic recession. For example, in the
2008-09 fiscal year, just prior to suspension, the loan
disbursements exceeded loan repayments by over $4 million.
Since the program ended, approximately $10.7 million in PTP loan
repayments has accrued to the General Fund each year.
Proposed Law: ABB 2231 would re-enact the PTP program, with
modifications. Specifically, this bill would:
Authorize the SCO to accept new claims for property tax
postponement, beginning on July 1, 2016.
Delete the previous program's $12.7 million annual
appropriation, and instead create the Senior Citizens and
Disabled Citizens Property Tax Postponement Fund (PTP
Fund), an interest bearing fund, continuously appropriated
to the Controller to fund the program, including
administrative costs and property tax postponement
disbursements. The new fund is created as of January 1,
2015.
Transfer any outstanding PTP loan repayments from
impound accounts remaining as of January 1, 2015 into the
PTP Fund.
Delete references to and authority for impound accounts,
and instead require all loan repayments to be made directly
to the PTP Fund.
Require the SCO to transfer any funds in the PTP in
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excess of $10 million to the General Fund.
Increase a fee that the SCO can charge to provide lien
status information from $10 to $30. This information is
only available to a person or entity having a legal and
equitable interest in the property.
Restrict PTP eligibility by requiring an applicant to
have at least a 40 percent equity interest in the property,
rather than 20 percent equity. In addition, mobilehomes,
houseboats, and floating homes would no longer be eligible,
and the bill provides for a winding down process for
existing loans for mobilehomes.
Provide that amounts postponed become due and payable
when the taxpayer refinances the home or enters into a
reverse mortgage.
Require the assessor to notify the SCO within 60 days of
processing a change in ownership.
Require the SCO to provide information that is required
to enforce a tax sale, including social security numbers,
upon request of the tax collector. The tax collector must
certify under penalty of perjury that the information is
required, and this information would not be considered a
public record subject to inspection.
Clarify that postponement only applies for property
taxes for the fiscal year in which the taxpayer makes the
claim, and excludes past delinquent taxes.
Require taxpayers to file applications from September
1st to April 10th of the fiscal year, instead of May 15th
to December 10th of the calendar year,
Replace references to certificates of eligibility and
warrants with references to electronic fund transfers to
properly reflect modern processes.
Clarify that all costs, fees, and interest for a fiscal
year, in addition to the taxes, are cancelled if an
application is timely filed before property taxes become
delinquent.
Authorize a county to adopt an ordinance to specify
conditions and procedures to delay the sale on a
tax-defaulted property if it is eligible to file a property
tax postponement claim.
Require the tax collector or assessor to include the
outstanding balance of a PTP loan in the minimum bid in the
event of a tax-defaulted sale, and specify that if the
minimum bid is not achieved, the proceeds would be divided
between the SCO and the tax collector on a proportionate
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basis.
Require the SCO, in the event of willful neglect, to
notify the claimant and provide a copy of the notification
to the tax collector of the taxes due and the 30-day
deadline, and allows the tax collector to return funds and
deny the claim.
Require the SCO to notify a claimant when it
electronically transfers property taxes after initially
reversing its decision to deny the claim.
Related Legislation: SB 1214 (Anderson), which was held on this
Committee's Suspense File, would re-enact the Senior Citizens
and Disabled Citizens Property Tax Postponement Program and is
substantially similar to this bill.
Staff Comments: AB 2231 requires that any amounts of repaid
property taxes from the previous PTP that remain in impound
accounts as of January 1, 2015 must be transferred to the PTP
Fund. The SCO indicates that approximately $3.2 million is
currently on deposit in impound accounts. This amount could be
used to initiate PTP activities in 2016-17, and would nearly
offset first year SCO administrative costs, but it would be
insufficient to fund any property tax payments for new
applicants. Prior to suspension of the previous program, the
SCO distributed approximately $12 million in claims per year on
average. Demand for the new program is unknown, but the program
would likely require a General Fund augmentation of $10 million
annually over a number of years. Eventually, the program could
become totally self-sufficient over the long-term as loan
repayments and interest offset demand for new claims.