Senate Bill No. 629

Introduced by Senator Beall

February 22, 2013

An act to amend Section 98 of the Revenue and Taxation Code, relating to local government.

LEGISLATIVE COUNSEL’S DIGEST

SB 629, as introduced, Beall. Tax equity allocation formula: County of Santa Clara.

Existing property tax law requires the county auditor, in each fiscal year, to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures, and generally requires that each jurisdiction be allocated an amount equal to the total of the amount of revenue allocated to that jurisdiction in the prior fiscal year, subject to certain modifications, and that jurisdiction’s portion of the annual tax increment, as defined. Existing property tax law also reduces the amounts of ad valorem property tax revenue that would otherwise be annually allocated to the county, cities, and special districts pursuant to these general allocation requirements by requiring, for purposes of determining property tax revenue allocations in each county for the 1992-93 and 1993-94 fiscal years, that the amounts of property tax revenue deemed allocated in the prior fiscal year to the county, cities, and special districts be reduced in accordance with certain formulas. It requires that the revenues not allocated to the county, cities, and special districts as a result of these reductions be transferred to the Educational Revenue Augmentation Fund (ERAF) in that county for allocation to school districts, community college districts, and the county office of education.

Existing property tax law requires the auditor of each county with qualifying cities, as defined, to make certain property tax revenue allocations to those cities in accordance with a specified Tax Equity Allocation (TEA) formula established in a specified statute and to make corresponding reductions in the amount of property tax revenue that is allocated to the county. Existing law requires the auditor of Santa Clara County, for the 2006-07 fiscal year and for each fiscal year thereafter, to reduce the amount of property tax revenue allocated to qualified cities in that county by the ERAF reimbursement amount, as defined, and to commensurately increase the amount of property tax revenue allocated to the county ERAF, as specified.

This bill would, instead, for the 2014-15 fiscal year and for each fiscal year thereafter, delete the requirement that the auditor of Santa Clara County reduce the amount of property tax revenues allocated to qualified cities in that county by the ERAF reimbursement amount, and commensurately increase the amount of property tax revenues allocated to the county ERAF.

This bill would make legislative findings and declarations as to the necessity of a special statute.

By imposing new duties in the allocation of ad valorem property tax revenues in the County of Santa Clara, this bill would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: yes.

The people of the State of California do enact as follows:

SECTION 1.  

Section 98 of the Revenue and Taxation Code is
amended to read:

98.  

(a) In each county, other than the County of Ventura,
having within its boundaries a qualifying city, the computations
made pursuant to Section 96.1 or its predecessor section, for the
1989-90 fiscal year and each fiscal year thereafter, shall be
modified as follows:

With respect to tax rate areas within the boundaries of a
qualifying city, there shall be excluded from the aggregate amount
of “property tax revenue allocated pursuant to this chapter to local
agencies, other than for a qualifying city, in the prior fiscal year,”
an amount equal to the sum of the amounts calculated pursuant to
the TEA formula.

(b) (1) Except as otherwise provided in this section, each
qualifying city shall, for the 1989-90 fiscal year and each fiscal
year thereafter, be allocated by the auditor an amount determined
pursuant to the TEA formula.

(2) For each qualifying city, the auditor shall, for the 1989-90
fiscal year and each fiscal year thereafter, allocate the amount
determined pursuant to the TEA formula to all tax rate areas within
that city in proportion to each tax rate area’s share of the total
assessed value in the city for the applicable fiscal year, and the
amount so determined shall be subtracted from the county’s
proportionate share of property tax revenue for that fiscal year
within those tax rate areas.

(3) After making the allocations pursuant to paragraphs (1) and
(2), but before making the calculations pursuant to Section 96.5
or its predecessor section, the auditor shall, for all tax rate areas
in the qualifying city, calculate the proportionate share of property
tax revenue allocated pursuant to this section and Section 96.1, or
their predecessor sections, in the 1989-90 fiscal year and each
fiscal year thereafter to each jurisdiction in the tax rate area.

(4) In lieu of making the allocations of annual tax increment
pursuant to subdivision (e) of Section 96.5 or its predecessor
section, the auditor shall, for the 1989-90 fiscal year and each
fiscal year thereafter, allocate the amount of property tax revenue
determined pursuant to subdivision (d) of Section 96.5 or its
predecessor section to jurisdictions in the tax rate area using the
proportionate shares derived pursuant to paragraph (3).

(5) For purposes of the calculations made pursuant to Section
96.1 or its predecessor section, in the 1990-91 fiscal year and each
fiscal year thereafter, the amounts that would have been allocated
to qualifying cities pursuant to this subdivision shall be deemed
to be the “amount of property tax revenue allocated in the prior
fiscal year.”

(c) “TEA formula” means the Tax Equity Allocation formula,
and shall be calculated by the auditor for each qualifying city as
follows:

(1) For the 1988-89 fiscal year and each fiscal year thereafter,
the auditor shall determine the total amount of property tax revenue
to be allocated to all jurisdictions in all tax rate areas within the
qualifying city, before the allocation and payment of funds in that
fiscal year to a community redevelopment agency within the
qualifying city, as provided in subdivision (b) of Section 33670
of the Health and Safety Code.

(2) The auditor shall determine the total amount of funds
allocated in each fiscal year to a community redevelopment agency
in accordance with subdivision (b) of Section 33670 of the Health
and Safety Code.

(3) The auditor shall determine the total amount of funds paid
in each fiscal year by a community redevelopment agency within
the city to jurisdictions other than the city pursuant to subdivision
(b) of Section 33401 and Section 33676 of the Health and Safety
Code, and the cost to the redevelopment agency of any land or
facilities transferred and any amounts paid to jurisdictions other
than the city to assist in the construction or reconstruction of
facilities pursuant to an agreement entered into under Section
33401 or 33445.5 of the Health and Safety Code.

(4) The auditor shall subtract the amount determined in
paragraph (3) from the amount determined in paragraph (2).

(5) The auditor shall subtract the amount determined in
paragraph (4) from the amount determined in paragraph (1).

(6) The amount computed in paragraph (5) shall be multiplied
by the following percentages in order to determine the TEA
formula amount to be distributed to the qualifying city in each
fiscal year:

(A) For the first fiscal year in which the qualifying city receives
a distribution pursuant to this section, 1 percent of the amount
determined in paragraph (5).

(B) For the second fiscal year in which the qualifying city
receives a distribution pursuant to this section, 2 percent of the
amount determined in paragraph (5).

(C) For the third fiscal year in which the qualifying city receives
a distribution pursuant to this section, 3 percent of the amount
determined in paragraph (5).

(D) For the fourth fiscal year in which the qualifying city
receives a distribution pursuant to this section, 4 percent of the
amount determined in paragraph (5).

(E) For the fifth fiscal year in which the qualifying city receives
a distribution pursuant to this section, 5 percent of the amount
determined in paragraph (5).

(F) For the sixth fiscal year in which the qualifying city receives
a distribution pursuant to this section, 6 percent of the amount
determined in paragraph (5).

(G) For the seventh fiscal year and each fiscal year thereafter
in which the city receives a distribution pursuant to this section,
7 percent of the amount determined in paragraph (5).

(d) “Qualifying city” means any city, except a qualifying city
as defined in Section 98.1, that incorporated prior to June 5, 1987,
and had an amount of property tax revenue allocated to it pursuant
to subdivision (a) of Section 96.1 or its predecessor section in the
1988-89 fiscal year that is less than 7 percent of the amount of
property tax revenue computed as follows:

(1) The auditor shall determine the total amount of property tax
revenue allocated to the city in the 1988-89 fiscal year.

(2) The auditor shall subtract the amount in the 1988-89 fiscal
year determined in paragraph (3) of subdivision (c) from the
amount determined in paragraph (2) of subdivision (c).

(3) The auditor shall subtract the amount determined in
paragraph (2) from the amount of property tax revenue determined
in paragraph (1) of subdivision (c).

(4) The auditor shall divide the amount of property tax revenue
determined in paragraph (1) of this subdivision by the amount of
property tax revenue determined in paragraph (3) of this
subdivision.

(5) If the quotient determined in paragraph (4) of this subdivision
is less than 0.07, the city is a qualifying city. If the quotient
determined in that paragraph is equal to or greater than 0.07, the
city is not a qualifying city.

(e) The auditor may assess each qualifying city its proportional
share of the actual costs of making the calculations required by
this section, and may deduct that assessment from the amount
allocated pursuant to subdivision (b). For purposes of this
subdivision, a qualifying city’s proportional share of the auditor’s
actual costs shall not exceed the proportion it receives of the total
amounts excluded in the county pursuant to subdivision (a).

(f) Notwithstanding subdivision (b), in any fiscal year in which
a qualifying city is to receive a distribution pursuant to this section,
the auditor shall reduce the actual amount distributed to the
qualifying city by the sum of the following:

(1) The amount of property tax revenue that was exchanged
between the county and the qualifying city as a result of negotiation
pursuant to Section 99.03.

(2) (A) The amount of revenue not collected by the qualifying
city in the first fiscal year following the city’s reduction after
January 1, 1988, of the tax rate or tax base of any locally imposed
tax, except any tax that was imposed after January 1, 1988. In the
case of a tax that existed before January 1, 1988, this clause shall
apply only with respect to an amount attributable to a reduction
of the rate or base to a level lower than the rate or base applicable
on January 1, 1988. The amount so computed by the auditor shall
constitute a reduction in the amount of property tax revenue
distributed to the qualifying city pursuant to this section in each
succeeding fiscal year. That amount shall be aggregated with any
additional amount computed pursuant to this clause as the result
of the city’s reduction in any subsequent year of the tax rate or tax
base of the same or any other locally imposed general or special
tax.

(B) No reduction may be made pursuant to subparagraph (A)
in the case in which a local tax is reduced or eliminated as a result
of either a court decision or the approval or rejection of a ballot
measure by the voters.

(3) The amount of property tax revenue received pursuant to
this chapter in excess of the amount allocated for the 1986-87
fiscal year by all special districts that are governed by the city
council of the qualifying city or whose governing body is the same
as the city council of the qualifying city with respect to all tax rate
areas within the boundaries of the qualifying city.

Notwithstanding this paragraph:

(A) Commencing with the 1994-95 fiscal year, the auditor shall
not reduce the amount distributed to a qualifying city under this
section by reason of that city becoming the successor agency to a
special district, that is dissolved, merged with that city, or becomes
a subsidiary district of that city, on or after July 1, 1994.

(B) Commencing with the 1997-98 fiscal year, the auditor shall
not reduce the amount distributed to a qualifying city under this
section by reason of that city withdrawing from a county free
library system pursuant to Section 19116 of the Education Code.

(4) Any amount of property tax revenues that has been
exchanged pursuant to Section 56842 of the Government begin delete Code end delete
begin insert Code, as that section read on January 1, 1998, end insert between the City
of Rancho Mirage and a community services district, the formation
of which was initiated on or after March 6, 1997, pursuant to
Chapter 4 (commencing with Section 56800) of Part 3 of Division
3 of Title 5 of the Government Code.

(g) Notwithstanding any other provision of this section, in no
event may the auditor reduce the amount of ad valorem property
tax revenue otherwise allocated to a qualifying city pursuant to
this section on the basis of any additional ad valorem property tax
revenues received by that city pursuant to a services for revenue
agreement. For purposes of this subdivision, a “services for revenue
agreement” means any agreement between a qualifying city and
the county in which it is located, entered into by joint resolution
of that city and that county, under which additional service
responsibilities are exchanged in consideration for additional
property tax revenues.

(h) In any fiscal year in which a qualifying city is to receive a
distribution pursuant to this section, the auditor shall increase the
actual amount distributed to the qualifying city by the amount of
property tax revenue allocated to the qualifying city pursuant to
Section 19116 of the Education Code.

(i) If the auditor determines that the amount to be distributed to
a qualifying city pursuant to subdivision (b), as modified by
subdivisions (e), (f), and (g) would result in a qualifying city having
proceeds of taxes in excess of its appropriation limit, the auditor
shall reduce the amount, on a dollar-for-dollar basis, by the amount
that exceeds the city’s appropriations limit.

(j) The amount not distributed to the tax rate areas of a
qualifying city as a result of this section shall be distributed by the
auditor to the county.

(k) Notwithstanding any other provision of this section, no
qualifying city shall be distributed an amount pursuant to this
section that is less than the amount the city would have been
allocated without the application of the TEA formula.

(l) Notwithstanding any other provision of this section, the
auditor shall not distribute any amount determined pursuant to this
section to any qualifying city that has in the prior fiscal year used
any revenues or issued bonds for the construction, acquisition, or
development, of any facility which is defined in Section 103(b)(4),
103(b)(5), or 103(b)(6) of the Internal Revenue Code of 1954 prior
to the enactment of the Tax Reform Act of 1986 begin delete (P.L. end delete begin insert (Public Law end insert
99-514) and is no longer eligible for tax-exempt financing.

(m) (1) The amendments made to this begin delete section, and the repeal
of Section 98.04, end delete begin insert section end insert by the act that added this subdivision
shall apply for the begin delete 2006-07 end delete begin insert 2014- end insert begin insert 15 end insert fiscal year and each fiscal
year thereafter.

begin delete

(2) For the 2006-07 fiscal year and for each fiscal year
thereafter, all of the following apply:

(A) The auditor of the County of Santa Clara shall do both of
the following:

(i) Reduce the total amount of ad valorem property tax revenue
otherwise required to be allocated to qualifying cities in that county
by the ERAF reimbursement amount. This reduction for each
qualifying city in the county for each fiscal year shall be the
percentage share, of the total reduction required by this clause for
all qualifying cities in the county for the 2006-07 fiscal year, that
is equal to the proportion that the total amount of additional ad
valorem property tax revenue that is required to be allocated to
the qualifying city as a result of the act that added this subdivision
bears to the total amount of additional ad valorem property tax
revenue that is required to be allocated to all qualifying cities in
the county as a result of the act that added this subdivision.

(ii) Increase the total amount of ad valorem property tax revenue
otherwise required to be allocated to the county Educational
Revenue Augmentation Fund by the ERAF reimbursement amount.

(B) For purposes of this subdivision, “ERAF reimbursement
amount” means an amount equal to the difference between the
following two amounts:

(i) The portion of the annual tax increment that would have been
allocated from the county to the county Educational Revenue
Augmentation Fund for the applicable fiscal year if the act that
added this subdivision had not been enacted.

(ii) The portion of the annual tax increment that is allocated
from the county to the county Educational Revenue Augmentation
Fund for the applicable fiscal year.

end delete

SEC. 2.  

The Legislature finds and declares that a special law
is necessary and that a general law cannot be made applicable
within the meaning of Section 16 of Article IV of the California
Constitution because of the unique fiscal pressures being
experienced by qualifying cities, as defined in Section 98 of the
Revenue and Taxation Code, in the County of Santa Clara.

SEC. 3.  

If the Commission on State Mandates determines that
this act contains costs mandated by the state, reimbursement to
local agencies and school districts for those costs shall be made
pursuant to Part 7 (commencing with Section 17500) of Division
4 of Title 2 of the Government Code.