BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 903
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Vidak
VERSION: 4/7/14
Analysis by: Eric Thronson FISCAL: yes
Hearing date: April 22, 2014 URGENCY: YES
SUBJECT:
State reimbursing lost local property tax revenues
DESCRIPTION:
This bill requires the High-Speed Rail Authority (HSRA) annually
to pay to a county the amount equivalent to any lost property
tax revenue with respect to all real property acquired for the
high-speed rail project.
ANALYSIS:
Typically, private property owners in California pay annual
property taxes, which include the one percent general tax levy,
as well as voter-approved debt rates, parcel taxes, Mello-Roos
taxes, and other assessments. Property tax revenues remain at
the local level and are distributed to various local governments
such as counties, cities, school districts, and special
districts. Certain properties are exempt from the one percent
property tax rate, such as property owned by governments,
hospitals, religious institutions, and charitable organizations.
Existing law created the California HSRA in 1996 to direct
development and implementation of intercity high-speed rail
service that is fully coordinated with other public
transportation services. In 2008, voters approved Proposition
1A (Prop 1A) authorizing $9.95 billion in general obligation
bonds for the high-speed rail project. Prop 1A authorizes HSRA
to use bond funds for, among other things, acquisition of
interests in real property and rights-of-way.
This urgency bill requires HSRA annually to pay to a county the
amount equivalent to any lost property tax revenue with respect
to all real property acquired for the high-speed rail project.
Specifically, this bill defines the amount payable to the county
as one percent of the amount paid by HSRA to acquire the
property, including a two percent increase annually. This bill
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specifies that HSRA make these property tax payments from the
general obligation bonds approved by Prop 1A. Finally, this
bill is an urgency measure.
COMMENTS:
1.Purpose . According to the author, private property acquired
for the implementation of high-speed rail will significantly
reduce the tax revenues for local governments. The resultant
loss of revenue for these local governments will weaken the
services they provide to the public, especially in many of the
rural counties in the Central Valley. The author contends
HSRA has the funding to not only acquire the property
necessary to construct the project, but also to compensate
counties for their lost tax revenue.
2.This bill appears to be without precedent . In order to
accomplish many of the vital tasks they are assigned,
governments must occupy and sometimes own real property. For
example, counties need courthouses to administer criminal and
civil legal proceedings; school districts need campuses to
educate children; hospitals need facilities to treat those
requiring medical assistance; transportation services need
facilities with which to deliver the mobility and connectivity
they are expected to provide. The Department of Finance and
the Legislative Analyst's Office report no example of the
state ever paying any compensation to local governments for
the lost property tax revenue resulting from the construction
of government facilities. In fact, in many instances, local
communities welcome the increased public investment in their
regions because it often means either improved services or
more employment opportunities, or both. Given that there is
no precedent for the reimbursement required in this bill, the
committee may wish to ask the author why this particular
governmental use of real estate should be treated differently
than every other governmental activity.
3.State could be required to overcompensate for lost revenue .
Because of the intricacies of public school funding in
California, this bill could lead to the state expending more
funding than an area would have otherwise received,
essentially double-penalizing the state. Currently, some
percentage of the property tax supports the local public
school and community college districts in which the property
is zoned. When the cumulative property taxes in the district
are not enough to meet a minimum guaranteed per-pupil amount,
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the state is required to provide enough funding to make up the
difference. In any case where property taxes decrease, such
as when property is taken from the tax rolls, the state is
required to backfill that loss for a school district to
maintain the minimum guarantee. This bill requires the state
to reimburse the county for all lost revenue from the entire
one percent general tax levy for any property it acquires,
even though a portion of that tax levy would have otherwise
gone to the local school district. Essentially, that means
that the state would compensate the county for more than it
would have otherwise received and backfill the local school
district as well.
4.What about other property tax recipients ? This bill requires
the state to reimburse the county for lost property tax
revenues. Other taxing jurisdictions also lose revenue when a
property is taken from the tax rolls, such as cities and
special districts for water or fire protection, but this bill
does not address any reimbursements to other local
governmental entities. The committee may wish to ask the
author why his bill addresses the counties' lost revenue and
no other local governments'.
5.Bond funds are finite, but property taxes go on forever . Bond
revenues are finite, by their nature, because voters only
approve a measure permitting the state to sell a specific
amount of bonds for a stated purpose. This bill, however,
requires the state to reimburse counties for lost property tax
revenues from the Prop 1A bond revenues forever. It is
unclear what the state should do once the bond dollars are
either no longer available or completely expended. Should the
committee wish to approve this bill, it may wish to ask the
author to amend the bill to address what the state should do
when the Prop 1A bonds are no longer available to reimburse
counties.
POSITIONS: (Communicated to the committee before noon on
Wednesday, April 16,
2014.)
SUPPORT: Citizens for California High-Speed Rail
Accountability
Kings County Board of Supervisors
Howard Jarvis Taxpayers Association
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Tos Farms, Inc.
OPPOSED: California Labor Federation
Sierra Club California
State Building and Construction Trades Council,
AFL-CIO