BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1203|
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THIRD READING
Bill No: SB 1203
Author: Jackson (D), et al.
Amended: 5/22/14
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 5-0, 4/24/14
AYES: Wolk, Beall, DeSaulnier, Hernandez, Liu
NO VOTE RECORDED: Knight, Walters
SUBJECT : Property taxation: welfare exemption: rental
housing and related facilities:
payment-in-lieu-of-taxes agreement
SOURCE : Author
DIGEST : This bill prohibits local agencies from imposing a
charge or fee on a low-income housing project which is eligible
for the property tax welfare exemption unless the charge or fee
meets specified conditions.
Senate Floor Amendments of 5/22/14 modify the conditions that
apply to local agencies' fees and charges on some rental housing
development projects.
ANALYSIS : The California Constitution provides that all
property is taxable unless explicitly exempted by the
Constitution or federal law, but also allows the Legislature to
exempt property used for charitable purposes owned by nonprofit
entities organized and operated for charitable purposes, such as
universities, hospitals, and libraries. The Legislature enacted
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this exemption, commonly known as the "welfare exemption."
According to the Legislative Analyst's Office, local agencies
statewide forego $3 billion annually in revenues from welfare
exempt properties.
Local agencies can impose dedications or fees under their
general police power; however, two U.S. Supreme Court cases
require local agencies to meet "nexus" (Nollan v. Coastal
Commission, 1987) and "rough proportionality" tests (Dolan v.
City of Tigard, 1994). The "nexus" test requires a government
to establish the link between the exaction and the interest
being advanced by that exaction, while "rough proportionality"
requires a connection between proposed exactions and the
projected impacts that the exactions are intended to allay.
State law allows local agencies to impose fees in accordance
with the two cases under the MFA, Subdivision Map Act, and
Quimby Act, among others.
Some local agencies impose "payment in lieu of tax" agreements,
or PILOTs, to compensate them for the services it provides the
property, but is not paid for in taxes due to the exemption.
Local agencies generally calculate PILOTs to equal the share of
countywide property tax revenues that agency would have received
from the property.
This bill, not withstanding any other law, as of January 1,
2015, bars local agencies from imposing a charge or fee on a
low-income housing described under the exemption from property
tax unless the charge or fee meets one of the following
conditions:
1.The fee or charge meets both of the following criteria:
A. The charge or fee is imposed pursuant to the MFA.
B. The charge or fee imposed on specified housing
development projects under the MFA must not prohibit or
discriminate against the housing development project
because of any of the following:
(1) The method of financing the development;
(2) The development is intended for occupancy by persons
and families of very low, low, or moderate income, as
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defined in state law, or persons and families of middle
income; or
(3) The development is subsidized, financed, insured, or
otherwise assisted by the federal or state government or
by a local public entity.
1.The charge or fee is for a specific service or product
provided directly to the housing development project, the
service or product is not provided to those not charged, and
the charge or fee does not exceed the actual cost of providing
the service.
This bill adopts legislative findings applying its provisions to
charter cities.
This bill deletes the requirement that the property owner must
certify that the funds that would have been used to pay property
taxes are used to maintain the affordability of the units or
reduce rents to be eligible for the exemption. This bill also
bars assessors from levying future escape or supplemental
assessments resulting from the requirement, and cancels any
outstanding tax, interest, or penalty levied between January 1,
2012 and January 1, 2015 resulting from the requirement.
However, this bill does not provide for any refunds of taxes.
This bill adds a definition of "related facilities" into the
welfare exemption. This bill makes legislative findings and
declarations supporting its purposes, including "no inference"
language to ensure that any authority adjudicating a challenge
to the legality of current PILOTs does not consider this bill to
ensure these disputes are determined using the law in place at
the time the local agency imposed the PILOT. This bill also
makes conforming changes.
Background
In June, 2012, Ventura County Assessor Dan Goodwin revoked the
welfare exemption, and issued escape assessments for penalty,
interest, and taxes for four previous years, for affordable
housing projects with PILOT agreements with cities. Goodwin
argues that because the property owner pays PILOT fees, he/she
cannot demonstrate that the property tax savings maintains the
affordability of the project or reduces rents, a necessary
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condition for the exemption. Given that the project owners and
developers do not have sufficient cash to pay the assessments,
they want the Legislature to erase the taxes, and provide
guidance regarding which fees municipalities can charge
low-income housing developments.
Comments
According to the author, "As a condition of project approval,
some local governments have required affordable housing
developers to agree to annual PILOT payments, often equal to the
share of the jurisdiction's share of the property tax. Most
recently, some county assessors are threatening certain
affordable housing projects that make PILOT payments with the
cancellation of their welfare exemption and the imposition of
back taxes for past years when PILOT payments were made. Back
taxes on PILOT agreements are often in the hundreds of thousands
of dollars. These assessments threaten to bankrupt the
affordable housing developments, which would result in the loss
of precious affordable housing. Affordable housing developments
provide critical opportunities for our low-income residents.
Often, these units can be their last resort before becoming
homeless. As confirmed by Legislative Counsel in 2012, there is
no legal authority to charge these PILOT fees. Affordable
housing developments should be protected by the welfare
exemption, not burdened by local governments requiring PILOT
fees."
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 5/23/14)
Board of Equalization, 4th District
BRIDGE Housing Corporation
Cabrillo Economic Development Corporation
California Housing Consortium
California Infill Builders Federation
LeadingAge California
The Arc of Ventura County
Ventura County Assessor
Western Center on Law and Poverty
OPPOSITION : (Verified 5/23/14)
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City of San Marcos
AB:k 5/23/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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