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Home My WebLink AboutMINUTES - 03051991 - 1.51 y JP.... ..Off. t 1 Irl TO: REDEVELOPMENT AGENCY ; Costa FROM: Phil Batchelor �: ... ._ T County Executive Director DATE: March 5, 1991 SUBJECT: Auditor General Report on Redevelopment Financing and Schools SPECIFIC REQUEST(S) OR RECOMMENDATIONS(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS Accept report of December, 1990 by the Auditor General of the State of California on tax increment revenues provided to school and community college districts from redevelopment project areas; and refer to the County Auditor- Controller for information. FISCAL IMPACT To be determined. BACKGROUND[REASONS FOR RECOMMENDATIONS The State Budget Act of 1990 directed the State Auditor General to examine a sample of recently established redevelopment project areas and determine the extent to which school districts receive tax revenue increments pursuant to Section 33401 and 33676 of the Health and Safety Code. Section 33401 permits Redevelopment Agencies to pay school and community college districts for financial burden or detriment caused by redevelopment. Section 33676 permits districts to receive a portion of the tax increment revenues attributable to inflation (the 2% Proposition 13 inflator) . CONTINUED ON ATTACHMENT: X YES SIGNATURE: J RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF G CY, C 4MMITT�Er, APPROVE OTHER SIGNATURE(S) : . ACTION OF AGENCY ON March 5, 1991 APPROVED AS RECOMMENDED X OTHER VOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A X UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE REDEVELOPMENT AGENCY ON THE DATE SHOWN. cc: Community Development March 5, 1'991 County Administrator ATTESTED County Counsel PHIL BATCHELOR, Auditor-Controller AGENCY SECRETARY BY__(: 1A 1 100�Ai , DEPUTY SRA12/jb/audgenrs.bos Two of the redevelopment project areas reviewed by the Office of the Auditor General were the County's West Pittsburg and North Richmond Redevelopment Project Areas. As a result of this review, it was determined that Contra Costa County was incorrectly calculating the Section 33676 payments to school districts. The Auditor-Controller has been so advised and is in the process of responding to the finding. The affect of the use of the incorrect methodology has resulted in an underpayment to school districts. REPORT BY THE AUDITOR GENERAL OF CALIFORNIA A REVIEW OF TAX INCREMENT REVENUES PROVIDED TO SCHOOL AND COMMUNITY COLLEGE DISTRICTS FROM REDEVELOPMENT PROJECT AREAS P - 023 DECEMBER 1990 u Y.. Summary 4 Results in Brief We were directed by the Budget Act of 1990 to examine a sample u{' of 20 recently established redevelopment project areas and n r determine the extent to which school districts receive tax increment revenues pursuant to Sections 33401 and 33676 of the Health and Safety Code. Section 33401 permits redevelopment agencies to pay school and community college districts for financial burden or detriment caused by redevelopment, such as increased services the districts must provide. Section 33676 permits districts to receive a portion of the tax increment revenues attributable to the inflation-caused increases in assessed value in the project areas. Tax increment revenues are the property taxes collected on any increase in the assessed value of property that occurs after the redevelopment project area is established We found the following conditions in our sample of school and community college districts: • Twelve districts entered into agreements to receive payments under Section 33401 of the Health and Safety Code to alleviate financial burden or detriment caused by redevelopment. However, four of these districts do not appear to have received the payments that their agreements required; • Nine districts received $349,400 under Section 33676 of the Health and Safety Code during the three fiscal years ending 1989-90; • S S-1 Office of the Auditor General • Nineteen districts neither received payments nor have agreements to receive payments under the two code sections,losing the opportunity to receive an estimated $45.2 million in revenues over the expected lives of the project areas; and • Nine districts had their state aid reduced by $353,500 because the tax increment revenues they received under Sections 33676 and 33401(b) of the Health and Safety Code were reported to the State as local property taxes. Background The Community Redevelopment Law allows the redevelopment of blighted areas which are unsafe and unfit,or have deteriorating buildings or properties. The redevelopment is financed, in part, from tax increment revenues. The Health and Safety Code authorizes the sharing of tax increment revenues between the redevelopment project areas and taxing entities. Taxing entities include school and community college districts. Under Section 33401 of the Health and Safety Code, school and community college districts may receive tax increment revenues to alleviate financial burden or detriment caused by redevelopment. Redevelopment causes a financial burden or detriment when a taxing entity must increase the services it provides in a project area. Unless a district receives payments or has an agreement with a redevelopment agency under Section 33401,Section 33676 of the Health and Safety Code states that districts shall elect to be allocated property tax revenues attributable to increases in the tax rate and to increases in the assessed property values caused by inflation. S-2 i Summary Districts The Health and Safety Code authorizes school and community That Have college districts to receive some portion of the tax increment Agreements revenues from redevelopment project areas. We reviewed 39 school With and community college districts and found that,from fiscal years Redevelopment 1987-88 through 1989-90,21 districts either have agreements with Agencies or redevelopment agencies under Section 33401 of the Health and Received Tax Safety Code or were paid tax increment revenues under increment Section 33676. Twelve of the 21 districts have agreements with Revenues redevelopment agencies under Section 33401. Some of these agreements require the redevelopment agencies to establish trust funds to pay for the districts' capital projects; some require that redevelopment agencies make other types of payments of tax increment revenues to the districts. We found, however, that three agencies appear to have failed to make the agreed-upon payments to four districts. The remaining 9 districts of the 21 were paid$349,400 under Section 33676. We found,however, that two counties used incorrect methods in calculating the amounts that the districts were receiving. Districts The Health and Safety Code authorizes school and community That Did college districts to receive some portion of the tax increment Not Have revenues under Section 33676 if they do not have agreements with Agreements redevelopment agencies under Section 33401 of the Health and With Safety Code. However, 19 districts in our sample that did not Redevelopment have Section 33401 agreements did not receive tax increment Agencies or revenues under Section 33676. Under the provisions of Receive Tax Section 33676, these districts could have received tax increment Increment revenues from fiscalyears 1987-88 through 1989-90. For example, Revenues in fiscal year 1989-90,the districts could have received approximately $88,300.Moreover,the 19 districts could have received an estimated $45.2 million over the 30- to 45-year expected lives of the redevelopment projects. Since the districts did not receive these revenues, Section 33676 provides that redevelopment agencies may receive these funds. S-3 Office of the Auditor General Effect of Tax The Education Code requires the California Department of Increment Education(CDE)and the California Community Colleges(CCC) Revenues on to reduce the amount of general apportionment, which is a School and portion of state aid that school and community college districts Community receive, by the funds that districts receive from local property College taxes. The county auditor-controllers for four of the six counties Districts we sampled included$353,500 of tax increment revenues received in the amounts they reported to the State as property tax revenues. The CDE and the CCC then reduced the general apportionments for nine districts in those counties. Both the CDE and the CCC believe that funds received under the Health and Safety Code, Section 33676, should reduce a district's general apportionment while funds received under Section 33401(b) should not reduce the general apportionment. A recently issued Attorney General's Opinion agrees that Section 33401(b)funds should not reduce a district's general apportionment. However, according to this opinion, funds received under Section 33676 should not reduce the general apportionment for a district. Recommen- To ensure that tax increment revenues are calculated correctly, dations the California Department of Education and the California Community Colleges should notify all county auditor-controllers that tax increment revenues that districts receive under Section 33676 of the Health and Safety Code should be based upon the difference between the base year assessed value adjusted for inflation(up to 2 percent per year)and the base year assessed value. To ensure that t school and community college districts receive tax increment revenues, the Legislature should amend Section 33676 of the Health and Safety Code to require school and community college districts to be allocated tax revenues when a redevelopment project area is established, unless an agreement is entered into or payments are received under Section 33401 of the Health and Safety Code. S-4 y Summary To resolve the varying opinions concerning the reporting of funds received under Section 33676 of the Health and Safety Code, the Legislature should clarify whether funds received under Section 33676 should offset a district's general apportionment. The CDE and the CCC should jointly develop consistent instructions on how the county auditor-controllers should report tax increment revenues to the State under Sections 33401 and 33676 of the Health and Safety Code. Agency The California Community Colleges(CCC)stated that,although Comments the CCC does not have authority to prescribe how county auditor- controllers account for tax increment revenues, the CCC will include the information in this report with forms sent to county auditor-controllers. In addition, the CCC will provide the same information to each community college district through correspondence to districts' chief business officers. The CCC stated that community college districts should automatically receive tax increment revenues pursuant to Section 33676 of the Health and Safety Code. The CCC also believes that Section 33676 revenues are local property taxes subject to offset in the calculation of state general apportionment. It further believes that districts are authorized to avoid this offset by agreeing to receive Section 33401 revenues. The California Department of Education stated that it will work with the California Community Colleges to develop recommendations on how the county auditor-controllers should report tax increment revenues to the State under Sections 33401 and 33676 of the Health and Safety Code. S-5