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COSTA
FROM: John Sweeten,County Administrator - COUNTY
DA'Z'E: Manch 11,2003
SUBJECT: Support SB 17 (Escutia)
SPECIFIC REQUEST(S)OR RECOMMENDATIONS)& BACKGROUND AND JUSTIFICATION
RECOMMENDATION(S):
SUPPORT SB 17 (Escutia), which would declare the intent of the Legislature to establish a program to specify
circumstances under which nonresidential commercial and industrial property undergoes a change of ownership
and thus is subject to reassessment.
BACKGROUND/REASON S FOR RECOMMENDATION(S):
Under Proposition 13, existing real property is reassessed only upon change of ownership (or following new
construction). Over the years, this has resulted in residential property owners paying an increasingly greater
percentage of the overall property taxes,compared to commercial and industrial property owners.
SB 17 establishes the intent of the legislature to enact a program to specify those circumstances under which
nonresidential commercial and industrial property undergoes a change in ownership to ensure that all real
property is assessed at the fair market value when that real property undergoes a change of ownership.
According to SB 17's findings and declarations, SB 17 would address the failure to capture rising land values of
nonresidential commercial and industrial properties, which have undergone a change of ownership. This
situation has:
)0- hampered the ability to of local governments to build new infrastructure and provide vital services;
➢ imposed a disproportionate property tax burden on newly constructed properties, when compared to
existing properties; and
➢ encouraged local governments to foster sales tax generating retail development, rather than fostering job
creating investments, such as manufacturing.
CONTINUED ON ATTACHMENT: 4 YES SIGNATURE: 1
%J6, t
RECOMMENDATION OF COUNTY ADMINISTRATOR,RECOMMENDATION OF BOARD C ITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON March 11, 2003 APPROVED AS RECOMMENDED X OTHER
VOTE OF SUPERVISORS
X UNANIMOUS
(ABSENT) I HEREBY CERTIFY THAT THIS IS A
AYES: NOES: �) TRUE AND CORRECT COPY OF AN
ABSENT: ABSTAIN: ACTION TAKEN AND ENTERED
DISTRICT III SEAT VACANT ON MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Contact:Sara Hoffman-335-1090
ATTESTED March 11. 2003
ae: CAO JOHN SWEETEN,CLERIC OF
Les Spahnn(via CAO) THE BOARD OF SUPERVISORS
AND COUN=UTY
BY r
SENATE BILL No. 27
Introduced by Senator Escutia
December 2,2002
An act relating to property taxation.
LEGISLATIVE COUNTSEti S DIGEST
SB 17, as introduced, Escutia. Property taxation: change in
ownership.
The California Constitution generally limits ad valorem taxes on real
property to I%of the full cash value of that property. For purposes of
this limitation, "full cash value" is defined as the assessor's valuation
of real property as shown on the 1975-76 tax bill under "full cash
value" or, thereafter, the appraised value of that real property when
purchased,newly constructed, or a change in ownership has occurred.
Existing property tax law specifies those circumstances in which the
transfer of ownership interests in a corporation, partnership, limited
liability company,or other legal entity results in a change in ownership
of the real property owned by that entity,and generally provides that a
change in ownership as so described occurs when a legal entity or other
person obtains a controlling or majority ownership interest in the legal
entity.
This bill would, pursuant to legislative findings and declarations,
state the intent of the Legislature to enact a program to specify those
circumstances under which nonresidential commercial and industrial
property undergoes a change in ownership, to ensure that all real
property is assessed at fair market value when that real property
undergoes a change in ownership.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program:no.
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S8 17
The people of the State of California do enact as follows:
I SECTION 1. The Legislature finds and declares all of the
2 following-
3 (a) For ad valorem property taxation purposes, the California
4 Constitution generally limits annual increases in the assessed
5 taxable value of real property to 2 percent of the property's
6 adjusted base year value, but requires that real property be
7 reassessed at its full cash value when that real property undergoes
8 a change in ownership.
9 (b) These rules provide a necessary protection for real property
10 owners when land values rise more rapidly than income.
11 (c) Because of difficulties in identifying changes in ownership
12 of certain nonresidential commercial and industrial properties,
13 these properties often escape reassessment at full market value
14 upon a change in ownership.
15 (d) As a result of these assessment anomalies, despite rapid
16 economic growth during the 1990s which increased the value of
17 nonresidential commercial and industrial properties,the share of
18 real property taxes paid by nonresidential commercial and
19 industrial property owners decreased, while the share of real
20 property taxes paid by residential property owners (e.g.
21 homeowners) increased.
22 (e) Failure to capture the rising land values of nonresidential
23 commercial and industrial properties that have undergone a
24 change in ownership has a range of negative consequences,
25 including,but not limited to:
26 (1) Hampering the ability of local governments to build new
27 infrastructure and provide vital services.
28 (2) Imposing a disproportionate property tax burden on newly
29 constructed properties when compared to existing properties.
30 (3) Encouraging local governments to foster sales
31 tax-generating retail development rather than fostering
32 job-creating investments such as manufacturing.
33 (f) Therefore, it is the intent of the Legislature to enact a
34 program to specify those circumstances under which
35 nonresidential commercial and industrial property undergoes a
36 change in ownership,to ensure that all real property is assessed at
-3— SB 17
1 fair market value when that real property undergoes a change in
2 ownership.
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