HomeMy WebLinkAboutMINUTES - 06032008 - C.39 TO: BOARD OF SUPERVISORS Contra
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FROM: JOHN CULLEN, o'er_;.;,; ;�� Costa
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County Administrator ;•, 4 �
�q coiirir�t County
DATE: June 3, 2008
SUBJECT: SUPPORT POSITION on AB 2872 (Houston): Local government
finance
SPDC IFIC REQUEST(S)OR RECOMMI:NDATION(S)&13ACKGIZOUND AND JUSTIFICATION
RECOMMENDATION
SUPPORT Assembly Bill 2872 (Houston), a bill that shifts, over a 20-year period, property taxes from
schools and community college districts to county governments that currently receive less than the
average share of property taxes collected within the county's boundaries and replaces the lost
revenue to schools with State General Fund revenue, as recommended by the Auditor-Controller and
County Administrator.
FISCAL IMPACT:
The County receives 13.3% of property taxes generated in Contra Costa County (prior to the
redevelopment increment deduction). If AB 2872 were to pass and the County were to instead
receive the statewide average of 17%, the County could receive an additional $58.1 million in
property tax revenue over a 20-year period. The impact in 2009-10 would be 5% of that total, or
about $2.9 million.
Preliminary data suggests that 38 counties would receive property tax augmentations totaling over
$1.3 billion in 2028-29, when the redirection of property taxes is fully phased in. The impact in 2009-
10 would be 5% of that total, or about $65 million, and the impact in 2010-11 would be 10% of the
total, or $130 million.
BACKGROUND:
AB 2872 is intended to reduce the disparity in property tax allocations to counties by raising the
allocation of counties that are currently below the statewide average.
When the voters passed Proposition 13 in 1978, they also gave the Legislature power over allocation
of property taxes among various local jurisdictions (cities, counties, special districts, school and
community districts). In general terms, property taxes were initially allocated among local jurisdictions
in proportion to their pre-Proposition 13 totals, which in turn reflected a variety of factors, such as the
proportion of the population living inside cities, the allocation of public services between cities and
counties, and varying property tax rates and service levels among jurisdictions.
CONTINUED ON ATTACHMENT: x YES SIGNATURE:
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDA'T'ION OF BOARD COM t ITTP
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOA l ON APPROVED AS RECOMMENDED OT
VOTE OF SUI'I:::RVISOItS1 111?REBY CER'T'IFY TINA"f THIS IS A TRUE AND CORREC"1 COPY
OF AN ACTION TAKEN AND I::NTERED ON MING TES OF THE
BOARD Of-SUPERVISORS ON T HE DATE SI IOWN.
�f UNANIMOUS(ABSENT /2en4_- )
—�` AYES: NOES:
ABSENT: ABSTAIN: _
Contact:
L. DeLancy 5-1097
Cc: ATTESTED
Sl"ED
L DcLane).,GAO's Oflice I N("I,
- I.E.N.CLERK OFTHE BOARD OFSUPERVISORS
S. Ybarra.Auditor-Controller
L. Driscoll,CAO's Office
BY: DI PII I"Y
AB X872 (County property taxes)—p. 2
June 3, 2008
Specifically, AB 2872:
1) Defines "county equity amount" as the difference between (a) the amount of total property taxes
collected in each county that is allocated to county government (instead of cities, special districts, and
school and community college districts) and (b) the amount that would be collected if the total were
allocated according to the statewide average percentage.
2) Requires that, for each county that received less than the.average statewide allocation in 2007-
08, the county auditor shall reduce county contributions to the Educational Revenue Augmentation
Fund (ERAF) by 5% increments over a 20-year period, so that by 2028-29 the ERAF reduction will
equal the county equity amount.
3) States its intent that any reduction to.educational entities be replaced with General Fund
moneys as required by law.
Subsequent to the passage of Proposition 13, the Legislature has taken several actions that have
resulted in reallocations of the property tax base. Immediately following Proposition 13, the
Legislature provided local government relief by shifting taxes from schools to local governments. In
the 1980s, it required counties to shift some property taxes to no- and low- property tax cities. And in
the early 1990s, it addressed major state budget deficits by shifting a major amount of property taxes
from cities, counties, and special districts to the newly created ERAF, which was then used to support
schools in place of the State General Fund. The State has mitigated about two-thirds of the ERAF
shift through the Proposition 172 one-half cent sales tax measure, trial court funding, the Citizens'
Option for Public Safety (COPS) Program and other measures. Local governments have also
contributed to differences in property tax allocations, through decisions involving how public services
are provided between cities, counties, and special districts, as well as the.use of redevelopment.
The net result of all these factors, and development patterns that have taken place since Proposition
13, is that the percentages of property taxes allocated to county government varies substantially
across the state. The average allocation is 17%, but the range is from 6% to over 60%. Presently, 38
counties are below the statewide average.
AB 2872 raises two key issues. First, given the major fiscal shortfall facing the State, is this the time
to be raising property tax allocation to counties at the expense of the State General Fund?
Second, while there is no question that there are great disparities in percentages of property taxes
allocated to counties, raising all-below average counties to the same percentage does not take into
account the fact there are many reasons why allocations should vary from county to county. As noted
above, in many instances the differences reflect local policy decisions and developmental patterns, as
opposed to statewide decisions regarding property tax allocations.
However, from a Contra Costa County perspective, the bill could bring additional revenue to the
County that it needs to fund critical services and.infrastructure.
AMENDED IN ASSEMBLY APRIL 9, 2008
AMENDED IN ASSEMBLY APRIL 3, 2008
CALIFORNIA LEGISLATURE-2007-08 REGULAR SESSION
ASSEMBLY BILL No. 2872
Introduced by Assembly Member Houston
(Principal coauthor: Assembly Member DeSaulnier)
February 22, 2008
An act to add Section 97.80 to the Revenue and Taxation Code,
relating to local government finance.
LEGISLATIVE COUNSEL'S DIGEST
AB 2872, as amended,Houston. Local government finance.
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
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AB 2872 —2--
Revenue Augmentation Fund in that county for allocation to school
districts,community college districts,and the county office of education.
This bill would, for the 2009-10 fiscal year and for each fiscal year
thereafter, require the auditor of a qualified county, as defined, to
increase the total amount of ad valorem property tax revenue otherwise
required to be allocated to that county by an applicable percentage of
the county equity amount, as defined, and to commensurately reduce
the total amount of ad valorem property tax revenue otherwise required
to be allocated to the county Educational Revenue Augmentation Fund.
This bill would also state the intent of the Legislature that any resulting
decrease in the amount of ad valorefn property tax revenue other►vise
required to be allocated to educational entities be replaced with General
Fund fnoneti:s as required by law
By imposing new duties on local officials in the annual allocation of
ad valorem property tax revenues, 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_folloivs:
1 SECTION 1. Section 97.80 is added to the Revenue and
2 Taxation Code, to read:
3 97.80. (a) Notwithstanding any other provision of.law,for the
4 2009-10 fiscal year and for each fiscal year thereafter,the auditor
5 of a qualified county shall do both of the following:
6 (1) increase the total amount of ad valorem property tax revenue
7 that is otherwise required to be allocated tothat county. by an
8 applicable percentage of the county equity amount as specified in
9 the following schedule:
10
11 Fiscal Year Percentage(%)
12 2009--10 .5
97
C 3�
—3— AB 2872
1. 2010-11 10
2 2011-12 15
3 2012-13 20
4 2013-14 25
5 2014-15 30
6 2015-16 35
7 2016-17 40
8 2017-18 45
9 2018--19 50
10 2019-20 55
11 2020-21 60
12 2021-22 65
13 2022-23 70
14 2023--24 75
15 2024-25 80
16 2025-26 85
17 2026-27 90
18 2027-28 95
19 2028--29 and each 100
20 fiscal year thereafter
21
22 (2) Decrease the total amount of ad valorem property tax revenue
23 that is otherwise required to be allocated to the county Educational
24 Revenue Augmentation Fund by an applicable percentage of the
25 county equity amount as determined in paragraph (1).
26 (b) For purposes of this section, both of the following apply:
27 (1) The county equity amount of a qualified county shall be the
28 difference between the following amounts:
29 (A) The product of both of the! following:
30 (i) The average statewide percentage,as determined by the State
31 Board of Equalization for the second preceding fiscal year,of total
32 ad valorem property tax revenue allocated in each county for that
33 fiscal year.
34 (11) The total ad valorem property tax revenue allocated within
35 a qualified county for the current fiscal year.
36 (B) The total ad valorem property tax revenue that would be
37 allocated to a qualified county without the allocation adjustments
38 made by this section.
39 (2) "Qualified county' means any county that was allocated,
40 for the 2007-08 fiscal year, less than the average statewide
97
AB 2872 —4-
1
4-1 percentage of total ad valorem property tax revenue allocated in
2 each county for that fiscal year.
3 (c) For the 2009-10 fiscal year and for each fiscal year
4 thereafter, ad valorem property tax revenue allocations made
5 pursuant to Sections 96.1 and 96.5 shall not incorporate the
6 allocation adjustments made by this section.
7 SEC. 2. It is the intent of the Legislature that anj� decrease
8 resulting from this act in the total amount of'ad valorem property
9 tax revenue that is otherwise required to be allocated to the
10 educational entities be replaced with General Fund moneys as
11 required by law
12 5E-G,-
13 SEC. 3. If the Commission on State Mandates determines that
14 this act contains costs mandated. by the state, reimbursement to
15 local. agencies and school districts for those costs shall. be made
16 pursuant to Part 7 (commencing with Section 17500) of Division
17 4 of Title 2 of the Government Code.
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