To: State Association of County Auditors

April 17, 2014

To: State Association of County Auditors

From: Matthew Siverling, Legislative Representative

Subject: April, 2014 Legislative Activity Report

This is the Legislative Activity Report on Association legislative matters of interest.

INTRODUCTION

I. Sponsored Legislation

The Association did not opt to sponsor any bills during the 2014 Legislative Session.

II. Other Legislation of Interest

Assembly Bill 1582 (Mullin) Position: None

The Association was recently alerted to potential questions on Assembly Bill 1582 (Mullin), which would revise the timeline for the preparation of the required Recognized Obligation Payment Schedule (ROPS) from six-month periods to a schedule for an annual fiscal period, to correspond with the former agency's fiscal year.

The Legislative Committee reviewed the bill during the previous meeting, but opted to take a “watch” position on the measure. The bill has since been approved by the Assembly Local Government Committee with a 9-0 vote.

Several members of the Association have raised some concerns about the measure that the Legislative Committee could consider. For example the measure may need to incorporate additional changes to facilitate an “annual fiscal period” (assuming a 7/1 to 6/30 fiscal year) ROPS, specifically giving Auditor-Controller clarification on how distributions and to be made under HSC 34183.

Further, some have opined that it “makes sense to go back to an annual cycle instead of a bi-annual.” Some are not sure how the policy change would impact the January 2 and June 1 allocations; and whether there would still be a kind of ‘true-up’ for the end of year apportionments being paid in the next cycle.

Some agree that having a single ROPS that utilizes the same fiscal year as the revenues used to pay the obligations should be more efficient; however, they have opined that the mechanics of doing this are not outlined in the bill.

The Association may wish to consider amendments that may clarify the questions that have been presented.

Assembly Bill 2040 (Garcia) Position: None

This measure was also reviewed by the Legislative Committee last month and received a “watch” position.

Since our last meeting, this bill was heard by the Assembly Local Government Committee and was approved with a 7-0 vote.

The Association was approached by Legislative staff who inquired whether the county auditors may want to take a closer look at the bill. The measure would require “local agencies” to report to the State Controller “specified information” about the compensation of local public officials and to post such information on their websites. For the purposes of the new mandate, “Compensation” means the salary, per diem, fees, reimbursement for expenses, and employment benefits paid with public funds. “Salary” means any and all payments made by a local agency as consideration for a public official’s services to the local agency, and include, but are not limited to, wages, health benefits, pension benefits, insurance coverage, compensated vacation and leave time, free or discounted transportation, payment or indemnification of legal defense costs, and any other item of value received by the public official from the local agency.

Some local agencies have begun to raise concerns and opposition to the bill, which they believe would be costly, time consuming and difficult to administer. For example, some county expense reimbursements don’t run through payroll unless they are taxable and then they are only reported it as “imputed income” for tax purposes.

The bill is attempting to tighten up reporting requirements on “compensation” in response to the City of Bell scandal that is continuing to reverberate throughout the State.

The payroll managers may wish to provide input to the Legislative committee to assist with an appropriate position.

Assembly Bill 2109 (Daly) Position: Pending

The Association was an active participant in the discussion last year on AB 892, by the same member. The measure was sponsored by the California Taxpayers Association. This is a reintroduction of that bill, which was held on suspense in the Assembly Appropriations Committee.

The bill mandates that the Board of Equalization obtain and report a prescribed list of information related to “parcel taxes” for the State. The information includes number of parcels affected, cost per parcel, total revenue generated, sunset date, and whether a resident with an exemption had mistakenly paid the tax.

This bill, unlike AB 892, does outline the manner in which the BOE would obtain the necessary information and mistakenly names the “county tax collector” as the individual responsible for compiling and transmitting the information.

Last year, there was a targeted background campaign administered by the sponsors of this bill related to parcel taxes. CalTax distributed a pamphlet entitled “California’s Other Property Tax” that seeks to “increase transparency and accountability” for the parcel taxes “being levied by local governments.” Further, CalTax made statements that they are seeking to give Californians a “better idea of their actual cost of living” and expose the fallacy of California’s reputation as a “low property tax state” as a result of Prop 13 protections.

The Association has submitted a detailed letter of “concerns” to the Author and the Legislature to outline the numerous problems and challenges with the bill. For example, the bill contains no definition of “parcel tax” and also requires the county auditors to submit detailed information that they currently do not have.

The BOE and the Author’s office have reached out and requested a meeting to attempt to address Association concerns and reduce workload and costs to the existing proposal.

Assembly Bill 2114 (Pan) Position: Pending to Oppose

This bill would impose a tax on every qualified rentee of qualified heavy equipment for the privilege of renting qualified heavy equipment at the rate of .75% of the gross receipts of the rental price from the renting of qualified heavy equipment. This bill would require a qualified renter to collect the tax from the qualified rentee at the time of rental. This bill would provide that this tax shall be in lieu of any personal property tax on qualified heavy equipment. This bill would require the tax to be administered by the State Board of Equalization and to be collected pursuant to the procedures set forth in the Fee Collection Procedures Law. This bill would require all revenues, interest, penalties, and other amounts, less refunds and the board’s costs of administration, derived from the imposition of the tax to be deposited in the General Fund.

This bill would also, for the 2015–16 fiscal year and for each fiscal year thereafter, require the county auditor to increase the total amount of ad valorem property tax revenue that is otherwise required to be allocated among the county and each city and special district in the county by the qualified heavy equipment reimbursement amount, and to commensurately decrease the amount of ad valorem property tax revenue that is otherwise required to be allocated to the county Educational Revenue Augmentation Fund by the qualified heavy equipment reimbursement amount.

The Association opted to join the Assessor’s Association in registering opposition to this bill prior to the upcoming hearing on the 21st. Specifically, the Association opposed because:

-AB 2114 does not define how or when the Auditor would be notified of the qualified heavy equipment reimbursement amount.

-It states the Auditor is to “Increase the total amount of ad valorem property tax revenue that is otherwise required to be allocated among the county and each city and special district in the county by the qualified heavy equipment reimbursement amount. The qualified heavy equipment reimbursement amount shall be allocated among the county, cities, and special districts in proportion to the amounts of ad valorem property tax revenue otherwise allocated among those local agencies.” The measure does not specify how the county auditor is to obtain this information.

-It states the Auditor is to “Decrease the total amount of ad valorem property tax revenue that is otherwise required to be allocated to the county’s ERAF by the qualified heavy equipment reimbursement amount.” AB 2114 does not specify how county auditors are to allocate that to the two different ERAF pots (K-12 & Supplemental pot and Community College pot), which is critical.

-It is unclear whether this should be handled as an exemption from the value on the tax roll or be removed altogether from the assessment roll.

-Whether this is removed or exempted from the roll, it would force higher general obligation tax rates to be set.

-Because heavy equipment will have two designations, rental and non-rental, this could contribute to corrections to the designation that would change the reimbursement amount. That may require the additional work of annual true-up reports.

The letter was delivered to the Assembly Revenue and Taxation Committee and will be reflected in the analysis.

Assembly Bill 2211 (Ting) Position: Pending

Last year, the Association joined the County Treasurer-Tax Collectors Association and CSAC in raising strong concerns last year with AB 920. This measure is a reintroduction of the “spirit” of last year’s opposed bill. The original concept would have mandated that all local expenditures be broken down by parcel and appear on the property tax bill. This measure proposes a “searchable electronic database” to be made available on the county’s website which provides information on “services” that are provided by your tax dollars traceable to the tax rate area (TRA).

The same issues continue to proliferate, including inflated dollar figures due to ERAF and RDA’s; as well as general issues with tracing dollars back to TRA’s. The Member had offered the federal government’s “Tax receipt” web tool as a model that we may be able to follow. Their model breaks the amount of taxes you paid down into percentages of various categories including “national defense”, “agriculture” and “healthcare”. Within each of those categories are more specific sub-categories that are also broken into percentages. Here is the link:

http://www.whitehouse.gov/2012-taxreceipt

The Legislative Committee reached out to the Author and met with him to discuss the fundamental problems with his proposal. As a result of the meeting, the Author amended the bill to attempt to address the concerns. The current version of the bill only requires a “pie chart” that details the distribution of County General Fund expenditures that breaks down the percentages of county, city, school and special district spending. It also requires a “brief explanation” of “services” provided by the local agencies. Lastly, the bill contains some confusing language indicating that counties are encouraged to “work toward” the Member’s prior goal of providing more detailed information.

The Association has not taken a position on the newest version of this bill, which is scheduled to be heard on April 23rd. The smaller counties may wish to provide some insight on whether they could post a “pie chart” on their website that would satisfy the mandate in the bill.

Senate Bill 1129 (Steinberg) Position: Concerns

Senate Bill 1129 requires that a successor agency’s oversight board must approve any action to remove an enforceable obligation from a ROPS for a successor agency that has received a finding of completion.

Senate Bill 1129 allows a successor agency that has received a finding of completion to enter into, or amend existing, contracts and agreements or otherwise administer projects in connection with long-term enforceable obligations, if the contract, agreement, or project will not commit new tax funds, or will not otherwise adversely affect the flow of tax increment to taxing agencies. The bill specifies that this provision applies to the substitution of private developer capital in a disposition and development agreement that has been deemed an enforceable obligation.

Senate Bill 1129 also:

· Declares that the requirement to reach a compensation agreement does not apply to the disposition of properties pursuant to a LRPMP.

· Prohibits DOF from requiring a compensation agreement or agreements as part of the approval of a LRPMP.

· Specifies that DOF must only consider whether a LRPMP makes a good faith effort to address the requirements set forth in state law.

· Requires DOF to approve LRPMPs as expeditiously as possible.

· Deletes a requirement that successor agencies must dispose of former redevelopment

· agencies’ properties if DOF does not approve the agency’s LRPMP by January 1, 2015.

Senate Bill 1129 allows a successor agency to use proceeds of bonds issued by a former redevelopment agency in 2011, upon approval of the oversight board, if:

· The proceeds are used in a manner that is consistent with the purposes for which the bonds were sold, and

· The oversight board, in consultation with the appropriate metropolitan planning organization, determines that the use of the bond proceeds is consistent with the sustainable communities strategy adopted by the metropolitan planning organization.

The Association has taken a position of “concerns”. In the letter drafted by Santa Clara County, they urge that the measure would harm all local governments that were affected by the diversion of property taxes away from core public services to RDA’s. It also points out that the bill does not advance the dissolution process, and represent a significant step backwards.

The Association may consider discussing Santa Clara’s opposition letter to determine if the current “concerns” position is appropriate.

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