Minutes
Thursday, February 23, 2012
Radisson Ontario Airport
2200 E Holt Boulevard, Ontario, CA USA 91761
1-909-975-5000
7:30 Activities began with sign-in, coffee/tea/pastries and a get acquainted period.
Ø 101 members and 4 guests were in attendance
Ø 40 counties were represented
8:10 President Ed Price, Santa Barbara County
Ø Meeting called to order
8:10 The Bacon Case, How does this impact refund processing? By Kelvin Aikens, County of Los Angeles
Ø Review of the Roger Bacon, et al v. County of L.A. et al case number 058574.
Ø Taxpayer issue started out as a change of ownership that had a supplemental enrolled for 91-92 on 1/28/93 and triggered a correction to correct in FY 92/93 and 93/94
Ø The assessment was appealed and a reduction was awarded. A refund was issued on 2/19/99. The taxpayer filed a claim because of the county pool interest rate used. He had four issues:
o Rate of interest – Court ruled Governmental entities have an absolute duty to pay interest under R&T 5151. The R&T 5096 has to do with the recovery of taxes not the rate.
o Two Installments – R&T 2605, L. A. pays interest if the 1st installments is paid (if the bill includes personal property), otherwise the bill has to be fully paid.
o Interest on accrual date – Court ruled in favor of the County.
o Statement of lien notice request by the taxpayer - Court supported that the due and payable should be based on the lien date rather than the bill date (reference R&T 2635 & 5097)
Ø L.A. County refunds automatically without claim notifications. A small portion of refunds do require additional information or research.
Ø They were able to get corrective legislation to amend Sections 4836, 5097, and 5151of the R&T code through AB2411 (effective 1/1/2009)
Ø L.A. does no 1099 refunds.
8:45 Review of Pass-Through Calculations – Part I by: Irene Liu, Santa Clara County; Kenneth Kan, Santa Clara County;
Ø See handout “AB1290 Pass Through Calculations” on Calsaca.org
Ø The agenda covered
o Triggers – RDA projects formed after 1/1/94 H& S 33607.5
§ Three tiers
o Calculation of H&S 33607.7 – Pre 1994 with amendments
o Base
Ø Santa Clara includes Supplemental and Unitary in the tax increment (ref H&S 33670)
9:35 Review of Pass Through Calculations – Part 2; Introduced by Juan Perez, San Diego County and presented by Barbara Godwin, San Luis Obispo
Ø Basic Aid Computation for AB1290
o See handout on Calsaca.org
o According to H&S 33676 (b) (1) under certain conditions a basic aid school districts shall receive pass through however the calculation in some cases will give the district more than their share
o The hair-cut methodology by H&S 34188 remedies the situation
9:50 Reminder to register by President Ed Price, Santa Barbara County
9:50 Break
10:26 AB1290 Questions lead by President Ed Price, Santa Barbara County
Ø Various questions asked on these topics:
o LAUSD TRA level model – need court ruling
o AB860 counties and ERAF contribution
o School demand letters are expanding the scope of the AUP audit – Bob Campbell, Contra Costa County stated if filed before 2/1/2012 they could be an enforceable obligation.
o Courts said schools share could include ERAF per an L.A. County Attorney but VLF and Triple flip should be taken out of ERAF which diminishes the property taxes to ERAF.
o PTAF lawsuit update – 33607.5 (a) (2) allocations to cities and county are to be made with regard to flip swap. Schools are affected by flip swap but non schools are without regard to flip swap.
o DOF originally said that all property tax revenue flows should be on the J29 but now the DOF says we should continue as we have in the past.
11:02 Negotiated Pass Through Calculations by Juan Perez, San Diego County
Ø The AB1389 report compared to the 33401 negotiated pass through agreements can help reconcile the agreements for the ABx1 26 RPTTF calculations
Ø Some Negotiated Pass Through Calculations are fairly simple. They may involve a percent of the current year tax increment share or the cumulative share. Some are tied to bond proceeds. Some are more complex.
Ø We need to request the agreements, ordinances and subordination agreements from the Successor Agencies. We may need to meet with them. There are lots of challenges.
Ø The interest may mean a separate trust is needed for the allocation.
Ø Some counties may have differences in city and or county calculations such as how ERAF was handled that will make it challenging to deal with.
Ø Some counties have deferred pass through.
11:25 Other Pass Through Questions – Lead by President Ed Price, Santa Barbara County
Ø Ed mentioned that some counties such as Riverside County may have catch-up provisions for pass through.
Ø LGRS report may need changes in the classification of revenue for non-schools since pass through is now in-lieu.
Ø Sally brought up that the DOF stated in their webinar that in determining whether something is enforceable just try to think “Would this hold up in the court of law?”
11:50 Lunch
1:05 Audit Guidelines Panel Discussion by: Andy Sisk, Assistant Auditor-Controller Placer County; David Showalter VTD; Betty Moya, SCO; Chris Hill, DOF
Andy led the discussions with:
Ø AUP comments have been received from a variety of agencies such as CALCPA, Los Angeles County, CRA, Consultants etc.
Ø Tomorrow is the caucus to discuss recent changes to the Agreed-Upon Procedures (AUP). Those expected to attend are 10-20 Auditor-Controller’s Office representatives, CPAs, State Controller’s Office (SCO) and possibly the Department of Finance (DOF). Others may attend as well.
Ø One of the biggest issues with the prior AUP was the State Association should be removed. Auditor-Controller’s are not a specified party.
Ø Who is the client? The Auditor-Controller or the SCO. There have been varying opinions. The Auditor-Controller’s Offices believe it is the SCO because the SCO plays a role to the bill such as the 3 days to take affect stipulation. The SCO needs to ensure the fiscal intent is accomplished.
Ø This is not an audit. H&S 34182 says audit and AUP but they are very different things.
Ø There should be an audit from 7/1/11 to 1/31/12 then an AUP.
Ø CPAs don’t understand the complexities and intricacies that the Property Tax Managers have to deal with which is another reason for some of the changes. The biggest issue here is the certification mentioned in H&S 34177.
Ø There is a need for independence.
Betty Moya & Chris Hill discussion:
Ø Contact information for Betty: email: phone: (916) 445-4989
Ø Contact information for Ting Ngo (SCO reporting):
Ø Several questions were addressed to Betty such as at what point would an RDA not need an audit? Betty stated no assets – no increment – no audit.
Ø Chris said if there are not assets or liabilities then they are inactive and there is nothing to audit.
Ø Jim Brown, Riverside County asked about the certification requirement in 34177. He was told by Andy that legislation for SB 654 was to strike the word “certify” but it has not gone anywhere. If approved would not take effect until next year.
Ø Arlene from Los Angeles asked about third party audits. Are the audits through 1/31 still necessary? They asked this question last year and are still waiting. Betty said whether H&S 33080 is still in effect is being looked at. If it is not still in effect it may be a mute point.
Ø The question was asked if the audit deadline will be extended. Chris Hill said this will be problematic because there are other deadlines depending on this audit.
Ø Chris was asked if he could expand on the letter regarding the school revenue because the revenues won’t be realized. Chris said they had to calculate what schools would receive from RDAs in relationship to the Prop 98 revenue limit so they used the FY 2009-10 SERAF and extrapolated what they would receive. He said they recognize these are estimates. In June 2012 they will be trued up and will receive their proper amount pursuant to Prop 98 revenue limit.
Ø The DOF has a hotline to report ABx1 26 issues and they have another email address for ROPS and other aspects of ABx1 26 issues email:
Ø Betty was asked if the ROPS could be challenged later after payments are made. She said there is a certain time period they can be challenged. Mainly the SCO will look at the audit and make comparisons to EOPS\ROPS etc.
Ø SCO used to match the SOI to the debt payments/schedules. Now the EOPS can be matched back to the SOI.
Ø Regarding the ROPS, what will happen if items are disallowed by the DOF? The DOF will notify the Auditor-Controller not to pay.
Ø Can pledged pass through for a prior pass through be on the ROPS? Yes, as long as it is a legitimate enforceable obligation. However pass through in general should not be on the ROPS since the Auditor-Controller is paying.
Ø Wouldn’t the letters from schools expand the scope of the audit? The SCO would like to see the school letters; they are not familiar with them.
Ø What is the priority of debt? Per Betty it is bonds, tax allocations then other debt
Ø Are reserves ok for the ROPS? Yes per Chris
Ø Will the Auditor-Controller be responsible for the pass through calculations ongoing? Yes, per Chris
Ø Betty stated the SCO will be sending a questionnaire to all active successor agencies around April 1 that will be due to the SCO on May 1.
Questions were addressed to David Showalter, VTD:
Ø How is the former RDA supposed to be reported in the CAFR? Could be a discretely reported component unit. Look at GASB 61
Ø What type of information will be needed for the audit? EOPS\ROPS, POS (official statements), trust agreements etc.
Ø Who will sign the representation letter? The responsible party
3:10 Break
3:25 Audit Guidelines Panel Discussion by: Andy Sisk, Assistant Auditor-Controller Placer County; David Showalter VTD; Betty Moya, SCO; Chris Hill, DOF continued;
Ø AUP changes – Andy Sisk identified some of the changes that have been recommended. The final AUP should be ready Friday, February 24 after the caucus in Sacramento. To attend the meeting contact 916-322-9105.
Ø For asset transfer and AUP questions contact Steve Mar, email: smar.sco.ca.gov
Ø For SERAF questions for the Property Tax Report contact Priscilla Moss . Ed suggested we filter all questions through him to avoid overloading Priscilla.
Ø Betty identified some of the deadlines. She mentioned the questionnaire is coming to the Successor Agencies around April 1 but needs to be tested first. The SCO plans to have all asset transfers audited by 6/30/2013. There is an asset transfer form in draft for all assets transferred between 1/1/2011 to 1/31/2012.
Ø Per Chris the ROPS draft should be adopted by the Oversight Board by 3/1/2012. The final ROPS should be completed by 4/15/2012. The DOF is encouraging early submittals.
Ø Chris stated there have been a lot of questions on enforceable obligations. They won’t have a final answer until the auditors take a final look with back-up documentation to determine the legitimacy. They hope to have more information on their web site soon.
Ø Ed requested that we have some input to assist with the refining of the ROPS that were created by the CRA. There is hope for a standardized form.
Ø True-up calculations will be needed but take from the next apportionment.
Ø Successor agency fees: for FY 2011-12 Chris said it is okay to give them the whole $250k if there is money.
Ø Per Ed the 5% Successor Agency fee is not to be calculated from the gross tax increment.
Ø Los Angeles County asked about the EOPS & ROPS that seem grossly overstated. Chris said it sounds like they are not within the law and he said he thought we should challenge them.
Ø The June 1 payment is to cover the ROPS for the period of July to December 2012.
4:30 Ed Price thanked all the presenters for both days and the County of San Bernardino for all their help with setting up and hosting the meeting.
4:35 Adjourn
Next events:
Tax Manual Committee - Monday May 7 – Sacramento
Tax Managers Committee – Tuesday May 8 - Sacramento