SB 863 FAQ
SB 863 (Chapter 722, Statutes of 2010), a Budget trailer bill which became effective upon signature by the Governor, appropriates $10 million for the Williamson Act Subvention Program for the 2010-11 fiscal year, and reenacts the provisions of AB 2530 (Nielsen) along with clean-up language to help implement the provisions of that Williamson Act bill which was signed into law earlier this year.
RCRC and CSAC staff collaborated with the CA Farm Bureau Federation and the Resource Landowners Coalition, the sponsors of AB 2530, to develop these Frequently Asked Questions (FAQ). This document reflects the understanding and intent of the organizations involved in AB 2530 and SB 863. However, as with the implementation of any statutory program, consultation with your County Counsel is recommended.
The text of SB 863 can be accessed at: http://www.leginfo.ca.gov/pub/09-
Are counties required to implement the provisions of SB 863?
No, this is a program that counties may opt into if they choose to and if certain conditions are met.
What does my county need to do in order to implement the SB 863 Program (Program) in 2011?
The new law that took effect on October 19th requires various actions by a county prior to a county collecting additional revenues starting with the December 2011 installment of property taxes.
- Make a determination that the state paid the county less than one-half of their foregone property tax revenues under Government Code Sections 16142 and 16142.1.
- Decide to implement the Program (9/18 year contract terms) on the next anniversary date of the Williamson Act contracts; and,
- Give landowners 90 days notice of the opportunity to non-renew and thereby opt out of the 9/18 year contract term or until February 1, 2011, a county may adopt a procedure to allow landowners 60 days notice of their right to non-renew.
A Board of Supervisors could make determinations #1 and #2 above at a
November or December 2010 Board meeting, and adopt a procedure to allow landowners 60 days notice to opt out. A county, following the procedure adopted, could then adopt the reduced term contracts and send the notices to landowners prior to February 1, 2011.
If a county provides additional flexibility in its resolution/ordinance or modified uniform rules regarding landowners’ notice of non-renewal subsequent to the lien date/anniversary date, then these hard deadlines may not be applicable. For example, a county could give landowners 90 days subsequent to the anniversary date to serve notice of non-renewal. The law states that the notice of nonrenewal, not actual non-renewal, is the trigger.
SB 863 became effective on October 19, 2010. Can a county revise the
property tax bills for the current year and collect additional revenues with
the 2nd installment of the current year property taxes?
No. Even though the bill did become effective the day it was signed by the Governor, the law specifically states that the new provisions of the Williamson Act relating to reduced-term contracts become effective on January 1, 2011.
SB 863 states that a county’s actual foregone property tax revenue shall be based on the county’s respective share of the general property tax dollars as reflected in the most recent annual report issued by the State Board of Equalization (BOE) or 20 percent, whichever is higher. Where can I find the most recent BOE annual report?
See BOE Table 15, 2008-2009 General Property Tax Dollar by County at:
Which fiscal year should be used when making the required determination
that the county has received payment of less than one-half of the foregone
general fund property tax revenue?
For the tax year beginning January 1, 2011, counties would use the Open Space Subvention payments received for FY 2009-2010.
Can a county combine the required written notice requirements?
The law specifically states that a county may combine the notice of final decision to adopt the Program with the notice advising landowners of their right to opt out of the Program by serving notice of nonrenewal.
The law does not specifically address combining the notice advising landowners of their right to opt out of the Program with a notice advising landowners of a Board of Supervisors hearing to consider adoption of the Program.
What happens if nonrenewal is filed during the subsequent year in which the reduced term/increased value provisions are operative?
If the county has adopted the reduced term contracts, a non-renewed contract would wind down from 8/17 years as the case may be. The parcels would also be automatically exempt from the increased value provisions [See Government Code Section 51244(b) (7)].
If the landowner decides not to renew the contract then the parcels are
immediately valued under Revenue and Taxation Code Section 426. If the county non-renews the contract, the landowner would still have the option to protest the non-renewal, thus delaying the non-renewal valuation pursuant to Section 426 until there are less than six years remaining on the contract. Since the contract has been non-renewed Government Code Section 51244 (b) (3) would not apply.
Does a county have to implement the Program in order to receive their share of the $10 million General Fund appropriation for the 2010-2011 fiscal year?
No, implementation of the Program is not a condition for receiving General Fund subvention payments.
How is the $10 million General Fund appropriation to be apportioned
between participating Williamson Act counties?
It was and is the intent of the Williamson Act Coalition when advocating for General Fund subvention funding that any appropriation be apportioned based on the participating counties’ proportionate share of the total claimed acreage. This is the formula that has been used since the inception of the subvention program in 1971. The Controller allocates these funds in accordance with Section 16144 of the Government Code and is required to reduce all payments on a pro rata basis as necessary so that the total of all payments does not exceed the amount appropriated.
The language as drafted in Section 16148 of SB 863 relating to the $10 million appropriation erroneously used a different allocation procedure based on the losses incurred by participating counties. We understand that it was legislative staff’s intent “to use the pre-existing allocation methodology”.
We will consult the State Controller’s Office regarding the necessity for corrective legislation in January. There is time to enact the required fix as existing law provides that “….the Controller shall make the payment on or before June 30, but no earlier than April 20, of each year.”
Can you explain the intent behind the recording requirement contained in SB 863?
The recording requirement was added to the legislation at the request of the CSAC/RCRC Williamson Act Working Group (WAWG). The WAWG felt that it was important that a potential purchaser of property be able to determine the current status of a parcel or parcels. At the same time, the WAWG was determined to keep the cost of recording this information to counties at a minimum. The solution arrived at was to require a county, in any year in which the Program was implemented, to record a single notice that lists all the parcel numbers and the current owners names so that the information is readily available. As an alternative the law also allows the notice to provide the same information for those parcels that are not affected.
What is the formula for determining the new assessed value of Williamson Act land under SB 863 and how are the funds allocated?
County assessors will continue to determine the restricted value based on
Sections 423, 423.3, 423.4 or 423.5 of the Revenue and Taxation Code, as
applicable, and the unrestricted value based on Section 110.1 and 51 (b).
Pursuant to existing law, the assessor shall enroll either the restricted value, the factored base year value (Section 110.1) or the current market value (Section 51(b)), whichever is lower. The amount of additional revenue is simply 10 percent of the difference between the property taxes due based on factored base year values or current market value for the contracted parcels and the property tax due based on the restricted value of those parcels.
Does a landowner have the right to appeal the base year value?
Yes, a landowner can appeal the base year value with certain restrictions.
The last paragraph of Property Tax Rule 305 (d) (1) provides: “Additionally, an application appealing a base year value for the most recent lien date, where that value is not the value currently on the assessment role, shall be filed with the clerk during the regular filing period beginning July 2 but no later than September 15 or November 30, as applicable.”
The BOE advises that when the assessment appeals rules were revised, this statement was specifically added to deal with properties where the base year value was not on the roll, e.g., properties under a Williamson Act Contract or a Historical Property Contract. In those instances, the restricted value is generally the lowest value and therefore the value that is on the roll.
How much additional revenue can a county expect to receive if it implements the reduced term contracts?
The amount of the additional revenue would be 10 percent of the difference between the property taxes due based on factored base year values or current market value for the contracted parcels and the property tax due based on the restricted value of those parcels. The restricted value is the value under Revenue and Taxation Code Sections 423, 423.3 or 423.5, whichever is applicable. Please note that this is not simply a 10 percent increase in the unrestricted or restricted value, whichever is lower. If the Proposition 13 or current market value is the enrolled value, then there is no additional charge to those contracted parcels.
How are property tax overrides for school bonds or other voter approved
The existing property tax base will continue to finance any bonded indebtedness. SB 863 specifies that all increased revenues generated by the Program shall be allocated exclusively to the respective counties in which those properties are located.
Any property tax overrides for school bonds or other voter approved
indebtedness will be taken into consideration in determining the Proposition 13 property taxes and property taxes due based on the restricted value.
Do these provisions of SB 863 run afoul of Proposition 218 and/or
No. The Office of the Legislative Counsel has determined that the 10 percent formula does not run afoul of Proposition 218 and/or Proposition 13. The Howard Jarvis Taxpayers Association was also consulted and “signed off” on the language.
The operative principle is that the reduction in the landowner benefit is
accompanied by a equivalent reduction in the landowner’s obligation to which the landowner has given implied consent.
Shortening the term of a Williamson Act contract has nothing to do with the use value calculation, unless the contract is in nonrenewal. This appears to be inconsistent with the valuation concept and the current procedures of the Act. Please explain.
The 10 percent reduction in the length of the contract restrictions triggers a statutorily authorized recapture of 10 percent of the participating landowners’ property tax savings.
Does the temporary shortening of Williamson Act contracts under SB 863 require a CEQA review?
Legislative staff who specialize in CEQA and others including the Farm Bureau’s environmental law attorneys say no. Article 19 of the CEQA Guidelines provides a Class 17 Categorical Exemption for the establishment of agricultural preserves, as well as the making and renewing of open space contracts under the Williamson Act. There has been a supposition that making new contracts that are ten percent shorter than the original term is tantamount to the cancellation of the contract and not subject to the Class 17 exemption. Cancellation, however, is a term of art in the Williamson Act that means immediate termination of the contract.
As the new contracts would still enforceably restrict the land and no cancellation proceedings would be initiated, the Class 17 exemption applies. Since the land is still restricted by self-renewing contracts one can presume that there will not be any environmental impact because the contracts annually self-renew by adding an additional year to the term. Given this and the fact that the contract is not being immediately terminated in order for the land to be sold, developed, taken out of farmland, there is no environmental impact. Note: Authority cited: Section
21083, Public Resources Code; Reference: Section 21084, Public Resources Code.
Some County Counsels believe that this is a grey area and that clarification in the CEQA Guidelines would be helpful.
SB 863 provides that two or three additional years must be added to the contracts on their next anniversary date to restore them to their full 10 or
20 year terms if increased revenues from the reduced contracts is not realized by the county. This provision seems to work at cross-purposes to the stated intent of the bill which is to partially restore funding to the
counties through shortened contract terms and property revaluations. Please explain the purpose of this requirement.
The language of the bill is somewhat convoluted. SB 863 provides that in any year following the implementation of the reduced term contract Program that the county receives state subvention funding that is more than one-half of the county’s actual foregone general fund property tax revenue, and therefore can not make the required finding in order to continue the Program, the terms of the contracts revert to the original 10 or 20 year terms.
The law states that the Program does not apply to, among other things, “atypical term contacts” if a county’s board of supervisors determines that
application of the Program to them would be inequitable or administratively infeasible. What is behind this language?
A few counties have contract terms that extend beyond the standard Williamson Act/Super Williamson Act contract terms (10/20 years). This language was added to address those counties with contracts that are “atypical”. For example, in the County of San Luis Obispo contracts start with an initial term of 20 years but revert to 10 year contracts after the first 10 years.
Why does the law contain a sunset date of January 1, 2015?
AB 2530 and SB 863 were intended to be a temporary response to the lack of state funding for the Open Space Subvention Program so that the Legislature and interested stakeholders could develop a more permanent solution.
Some counties will not qualify to implement the Program in 2012-2013 because their share of the $10 million subvention payment will be more than the “one-half of the participating county’s actual foregone general fund property tax revenue”.
This issue has been put on a list of issues to be discussed among counties and other stakeholders.
Last Updated: October 29, 2010
Contacts: Kathy Mannion, RCRC, (916) 447-4806
Karen Keene, CSAC, (916) 327-7500 x511