Government Finance and Operations 05/10/2013
Local Vote Thresholds
SCA 9 (Corbett) – Support
As Introduced on December 14, 2012
SCA 11 (Hancock) – Support
As Introduced on January 25, 2013
SCA 9 and SCA 11, by Senators Ellen Corbett and Loni Hancock, are among this year’s measures that would reduce the vote threshold for special taxes to 55 percent, from the current two-thirds vote requirement. SCA 11 would do so generally, while SCA 9 would do so for special taxes to fund community and economic development projects.
As a matter of long-standing policy, CSAC supports these measures and others that would reduce the vote threshold from the current 2/3 supermajority requirement, therefore allowing communities to self-determine the level of revenues they want. We are encouraging the Legislature to consider all of these measures in a broad discussion about what is appropriate to be placed before the voters in 2014. That discussion should consider the needs and desires of local communities, as well as providing counties the flexibility to pursue special taxes in either the entire county or only in the unincorporated areas.
The Senate Governance and Finance Committee will consider SCA 9 and SCA 11 at its hearing next Wednesday, May 15.
Assembly Revenue and Tax Suspense File
The Assembly Revenue and Taxation Committee will announce the chair’s decisions about which bills get released from their suspense file next Monday, May 13. Five of those bills are tax exemptions that would affect county revenues, mostly from the sales and use taxes, but also one affecting property taxes. CSAC has a position of “oppose unless amended” on all of these bills. If the tax exemptions are a matter of statewide concern, then the state should use statewide revenues to provide them, instead of spending county money. The bills are AB 479 (Donnelly), AB 486 (Mullin), AB 718 (Melendez), AB 777 (Muratsuchi), and AB 1326 (Gorell).
Sales and Use Taxes
SB 376 (Correa) – Oppose Unless Amended
As Amended on April 30, 2013
SB 376, by Senator Lou Correa, would exempt property used for manufacturing and similar activities from sales and use taxes.
CSAC appreciates that SB 376 excludes the Bradley-Burns and local transactions and use components of the tax from the exemption, but the bill still uses local agencies’ money to incentivize purchases of manufacturing equipment.
Counties receive as much as 3.3125 cents, or almost 45 percent, of the revenue the sales tax generates, depending on where the sale takes place. The Bradley-Burns is part of that, but counties also receive several other portions. Importantly, this includes 1.0625 cents for 2011 Realignment. It also includes a half-cent for 1991 Realignment, most of another half-cent for Proposition 172 public safety services, and a quarter-cent that funds county transportation activities.
If favoring these purchases is an issue of statewide concern, as passing this bill would indicate, then the state should use statewide revenues to reimburse counties and other local agencies for their losses, as provided by statute. Alternatively, the bill can exempt the local portions of the tax from the special treatment the bill would implement, as it already does for the Bradley-Burns and transactions and use components.
AB 1322 (Patterson) – Support
As Amended on May 1, 2013
Assembly Bill 1322, by Assembly Member Jim Patterson, would restore the Senior Citizens’ Property Tax Postponement Program in a manner that would create a financially sustainable program. Regrettably, the state’s Senior Citizens’ Property Tax Postponement Program was eliminated in the February 2009 budget agreement.
The Senior Citizen’s Property Tax Postponement Program offered income-eligible seniors and the disabled the opportunity to postpone their property tax payments in exchange for full repayment with interest when their home is sold. The premise of the Senior Citizens’ Property Tax Postponement Program was to provide assistance to income eligible seniors and the disabled to allow them to stay in their homes by deferring their property taxes until sale of the property or death.
The program had a minimal start-up cost and, in most years, generated revenue for the state General Fund. Unfortunately, in large part due to the recent recession and housing crisis, the program failed to pay for itself in 2007-08 and 2008-09, making it a target for elimination given the state’s budget crisis.
In the ensuing years, CSAC, along with county assessors, auditor-controllers, and treasurer-tax collectors, worked with the Legislature, the State Controller’s Office, and the State Treasurer’s Office to identify program improvements and a new financing mechanism that would ensure that the program would be fully self-funded while continuing to allow eligible Californians to utilize this important service.
The Legislature eventually approved a program that allowed counties to voluntarily provide the program locally; however, that program failed to authorize counties to establish a priority lien as security for repayment. As a result, to our knowledge, only one county has opted to provide the program locally. AB 1322 instead provides a fiscally sustainable mechanism to reestablish the program on a statewide basis.
The Assembly Appropriations Committee will consider AB 1322 at its hearing next Wednesday, May 15.
SB 19 (Knight) – Oppose Unless Amended
As Amended on April 18, 2013
SB 19, by Senator Steve Knight, would exempt equipment and materials related to commercial space launch sites from sales and use taxes. SB 19 does not reimburse local agencies for the resulting revenue loss.
The Senate Governance and Finance Committee passed SB 19 at its hearing on Wednesday, May 8. The bill now moves to the Senate Appropriations Committee.
SB 636 (Hill) – Support
As Introduced on February 22, 2013
As previously reported in the Bulletin, SB 636, by Senator Jerry Hill, would modify a provision included in the last year’s redevelopment budget trailer bill relating to the allocation of property tax revenues from the Redevelopment Property Tax Trust Fund.
The Senate Appropriations Committee had planned to hear the bill on May 6, but now plans to consider the measure on Monday, May 20.
Inverse Condemnation and Comparative Fault
AB 436 (Jones-Sawyer) – Support
As Introduced on February 15, 2013
AB 436, by Assembly Member Reginald Jones-Sawyer, would apply the principle of comparative fault to inverse condemnation cases where the defendant is a government agency. It would also apply normal tort standards relating to post-offer costs.
The state of the law on the issue of comparative fault has been uncertain for years. Because of the uncertainty, public agencies in inverse condemnation cases are at risk of being found liable for the full cost of a property, even when the agency only had a small part of the fault. AB 436 would settle this area of law reasonably and fairly.
The other provision of the bill would encourage property owners in inverse condemnation cases to accept reasonable settlement offers from the public agency. Under current law, if the property owner recovers anything, they are entitled to their full attorney fees and costs. This is only true for inverse condemnation cases. AB 436 would instead specify that if the plaintiff rejects an offer and fails to obtain a more favorable judgment, the plaintiff cannot recover costs incurred after the time of the offer. These new provisions are not only fairer, but also help to ease the burden on the courts.
The Assembly Judiciary Committee passed AB 436 at its hearing on Tuesday, May 7. The bill now moves to the Assembly Floor.