Government Finance and Operations 09/16/2010
Transient Occupancy Taxes Could Be Subject of End-of-Session Play
Taking the lead from their national counterparts, online travel
companies (OTCs) continue to press for state legislation to
exempt them from properly remitting local transient occupancy
taxes (TOT). Rumors indicate that this issue could appear
in SB 625 or another vehicle and counties need to be on
There has been an ongoing controversy about the appropriate collection and allocation of TOT for rooms booked through an online travel company. TOT is levied on the consumer as a percentage of the room rate charged. People who pay for a hotel room, regardless of how much they pay for the room, pay this tax, which is then transmitted to the local agency by the hotel.
Because the OTC purchases the room from the hotel at a discounted or wholesale rate, then marks up that rate, there is a differential between the amount paid to the hotel and the amount charged to the customer. The OTC does not itemize the taxes imposed on the customer at the time of payment – instead the amount is bundled with other “taxes and charges”. The customer pays the room rate plus the additional taxes and charges. However, the OTC only remits to the hotel the amount of tax paid on the wholesale rate, not the rate paid by the customer. Local governments are then shortchanged as a result.
CSAC will continue to keep you informed of the latest information on this important topic.
Senior Citizen’s Property Tax Postponement Program
AB 1718 (Blumenfield) – Support
As Amended on August 9, 2010
Assembly Bill 1718 is the result of ongoing discussions between state and local entities focused on restoring the Senior Citizen’s Property Tax Postponement Program (Program), which was eliminated in the February 2009 budget agreement.
The 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 program had a minimal start-up cost and, in most years, generated revenue for the state General Fund (GF). 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.
CSAC, along with county assessors, auditor-controllers, and treasurer-tax collectors, has been working with Assembly Member Blumenfield, the State Controller’s Office, and the State Treasurer’s Office to identify program improvements and a new financing mechanism that will allow the program to be fully self-funded while continuing to allow eligible Californians to utilize this important service. We pledge our commitment to assist in developing a workable program that does not result in a cost to the state GF.
The latest amendments to the bill give counties the option to join the program.
AB 1718 moved out of the Senate Appropriations Committee on August 12 by function of Senate Rule 28.8, which allows bills with no affect on the state’s GF to leave the fiscal committee without a vote. The bill now moves to the Senate Floor.
AB 2531 (Fuentes) – Oppose
As Amended on August 3, 2010
Assembly Bill 2531, by Assembly Member Felipe Fuentes, expands the authority of redevelopment activities to include economic development programs and services that are far beyond the traditional scope of redevelopment as contemplated by voters and defined in statute by the Legislature.
AB 2531 outlines a new role for redevelopment in California by authorizing redevelopment agencies to use their tax increment dollars to provide businesses with any kind of financial assistance, including but not limited to loans, loan guarantees, job training, and apprenticeship programs.
This redefinition of what constitutes “redevelopment” is important to California counties because the funding stream for redevelopment is the property tax increment — property tax revenues that would otherwise fund programs and services provided by schools, counties, and special districts. The promise of redevelopment is that investments made with property tax increment dollars increase property values, so that when redevelopment ends, all agencies benefit from the increased tax revenue that then flows from those properties.
AB 2531 contemplates providing programs and services that may not withstand the test of time or the vagaries of the economy, and in some cases are unlikely to increase property values. Given the scarcity of funding for local programs and services, it is difficult for counties to believe that such activities are an appropriate use of redevelopment agencies’ extraordinary power of tax increment capture. Our view is that there is a number of public sector entities, including the State of California and its cities and counties, that already provide such services, at their own option and expense.
AB 2531 passed the Senate Floor 22-13 on a nearly party-line vote on August 12, the two exceptions being Senator Correa voting against and Senator Huff voting for the measure. It is now on the Assembly Floor for concurrence of Senate amendments.
AB 496 (Davis) – Support
As Amended on July 15, 2010
Assembly Bill 496, by Assembly Member Mike Davis, states the Legislature’s intent to reimburse counties for the costs of legislative and congressional vacancy elections. Under the terms of the bill, that reimbursement could not take place before the 2011-12 fiscal year.
The Senate Elections, Reapportionment and Constitutional Amendments Committee passed AB 496 at their hearing on August 10. However, the bill failed to pass the Senate Appropriations Committee two days later and is now dead.
AB 1690 (Chesbro) – Support
As Introduced on January 27, 2010
Assembly Bill 1690, by Assembly Member Wes Chesbro, would reimburse Humboldt County for its property tax losses sustained due to the earthquake this last January.
The Senate Appropriations Committee passed AB 1690 unanimously on August 12 and it now heads to the Senate Floor.
AB 2136 (V. Manuel Perez) – Support
As Amended on June 16, 2010
Assembly Bill 2136, by Assembly Member V. Manuel Perez, would reimburse Imperial County for its property tax losses sustained due to the recent earthquake in the county.
The Senate Appropriations Committee passed AB 2136 unanimously on August 12, as amended, and it now heads to the Senate Floor.
AB 1662 (Portantino) – Watch
As Amended on August 12, 2010
Assembly Bill 1662, by Assembly Member Anthony Portantino, would reimburse several counties for their property tax losses sustained due to fires and winter storms over the past year that the Governor declared as disasters. The affected counties are Calaveras, Imperial, Los Angeles, Monterey, Orange, Riverside, San Bernardino, San Francisco, and Siskiyou.
In passing the Senate Appropriations Committee on August 12, the author amended the bill and, due to those amendments, CSAC no longer supports AB 1662. The amendments condition future disaster relief on the following actions by the county:
- provision of adequate structural fire protection services in state responsibility areas.
- compliance with existing fire prevention requirements in very high fire hazard severity zones.
- having a fire risk reduction public education program if it has land designated as a very high fire hazard severity zone within its jurisdiction.
SB 1040 (Padilla) – Support
As Amended on June 23, 2010
Senate Bill 1040, by Senator Alex Padilla, would expand the California Advanced Services Fund (CASF), which encourages deployment of broadband in unserved and underserved areas, from $100 million to $225 million. It would also delete the sunset date on the program; the sunset is unnecessary since the program caps the dollar amount.
The California Public Utilities Commission (PUC) and the Legislature created CASF in 2007 and 2008 to help fund the expansion of broadband infrastructure into difficult-to-serve areas. While the program could be designed more perfectly to assist rural areas further, the CASF is still an important part of closing the digital divide and creating economic opportunities for residents of rural areas.
The Assembly Appropriations Committee passed SB 1040 at their hearing on August 12 and it now moves to the Assembly Floor.