Government Finance and Operations update 5/2/2014
SB 1129 (Steinberg) – Oppose
As Amended on April 22, 2014
SB 1129, by Senator Darrell Steinberg, seeks to make changes to three components of the redevelopment dissolution process: enforceable obligations, long range property management plans and compensation agreements, and use of bond proceeds for debt issued in 2011. Because each of these directly affects the allocation of property tax revenues and we know that the allocation of property tax revenues is a zero-sum game, SB 1129 will have fiscal consequences for affected taxing entities, including counties.
By authorizing the use of bond proceeds issued in 2011 regardless of whether the agency receives a finding of completion, SB 1129 redirects property tax increment revenues to fund new projects instead of paying down debt. We understand that some redevelopment officials responded to the Governor’s 2011 proposal to eliminate RDAs by accelerating their tax allocation bond sales. In the first six months of 2011, RDAs collectively issued $1.5 billion in tax allocation bonds, exceeding the level of debt issued in the entire prior fiscal year. Further, many of these bonds were issued at significantly higher interest rates than in previous years. From a fiscal perspective, it does not make sense to allow a successor agency to utilize bond proceeds instead of defeasing the bonds, as these debt obligations would require property tax increment revenues well into the future at a high cost.
By eliminating the requirement that a city or county must negotiate compensation agreements with other taxing entities for former RDA properties that it retains pursuant to a long range property management plan, SB 1129 does away with an important tool for affected taxing entities to ensure that development can occur while protecting all local governments’ investments in such properties. Former RDA properties were purchased using property tax increment revenues from all local taxing entities; compensation agreements are a reasonable means to ensure that local agencies are working collaboratively to resolve issues regarding future use of these properties.
By authorizing a successor agency to enter into new and/or amended enforceable obligations without oversight board approval, SB 1129 places successor agencies back in the redevelopment business. Counties are concerned that there are insufficient safeguards in place to ensure that any changes are consistent with the wider community’s values and the Legislature’s intent to expeditiously wind down RDAs. Oversight Board and DOF review are important components to ensure that enforceable obligations are appropriate and lawful, particularly in light of recent audit findings on the practices of some redevelopment agencies.
The Senate Appropriations Committee will consider SB 1129 at its hearing next Monday, May 5.
AB 2119 (Stone) – Support
As Introduced on February 20, 2014
CSAC supports AB 2119, by Assembly Member Mark Stone, which would allow counties to propose a transaction and use tax increases only in the unincorporated area of the county. The proceeds from the tax, if unincorporated voters approve it, could only be used in the unincorporated area.
A peculiar effect of the current construction of tax law is that residents of unincorporated areas are the only geographically distinct groups in the state without the choice to tax themselves for general government services. AB 2119 would fix that oversight.
Despite being the level of government directly responsible for the health and safety of the state’s residents, counties have very little tax authority. The sales tax is one of those authorities, but under current law counties can only impose such a levy countywide, with permission from all the county’s voters, including those who live in cities.
Many cities levy their own sales taxes, for the sole benefit of city residents. Those residents are often understandably reluctant to impose a further tax on themselves. AB 2119 would give residents who live outside of cities the same rights as those who live in them.
The Assembly Revenue and Taxation Committee will consider AB 2119 on Monday, May 5.
AB 2231 (Gordon) – Support
As Amended on April 21, 2014
AB 2231, by Assembly Member Rich Gordon, would restore the Senior Citizens’ Property Tax Postponement Program that 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. 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 at the time.
Subsequent efforts to restore the program resulted in the passage of AB 1090 (Blumenfield) in 2011, a bill that authorized counties to opt to provide the program using local funds. Counties, however, were not authorized to place a priority lien on the property to ensure repayment of deferred property taxes. Without priority lien status, counties are limited in their ability to finance such a program, given their fiduciary responsibilities to taxpayers and other local agencies.
AB 2231 reestablishes the Senior Citizen’s Property Tax Postponement Program at the state level with important modifications to ensure that the state’s General Fund is protected during economic downturns, and keeping the program up and running when these residents need it most.
The Assembly Revenue and Taxation Committee passed AB 2231 unanimously at its hearing on Monday, April 28. The bill now moves to the Assembly Appropriations Committee.
AB 2109 (Daly) – Concerns
As Amended on March 24, 2014
AB 2109, by Assembly Member Tom Daly, would require the Board of Equalization to annually report information related to locally-assessed parcel taxes, including the type and rate of tax, the number of parcels subject to and exempt from tax, the sunset date of the tax, and the revenue generated from the tax. This information would be provided to the Board of Equalization by the county auditor.
CSAC has communicated its fiscal concerns about AB 2109 to the author, who has committed to working with us to minimize costs.
The Assembly Revenue and Taxation Committee passed AB 2109 unanimously at its hearing on Monday, April 28. The bill now moves to the Assembly Appropriations Committee.
AB 1873 (Gonzalez and Mullin) – Support
As Amended on April 22, 2014
AB 1873, by Assembly Members Lorena Gonzalez and Kevin Mullin, would authorize a county to conduct a special vacancy election entirely by mail. This common-sense approach provides an opportunity to improve voter participation and save money. The bill would also allow processing of envelopes and ballots earlier than under current law, and would define ballots received within three days after the election as having been timely received if they either are postmarked or signed and dated on or before Election Day.
Special elections are costly, especially when they cannot be consolidated with other elections. In Los Angeles County alone, special elections have cost more than $27 million since 2008. County election officials conduct these elections in the same way as other statewide elections, with the parallel process of polling places and poll workers run alongside the increasingly popular mail ballots. Costs associated with special elections are usually unanticipated and unbudgeted, creating a fiscal pressure on election departments and the county generally.
Special elections have embarrassingly low voter turnout. The 2013 special elections were particularly poor in turnout, with turnout rates in single digits in some of the later elections. There must be a better way to improve voter participation without imposing significant costs on counties.
CSAC is very interested in exploring new approaches to elections that will result in lower costs to counties and improved voter participation. AB 1873 promises progress on both.
The Assembly Elections and Redistricting Committee will consider AB 1873 at its hearing next Tuesday, May 6.
AB 1861 (Harkey) – Support
As Introduced on February 19, 2014
AB 1861, by Assembly Member Diane Harkey, would fund the Voter Identification Procedures mandate in the current budget year.
The Voter Identification Procedures mandate requires county election officials to “compare the signature on each provisional ballot envelope with the signature on the voter’s affidavit of registration.” The mandate is currently suspended, which means that county election officials may, under the law as it currently stands, count a provisional ballot without first checking the signature on the envelope.
Given that the purpose of provisional ballots is to give the opportunity to vote to people whose identity cannot be immediately determined, the fact that the law doesn’t require their identity to be determined before counting the ballot is absurd.
This suspension is part of a historic defunding of elections that the state of California has committed over the past few years. The defunding includes several mandate suspensions, including this one, that threaten not only the integrity of our elections, but also equal access to the ballot (the permanent absent voter mandates are also suspended). The state has also stopped reimbursing the costs of legislative vacancy elections over the past few years.
These actions taken together have resulted in the state defunding elections to the tune of about $40 million per year.
Also at stake for this bill in particular is the issue of fairness. Counties fulfilled this mandate for years on the explicit promise that once the costs were known and were determined through a quasi-judicial process to be a reimbursable mandate, a system that is tilted strongly against local agencies by design, the state would pay for those services. In the case of this mandate, as soon as the bill came due, the state reneged on that promise by suspending the mandate, and has therefore never paid a penny of its obligation.
The Senate Budget Subcommittee No. 6 put AB 1861 on its suspense file after it heard testimony on Monday, April 28.
SB 1062 (Block) – Support If Amended
As Amended on March 24, 2014
SB 1062, by Senator Marty Block, would require counties to prepay postage for all vote-by-mail ballots. As currently written, it would impose a mandate on counties on the order of $5 million to $7.5 million for a single general election.
CSAC supports efforts to increase voter participation, but we believe it is inappropriate for the state to decide how counties should spend their money. If the state wants every voter to be able to return the mail ballot without a stamp, they should require the Secretary of State’s office to use their Business Reply Mail account for this purpose, thus requiring no reimbursement.
The author’s office has been in touch with CSAC about making this change to the bill.
The Senate Appropriations Committee will consider SB 1062 at its hearing on Monday, May 5.
AB 2338 (Wagner) – Oppose
As Introduced on February 21, 2014
AB 2338, by Assembly Member Donald Wagner, would place limitations on pre-election challenges for local initiatives. CSAC asserts that it is wholly appropriate for local governments to file declaratory relief actions when initiatives clearly violate state or federal law.
Pre-election declaratory relief serves an important public purpose by allowing local agencies to seek judicial review of an initiative ordinance before incurring the expense of an election to consider a potentially invalid law. The courts have determined that a pre-election challenge is appropriate (under a more demanding standard of judicial review) when an initiative is facially illegal. The California Court of Appeals lays out a compelling argument for pre-election challenges:
“On the question of whether it is appropriate for a court to address a preelection challenge of a proposed initiative, we observed that ‘if an initiative ordinance is invalid, no purpose is served by submitting it to the voters. The costs of an election – and of preparing the ballot materials necessary for each measure – are far from insignificant.’
“Proponents and opponents of a measure may both expend large sums of money during the election campaign. Frequently, the heated rhetoric of an election campaign may open permanent rifts in a community. That the people’s right to directly legislate through the initiative process is to be respected and cherished does not require the useless expenditure of money and creation of emotional community divisions concerning a measure which is for any reason legally invalid.” (City of Riverside v. Stansbury (2007))
The initiative power is not absolute. The California Constitution and case law clearly place restrictions on the initiative power. A local initiative may not conflict with state legislation, may not impair contracts, may not impair essential governmental functions, may not violate individual rights protected by the state and federal Constitutions, and the list goes on. AB 2338 seeks to place any measure, regardless of its validity, before the electorate and incur the political, social, and financial expenses associated with a post-election challenge. We respectfully disagree with this approach.
The bill failed to pass out of the Assembly Judiciary Committee at its hearing on Tuesday, April 29. The bill is now dead.
SB 1455 (DeSaulnier) – Support
As Amended on April 9, 2014
SB 1455, by Senator Mark DeSaulnier, would give voters the choice of enacting a new library construction and renovation bond.
As the internet age began, many predicted the slow death of libraries. Much to our delight, exactly the opposite has occurred and there is a greater demand for libraries per capita than there has been in decades. Through a combination of forward thinking and circumstance, libraries have become a hub of community activity.
Libraries today serve as some residents’ only access to the high-speed internet connections that have become so critical to today’s students, entrepreneurs, artists, researchers, and job seekers. They serve as a critical “third space” for groups of like-minded and open-minded residents to gather and learn. They also still let people read books for free, which is an important service that sometimes gets taken for granted.
Given the statewide benefits libraries serve, we believe it is appropriate for voters statewide to consider a general obligation bond.
The Senate Governance and Finance Committee passed SB 1455 at its hearing on Wednesday, April 30. The vote was 4-2 with one member abstaining. The bill now moves to the Senate Appropriations Committee.