BILL ANALYSIS Ó AB 654 Page 1 Date of Hearing: May 13, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 654 (Brown) - As Amended April 22, 2015 ----------------------------------------------------------------- |Policy |Housing and Community |Vote:|6 - 0 | |Committee: |Development | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | |Local Government | |9 - 0 | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: Yes SUMMARY: This bill prohibits a county auditor from allocating to the Redevelopment Property Tax Trust Fund (RPTTF), except as specified, revenues derived from a property tax rate approved by AB 654 Page 2 voters in a city, county, or special district, to pay for the State Water Project. FISCAL EFFECT: Significant General Fund costs, likely in excess of $5 million annually, beginning in 2016-17, due to the diversion of revenues from State Water Project tax rates from the RPTTF to the city, county, or special district that imposed the tax rate. Any amount of property tax revenue diverted away from schools would typically result in corresponding General Fund expenditures to meet the minimum funding guarantees of Proposition 98. On average, schools receive 50% of property tax revenues in each county. COMMENTS: 1)Purpose. According to the author, "The measure would remedy the situation in which the revenues derived from voter-approved property tax overrides are being misallocated in the course of the RDA dissolution process in the County of San Bernardino. Currently the San Bernardino County Auditor- Controller is allocating the residual balances from each former RDA's Redevelopment Property Tax Trust Fund to taxing entities based on each agency's share of the 1% County General Tax levy without taking into account any specific debt service override tax. This results in Valley District's Debt Service Tax Override proceeds that are not needed for the payment of approved former RDA expenses to be allocated out to all taxing entities ignoring that a certain portion of that residual balance was derived directly from Valley District's tax override rate." AB 654 Page 3 2)Background. In the 1960s, the voters of San Bernardino County approved a tax increase to fund State Water Projects in the county. After the creation of redevelopment, the Valley Municipal Water District (Valley District) entered into pass through agreements with the RDAs to receive some or all of the property taxes they would have received pre-redevelopment. According to Valley District, they had 23 negotiated agreements with ten RDAs for project areas throughout its service area. Although Valley District is receiving a portion of the payment, Valley District indicates that it is not receiving its entire pass through payment and is entitled to an additional $10 million which is being distributed by the San Bernardino county-auditor to other taxing entities out of the residual balance remaining after all the obligations of the RDA are paid. Local water agencies can levy ad valorem rates above the 1% rate to pay their annual obligations for water deliveries from the State Water Project. State courts have concluded that such costs were voter-approved debt because voters approved the construction, operation, and maintenance of the State Water Project in 1960. As a result, most water agencies that have contracts with the State Water Project levy a voter-approved debt rate. It is not clear how many, in addition to Valley District, have pass through agreements with former RDAs and could qualify for additional tax revenues under this bill. 3)Amendment. The bill needs an amendment to fill in the blank date by which a county auditor-controller must deem as correct AB 654 Page 4 the allocation of revenues derived from the imposition of the State Water Project property tax rate. The author has indicated plans to add the date July 1, "2015." 4)Related Legislation. AB 1009 (Garcia), pending in this Committee, authorizes a city or county that levies a property tax rate, approved by the voters, to make payments in support of pension programs and levied in addition to the general property tax rate, to make a request to an oversight board to prohibit revenues derived from that property tax rate from being deposited into a Redevelopment Property Tax Fund. This bill takes the same approach as AB 1009, but instead, deals with property tax override rates approved by voters in support of the State Water Project. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081