State Oversight

AB 506 (Wieckowski) – Neutral
Chapter No. 675, Statutes of 2011

AB 506, by Assembly Member Bob Wieckowski, was, until the final days of the legislative session, the latest iteration of the municipal bankruptcy bill that CSAC and our partners have been fighting in recent years.

Earlier versions of the bill placed significant hurdles before a local agency that required protections from the federal bankruptcy court. Specifically, local agencies in fiscal distress would have been required to first participate in a so-called “neutral evaluation” process. CSAC and our local government partners had long expressed significant concerns about the consequences of a delay in seeking relief from the federal courts. At its worst, AB 506 could have jeopardized the provision of public services in local communities.

However, AB 506 was amended in the final days of the legislative session to create a formal mediation process that counties could use prior to seeking bankruptcy protection. Local agencies continue to have the ability to have direct access to the federal court in a fiscal emergency. These amendments are substantially similar to an alternative proposal jointly offered by CSAC, the League of California Cities, the Regional Council of Rural Counties, the Urban Counties Caucus, the California Special Districts Association, and the Association of California Healthcare Districts. 

AB 187 (Lara) – Concerns
Chapter No. 451 Statutes of 2011

AB 187, by Assembly Member Ricardo Lara, authorizes the State Auditor to establish a high-risk local government agency audit program to identify, audit, and issue reports on any local government agency program that the Auditor identifies as being at high risk for the potential of waste, fraud, abuse, or mismanagement or that has major challenges associated with its economy, efficiency, or effectiveness.

AB 187 contains no specific criteria for meeting the high-risk category, which would at least provide local agencies with an understanding of the potential for audit by the State Auditor, especially since the costs of complying with an audit could be substantial.

SB 186 (Kehoe) – Neutral
Two-Year Bill

SB 186, by Senator Christine Kehoe, would give the State Controller broad authority to audit local agencies when he has a documented reason to believe that the local agency is not complying with the financial requirements in state law, grant agreements, local charters, or local ordinances.

Earlier versions of the bill, about which CSAC expressed grave concerns, would have given the Controller extraordinary power and discretion, and would have required local agencies to pay all of the Controller’s costs for the audits. Earlier versions also did not require the Controller’s reasons to be documented.

Redevelopment

SB 286 (Wright) – Concerns
Two-Year Bill

SB 286, by Senator Rod Wright, would redesign certain aspects of redevelopment law. It was introduced as an alternative to the Governor’s proposal to eliminate redevelopment agencies, and was sponsored by the California Redevelopment Association and the League of California Cities.

The bill would make a number of major changes, including excluding education funds from newly established project areas’ tax increment, limiting how much of a city can be in redevelopment, and requiring clearer short-term goals from redevelopment agencies. It would also have allowed RDAs to spend money on energy efficiency and greenhouse gas reductions, retention of manufacturing jobs, and sponsoring agency administrative expenses and overhead.

While some of the changes would tighten redevelopment law in welcome ways, CSAC had concerns with other sections. We worry about decoupling the state’s financial interest from redevelopment by excluding school property tax from their funding. We are concerned with expanding redevelopment’s goals to energy efficiency improvements and job retention, which are valid public policy goals but are not related to redevelopment.

SBX1 8 (Committee on Budget and Fiscal Review) – No Position
Vetoed

SBX1 8, by the Senate Budget Committee, would have modified the provisions of the budget that eliminated redevelopment agencies unless they provided more money for schools and other interests.

The Governor in his veto message said he thought it unwise to modify legislation that was currently pending review by the Supreme Court. The Court has said it will rule on the redevelopment lawsuits by January 15.

Among other things, SBX1 8 would have given redevelopment agencies greater flexibility to make the required payments and would have strengthened protections for the low- and moderate-housing funds left by redevelopment agencies that are eliminated.

Local Taxes

AB 1050 (Ma) – Pending
Two-Year Bill

Often, “Two-Year Bill” means that the bills has little chance of moving any further and is effectively dead. However, that is not the case for AB 1050, by Assembly Member Fiona Ma, which would establish a way to collect state and local fees and taxes on prepaid cell phones.

Currently, fees and taxes that apply to these services — including 9-1-1 fees and local utility user taxes among others — go unpaid because there is no way to bill a consumer for the fees and taxes on the services they end up using when that person has already paid for that service. AB 1050 contemplates a point-of-sale charge. CSAC has been working with the wireless phone companies, the League of Cities, the emergency number representatives, the Board of Equalization, the Public Utilities Commission and others to draft the bill in such a way that it protects local agencies’ tax authority and also collects those taxes.

ABX1 43 (Solorio) – Support
Two-Year Bill

ABX1 43, by Assembly Member Jose Solorio, would increase the VLF adjustment amount for Orange County so the law treats all of their original VLF revenues the same as it does for the other fifty-seven counties.

When the state swapped out county VLF revenues for a like amount of property tax in 2004, Orange County opted to continue the intercept program due to their outstanding bankruptcy debt. Subsequently, Orange County refinanced that debt to save money.

With the revenue stream no longer specifically pledged to that debt, there is nothing distinguishing this VLF revenue from that swapped in 2004, and the state should therefore treat the money exactly as they treated the rest of county VLF. That is, the state should swap this VLF revenue for a like amount of property taxes.

SB 653 (Steinberg) – Support
Two-Year Bill

SB 653, by Senate President pro Tem Darrell Steinberg, would grant counties new taxing authority within limits set by the Constitution. SB 653 would allow communities that are willing to pay more money for local services to do so, and do so with a revenue source that is appropriate for those communities, without forcing the same of residents in other areas. This is true local control, which counties support.

Specifically, SB 653 would allow counties and school districts to impose the following taxes: personal income, transactions and use, vehicle license fees, oil severance, and excise taxes on products such as cigarettes, alcohol, and sweetened drinks.

SB 223 (Leno) – Watch
Vetoed

SB 223, by Senator Mark Leno, would have authorized San Francisco to place a measure before voters to impose an assessment on vehicles owned by that county’s residents. Previous versions of the bill allowed any county to do so, which CSAC supported.

The Governor’s veto message states, in part: “Before we embark on a piecemeal approach for one city, we should try to fashion a broader revenue solution to our state’s fiscal crisis.”

Property Taxes

AB 1090 (Blumenfield) – Support in Concept
Chapter No. 369, Statutes of 2011

AB 1090, by Assembly Member Bob Blumenfield, allows counties, at their option, to implement the County Deferred Property Tax Program for Senior Citizens and Disabled Citizens, allowing qualified property owners to defer their property taxes until the property changes hands. The state eliminated the statewide version of the program in the February 2009 budget agreement. For more details, see this section of last week’s Bulletin.

The State Controller’s Office is would like to post web links to participating counties. Counties choosing to participate in the program can contact Linda Lingbloom at LLingbloom@sco.ca.gov.

AB 820 (Gordon) – Support
Chapter No. 207, Statutes of 2011

AB 820, by Assembly Member Rich Gordon, would require county officials to charge a sufficient fee for certificates of payment showing taxes paid.

Most requests for these certificate requests are for the current year, and easily provided. However, those that are for probate court, for subdivision maps, or from long ago can require significant research. The establishment of new fees must go through the review procedures proscribed by Government Code Section 54986 and must comply with the provisions of Proposition 26. Charging actual costs will reduce pressure on county finances.

AB 832 (Ammiano) – Support
Two-Year Bill

AB 832, by Assembly Member Tom Ammiano, would provide that business exclusions for software be granted under a clear and convincing standard. Under AB 832, if a business wishes to receive an application software exemption, they must provide assessors with the necessary data to validate their claims. Unlike other forms of property, assessors cannot independently verify the existence and value of application software. There is no market data available to assessors for specialized application software in business equipment. Application software may be highly customized, and various types of equipment can have more or less application software than others. Assessors must rely upon businesses to provide the evidence to support their claim. There is no industry price guide for application software, and it is impossible for assessors to distinguish between taxable “basic operational” programs and nontaxable “application” software without evidence from the taxpayer.

AB 865 (Nestande) – Oppose Unless Amended
Two-Year Bill

AB 865, by Assembly Member Brian Nestande, would extend by 17 years the property tax exemption for newly constructed active solar energy systems.

Counties have no quarrel with the Legislature exempting these projects, which can add significant value to nearly valueless land, from property taxes. However, AB 865 fails to reimburse local agencies for the resulting revenue loss, as provided in statute. Unilaterally using county revenue to favor these projects during times of such fiscal stress seems ill-considered. If favoring these projects is an issue of statewide concern, as passing this bill would indicate, then the state should be willing to use statewide revenues to reimburse counties for their losses, as provided by statute.

AB 902 (Alejo) – Support
Chapter No. 208, Statutes of 2011

AB 902, by Assembly Member Luis Alejo, requires county tax collectors to recover their reasonable and actual costs related to making personal contact with the owner-occupants of the proposed sale of their tax-defaulted property. It does the same for the costs of notifying parties of interest in tax-defaulted property sales.

SB 507 (DeSaulnier) – Support
Chapter No. 708, Statutes of 2011

SB 507, by Assembly Member Mark DeSaulnier, would double the time property owners have to file change in ownership statements with county assessors, and would increase the fines for filing them late.

When a property changes hands in California, the Constitution requires the county assessor to reassess the property. To that end, the new property owner must file a change in ownership statement within a certain period after the change in ownership. SB 507 would double that period from 45 days to 90. Changes of possession resulting from a death retain their longer 150-day period for filing these statements.

SB 507 also raises the cap on penalties for failing to respond to a specific request from the county assessor to file a change in ownership statement. The current cap is too often insufficient to urge compliance with the law, especially for large commercial properties.

Elections

SB 641 (Calderon) – Oppose
Two-Year Bill

Senate Bill 641, by Senator Ronald Calderon, would have allowed voters to conditionally register and provisionally vote during the fourteen days prior to an election. Currently, citizens must register before this time in order to vote in an election.

CSAC sincerely appreciates Senator Calderon’s attention to the people’s access to elections, but objected to the grave financial difficulties many counties would have faced complying with this bill in particular, especially given the Legislature’s suspension of funding for voter access mandates in this year’s budget.

AB 80 (Fong) – Support
Chapter No. 138, Statutes of 2011

AB 80, by Assembly Member Paul Fong, consolidates the presidential primary with the June statewide direct primary.

In the wake of so many states moving their primaries earlier attempting to influence presidential nominations, the two major national committees instituted new rules that penalize state parties if they hold their primaries before specified dates. What’s more, having separate elections cost several tens of millions of dollars and reduced voter participation at the non-presidential June primary to record low levels.

CSAC supports consolidating the elections for cost reasons, and supports the June date because having the primary in March would impact deadlines for local redistricting.

AB 732 (Buchanan) – Support
Chapter No. 453, Statutes of 2011

AB 732, by Assembly Member Joan Buchanan, requires the fiscal summary for statewide bond measures to include a table, and for that table to appear in the circulating title and summary and in the ballot pamphlet analysis.

The California Constitution requires voter approval for large amounts of state debt. Current law requires the Attorney General and the Legislative Analyst to prepare summaries that help voters decide whether to place items on the ballot and whether to pass them when they appear on the ballot. These summaries include fiscal effects.

AB 732 requires these summaries to include a table of the fiscal effects, which would provide an easy-to-understand source of information about the bond’s fiscal effects. It is important for voters to understand both benefits and the fiscal effects of bonds when considering them.

AB 1021 (Gordon) – Support
Vetoed

AB 1021, by Assembly Member Rich Gordon, would have required voter notification when proposed ballot measures would significantly increase net costs.

Current law requires the Attorney General and the Legislative Analyst to prepare summaries that help voters decide whether to place items on the ballot and whether to pass them when they are on the ballot. These summaries include fiscal effects. AB 1021 would have required these summaries to notify voters when a ballot measure would establish or expand a program costing more than $1 million without providing for new revenue or offsetting savings.

In his veto message, the Governor said that the measure would “add words, but not greater understanding about the financial impact of a voter initiative.”

SB 106 (Blakeslee) – Support
Two-Year Bill

SB 106, by Senator Sam Blakeslee, would have changed statute to say that the state shall pay the costs of legislative vacancy special elections.

A statute to this effect was in effect for many years up through the end of 2008. Since the beginning of 2009, counties have spent at least $20 million to fill eleven vacancies, and more vacancies will need to be filled later this year. SB 106 would cover elections held between January 1, 2009, and April 19, 2011.

SB 141 (Price) – Support
Two-Year Bill

SB 141, by Senator Curren Price, is exactly like SB 106, above, except that it does not specify a reimbursement period from January 1, 2009, to April 19, 2011.

Sales and Use Taxes

AB 155 (Calderon) – Support
Chapter No. 13, Statutes of 2011

The Governor has signed AB 155, by Assembly Member Charles Calderon, which deals with the collection of state and local use taxes, and which was significantly amended on the final day of the legislative session.

One of this year’s budget trailer bills, ABX1 28, redefined which retailers are required to collect sales and use taxes on sales to Californians, and was designed to capture sales made by internet companies like Amazon.com. Amazon filed a referendum against that bill and began collecting signatures to overturn it. Once a referendum is filed, the law in question in suspended until the referendum succeeds or fails. AB 155 then became a vehicle for circumventing the referendum, and the state started negotiating with Amazon, as widely reported in newspapers.

AB 155 now enacts the results of those negotiations. The requirement for collecting sales and use taxes return to its pre-ABX1 28 status for the time being. However, the requirement returns in about a year if Congress takes no action, or if Congress adopts a law authorizing states to collect taxes on the types of sales in question but California does not adopt it.

CSAC supports measures that increase compliance with the sales and use tax.

AB 686 (Huffman) – Support
Chapter No. 176, Statutes of 2011

AB 686, by Assembly Member Jared Huffman, allows counties and cities to set their transactions and use taxes in increments of an eighth of a percent, instead of a quarter.

Under AB 686, county and city tax increases and extensions still need to comply with all constitutional voting requirements. However, allowing local agencies to more precisely set their tax rates will give them more flexibility in matching the tax rate with a community’s specific need.

SB 516 (Correa) – Oppose Unless Amended
Two-Year Bill

SB 516, by Senator Lou Correa, would discount the value of a trade-in motorcycle from the sales price of a new motorcycle when calculating sales tax. The bill would exempt the state from reimbursing local agencies for their lost revenue.

Unilaterally using county revenue to favor these purchases during times of such fiscal stress seems ill-considered. If favoring these purchases is an issue of statewide concern, as passing this bill would indicate, then the state should be willing to use statewide revenues to reimburse counties for their losses, as provided by statute.

SB 686 (Padilla) – Oppose Unless Amended
Two-Year Bill

SB 686, by Senator Alex Padilla, would exempt from sales taxes property purchased for use in biotechnology manufacturing. It would exempt the state from reimbursing local agencies for their lost revenue.

Again, unilaterally using county revenue to favor these purchases during times of such fiscal stress seems ill-considered. If favoring these purchases is an issue of statewide concern, the state should be willing to use statewide revenues to reimburse counties for their losses, as provided by statute.

General Government

AB 33 (Jeffries) – Support
Two-Year Bill

AB 33, by Assembly Member Kevin Jeffries, would give the Governor 90 days to appoint someone to a vacancy on a county board of supervisors. If the Governor fails to do so, the bill would allow the board either to fill the vacancy by appointment, call a special election to do so, or vote to leave the seat vacant until the next regular election. Under current law, the Governor has the authority to fill supervisorial vacancies and no deadline for doing so. AB 33 is similar to last Assembly Member Jeffries AB 1671 from last year, which CSAC supported, but which Governor Schwarzenegger vetoed. This year, Mr. Jeffries bill did not make it out of the Assembly Local Government Committee, possibly for reasons unrelated to the bill’s content.

AB 328 (Smyth) – Support
Two-Year Bill

AB 328, by Assembly Member Cameron Smyth, would apply the principle of comparative fault to inverse condemnation cases, as well as Civil Code of Procedure Section 998.

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 328 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. AB 328 would specify that if the plaintiff rejects an offer and fails to obtain a more favorable judgment, the plaintiff pays the attorney fees from the time of the offer. This is not only favorable to counties, but it also helps to ease the burden on the courts.

SB 3 (Padilla) – Support
Chapter No. 695, Statutes of 2011

SB 3, by Senator Alex Padilla, extends to 2015 authority for the CPUC to use the California High-Cost Funds A and B to support telephone and broadband services in high-cost service areas, primarily rural, and to support small independent providers. It would also explicitly require contributions to the fund from Voice over Internet Protocol (VoIP) revenues.

The high-cost funds, A and B, subsidize the cost of providing telecommunication services to rural and hard-to-reach parts of the state. They are funded with surcharges on all telephone bills and help ensure that access to phone and broadband services are universal, to everyone’s benefit. This ensures that residents of rural counties and the hard-to-reach places in all counties have affordable access to the telecommunications system that is so important to our economy, our safety, and our daily lives.

SBs 191, 192, and 193 (Committee on Governance and Finance) – Support
Two-Year Bill (SBs 191 and 192)
Chapter No. 303, Statutes of 2011 (SB 193)

SB 193, by the Senate Governance and Finance Committee, will retroactively cure the minor errors and omissions that public officials make, giving investors confidence in public agencies’ securities and therefore lead to lower interest rates for state and local bonds. It does not correct fraud, corruption, or unconstitutional acts. This “validating act” is traditionally noncontroversial and receives “aye” votes from all legislators, since with their passage everyone wins.

However, when Senator Wolk presented the three validating acts earlier this year in the Assembly Local Government Committee, Vice Chair Alejo asked for amendments to all three bills. Mr. Alejo said that he was concerned about the actions taken by some redevelopment agencies in reaction to the Governor’s proposal to end redevelopment agencies. He worried that the validating acts might be used inappropriately to attempt to protect questionable asset transfers and interagency borrowing. Mr. Alejo’s amendments removed redevelopment agencies from the bills’ protections. The Assembly Local Government Committee adopted Mr. Alejo’s amendments on a 7-0 vote. In reaction, the California Redevelopment Agency and the League of California Cities withdrew its earlier support for the three bills. Because of all of this, the first validating act, SB 191, failed passage on the Assembly Floor earlier this summer. SB 192, the second validating act, did not come up for a vote since, as an urgency measure, it would have required but been unable to obtain a two-thirds vote.