Loading...
HomeMy WebLinkAbout4/4/2001 - STAFF REPORTS (16) DATE: April 4, 2001 TO: City Council FROM: Acting City Manager AB 1007 AND AB 1137 - REQUEST FOR FORMAL OPPOSITION RECOMMENDATION: It is recommended that City Council take action in opposition to AB 1007 and AB 1137, both dealing with retroactivity of the recent property tax recalculation. SUMMARY: As a result of a property tax recalculation, the City suffered a loss of approximately $700,000 this year; the two Bills currently pending could result in retroactivity of the recalculation. BACKGROUND: Riverside County was one of four counties that were required by the State Controller to bring their property tax formula into compliance with the intent of AB 454. As a result, Palm Springs has lost approximately$700,000 annually from its tax collection. AB 1615, adopted this last year,validated the County's recalculation and provided for no retroactivity. AB 1007(Pacheco)would repeal the AB 1615 and the validation of the recalculation, thus leaving open the question of retroactivity. AB 1137 (Hollingsworth) would allocate State revenues to the County so they could pay those underpaid for the four previous years and thus, cities like Palm Springs would have an obligation to repay the State over 30 years. Attached, please find additional information on this subject. Neither Bill is good for 4ZT;777--- ALLENrmally oppose the Bills is requested. F. SMOOT Acting City Manager ATTACHMENTS: 1. Supplemental Bill Information MAR.30.2001 10:27AM INLAND EMPIRE LEG OF NO.285 P.1 FAX TRANSMITTAL 13 Pages March 29, 2001 TO: Mr. Sam Goepp, Valley Wide Park District Mr, Jerry Johnson, City Manager, City of Norco "_,'I' I P _. Mr. John Holmes, City Manager, City of Riverside LEGISLATIVE Mr. AI Smooth, Asst. City Manager, City of Palm Springs OFFICE REPRESENTING FROM: Pamela Milligan, Legislative Representative SAN BERNARDINO & RIVERSIDE COUNTIES RE: AS 1007 (Pacheco) and AS 1137 (Hollingsworth) Request for Formal Opposition Legislative Representatives John Quimby Pamela Mllligarl Attached are documents explaining the Riverside County Board of Jim Wiltshire Supervisors opposition to AS 1007 and AS 1137. 1 am sure that you folks are very aware of these measures and the fiscal impact they would have on your jurisdictions should they be enacted into law. I am requesting that you join the County in opposing this legislation and help us ensure the bills remain in the Assembly Local Government Committee on April 1 Sth. In addition to letters of opposition, if any member of your organization or your lobbyist would be willing to join Dan Rodriguez of the Jurupa Park District and me testify before the Assembly Local Government Committee in opposition to these measures, your participation would be greatly appreciated. After reviewing this information, please call me at (916) 552-7979. Thank you for your consideration. acra ent , 9 514 p Iq 925 Sacramento,U 95516 Zillie Tel: (916)552-7979 Fax:(916)441-1365 MAR.30.2001 10:28RM INLAND EMPIRE LEG OF NO.285 P.3 { Marr. �aq' 2001 LEGISLATIVE ANALYSIS BILL NUMBER: Assembly Bill 1137 AUTIIOR: Assembly Member Dennis Hollingsworth PRESENT LAW: Existing property tax law requires the County Auditor in each fiscal year to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures. In 1987, the Legislature enacted AB 454 (Cb.921), which changed the methodology for allocating unitary property tax. The State Controller's Office provided no guidance or standard procedures for implementing this new law. Monterey, Riverside, Santa Clara, and Ventura Counties all implemented a similar allocation formula based on the traditional AB 8 allocation formula. The State Controller's Office recognized a conflict between the language of AB 454 and the intent of the law and has persuaded these counties to amend their formulas to be aligned with the intent of AB 454. Each of the four counties are in different stages of amending their allocation methodologies. Last year, AB 1615 validated the property tax formula for Riverside County through Fiscal Year 1999/00 and thereafter requires the County to use an amended formula agreed to by the State Controller. PROPOSED LAW; AB 1137 amends the provisions of AB 1615 and would instead: • Validate the property tax allocation formula through FY 1995/96; 11 #43 MAR.30.2001 10:28AM INLAND EMPIRE LEG OF NO.285 P.4 Legislative Analysis Assembly Bill 1137 Page 2 • Require the State to allocate to the County revenue to pay taxing entities that would have received more property taxes for FYs 1996/97 through 1999/00 if the amended formula had been in place. • Establish a mechanism for taxing entities that were overpaid taxes for FYs 1996/97 through 1999/00 if the amended formula had been in place to pay back their share of the State loan to the County over a 30-year period. • Requires the State to loan Riverside County an unspecified amount to pay the City of Murrieta property taxes they would have received for FYs 1990/9) through 1999/00 if the amended formula had been in place. The County would solely be•responsible to pay this amount back to the State General Fund over a 30-year period. RECOMMENDATION_ OPPOSE DISCUSSION: Allocating property tax revenue is an excruciatingly complex process involving many computations, and statutory interpretations. This situation is compounded by a historical lack of guidance and procedures by the State Controller's Office. Moreover, infrequent audits exacerbate the situation by allowing inconsistencies and/or interpretation problems to go unnoticed for years. When allocation errors are discovered the legislative process is commonly used to remedy the situation. After many years of debating the State Controller on the allocation method used in Riverside County, the Auditor- Controller agreed to amend the County's property tax allocation formula. It was recognized that retroactive implementation of the amended formula would create huge burdens for jurisdictions; specifically, if jurisdictions that received too much tax revenue under the old formula were required to pay this revenue to jurisdictions that were determined to have received less revenue under the amended formula, then huge fiscal burdens could be created for these entities. The complexity of shifting revenue among 124 taxing entities makes the task nearly impassible. AB 1615 (Ch. 604, Stats. 2000) validated the County's historical property tax formula through FY 1999/2000 making any amendment to the formula prospective only. rZ � MAR.30.2001 10:28AM INLAND EMPIRE LEG OF NO.285 P.5 Legislative Analysis Assembly Bill 1137 Page 3 A small number of cities are unhappy with the validation contained in AB 1615 and have requested the County compensate their jurisdictions based on the amended allocation formula for past years. This position does not consider the following: 1. The property tax formula used by the Auditor- Controller was "legally" correct: and met the requirements of the law. The Auditor-Controller's agreement to amend the formula for consistency with legislative intent does not negate the fact that the historical formula was legal and valid. 2. The County is only one of many taxing entities that benefited under the historical formula. Any proposed solution should consider the fiscal impact of lost revenue on these entities—it appears inappropriate to solve one jurisdictions fiscal problem by creating fiscal problems for other jurisdictions. 3. The additional revenue received by the County was used enhance countywide services (e.g, foster care, juvenile justice, health and welfare, district attorney, probation, etc), All jurisdictions benefit from these enhanced services. It would be almost impossible to quantify these services and benefits, but unacceptable to ignore that they were provided. 4. Currently, the amended property tax formula has been calculated for FY 1999/00 only. A common misperception is to multiply this amount by sixteen (the number of years the historical formula was used) to estimate revenue not received. This snapshot in time cannot be grossly applied to past years. The property tax allocation formula has been modified many times over the past sixteen years. Each modification takes into account many factors such as boundary changes and assessed valuations. The Auditor-Controller has requested guidance from the State Controller on this issue and is currently awaiting a reply. The final calculations will likely result in quantities that differ drastically from multiplying last year's adjustment over the past sixteen years. 5. In the absence of AB 1615, cities had the option of suing the County and having their grievances addressed 12A MAR.30.2001 10:28AM INLAND EMPIRE LEG OF NO.285 P.6 Legislative Analysis Assembly Bill 1137 Page 4 in court. Five cities (Murrieta, Lake Elsinore, Corona, Moreno valley, and Temecula) filed lawsuits against the County before the enactment of AB 1615. The lawsuits, that seek more than $18 million in back property tax, allege fraud and breach of duty and seek repayment from the County with interest. The issue will be heard in San Bernardino County Superior Court. In effect, the cities with grievances have pursued the legal course of action that existed before AB 1615 became law. Any subsequent legislation unnecessarily interferes with this litigation. AB 1615 was necessary to bring Riverside County's property tax allocation formula in compliance with new guidance from the State Controller's Office and to move forward. Retroactive payment to jurisdictions claiming they are owed more is unworkable and potentially devastating to numerous taxing entities_ Validation of allocation errors and prospective correction is not a perfect solution, but it is a solution the State Legislature has historically approved as the least damaging. F,JSCAL EFFECT: If the State Controller determined a methodology for retroactively applying the amended formula to prior year property tax allocations, this bill could potentially cost Riverside County nearly $ 8 million. ORGANIZATION POSITIONS: The following organizations are on record in support of the measure: 1) City of Murrieta There is no known opposition to the measure at this time_ MAR.30.2001 10:27AM INLAND EMPIRE LEG OF NO.285 P.2 SUBMITTAL TO THE BOARD OF SUPERVISORS „ 4 COUNTY OF, IERSIDE,STATE OF CALIFORNIA FROM: EXECUTIVE OFFICE SUBMITTAL DATE: March 20, 2001 tY R Yo SUBJECT: Position on Assembly Bill 1137 (Hollingsworth) RECOMMENDED MOTION: That the Board of Supervisors oppose Assembly Bill 1137 and direct the Executive Office and the Board's Sacramento representative to further the Board's position. BACKGROUND: Last year, AS 1615 (Longville) validated the County Auditor's property tax allocation formula through FY 1999100 and thereafter required the County to use an amended formula. Although the former formula was legal and valid, the State Controller recognized a conflict between the language of the implementing legislation, AB 454 of 1987, and its intent. Four counties, including Riverside, using legally valid formulas based on traditional (AS 81 allocation methodology were persuaded to amend their formulas to reflect the intent of AB 454. AS 1737 would amend the provisions of AS 1615 and instead validate the former formula through FY 1995/96. In addition, the bill requires the State to allocate revenue to the County to pay entities that would have received more revenue in the past had the amended formula been in place; and establish,a mechanism for overpaid taxing entities to payback their share of the loan over 30 years, The City of Murrieta, under the bill, would be paid the amount of property taxes they would have received had the amended formula been in place for FYS 1990191 through 1999100. AS 1137 makes the County solely responsible for repaying this portion of the loan, The County is only one of many taxing entities that benefited under the former formula, It is inappropriate to craft a solution that fixes one entity without considering the fiscal impact of all entities, including those receiving less under gthe amended formula, FINANCIAL DATA: N/A Barbara Dunmore, Principal Management Analyst CURRENT YEAR COST S ANNUAL COST $ NET COUNTY COST $ IN CURRENT YEAR BUDGET: YES/ NO/ BUDGET ADJUSTMENT: YES/ NO/ FOR FY: 'o 'q SOURCE OF FUNDS: o_ a C.E.O. RECOMMENDATION: APPROVE LL 08 N a � / r✓ ZLuW O U U County Executive Officer Signature L W ma� N c u MINUTES OF THE BOARD OF SUPERVISORS CCLU F a 9 o jZ On motion of Supervisor Tavaglione, seconded by Supervisor Buster and du1- d It E � U.WAS ORDERED that the above matter is approved as recommended. w<Lu a E —0Z a co p Ayes: Tavaglione, Venable and Mullen i a tL w > Noes: Buster Gerald A. Maloney 00 Absent: Wilson Clerk o tl e B and ¢� Date: March 20 2001 By: Q o CC 0 xc: E.O.,Co. ep.,Auditor, Treasurer Deputy z \\Prev, Agn. ref. Dist. ALL AGENDA NO. 0A ; FORM 11 (Ray. 8196) 2A7 y MAR.30.2001 10:29AM INLAND EMPIRE LEG OF NO.285 P.7 SUBMITTAL TO THE BOARD OF SUPERVISORS COUNTY OF ''VERSIDE,STATE OF CALIFORNIA FROM: EXECUTIVE OFFICE SUBMITTAL DATE: March 20, 2001 n SUBJECT: Position on Assembly Bill 1007 (Pacheco) RECOMMENDED MOTION: That the Board of Supervisors oppose Assembly Bill 1007 and direct the Executive Office and the Board's Sacramento representative to further the Board's direction. BACKGROUND: Last year, AS 1615 (Longville) validated the County Auditor's property tax allocation formula through FY 1999/00 and thereafter required the County to use an amended formula. Although the former formula was legal and valid, the State Controller recognized a conflict between the language of the implementing legislation, AB 454 of 1987, and its intent. Four counties, including Riverside, using legally valid formulas based on traditional (AB 8) allocation methodology were persuaded to amend their formulas to reflect the intent of AS 454. AS 1007 would repeal the provision of AS 1615 thereby invalidating the property tax allocation formula used through Fiscal Year 1999/00. Prior to the enactment of AS 1615, five cities pursued a legal course of action to address their grievances by filing lawsuits against the County. The lawsuits, seeking more than $18 million in repayment from the County with interest, allege fraud and breach of duty. These cities pursued an option that existed for all jurisdictions before AS 1615 became law. Any subsequent legislation unnecessarily interferes with this litigation. . /yin/ /( aJ Barbara Dunmore FINANCIAL DATA: N/A Principal Management Analyst CURRENT YEAR COST $ ANNUAL COST $ NET COUNTY COST $ IN CURRENT YEAR BUDGET: YES/ NO/ BUDGET ADJUSTMENT: YES/ NO/ FOR FY: o o SOURCE OF FUNDS: as C,E.O. RECOMMENDATION: APPROVE U CJ County Executive officer Signature � ) ❑ o a MINUTES OF TIDE BOARD OF SUPERVISORS v On motion of Supervisor Tavaglione, seconded by Supervisor Buster and duly carried by E ° unanimous vote, IT WAS ORDERED that the above matter is approved as recommended. U O N 0 m Ayes: Buster,Tavaglione, Venable and Mullen Noes: None Gerald A. Maloney r x Absent: Wilson Clerk o and ro Date: March 20 2001 By: nn0ep a Prev. AN: ref. E.O., Co.�tep,,�sdita�,LTreasurer AGENDAR&ty FARM 11 (Roy. 8/96) �, MAR.20.2001 10:29AM INLAND EMPIRE LEG OF NO.285 P.8 1k J � t J �jq Y 9, 154 2001 L,EGISLATTVE ANALYSIS BILL N( NMER: Assembly Bill 1007 AUTHOR: Assembly Member Rod Pacheco PRESENT LAW: Existing property tax law requires the County Auditor in each fiscal year to allocate property tax revenue to local jurisdictions in accordance with specified formulas and procedures. In 1987, the Legislature enacted AB 454 (Ch.921), which changed the methodology for allocating unitary property tax. The State Controller's Office provided no guidance or standard procedures for implementing this new law. Monterey, Riverside, Santa Clara, and Ventura Counties all implemented a similar allocation formula based on the traditional AB 8 allocation formula, The State Controller's Office recognized a conflict between the language of AB 454 and the intent of the law and has persuaded these counties to amend their formulas,to be aligned with the intent of AB 454. Each of the four counties are in different stages of amending their allocation methodologies. Last year, AB 1615 validated the property tax formula for Riverside County through Fiscal Year 1999/00 and thereafter requires the County to use an amended formula agreed to by the State Contfoller, PROPOSED LAW: Assembly Bill 1007 would repeal the provisions of AB 1615 thereby invalidating the property tax allocation formula used through Fiscal Year 1999-2000. RECOMMENDATION: OPPOSE / :? Al MAR.30.2001 10:29AM INLAND EMPIRE LEG OF NO.285 P.9 1-cgislative Analysis Assembly Bill 1007 Page 2 DISCUSSION: Allocating property tax revenue is an excruciatingly complex process involving many computations and statutory interpretations, This situation is compounded by a historical lack of guidance and procedures by the State Controller's Office. Moreover, infrequent" audits exacerbate the situation by allowing inconsistencies and/or interpretation problems to go unnoticed for years. When allocation errors are discovered the legislative process is commonly used to remedy the situation. After marry years of debating the State Controller on the allocation method used in Riverside County, the Auditor- Controller agreed to amend the County's property tax allocation formula, It was recognized that retroactive implementation of the amended formula would create huge burdens for jurisdictions; specifically, if jurisdictions that received too much tax revenue under the old formula were required to pay this revenue to jurisdictions that were determined to have received less revenue under the amended formula, then huge fiscal burdens could be created for these entities. The complexity of shifting revenue among 124 taxing entities makes the task nearly impossible. AB 1615 (Ch. 604, Stats. 2000) validated the County's historical property tax formula through TY 1999/2000 making any'' amendment to the formula prospective only. A small number of cities are unhappy with the validation contained in AB 1615 and have requested the County compensate their jurisdictions based on the amended allocation formula for past years. This position does not consider the following: 1, The property tax formula used by the Auditor- Controller was "legally" correct and met the requirements of the law. The Auditor-Controller's agreement to amend the formula for consistency with legislative intent does not negate the fact that the historical formula was legal and valid. 2, The County is only one of many taxing entities that benefited under the historical formula. Any proposed solution should consider the fiscal impact of lost revenue on these entities—it appears inappropriate to J.V ID MAR.30.2001 10:30AM INLAND EMPIRE LEG OF NO.285 P.10 Legislative Analysis Assembly Bill 1007 Page 3 solve one jurisdictions fiscal problem by creating fiscal problems for other jurisdictions. 3. The additional revenue received by the County was used enhance countywide services (e.g. foster care, juvenile justice, health and welfare, district attorney, probation, etc). All jurisdictions benefit from these enhanced services, It would be almost impossible to quantify these services and benefits, but unacceptable to ignore that they were provided. 4_ Currently, the amended property tax formula has been calculated for FY 1999100 only. A common misperception is to multiply this amount by sixteen (the number of years the historical formula was used) to estimate revenue not received. This snapshot in time cannot be grossly applied to past years. The property tax allocation formula has been modified many times over the past sixteen years. Each modification takes into account many factors such as boundary changes and assessed valuations. The Auditor-Controller has requested guidance from the State Controller,on this issue and is currently awaiting a reply. The final calculations will likely result in quantities that differ drastically from multiplying last year's adjustment over the past sixteen years. 5. In the absence of AB 1615, cities had the option of suing the County and having their grievances addressed in court. Five cities (Murrieta, Lake Elsinore, Corona, Moreno valley, and Temecula) fled lawsuits against the County before the enactment of AB 1615. The lawsuits, that seek more than $18 million in back property tax, allege fraud and breach of duty and seek repayment from the County with interest. The issue will be heard in San Bernardino County Superior Court. In effect, the cities with grievances have pursued the legal course of action that existed before AB 1615 became law, Any subsequent legislation unnecessarily interferes with this litigation. AB 1615 was necessary—to bring Riverside County's property tax allocation formula in compliance with new guidance from the State Controller's Office and to move forward_ Retroactive payment to jurisdictions claiming they are owed more is unworkable and potentially IJA // MAR.30.2001 10:30AM INLAND EMPIRE LEG OF NO.285 P. 11 Legislative Analysis Assembly Bill 1007 Page 4 devastating to numerous taxing entities. Validation of allocation errors and prospective correction is not a perfect solution, but it is a solution the State Legislature has historically approved as the least damaging. FISCAL EFFECT: Assembly Bill 1007, if enacted, would allow additional taxing entities to file lawsuits against the County. If all taxing entities (approximately 280) were successful and awards were based on the amended formula being in place for the past 16 years, Riverside County could potentially lose $38 million. ORGANIZATION POSITIONS: There is known support or opposition for this measure. MAR.30.2001 10:30AM INLAND EMPIRE LEG OF NO.285 P.12 March 29, 2001 TO: Sam Goepp, Jerry Johnson, John Holmes, Al Smooth FROM: Pamela Milligan j RE: Assembly Local Government Committee Members The resolution opposing AB 1137/AB 1007 should be sent to: The Honorable Rod Pacheco LEGISLATIVE Member, California State Assembly OFFICE State Capitol, Room 4116 REPRESENTING Sacramento, CA 95814 SAN BERNARDINO & RIVERSIDE COUNTIES The Honorable Dennis Hollingsworth Member, California State Assembly Legislative State Capitol, Room 3098 Representatives Sacramento, CA 95814 )ohn Quimby Pamela Milligan Jim Wiltshire The Honorable Patricia Wiggins Chair, Assembly Local Government Committee State Capitol, Room 4016 Sacramento, CA 95814 The Honorable Simon Salinas Member, Assembly Local Government Committee State Capitol, Room 2175 Sacramento, CA 95814 The Honorable David Cogdill Member, Assembly Local Government Committee State Capitol, Room 4208 Sacramento, CA 95814 The Honorable Ellen Corbett Member, Assembly Local Government Committee State Capitol, Room 4126 Sacramento, CA 95814 The Honorable Lynn Daucher Member, Assembly Local Government Committee State Capitol, Room 2111 Sacramento, CA 95814 The Honorable Manny Diaz Member, Assembly Local Government Committee State Capitol, Room 2170 Sacramento, CA 95814 1 127 11th St..Ste. Sao-amrn 95814to,CA 95814 Tel:(916)552-7979 Aft Far.(916)441-1365 MAR.30.2001 10:30AM INLAND EMPIRE LEG OF NO.285 P.13 The Honorable Tom Harmon Member, Assembly Local Government Committee State Capitol, Room 5158 Sacramento, CA 95814 The Honorable Jay Le Suer Member, Assembly Local Government Committee State Capitol, Room 2016 Sacramento, CA 95814 The Honorable Gloria Negrete-McLeod Member, Assembly Local Government Committee State Capitol, Room 25175 Sacramento, CA 95814 The Honorable Fran Pavley Member, Assembly Local Government Committee State Capitol, Room 5144 Sacramento, CA 95814 PALM 10 U City of Palm Springs ti Office of the Mayor 3200 Tahgma Canyon Way • Palm Springs,California 92262 TEL(760)323-8200 • PAX(760)323-8207 •TDD(760)864-9527 April 4, 2001 The Honorable John Longville, Chairman Assembly Local Government Committee P. O. Box 942849 Sacramento, CA 94249-0001 Dear Chairman Longville: Re: Opposition to AB 1007 and AB 1137 On behalf of the City Council of the City of Palm Springs,I urge your strong opposition to AB 1007 and AB 1137,which raise an issue that was addressed by the Legislature last year by AB 1615. AB 1615 had validated the Riverside County Auditor's property tax allocation formula through fiscal year 1999-2000 as a means of resolving a conflict between the language of the implementing legislation, AB 454, adopted in 1987, and its intent. Four counties, using legally valid formulas, were persuaded to change their allocation formulas to reflect the intent of AB 454 for periods following fiscal year 1999-2000. AB 1615 resolved a complex problem with a realistic solution. Since the former formula was legal and valid,even though it has been changed for the 2000-01 fiscal year,we believe it is inappropriate to pit taxing entities against each other into the future over these past issues, as AB 1007 and AB 1137 would do. Again, please oppose AB 1007 and AB 1137. Sincerely, William G. Kleindienst Mayor cc: City Council WGK:mme Post Office Box 2743 • Palm Springs, California 92263-2743