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AGENDA REPORT
DATE:
May 14, 2001
TO:
Honorable Mayor and City Council
FROM:
John B. Bahorski, City Manager
SUBJECT:
SB 810 - Property Tax Retainment
SUMMARY OF REQUEST:
That Council support SB 810 (Ackerman) and authorize Mayor's signature on attached
comment letter.
Orange County Transportation Authority (OCTA) is sponsoring SB 810 to reinstate to
single -county transit districts full retention of their property tax. As a result of the
property tax shift that occurred in 1992193, the OCTA bus system has lost more than $28
million of revenue that local voters authorized for Orange County Transit District.
OCTA indicates the demand for and the need to fund comprehensive bus service is
greater than ever. OCTA topped the nation in ridership growth among major transit
operators during 1997 with a 9.9% increase. In subsequent years, the increase was an
additional 14 %.
FISCAL IMPACT:
None
RECOMMENDATION:
That Council support adoption of SB 810 and authorize Mayor's signature on attached
letter.
Supporting Documents:
A) Letter of Support
B) Text of SB 810
Agenda Item
May 15, 2001
The Honorable Dick Ackerman
California State Senate
Capitol Building, Room 4066
Sacramento, California 95814
Dear Senator Ackerman
The City of Seal Beach is supporting SB 810 to restore tax equity among transit districts. For
nine years, transit districts in the counties of Orange, Marin, San Joaquin and Santa Barbara have
been treated differently with respect to Educational Revenue Augmentation Fund (ERAF)
property tax redirection that other counties.
Our community relies upon the Orange County Transportation Authority to provide safe,
convenient and reliable bus service for our residents and employees of our businesses, and to
meet the special needs of persons with disabilities. The continued loss of funding impacts the
basic levels of public transportation service.
The City of Seal Beach urges the passage of SB 810 and requests that you forward this letter of
support to the Senate Committee on Appropriations.
�Si/ncc�erely,
Si
!- a &OA&
Patricia E. Camp ell
Mayor, City of Seal Beach
SENATE BILL No. 810
Introduced by Senator Ackerman
(Principal coauthor: Senator Dunn)
(Coauthors: Senators Burton, Johnson, Machado, Morrow, and
O'Connell)
(Coauthors: Assembly Members Bates, Bill Campbell, John Campbell,
Correa, Daucher, Hannan, Jackson, Kelley, Maddox, Maldonado,
Matthews, Nation, and Pescetti)
February 23, 2001
An act to add Section 97.27 to the Revenue and Taxation Code,
relating to local government finance, making an appropriation therefor,
and declaring the urgency thereof, to take effect immediately.
LEGISLATIVE COUNSELS DIGEST
SB 810, as introduced, Ackerman. Property tax revenue
allocations: property tax revenue shifts: single - county transit districts.
Existing law requires the county auditor, in each fiscal year, to
allocate property tax revenues to local jurisdictions in accordance with
specified formulas and procedures, and generally requires that each
jurisdiction be allocated an amount equal to the total of the amount of
revenue allocated to that jurisdiction in the prior fiscal year, subject to
certain modifications, and that jurisdiction's portion of the annual tax
increment, as defined. Existing property tax law modifies these
provisions by requiring that, for purposes of determining property tax
revenue allocations in each county for the 1992 -93 fiscal year, the
amounts of property tax revenue deemed allocated in the prior fiscal
year to special districts, including single - county transit districts, be
reduced in accordance with a specified percentage. Existing law
requires that the revenues not allocated to the special districts w a result
of these reductions be transferred to the Educational Revenue
99
SB 810 —2—
Augmentation Fund in that county for allocation to school districts,
community college districts, and the county office of education.
This bill would, as provided, for the 2001 -02 fiscal year and each
fiscal year thereafter, exclude single-county transit districts from these
reduction and transfer previsions.
The bill would state the intent of the Legislature in enacting the bill's
provisions.
The bill would appropriate $630,000 from the General Fund to the
Department of Finance for allocation to community college districts for
the reimbursement of revenue losses incurred by those districts in the
2001 -02 fiscal year as a result of this bill.
This bill would declare that it is to take effect immediately as an
urgency statute.
Vote: 2/3. Appropriation: yes. Fiscal committee: yes. State - mandated
local program: no.
The people of the State of California do enact as follows:
1 SECTION 1. Section 97.27 is added to the Revenue and
2 Taxation Code, to read:
3 97.27. (a) (1) Notwithstanding any other provision of this
4 article, for the 2001 -02 fiscal year and each fiscal year thereafter,
5 the auditor shall allocate ad valorem property tax revenues to a
6 transit district that is located entirely within a single county in
7 those amounts that would be determined if no reduction had been
8 made with respect to that district pursuant to subdivision (c) of
9 Section 97.2 for the 1992 -93 fiscal year.
10 (2) For purposes of the allocation of ad valorem property tax
11 revenues in the 2001 -02 fiscal year and each fiscal year thereafter,
12 the implementation of paragraph (1) does not require any increase
13 in the amount of the reduction calculated for any local agency for
14 the 1992 -93 fiscal year pursuant to Section 97.2.
15 (b) The Legislature finds that transit districts located entirely
16 within a single county did not benefit from the allocations from the
17 Special District Augmentation Fund authorized under former
18 Section 98.6, as that section read on June 15, 1993. Therefore, it
19 is the intent of the Legislature in enacting this section to ensure that
20 each transit district, whether located within multiple counties or
21 entirely within a single county, is treated equally in the allocation
-3— SB 810
1 of those revenues essential to the preservation of adequate and
2 quality public services.
3 SEC. 2. The sum of six hundred thirty thousand dollars
4 ($630,000) is hereby appropriated from the General Fund to the
5 Department of Finance for allocation to community college
6 districts to reimburse those districts for any revenue losses
7 incurred by those districts for the 2001 -02 fiscal year as a result
8 of this act. If the total amount of losses subject to reimbursement
9 under this section is less than six hundred thirty thousand dollars
10 ($630,000), the Department of Finance shall, after making all
11 required reimbursements, transfer the excess of six hundred thirty
12 thousand dollars ($630,000) over the total amount of those
13 reimbursements to the Treasurer, for deposit into the General
14 Fund.
15 SEC. 3. This act is an urgency statute necessary for the
16 immediate preservation of the public peace, health, or safety
17 within the meaning of Article IV of the Constitution and shall go
18 into immediate effect. The facts constituting the necessity are:
19 In order to provide timely and essential funding for transit
20 districts, located throughout the state, that are suffering from
21 severe funding shortages to the detriment of basic levels of public
22 transportation services, it is necessary that this act take effect
23 immediately.
n
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OCTA
BOARD OF DIRECTORS
April 10, 2001
Mkbeel WaM
Chairmen
Patricia Campbell
Torlos,ouer
V'I,.chaime"
Mayor
Artnu, C. Brow"
City of Seal Beach
Dial°'
211 8th St.
Sa.h t. Call
Seal Beach, CA 90740
DIIOw
lao.Cook
Dear Mayor Campbell:
D4CC(ol
rm ."a"
Dlwtol
Once again, the Orange County Transportation Authority (OCTA) is sponsoring
Miguelp'Fuo
a bill, SB 810, to reinstate to single- county transit districts full retention of their
DI.tor
property tax. The bill author is Senator Dick Ackerman of Fullerton. The 19 co-
Jam. W Sine
authors of this bill include the entire delegations of the four affected counties
Dbemo,
and Senate President Pro Tern John Burton. The bill already has unanimously
cnanesv smllh
passed Senate Local Government Committee.
oirvmr
Tho.W M.
A predecessor bill made it to the last committee only to die last session. We
have received encouragement that this time our bill may be considered by the
S n19rt,.ro,
Governor in company with other Educational Revenue Augmentation Fund
Cy
(ERAF) equity reforms. We look forward to adding your city to our long list of
"IhIAP CoAd
Auamete
previous supporters. We hope you will take an advocacy position and send a
Shirley McCracken
support letter to Senator Ackerman on behalf of SB 810. The demand for, and
Allamele
our need to fund, comprehensive bus service is greater than ever.
Gf WT Winlerbobom
Altemato
Enclosed is a sample letter in support of SB 810, and our bill analysis. If you
ae,N0,I.
have any questions or suggestions, please contact Thomas Fortune, Principal
Bxoni uMembe;
Government Relations Specialist, at (714) 560 -5583.
Sincerely,
— _Z_ 1 �1--?
Michael Ward
Chairman
ILVA
Attachments: Sample support letter for SB 810
SB 810 bill analysis
Omnge County Trans nafion Authonty
550 South Main StreetI P.O. Box 14184 10range /Calihomia 92863 - 15841(114)560- OCTA(6282)
BILL: SB 810 (Dick Ackerman, R- Fullerton)
Introduced February 23, 2001
SUBJECT: Provides that Single -County Transit Districts Retain Their Property
Taxes Like Multi -County Districts
STATUS: Passed Senate Local Government Committee 5 -0 on April 4, 2001
Pending in Senate Appropriations Committee
SUMMARY AS OF APRIL 6,2001:
Beginning with Fiscal Year 2001 -02, this bill would discontinue annual redirection
of 40 percent of single -county transit districts' property tax revenues to County
Educational Revenue Augmentation Funds (ERAFs). At present, that amounts to
$4.5 million per year.
Not all single - county transit districts within the state receive property tax — only
those in which the property tax share was locally authorized. Those that do and
are affected by the bill are: the Orange County Transit District, which is a legal
entity of the Orange County Transportation Authority (OCTA), the Santa Barbara
Metropolitan Transit District, the San Joaquin Regional Transit District, and the
Marin County Transit District.
The Bay Area Rapid Transit (BART) and Alameda- Contra Costa Transit (AC
Transit) districts, the other two transit districts in the state which receive property
tax, are exempted from the property tax redirection because they are multi -
county districts.
The bill expresses the intent of the Legislature "to ensure that each transit
district, whether located within multiple counties or entirely within a single county,
is treated equally in the allocation of those revenues essential to the preservation
of adequate and quality public services." The bill states as a legislative finding
that single -county transit districts did not benefit from Special District
Augmentation Funds, which many special districts of other types did for the 14
years between the enactment of Proposition 13, limiting property tax rates, in
1978, and the advent of ERAF in 1992.
SB 810 guarantees that removal of single -county transit districts from the
property tax redirection to ERAFs would not result in an increase for any other
local general purpose government or special district.
Potential loss of funds to kindergarten through 12th grade school districts and
County Departments of Education as a result of this bill would be by state law
backfilled with apportionments from the State General Fund. State aid would not
automatically reimburse Community College District revenue in the first year, but
would in subsequent years. For that reason, the bill includes a one -time
allocation of $630,000 to make community college districts whole in 2000 -01.
(The particular dollar amount, calculated in a prior year, may need to be revised
as the bill advances.)
Senator Joe Dunn is a principal co- author, and the rest of the legislative
delegations of the four affected counties, 18 others, are co- authors of SB 810.
This bill carries urgency status and, if passed by a two- thirds or greater vote of
both the Senate and Assembly and signed by the Governor, would become law
immediately. The bill states the reason for the urgency is that the transit districts
suffer from "severe funding shortages to the detriment of basic levels of public
transportation service."
EFFECTS ON ORANGE COUNTY:
As a result of the property tax shift, the OCTA bus system has lost more than $28
million of revenue that local voters authorized for Orange County Transit District
(OCTD). The loss, at a current rate of $3.7 million per year, would end with the
current fiscal year if this bill is enacted. No refund of prior losses is involved.
Benefits to the other three transit districts are of lesser amount, but significant to
their smaller operations. Historically, OCTA has contributed about 77 percent of
the four transit districts' total transfer of funds to education. Each year, the
affected amounts change based upon annual property tax roll additions and
reassessments in each county.
If BART and AC Transit were required to redirect 40 percent of their annual
property tax revenues to education, the impact to them would be about $35
million per year. This comparison shows that a disproportionate penalty was put
on the small transit districts, and particularly OCTA, in an eleventh -hour
compromise by the Legislature and the Governor to construct a 1992 -93 state
budget. The following year, with adequate time for consideration, all transit
districts were exempted, along with hospital districts and wholesale water
districts, from additional property tax redirection. That set the precedent where
the line should be drawn for special districts' involvement in ERAF. Without this
legislation to cut it off, however, the 1992 -93 tax redirection action rolls forward
year after year for OCTA and the three other transit districts.
In the case of OCTA, the transit funding loss is aggravated by the 1994 County of
Orange bankruptcy. The OCTD account of OCTA lost $29 million in unrecovered
payout settlements from the bankrupt Orange County Investment Pool. In
addition, OCTA loses $15 million per year for 15 years ($225 million) of
Transportation Development Act (TDA) funds normally available for transit
operations, but redirected by 1995 legislation to the County of Orange to
underwrite bankruptcy recovery bonds. The $15 million is a net annual loss; $38
million of redirected TDA funds are offset by $23 million of gasoline tax funds
directed from the County of Orange to OCTA.
Nevertheless, OCTA bus service has been reconfigured and stabilized — by a
consolidation of routes, new union contracts, administrative layoffs, and fund
infusion from a commuter rail reserve and other accounts. Recovering some
ground over the past four years, OCTA has added 186 drivers and increased bus
frequency on its most heavily patronized routes, and on evenings and weekends.
The added bus service has been funded with increased revenues from the non -
diverted balance of TDA and a fare increase (by substitution of day passes for
transfers), the first since 1991.
OCTA topped the nation in ridership growth among major transit operators during
1997 with a 9.9 percent increase, according to the American Public Transit
Association. In subsequent years, the increase was an additional 14 percent,
and weekday use now tops 180,000 daily boardings. In spite of the added bus
service hours, occurrences of drivers having to pass by clusters of waiting
customers have been as high as 347 per month because buses are loaded to the
limits for standing riders. OCTA is under constant scrutiny from the Orange
County Citizens' Bus Restructuring Task Force advocating for more service.
OCTA bus routes are essential to welfare -to -work initiatives. Sixty-six percent of
Orange County's 30,000 CalWORKS clients live within one - quarter mile of an
OCTA bus stop. All 10 employment centers with high concentrations of entry-
level job opportunities are served by transit. Of the 87 job training centers in
Orange County, 67 are within one -third mile of an OCTA bus stop.
In each of the last two sessions, almost identical bills, SB 854 by Senator Jack
O'Connell, and SB 710 by Senator Dunn, have reached the Assembly
Appropriations Committee with strong member vote support, only to be held on
suspense. In 1995, an earlier version, SB fizz by Senator David Kelley, passed
the Senate and was recommended by a bipartisan Conference Committee on
ERAF adjustment bills, only to be held back by an unrelated political issue.
OCTA POSITION
SPONSOR