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Home My WebLink About04/04/2000, COMM - MEETING OF LCC REVENUE AND TEXATION COMMITTEE SAN JOSE, MARCH 24, 2000 ML..IING AGENDA DATE )y� ° ITEM #camurtiah' COMMUNICATION %COUNCIL ❑�,,CDD DIR RCAO VIN DIR April 4, 2000 Agenda ffACA0 ❑PIRC c, LTATT091EY ❑PVI D:-I tri 10,,:3 ❑FJL:L= ;.:.I To: Mayor Settle cit Members Ewan, Marx and Ro ed ❑IIE-' Di;,❑um U From: Ken Schwartz El PERS DIR Copies: John Dunn, FkWian, Jeff Jorgensen and Bill Statler Re: Meeting of LCC Revenue and Taxation Committee San Jose,March 24, 2000 I return from these R&T meetings wishing the entire Council could be in attendance along with administrative staff and our Planning commission as well. Given our inability to do that, I have to conclude that our policy to have Jeff watchdog what is happening in Sacramento and alerting appropriate staff to respond by preparing letters for Allen's consideration is a wise policy. Much is happening in Sacramento and the LCC's staff is working very hard to keep us advised with recommended actions;they continue to stress the importance that letters from cities have on legislators. Because of this, I want to compliment our department heads, our administrative staff Jeff and Allen for keeping up with this never-ending task As to the R&T meeting itself,the committee made"support"or"oppose" recommendations to the League's Board of Directors on approximately 30 pieces of pending legislation. We discussed two additional items of concern: (1)the Controller's Smart/Smarter Plan for Local Government finance Reform(ouch!);and(2)the California State Association of Counties(CSAC)'s Proposal for Sales Tax Reallocation being carried by Senator Alpert as SB1982. (some parts OK, some parts not OK) Should any of you like more detail on any of this, give me a buzz Now,the bigger item Our morning session was devoted to a presentation by Marianne O'Malley of the Legislative Analyst Office(LAO). Talk title: "Reconsidering AB 8: Exploring Alternative Ways to Allocate Prop Taxes." The LAO has generated 5 alternatives in response to the Legislature's 1999 declaration that the existing property tax allocation system is"seriously flawed"and stated its intent to revamp the system in order to: `11)increase taxpayer knowledge,(2)provide greater local control, and(3)correct the skewed land use incentives faced by local governments." O'Malley presented three of the five alternatives and generated considerable discussion. She made one comment that really bugged me. It went something like this: "If only local government officials would raise their own fiords(levy their own taxes)the State wouldn't have the problems we have today." This may not be an exact quotation,but this was the sense. Nevertheless,her presentation was eye opening. So much so that when she said that she would be wiUTmg to meet with groups throughout the State to discuss the LAO alternatives, I made a note that we should invite her to SLO. RECEIVED APR 0 3 2000 SLO CITY COUNCIL Page 2: Communications To this end, I recommend that we ask staffto contact Marianne O'Malley and determine if she indeed is available to come to SLO and make a presentation to us and if so determine ifthere is a mutually agreeable date and time. I would favor an evening presentation in the City-County Library to which we would extend an invitation to all of the other cities in SLO County and to the Board of Supervisors. I would want our Planning Commissioners as well as key staff in Community Development, Finance and Public Works and our economic and environmental managers to attend. I think we could all profit from hearing Ms. O'Malley. I have attached the cover page this LAO report to tweak your interest. t Reconsidering AB 8: Exploring Alternative Ways to • Allocate Property Taxes ' • � � IIIA, In Chapter 94, Statutes of 1999 (AB 676, Brewer), the Legislature de- clared the existing property tax allocation system to be "serious flawed" and stated its intent to revamp the system in order to: (1) increase taxpayer knowledge, (2) provide greater local control, and (3) correct the skewed land use incentives faced by local governments. • This report highlights five alternatives to improve local finance. ❖ Alternative 1: Set Uniform Rates. Each jurisdiction would be allocated a property tax share based on the services it provides. ❖ Alternative 11: Local Control Over ERAF. Cities and/or coun- ties would be given direct authority over the rate and allocation of a share of the property tax. ❖ Alternative 111: Property Taxes for Municipal Services and Schools.The allocation of every property's tax bill would be iden- tical—half to local municipal services and half to schools. ❖ Alternative IV Re-Balance Tax Burden. Three local revenue sources would be changed significantly in order to provide a sales tax reduction and create local control over property tax rates. ❖ Alternative V.Making Government Make Sense.The respon- sibilities of the state and local governments would be realigned to create more efficient program coordination. • The following three considerations are important in improving the chances for local finance reform: ❖ No Perfect Solution Exists. By acknowledging the tradeoffs in- herent in all reform proposals, the Legislature can determine which alternative best meets its priorities. ❖ Need for Focused Attention. The Legislature could create a joint committee charged with evaluating all reform proposals and recommending the best alternative within a specific time period. ❖ Set Aside Funds. In passing Chapter 94,the Legislature acknowl- edged the desirability of providing funding to facilitate reform. February 3, 2000 INTRODUCTION California's property owners pay over $20 bil- flawed" and states legislative intent to revamp the lion of property taxes each year. These tax rev- property tax allocation system to: enues—the third largest source of tax revenues in California—are then allocated among several ♦ Increase taxpayer knowledge of the allocation of property taxes. thousand local governments, pursuant to a com- plex state statute. While significant legislation ♦ Provide greater local control over property pertaining to the property tax allocation system tax allocation. has been enacted over the years, the allocation system is still commonly referred to as "AB 8," ♦ Give local governments greater fiscal after the bill .which first implemented the system— incentives to approve land developments Chapter 282, Statutes of 1979 (L. Greene)., other than retail developments. Over the years, the Legislature, local govern- To assist the Legislature in this effort, Chap- ments, the business community, and the public ter 94 directs the Legislative Analyst's Office have become increasingly critical of the state's (LAO) to develop alternatives for restructuring the property tax allocation system because (1) it does property tax allocation system, including one not allocate revenues in a way that reflects mod- which provides for a minimum property tax share ern needs and preferences of local communities for each county. This report is written in fulfillment and (2) it centralizes authority over local revenues of Chapter 94's requirements. in Sacramento. This report begins with an examination of the To respond to these concerns, the Legislature problems in the current property tax allocation enacted Chapter 94, Statutes of 1999 (AB 676, system and a discussion of the tensions and trade- Brewer). Chapter 94 declares that California's offs inherent in reform proposals.The report then system for allocating property taxes is "seriously discusses five alternatives for revamping the"AB 8" system and outlines a process for enacting reform. WHAT ARE THE PROBLEMS WITH THE ALLOCATION SYSTEM? As noted above, Chapter 94 highlights three rectly related to the current allocation system. specific problems with California's system of Figure 1 lists each of these problems, which are property tax allocation. In addition, we have discussed in more detail below. identified some other concerns which are indi- 2 04-04-00 04-04-04 Packets&Agendas Packet and Agenda 3807 Broad Street Annexation Pacific Bell,A&R Welding, 7y779-99 Farm Supply Annexations i Scott Lathrop Farm Supply P.O.Box 13938 675 Tank Farm Road San Luis Obispo,CA 93406-3938 P.O.Box 111 San Luis Obispo,CA 93406 Diane Fredericks RRM Design Group 3701 South Higuera San Luis Obispo,CA 93401 Final Tract Map Tract 2294 Pacjflc Bell,A&R Welding, Cannon Associates Farm Supply Annexations Attn: Dick Hefner 364 Pacific San Luis Obispo,CA 93401 David Erbstoesser Kelly Gearhart,Sr. 205 Tank Farm Road 6205 Alcantara San Luis Obispo,CA 93401 Atascadero,CA 93422 Pults&Associates Attn: Kim Hatch 3450 Broad Street,Suite 106 San Luis Obispo,CA 93401 Scianoff Tentative Subdivision Map Pacific Bell TR 4-99 Attn: Jill Viggiano 2600 Camino Ramon,Rm.3E402 San Ramon,CA 94583 Union Oil of California Stephen Scianoff Property Tax 1720 Johnson Avenue P.O.Box 7600 San Luis Obispo,CA 93401 Brea,CA 90051 Cannon and Associates Thomas Brajkovich Attn: Patti Whelen 1009 Morro Street 364 Pacific Street San Luis Obispo,CA 93401 San Luis Obispo,CA 93401