9:00 Welcome/Introductions/Acknowledgment to Auditor-Controller Attendees/Announcements

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9:00 Welcome/Introductions/Acknowledgment to Auditor-Controller Attendees/Announcements

P r o p e r t y T a x M a n a g e r s ’ S u b - C o m m i t t e e

Minutes Tuesday May 6, 2014 Hilton Sacramento – Arden West 2200 Harvard Street, Sacramento, CA 95815

8:30 Sign-In

9:00 Welcome/Introductions/Acknowledgment to Auditor-Controller attendees/Announcements

9:10 Sub-Committee Business:  Approval of February 2013 Meeting Minutes - Pam Elias, Riverside County  Treasurer’s Report - Darlene Hoang, Los Angeles County

9:20 Updates:  CALSACA Website - Marcia Salter, Nevada County. o There is a new web manager from a different entity. Some people may still have posting issues due to computer upgrades. If having difficulty toggle the rich text editor switch. Marcia asked if we wanted to use survey monkey for survey issues. It depends on the issue was the response. o It was also announced that Marcia Salter is the new SACA president. o Marcia thanked the sub-committee for all their hard work. She also recapped some of the topics from the recent SACA conference.  Legislative - Andy Sisk, Placer County. o Andy provided a handout from Matt Siverling, Legislative Representative for SACA. o Updates provided on: . AB1582 (ROPS timeline bill) – SACA has concerns on this bill . AB2040 (SCO report compensation bill) – Leg. committee opposes . AB2109 (Direct Charge Transparency bill) – this bill conflicts with getting tax bills out on time (due to conflicting resources). Possibly SCO can collect the information. However the SCO has limitations. Lots of concerns on this bill and all the work that it would take to comply. SACA does not like the bill, but does not have a formal opposition. . AB2114 – SACA opposes this bill. It is a tax on those that rent heavy equipment. The bill also gets into ERAF. Andy to provide our group the letter they drafted. The bill has more amendments that they really dislike. CSAC also involved because of the impact of ERAF. . AB2211 – Ting bill. Mr. Ting is starting to understand the work and costs this bill would create after meeting with Andy Sisk and Bob Campbell. Mr. Ting likes the transparency on the Contra Costa website (pie chart etc). About 20 counties were surveyed on their transparency of property tax distributions (i.e., pie chart after ERAF and RDA, with a link to the County

F r a n k D a v i e s , P r e s i d e n t  C h r i s t y R e d f o r d , 1 s t V P  B o b b y M e r c a d o , 2 n d V P P a m E l i a s , S e c r e t a r y  D a r l e n e H o a n g , T r e a s u r e r P r o p e r t y T a x M a n a g e r s ’ S u b - C o m m i t t e e

budget, and how County funds are spent). He said there was a meeting on May 6th (afternoon) with the Special Districts Association (who are concerned but not yet opposed). . SB1129 – Successor Agency bill. SACA has concerns with this bill.  Technology - Kim-Anh Le, Santa Clara County. o Kim provided handouts: . “Implementation of a New Property Tax System and Property Tax Data Strategies” . “Replacing Property Tax Software Systems – Five Factors” by Grant Street Group  Test Claim - Kim briefly talked about the Triple Flip 2004-05 test claim. Los Angeles County filed a test claim for VLF Swap.

 Unitary in ERAF/ State Controller’s Accounting Manual - Kim-Anh Le, Santa Clara County o SACA letter dated 3/21/14 to adopt changes to the guidelines (Unitary TRA only 000-001 and 000-511). o She surveyed how many counties have Qualified Property and who has been audited on it thus far. Qualified Property is not exempt from ERAF. o VLF supplemental observation went to three counties. The SCO stopped posting the observation after the audit in Alameda County. In FY 2014-15 we must take VLF from supplemental. For supplemental factors in FY 2014-15 adjust current and restate prior year factors. o TRA 000-001 & 000-511 – take out ERAF, take out VLF o TRA 000-002 – leave ERAF, take out VLF (in FY 14-15) o TRA 000-095 – leave ERAF

10:15 Break

10:30 California Department of Education, Peter Foggiato.  Peter provided a background of what the responsibilities of their office as well as formulas and challenges (see handout).

10:55 Department of Finance, Chris Hill, Derk Symons  Derk provided a brief update of ROPS 13-14B and ROPS 14-15A (so far):

F r a n k D a v i e s , P r e s i d e n t  C h r i s t y R e d f o r d , 1 s t V P  B o b b y M e r c a d o , 2 n d V P P a m E l i a s , S e c r e t a r y  D a r l e n e H o a n g , T r e a s u r e r P r o p e r t y T a x M a n a g e r s ’ S u b - C o m m i t t e e

 Derk also mentioned that bond debt service is most important. It is important to ensure funding from RPTTF for Bond Debt.  Update from Chris Hill: o He spoke about the withholding letters and the importance of paying bond debt. In theory, the withholding funds should have been able to be paid but some spent the cash or liquidated it. o Policy Issues: Tax increment caps were addressed in their letter dated 4/2/14, which says that caps are not applicable unless hit prior to 2011. No legislation is expected. o DOF had 180 lawsuits (filed in the Sacramento Court) and the State prevailed in most cases. Issues varied from: DDR claw backs; executing new agreements; loan repayments; enforceable obligations etc. Suits not won were where the Oversight Board authorized the SA to enter into new contracts between certain time periods (some lacked clarity for the period). The State to appeal. Also, there was a concern that the DDR claw backs were a violation of Prop 22 but the Sacramento Court said it was not a violation (reference the Brentwood case). There is another case (for Foster City) in regards to the possible violation of Prop 22 which may have the same outcome (which would be a massive loss to the County and cities). o Long Range Plans – DOF will approve for the intent to pay for compensation agreements but it is up to the SA and the ATE (affected taxing agencies) to decide. o Legislation update (By Chris Hill): . SB1129 (Steinberg) – DOF has no position. This bill would have numerous changes, such as no State review. There is no encumbrance of new property tax revenue which is a big problem. This bill violates the legislative intent. It would allow proceeds prior to December 31, 2010 to be spent. The bill seems to violate bond covenants. The impact is over

F r a n k D a v i e s , P r e s i d e n t  C h r i s t y R e d f o r d , 1 s t V P  B o b b y M e r c a d o , 2 n d V P P a m E l i a s , S e c r e t a r y  D a r l e n e H o a n g , T r e a s u r e r P r o p e r t y T a x M a n a g e r s ’ S u b - C o m m i t t e e

$1 billion. The Governor has no position on this bill yet. The bill is to be heard on May 7, 2014. . Governors Initiative – IFD expansion proposal (DOF said it is a good tool). The DOF would like change the process from 2/3 vote to 55% voter approval. The proposal is a trailer bill (“n” version?) which is to be presented on May 14. If passed we may have many IFDs for tracking. DOF is requesting an amendment requiring that if the IFD is within a project area, it must encompass the entire project (but the IFD can extend beyond the project). Here are some of the good things about the initiative:  Requires voter approval.  Can’t take funding from ATE’s without their agreement to participate.  Can’t take funding from schools.  Will expand potential uses to add economic development. . AB471 made changes to allow housing to get admin funds but was primarily a technical bill. . Pension levies – Property tax for pension obligations does not qualify as an enforceable obligation. Sacramento Court agreed. The cities now have to pay the pension obligations. This may result in pension bond defaults. The DOF is working with Frank Davies to survey the counties to quantify the RPTTF funds from pension bonds. . AB1582 – This is for an annual ROPS. However it does not change the underlying statutes for bi-annual obligations. Seems pre-mature. o There was a question about time limits. Response from the DOF was that time limits should not inhibit debt service payments. o If debt is paid off, then still calculate the tax increment to pay off other projects. o There was a question as to whether tax increment should be calculated for a newer project that had no SOI; no tax increment but there was another project in the agency. DOF said to email them on this situation. o Another question was asked about a project that never went live but the SA is now adding it to the ROPS. The DOF said to follow the SCO instructions. o Chris talked about the ruling for the LAUSD lawsuit. In 2007, LAUSD sued the County of Los Angeles and Redevelopment. Issue was over AB1290 pass through payments that were not credited to schools for ERAF. The County lost the suit in the Appellate court. This means it is binding in Los Angeles and may set precedence for other Counties as well. He said to talk to our counsel for the best course of action. The second issue with this lawsuit is there is no make-up payment so the SA wants retroactive reimbursements. The third item was a school of thought to calculate and place on the county wide ERAF and flow it out (do the calculation and revert to schools in the project area only). For the third item, the law is not clear and the DOF had no opinion yet, therefore we should consult with counsel.

11:47 Riverside County Property Tax System Update, by Pam Elias

F r a n k D a v i e s , P r e s i d e n t  C h r i s t y R e d f o r d , 1 s t V P  B o b b y M e r c a d o , 2 n d V P P a m E l i a s , S e c r e t a r y  D a r l e n e H o a n g , T r e a s u r e r P r o p e r t y T a x M a n a g e r s ’ S u b - C o m m i t t e e

 Riverside County is planning to go-live with Aumentum 10.1 in February 2015.  With the new system there is an integration of 3 departments and many ancillary systems.  There are three conversion cycles remaining before go-live.  Testing is slow but progressing.  Document management activities are in process (lots of scanning).  Reports – Defined and documented but still need to develop and implement. Also, looking at alternative solutions for reporting and costs associated with the solutions.  Infrastructure set-up and installation continues.  Training – Development of training program curriculums and materials are in process. There will be a need for multiple training sights.  Egov – Design to be delivered this month. Looking at hosting services and pricing.  Overall – There is a lot to do in a short amount of time.

12:00 Lunch

1:05 CSAC Update by Jean Hurst. Jean provided an update on what they do and who they are. Here are some of the items mentioned:  They represent County Government before the legislature.  They give awards for best practices.  They have conferences for their members. They also attend conferences to give updates.  There are about 200 bills that they are currently reviewing.  They work closely with the Brown Administration.  They are non-political and non-partisan organizations.  What is ahead with the State Budget and legislation: o Next Wednesday the Governor’s revised budget to be released. o Fiscally, things are looking up, and there are healthy revenues. o The April income tax and corporate tax exceeded projections by $2 billion. A budget surplus was projected at $7 billion but came in at $9 billion. Half of the money will go to schools and CSAC is proposing that the other half be used to pay off fiscal debt. o In the May revision (regarding the) AB109 – CSAC requested more money to help the counties deal with the work. With the prison population there is a severe need to lower the population. They have asked for $87m for the regular allocation and $100m for grants for additional supportive services. They are hoping that the May revision includes a plan to repay County mandates. o Outstanding budget issues: finalize the insufficient ERAF needed and the Assessor Property Tax Administrative grant proposal. State would like a revenue match proposal for the Assessor grant which will be difficult for counties. o CSAC has continued to bring up the issue to the State that schools are not

F r a n k D a v i e s , P r e s i d e n t  C h r i s t y R e d f o r d , 1 s t V P  B o b b y M e r c a d o , 2 n d V P P a m E l i a s , S e c r e t a r y  D a r l e n e H o a n g , T r e a s u r e r P r o p e r t y T a x M a n a g e r s ’ S u b - C o m m i t t e e

paying for the property tax administration. The issue seems to continue to fall on deaf ears. o IFDs (tool for economic development), may be more flexible in the governor’s proposal. It is not well received in the legislature. But there is a need for an economic tool. The May revision may have a more flushed out IFD proposal. CSAC supports the IFD issue. o The JEDI had no money in the signature process so it did not continue. It would have decimated counties. o Mandates – Old and new, there is a proposal to fund election mandates. The DOF is not budging (or budgeting?). o Rainy day fund – May be on the November ballot for a more robust rainy day fund. o ACA 4 – They would like to see this one scrapped. o Issues in the legislature with 3 Legislators on suspension. o The Speaker of the House and the Pro-Tem are at odds on the rainy day fund issue. o Outstanding issues: The unfunded liabilities with the CALSTRS is a mess. CALPERS is more flexible on how unfunded liabilities can be paid off. o Legislative implementation – AB109 has lots of allocation issues. Affordable Care Act implementation has many issues too. o RDA Dissolution – Has issues with bond proceeds; affordable housing; long range management plans. CSAC is opposing SB1129 Steinberg bill. o Cap and trade issues o Water (drought) issues – Discussion of a bond initiative for the November ballot. o Cal Fire – Wildfire worries o Two measures: . Senior Citizen property tax postponement (stopped in 2009). They want to bring it back with AB2231 and SB1214 . AB1521 – In 2001 the legislature removed the VLF funding from the 4 new cities and city annexations. The funding was given to public safety for realignment. There were four new cities in Riverside that lost funding. One lost funding a couple of days before it incorporated. SB69 and AB1521 are newer bills to try to restore funding by pulling the money from ERAF. However, Administration is not interested in those bills. It may pass. It is unfortunate, because the new cities followed the rules and the rules changed. CSAC is sympathetic to the new cities. o Economic Recovery Bond Payment – Not talked about but mid 2015 is Jean’s guess at the payoff.

1:45 Racehorse Tax by Jon Baker, San Diego County. (See handout)

1:55 Get To Know Butte County by David Houser. (See handout)

F r a n k D a v i e s , P r e s i d e n t  C h r i s t y R e d f o r d , 1 s t V P  B o b b y M e r c a d o , 2 n d V P P a m E l i a s , S e c r e t a r y  D a r l e n e H o a n g , T r e a s u r e r P r o p e r t y T a x M a n a g e r s ’ S u b - C o m m i t t e e

2:13 Tax Manual Update by Roxanne Nored, Placer County.  Committee met on May 5, 2014. They discussed several updates. They are looking for tools and a means to convert the current manual. Options could be MS publisher or Adobe Professional but individual files can’t be manipulated.

2:19 What’s Up With Your County by Frank Davies.  (See handout for AB2647) regarding El Toro Redevelopment Project Area and proposed legislation.  Excess ERAF - Kim Le from Santa Clara County said their County is now joining the excess ERAF group. It was discussed that we should test our Counties annually. Sally proposed putting the test in the Tax Manual. Roxanne made a note to add it to the list.

2:30 Break

2:45 Legislative Analyst’s Office by Brian Uhler (see handout)  Background of the LAO: o Established in 1941 for objective budget and non-partisan advisory fiscal consultants. o They currently serve 120 legislators. o Their responsibilities include: analysis of the Governors budget; forecasting revenues; serve as staff to the Legislature; prepare special reports; establish fiscal effects of the proposed initiatives; prepare analysis for ballot measures etc. o They produce major publications with forecasts and spending plans, ballot analysis, Cal Facts and special reports.  IFD Report – They produced a report in 2014 about the financing tool of IFDs. They agree in principle with the Governor except the language is too broad. Also, the 2/3 vote in the current year law is being proposed by the governor to change to 55%. The LAO has concerns with this proposed change because it could be a violation of the Constitution. It also may not be district and independent enough. They recommend that the district be restructured to be an independent separate legal entity or expand the vote to include all voters affected by the decisions (have everyone in the city i.e. vote, not just those in the project.) IFDs use tax increment financing. The ATE’s would have to pass a resolution to agree to participate.  “Major Milestones: Over Four Decades of the State-Local Fiscal Relationship” can be found at: http://www.lao.ca.gov/handouts/localgov/2012/state-local-fiscal-relationship- 112912.pdf . This was last updated in 2012 (he called it the swirl map).  LAO website: http://www.lao.ca.gov/  Brian can be reached at: [email protected]

3:10 Community Colleges by Patricia Servin. (See handout)  She provided a question and answer handout regarding ERAF.  She talked about reporting deadlines and variances in data (3% okay).

F r a n k D a v i e s , P r e s i d e n t  C h r i s t y R e d f o r d , 1 s t V P  B o b b y M e r c a d o , 2 n d V P P a m E l i a s , S e c r e t a r y  D a r l e n e H o a n g , T r e a s u r e r P r o p e r t y T a x M a n a g e r s ’ S u b - C o m m i t t e e

3:30 RDA Update/The Audit Process by the State Controller’s Office – Elizabeth Gonzalez and Scott Freesmeier. (See handout)  They provided a handout and described the types of audits they are performing as well as the report process and the scope.

3:55 Roundtable:  Frank Davies talked about the “PROPERTY TAX MANAGERS’ SUBCOMMITTEE 2013 ANNUAL REPORT OF ACTIVITIES AND FUNDING REQUEST FOR 2014” prepared by Ed Price. The report can be found on CALSACA at this link: http://calsaca.org/sites/default/files/tax_managers/2013_Revised_Report_of_Activities_t o_CSACA.pdf  Jon Baker provided an update of the San Diego litigation which includes the County vs. 7 cities. The issue has to do with the distribution of residual funds from HS 34183/34188. A writ was filed in January. The County has been meeting regularly with their counsel. The next step is the fact finding process. No dates yet. Both parties want a quick decision on the facts. The County distributes the residual off gross tax and the cities interpret the distribution should be much more narrow.  Survey on pension overrides is being conducted by Frank Davies for Chris Hill.  AB777 passed. This bill provides for exemptions on space exploration.  Topics for the next meeting. If you have topics and speakers for the next meeting please let Frank know.  October meeting will include election of new officers. If you are interested in becoming an officer, please let Frank know.

4:06 Adjourn

Next Meeting – Monday & Tuesday, October 6 & 7, 2014 – Sacramento

F r a n k D a v i e s , P r e s i d e n t  C h r i s t y R e d f o r d , 1 s t V P  B o b b y M e r c a d o , 2 n d V P P a m E l i a s , S e c r e t a r y  D a r l e n e H o a n g , T r e a s u r e r

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