SENATE COMMITTEE ON

ELECTIONS AND CONSTITUTIONAL AMENDMENTS

Senator Thomas Umberg, Chair

2019 - 2020 Regular

Bill No: ACA Hearing Date: 6/23/20

Author:
Version:	6/20/20
Urgency:		Fiscal:	Yes
Consultant:	Colin Grinnell

Subject: The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act

DIGEST

This measure, if approved by the voters, would enact the “Home Protection for Seniors, Severely Disabled, Families, Wildfire and Natural Disasters Act,” which allows base year value transfers for replacement properties without regard to the replacement property’s location or value; limits or repeals the parent-child, grandparent-grandchild exclusion from change in ownership; directs the Director of Finance to determine any net revenue gain resulting from these changes; and allocates any revenue gain for fire suppression and to reimburse local agencies for revenue losses.

ANALYSIS

Existing law:

Provides that all property is taxable unless explicitly exempted by the Constitution or federal law (Article XIII of the California Constitution).
Limits the maximum amount of any ad valorem tax on real property at 1% of full cash value, and directs assessors to set assessed values at 1975 market value levels and only reappraise property thereafter if there is new construction or a change in ownership (Article XIIIA of the Constitution; Proposition 13, 1978).
Establishes constitutional limits on assessed value inflationary growth of real property to 2% per year.
Generally sets a property’s value as its sales price when purchased or, when there is no sales price, at its fair market value when ownership changes (base year value).
Requires an annual inflation adjustment to that value that does not exceed 2% (factored base year value), based upon the California Consumer Price Index for all items as calculated by the Department of Industrial Relations.
Permits qualified taxpayers to continue to pay property taxes at the factored base year value of his/her previous home (or other property types where the law allows) and not on the value of their newly purchased home, including:
1. Taxpayers affected by disasters, defined as damaged by a major misfortune or calamity, and located in an area declared to be in a state of disaster by the Governor.
2. Disabled taxpayers and those over the age of 55, so long as the replacement home is of equal or lesser value and within the same county, or to another county if the incoming county enacts an ordinance accepting base-year value transfers. State law limits taxpayers to one transfer per lifetime, with one exception.
3. Owners of contaminated property, or those displaced by eminent domain, acquisition by public entity, or inverse condemnation.
Excludes from change-in-ownership reassessment transfers from parents to children for:
1. Primary residences, regardless of value or number of transfers.
2. Up to $1 million in aggregate value of all other types of property, such as second homes or business properties.
Applies the parent-child exclusion from change-in-ownership to grandparents and grandchildren when all of the parents of that grandchild or those grandchildren, who qualify as the children of the grandparents, are deceased as of the date of the purchase or transfer.

This bill:

Enacts the “Home Protection for Seniors, Severely Disabled, Families, Wildfire and Natural Disasters Act.”
Creates a new section of the California Constitution to allow base year value transfers for disabled taxpayers and those over the age of 55, as well as a victim of a wildfire or other natural disaster, regardless of the replacement property’s value or location, so long as the replacement property is purchased or constructed within two years of the date the original property is sold. To implement these provisions, the measure:
1. Provides that if the replacement property is of equal or lesser value of the original property, its taxable value is equal to that of the original property.
2. Provides that if the replacement property is of equal or greater value of the original property, its taxable value is equal to that of the replacement property, plus the difference in value between the sales price of the original property and the sales price of the replacement property is subsequently added to the base year value. For example, if the original property has a base year value of $230,000 sells for $500,000, and the taxpayer purchases a $750,000 replacement property, its new base year value is $480,000 ($750,000 – 500,000 = $250,000 + $230,000 = $480,000).
3. Allows disabled taxpayers or those over 55 three transfers. Victims of wildfires and natural disasters default to the current one transfer limit.
4. Requires taxpayers to file an application with the assessor to claim a transfer with contents identical to the application for current transfers.
5. Applies beginning April 1, 2021.
Creates a new section of the California Constitution to limit the parent-child and grandparent-grandchild exclusion from change in ownership of a principal residence only if the property continues as the primary residence of the transferee. The new section further:
1. Provides that even if the property continues as the primary residence of the transferee, and the property has a current market value of more than $1 million, the exclusion can only reduce assessed value by $1 million. For example, a home with a taxable value of $500,000 that could be sold at the date of transfer for $2 million, would have a new assessed value of $1 million.
2. Applies these provisions to family farms, as defined.
3. Requires the transferee to claim the homeowners’ or disabled veterans’ at the time of transfer to apply the exclusion. However, a transferee can apply the exclusion up to one year after the purchase or transfer, and receive a refund of previous taxes paid or owed between the date of the transfer and the date they file the claim.
4. Directs the State Board of Equalization (BOE) to adjust the $1 million exclusion amount annually for inflation beginning on February 16, 2023.
5. Repeals the parent-child, grandparent-grandchild exclusion for up to $1 million in aggregate value of all other types of property that is not the principal residence, effective February 15, 2021.
6. Defines several terms.
Creates a new section of the California Constitution to allocate any additional revenues or savings to the state to the California Fire Response Fund and the County Revenue Protection Fund, and continuously appropriate moneys to those purposes, as specified. The new section implements these provisions by:
1. Deeming the moneys in the fund revenues General Fund Revenues for purposes of the state’s appropriations limit.
2. Requiring the Director of Finance to calculate additional revenues and net savings to the state resulting from the measure during the preceding fiscal year each September 1^st between 2022 and 2027 using the best data or available estimates if data is not available.
3. Deeming the Director of Finance’s calculation final, and requiring the Director to certify the calculation no later than September 1 of each year.
4. Further requiring the Director of Finance to multiply the amount calculated in the previous fiscal year by the increase in property tax revenues allocated to local agencies in that fiscal year, commencing on September 1, 2028, and each September 1 thereafter.
5. Directing the Controller to transfer 75% of the amount certified by the Director of Finance for the applicable year to the California Fire Response Fund.
6. Directing the Controller to transfer 15% of the amount to the County Revenue Protection Fund to reimburse counties with “negative gain.”
7. Specifying that funds in the California Fire Response Fund are subject to appropriation by the Legislature according to a specified methodology, which states funds must be used to expand fire suppression staffing in underfunded special districts that provide fire suppression staffing, and must not supplant existing state or local funds utilized for those purposes, and further:
  - 1. Allocates 20% to the Department of Forestry and Fire Protection to fund fire suppression staffing.
    2. Sends 80% to the Special District Fire Response Fund, a subaccount, for districts that provide fire protection services in accordance with the following criteria:
      1. 50% for districts formed after July 1, 1978, and employ full-time or full-time-equivalent station-based personnel who are immediately available to comprise at least 50% of an initial full alarm assignment.
      2. 25%, for districts formed before July 1, 1978, are underfunded due to a disproportionately low share of property tax revenue and an increase in service level demands since July 1, 1978, and employ full-time or full-time-equivalent station-based personnel who are immediately available to comprise at least 50% of an initial full alarm assignment.
      3. 25% for districts that provide fire protection services and employ full-time or full-time-equivalent station-based personnel who are immediately available to comprise between 30% and 50% of an initial full alarm assignment.
    3. Directs the Legislature to take into account the following factors, in order of priority, when determining whether a special district is “underfunded:”
      1. The degree to which the district’s property tax revenue is insufficient to sustain adequate fire suppression, as measured against the population density, size of the service area, and number of taxpayers within the boundaries of the special district.
      2. Whether the special district, upon formation, received a property tax allocation in accordance with Chapter 282 of the Statutes of 1979.
      3. Geographic diversity.
    4. Funds be allocated in the form of grants with a term of not less than 10 years.
    5. That in any fiscal year after the first fiscal year of transfer that the amount transferred from the General Fund to the California Fire Response Fund exceeds the amount transferred in the previous fiscal year by more than 10%, the Controller shall not transfer the amount in excess of 10%; instead, the amount remains in the General Fund.
Creates a new section of the California Constitution to:
1. Direct counties to annually determine the gain for each county and each local agency within the county by:
  1. Adding the additional revenues from reassessments of original residents of outgoing transfers authorized by ACA 11, then
  2. Subtracting revenue decrease resulting from incoming transfers from other counties, and then
  3. Adding revenue resulting from ACA 11’s changes to the parent-child and grandparent-grandchild exclusion from change in ownership.

b) State that counties with a positive gain cannot received funds from the County Revenue Protection Fund, but a county with a negative gain is eligible for those funds.

c) Require the California Department of Tax and Fee Administration (CDTFA) to determine each eligible local agency’s aggregate gain every three years, based on the amounts determined by the counties, and provide reimbursements. However, if there are insufficient moneys in the fund, CDTFA allocates available funds based on each local agency’s pro rata share based on that agency’s reimbursement as a percentage of total reimbursements.

d) State at the end of the three-year period, CDTFA must transfer any remaining money from the County Revenue Protection Fund to the General Fund if each local agency that has a negative gain has been reimbursed.

e) Permit CDTFA to issue regulations pursuant to the Administrative Procedures Act to implement ACA 11.

Defines several terms.
Makes legislative findings and declarations supporting its purposes.

BACKGROUND

Base year value transfers. Proposition 13 provided property owners in California with substantial protections from higher property tax rates and annual reassessments. However, because the initiative generally set a property’s taxable value at its purchase price plus growth of up to 2% per year, taxpayers who sold their homes and purchased new ones will likely pay higher property taxes, thereby levying a tax penalty on those seeking to acquire housing that more closely meet their demands. For example, a four-bedroom single family home may be more house than an empty-nest couple needs, but purchasing a two-bedroom condominium may lead to a tax increase, especially if the taxpayer’s current home has appreciated in value significantly during the time they owned it. Proposition 60 and 90 removed that incentive and allowed persons over 55 and the disabled to move without the tax consequence, so long as the value of the replacement home met the definition of “equal or lesser value” in statute.

Base year value transfer benefits taxpayers according to (1) the amount of time they have lived in their current residences, which generally results in a difference between assessed value for tax purposes and market value that grows each year due Proposition 13’s 2% cap on assessed valuation growth, and (2) the purchase price of the replacement. If the taxpayer’s home has appreciated in value, the higher the price of the replacement property can be under the current 110% if 2 years % restriction and still be eligible for a transfer. For example, a taxpayer who purchased their residence for $100,000 in 1975 now has a base year value under Proposition 13 that cannot exceed $230,000 under the 2% cap, regardless of its current market value. If that taxpayer sold their residence for $400,000 and purchased a new one for $440,000, a base year value transfer allows them to continue to pay property taxes based on the $230,000 value, not $440,000, which at the 1% rate results in $2,100 in annual tax savings ($440,000 - $230,000 = $210,000 x 1% = $2,100).

In June 1986, voters amended the California Constitution to allow base year values transfers for certain disasters (Proposition 50, 1986). Revenue and Taxation Code (R&TC) §69 implements Proposition 50 to allow the transfer when:

The damaged property sustains physical damages amounting to more than 50% of its full cash value immediately prior to the disaster;
The replacement property is located in the same county as the damaged property and is acquired or newly constructed within five years after the disaster;
The replacement property is comparable to the damaged property in size, utility, and function. For example, a residential property can be replacement property for a damaged residence, but not for a commercial, agricultural, or industrial property;
The market value of the replacement property does not exceed 120% of the fair market value of the replaced property in its pre-damaged condition. Property owners can still receive the disaster relief in cases where the value of the replacement property exceeds the 120% limitation, but any amount over this threshold is assessed at full market value and added to the transferred base year value; and,
The buyer of the replacement property was the owner of the damaged property at the time of damage.

Homes only. In November 1993, voters additionally allowed taxpayers to transfer base year values to other counties when their property is damaged by a major misfortune or calamity and located in an area declared to be in a state of disaster by the Governor (Proposition 171). However, Proposition 171 only allowed transfers to other counties for a taxpayer’s principal place of residence, and solely when the board of supervisors in the county where the replacement property is located has adopted an ordinance making this benefit available. Additionally, replacement homes must be purchased within three years rather than five years. Eleven counties have such an ordinance: Contra Costa, Los Angeles, Modoc, Orange, San Diego, San Francisco, Santa Clara, Solano, Sonoma, Sutter, and Ventura. Revenue and Taxation Code §69.3 implements Proposition 171's provisions for base year value transfers for out-of-county replacement homes.

In November 1986, voters approved Proposition 60 to amend the Constitution to let a homeowner over the age of 55 transfer his/her base year value to a base year value to a replacement home of equal or lesser value within the same county under specified circumstances.

Two years later, in November 1988, voters expanded base year value transfer availability to allow transfers to counties that adopt ordinances allowing the transfer (intercounty transfers). In 2018, ten counties allowed these out-of-county transfers: Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura. (Proposition 90, 1988). In June 1990, voters approved Proposition 110 to allow disabled individuals regardless of age to transfer base year values to a purchased or newly constructed replacement property. (Proposition 110, 1990).

R&TC §69.5 provides further details to implement all three propositions for individuals over the age of 55 and disabled persons. Among the conditions, the property must be eligible for the homeowners’ exemption, and the replacement property must be purchased or newly constructed within two years of the sale of the original property. This law limits base year value transfers to one per taxpayer; however, the Legislature added a sole exception to the one-time limit for a taxpayer who claims the benefit first as a person 55 years of age or older, and subsequently becomes disabled (SB 1692 (Petris), Chapter 897, Statutes of 1996). In that case, the taxpayer can transfer the base year value from the original home twice; however, the law does not similarly treat a taxpayer who initially claims the transfer a disabled person cannot then subsequently claim another benefit after they turn 55. The Legislature approved SB 246 (Bates of 2017), which would have allowed a second transfer for a disabled person after they turn 55; however, Governor Brown vetoed the measure.

Parent-Child Transfers. The Legislature enacted two change in ownership exclusions for transfers between parents and children, and then grandparents and grandchildren, which were then approved by voters. Proposition 58 (1986) exempted from change in ownership transfers of property from parents to children (ACA 2, Hanigan), which voters extended to grandchildren ten years later, so long as the grandparent is deceased (Proposition 193, 1996; ACA 17, Knowles).

In October, 2017, the Legislative Analyst’s Office (LAO) published “the Property Tax Inheritance Exclusion,” indicating that the Legislature may want to review the exclusion. LAO wrote:

“The decision to create an inherited property exclusion has been consequential. Hundreds of thousands of families have received tax relief under these rules. As a result, local government property tax collections have been reduced by a few billion dollars per year. Moreover, allowing children to inherit their parents’ lower property tax bill has exacerbated inequities among owners of similar properties. It also appears to have encouraged the conversion of some homes from owner occupied primary residences to rentals and other uses. In light of these consequences, the Legislature may want to revisit the inheritance exclusion.”

In August, 2018, the Los Angeles Times identified several homes owned by prominent, wealthy individuals who were subsequently renting out homes after applying the exclusion on residences inherited from their parents. The article stated that in Los Angeles County, as many as 63% of homes subject to the exclusion were used as second residences or rental properties last year.

COMMENTS

1) According to the author: ACA 11 seeks to provide much needed housing relief for our state’s most vulnerable populations, while also creating a stable revenue source for both Special Districts that provide fire protection and local governments to improve services to their communities.

ACA 11 seeks to replace the ballot measure entitled “Changes Requirements for Transferring Property Tax Base to Replacement Property. Expands Business Property Reassessment. Initiative Constitutional Amendment,” which became eligible for the November General Election April 2019.

ACA 11 continues to protect seniors, persons with disabilities, families, and victims of wildfire by limiting property tax increases on primary residences, as originally intended under Propositions 60 and 90, and Propositions 58 and 193. SCA 2 also expands these protections to include wildfire victims and removes unfair location restrictions from Propositions 60 and 90. Removing these restrictions will allow our most vulnerable residents to move closer to family or medical care, to a senior or retirement community, or to replace a damaged home anywhere within California.

ACA 11 also protects the Constitutional right of parents and grandparents to pass the family home to their children, ensuring that their heirs can afford to move into that home as their primary residence.

Out-of-state investors, non-California residents, and trust fund heirs have used Propositions 58 and 193 on vacation homes, investment property, and beachfront rentals. By closing these unintended loopholes, the state will be able to generate hundreds of millions of dollars for local governments to fund fire protection, emergency services, and other critical local programs to support the homeless and provide mental health services or to help fund the development of new affordable housing projects throughout California.

California’s persistent housing shortage, which places an upward pressure on housing costs, has created an unprecedented affordability crisis for California’s working families. The state has the 49th lowest ratio of housing units per resident and our states vacancy rate in 2019 was just 4.4%. Home purchase prices and rents statewide continue to rise faster than wages, which results in housing costs making up a greater percentage of a family’s monthly budget. SCA 2 will open up tens of thousands of new housing opportunities throughout California for renters and first-time homeowners. As a result of increased demand, SCA 2 will spur housing construction at all income levels to accommodate the demand for housing statewide.

2) Inequality. According the Pew Charitable Trust, the growth in income in recent decades has tilted to upper-income households. The Public Policy Institute of California’s (PPIC’s) “Just the Facts: Income Inequality” from January, 2020 reports that “while California’s economy outperforms the nation’s, its level of income inequality exceeds that of all but five states. Families at the top of the income distribution in California have 12.3 times the income of families at the bottom.” PPIC adds that the wealth gap is correlated with race, as African American and Latino families make up 12% of those with incomes above the 90th percentile, despite comprising 43% of all families in California, due to the fact that African American and Latino adults are overrepresented in low-wage jobs and have higher unemployment rates, and African American adults are less likely to be in the labor force. A family’s wealth is largely contingent on their home value; Deloitte’s report “The Future of Wealth in the United States” states that residential property alone constitutes nearly 58% of nonfinancial assets on household balance sheets in the United States. In many parts of the United States, discriminatory housing policies such as redlining and predatory lending have significantly hindered the ability of African American and Latino families to own and acquire a home that will appreciate in value over time, thereby building wealth.

PPIC adds that wealth inequalities are worse than income inequalities:

“In California, 20% of all net worth is concentrated in the 30 wealthiest zip codes, home to just 2% of Californians. African American and Latino families have much lower wealth levels compared white families; nationwide, the typical (median-wealth) white family has more than eight times the wealth of a typical African American or Latino family. While homeownership is an important component of wealth—and white and Asian families are more likely than others to own homes—other income-producing assets also play a major role in California’s wealth gap.”

Base year value transfers benefit existing homeowners by reducing the taxes they would have paid according to how long they have owned their current residence, and how much their home’s market value has appreciated. Current law restricts base year value transfers to replacement properties of equal or lesser value, a restriction ACA 11 would constitutionally eliminate, therefore extending an already powerful tax benefit that primarily benefits those who have already accrued housing wealth. Additionally, ACA 11 does not set any restriction on a taxpayer’s income or their housing value to apply its expanded benefits.

3) Old and young. Proposition 13’s tax benefits grow the longer the taxpayer stays in their home, as an incumbent homeowner’s assessed value can only grow by 2% per year. For example, taxpayer who purchased their residence for $100,000 in 1975 now has a base year value under Proposition 13 that cannot exceed $230,000 under the 2% cap in annual inflationary growth, when the median home price has almost doubled since 2012. Assuming a new homebuyer purchases a similar house next door to an incumbent neighbor, they may pay many times the annual amount of property tax despite being eligible for the same level of public services paid for by those taxes. Additionally, except for disabled individuals and victims of natural disasters, only taxpayers over the age of 55 can apply a base year value transfer. Homebuyers over 55 can incorporate the tax savings when bidding on a new home against younger homebuyers, who cannot, and also must often service student loan debt. ACA 11 would allow base year value transfers without regard to the location and value of the replacement property, further bolstering the purchasing power of those over 55, as well as increasing from one to three the number of transfers a taxpayer can make.

4) Good deal. The combination of the Proposition 13 method of property taxation and the grandparent-grandchild/parent-child exclusion can be highly beneficial, with benefits that grow the longer the same family owns the property. Most properties’ assessed valuation is below its market value because of the 2% cap on inflationary property value growth, so a typical property in the state is about two‑thirds of its market value, according to LAO. LAO adds that the exclusion that ACA 11 limits is applied to between 60,000 and 80,000 properties statewide each year, or about 10% of total property transfers. Additionally, LAO states that 5% of all property transfers in the state in the last decade apply the exclusion, the vast majority of which are single-family homes. LAO also states that the exclusion has a significant cost, estimating that exclusions reduced statewide property tax revenues by around $1.5 billion from what they would be in the absence of the exclusion in 2015-16. Additionally, the exclusion can be applied to the same property an infinite number of times, thereby providing a benefit that increases the more the value of the property grows and the longer the same family holds it.

5) Young and old. As mentioned above, older generations can transfer their principal residence and up to $1 million in other property to their lineal descendants without a reassessment, passing along the savings that have accrued under California’s Proposition 13 method of property taxation. ACA 11 adds a key requirement for future transfers of principal residences: the descendants must live in that residence to enjoy the tax benefit. If the descendants do not, property taxes could increase significantly. As a result, many descendants who cannot or do not wish to relocate may have to sell the homes where their parents or grandparents raised them, or come up with other funds sufficient to pay the additional taxes. However, by ending a tax benefit for converting inherited properties into rental properties, ACA 11 could help ameliorate the state’s affordable housing crisis by ending the significant incentive to hold these properties off the home sales market. ACA 11 would also repeal the parent-child, grandparent-grandchild exclusion from change in ownership for up to $1 million in property that is not the principal residence. As a result, children or grandchildren inheriting a property that is used for a business, rental housing, or for investment purposes may be forced to sell it if they cannot pay property taxes based on current market values.

6) Enforceable? Under ACA 11, transferees could continue to apply the parent-child, grandparent-grandchild exclusion from change in ownership so long as they claim the homeowners’ exemption, a $7,000 reduction in taxable value when the home is the principal place of residence of the owner on January 1st of the year the exemption is claimed. The property must be the taxpayer's true, fixed and permanent home, and principal establishment to which they intend to return if absent. Assessors use vehicle registration, voter registration, bank accounts, and state income tax filings to determine whether a property qualifies. Once granted, the exemption continues until the taxpayer notifies the assessor or ownership changes. However, ACA 11 does not specify whether the transfer still applies if the transferee stops using the property as their principal residence; they need only claim the exemption at the time of the transfer or the one-year period thereafter. SCA 3 (Hill) contained language that ACA 11 does not that would reverse the exclusion, and require the assessor to revalue the property:

If the transferee subsequently ceases to use the residence as his or her principal residence, the exclusion provided for in this subdivision shall no longer apply, and the residence shall be assessed at its full cash value as of the date of the transfer from the parent or grandparent to the transferee, as adjusted in accordance with subdivision (b).

7) Crunching the numbers. ACA 11 requires the Director of Finance to calculate the state revenue benefit from its provisions, assuming that additional sales of homes will boost income taxes, and higher property taxes accruing from its expanded base year value transfers and changes to the parent-child, grandparent-grandchild exclusions from change in ownership. However, it will be difficult for the Director to do so. First, the first $250,000 (single)/$500,000 (joint) from the sale of the principal residence is currently excluded from income for state tax purposes. Realtors who sell more homes due to ACA 11 may earn more income, but it will be hard to determine what the baseline income they would have made but for the measure. Additionally, ACA 11 directs counties and CDTFA to determine its revenue effect for each of California’s 58 counties, 482 cities, and 2,300 special districts, which will be cumbersome. The measure also only directs counties to calculate revenue loss from transfers incoming from other counties, not revenues gained or lost resulting from transfers within the same county where the replacement property is of greater value than the original property, a current constitutional requirement ACA 11 supersedes, which will likely affect revenue. Lastly, while taxpayers currently submit claims when applying the $1 million change in ownership exclusion for inherited property, they will not if ACA 11 eliminates the exclusion, so counties and CDTFA may lack the data needed to accurately calculate these gains.

8) Options. Taxpayers whose property is substantially damaged in a wildfire or other natural disaster currently have five years to transfer their base year value to a comparable property within the same county, so long as the replacement property’s cost is within 120% of the value of their damage property. Taxpayers can also transfer the base year value from their home to another county so long as the incoming county elects to participate, subject to the same restrictions. ACA 11 would allow these taxpayers to transfer base year values to replacement properties with a cost of more than 120% of their original property, but they would have only two years instead of five to do so.

9) CDTFA? ACA 11 requires the CDTFA to determine each eligible local agency’s aggregate gain every three years, based on the amounts determined by the counties, and provide reimbursements. Formed by the Legislature in 2017 to assume the non-Constitutional functions of the BOE, CDTFA does not perform many property tax functions. As a result, CDTFA may lack the expertise or resources to determine ACA 11’s revenue effects for all of California’s local agencies.

10) Clarity. Several provisions of ACA 11 would benefit from further clarity.

Is the $1 million exclusion for the family farms in addition to the $1 million for principal residences, for a total of $2 million, or is the total exclusion $1 million for either or both?
What are the property tax revenues allocated to local agencies in Section 2.2 (b)(2)?
Is a ten-year grant for a special district allocated in equal amounts each year? If a special district does not obtain a grant in the first year, can it then only be awarded one out of the growth in amounts transferred by the Controller? Do grants continue at previously authorized levels if the Director of Finance calculates ACA 11 results in a loss or a lower amount of growth than the previous year?
Should CDTFA and county auditors determine the location of transfers by tax rate area when determining “gain” for cities, school and special districts?
Is CDTFA required to use a county’s determination of gain for each local agency? Under what circumstances should it not?
Does every local agency need to be reimbursed for all of negative gains before CDTFA remits moneys from the County Revenue Protection Fund to the General Fund? The measure only states that the remittance occurs “if each local agency that has a negative gain has been reimbursed.”
If a fire district receives a grant from the California Fire Response Fund, is it ineligible for a reimbursement from the County Revenue Protection fund if its grant exceeds its negative gain?
Argument in Support. In a letter supporting ACA 11, the California Professional Firefighters stated, in part, the following:

ACA 11 is a compromise measure to replace a measure qualified for the November ballot, ensuring that funding for fire protection and local government revenues are protected, and allowing for flexibility and reform in California’s property tax formulas, while leaving the protections of Proposition 13 intact. This measure contains several provisions intended to increase the stock of available housing and provide protections to vulnerable Californians in the housing market, while creating protected funding for underfunded fire districts throughout the state and ensuring that counties and local governments receive equal and equitable funding through the provisions.

RELATED/PRIOR LEGISLATION

SCA 2 (Galgiani) of 2020, substantially identical to ACA 11. Currently pending in the Assembly Elections and Redistricting Committee.

SCA 3 (Hill) of 2019, provides that the parent-child and grandparent-grandchild exclusion only apply when only the transferee uses the residence as his or her principal residence. The measure is currently on the inactive file on the Senate Floor.

SCA 4 (Galgiani) of 2019, expands the Constitution’s current base year value transfer authority, and limits the parent-child and grandparent-grandchild transfers in a similar but not identical way as this measure. The measure is currently pending in the Senate Committee on Governance and Finance.

PRIOR ACTION

Senate Budget and Fiscal Review:
Assembly Floor:	76 - 0
Assembly Budget Committee:

Note: Prior votes do not reflect the current version of this bill.

POSITIONS

Sponsor: California Professional Firefighters

California Association of Realtors

Support: None received

Oppose: None received

-- END --

ACA 11: The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act.

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