parcel taxes

8/11/2019 Parcel Taxes

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Vol. VIII, No. 34October 3, 2014

IN THIS ISSUE

Parcel Taxes:California Tax Foundation StudyFinds That Parcel Taxes Cost Taxpayers MoreThan $1.9 Billion Per Year 1

Governor: Governor Signs CalTax-SponsoredParcel Tax Transparency Bill 3

Franchise Tax Board: No Open Discussion ofHyattCase at FTB Meeting 9

State Board Of Equalization: Cynthia BridgesReports on Boards 2013-14 Accomplishments 10

Initiative Update: CalTax Recommendationsfor the November Election 12

Local Taxes: S.F. Supervisors Approve Proposalfor Parcel Tax for Transbay Transit CommunityBenefits District; Key Taxpayers NowOppose Levy 13

Public Employee Pensions: Cities Can TrimPension Liabilities Through Bankruptcy, CourtSays 14

Assessors: Trinity County Assessment PracticesNeed Improvement 15

Waste, Fraud & Mismanagement: Your TaxDollars At Work:Mistakes at the SacramentoCounty Elections Office Will Cost TaxpayersMore Than $68,000 16

Potpourri: Symposia, Sightings, Salutes &Snafus:Clarification: Los Angeles CountyAssessment Roll Was Released in July 17

Tax Trivia: Which Author Once Compared TaxCollectors With Taxidermists? 18

PARCEL TAXES:

California Tax Foundation Study Finds That Parcel Taxes CostTaxpayers More Than $1.9 BillionPer Year

The California Tax Foundation on October 1released the states first comprehensive study ofCalifornia parcel taxes, identifying more than $1.9billion in parcel taxes imposed annually onproperty owners.

These taxes on parcels of property are in addition

to the more well-known annual property tax thatis based on property value.

We surveyed every local government in thestate, and filed hundreds of Public Records Actrequests, to collect more than 11,500 filesrelating to parcel taxes, said Robert Gutierrez,director of the California Tax Foundation, a

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nonprofit organization that serves as the research arm of the California TaxpayersAssociation. This first-of-its-kind study sheds light on a complicated, expensive tax thatmany property owners know very little about.

Piecing Together Californias Parcel Taxes An In-Depth Survey of Local Special Taxes on

Propertyincludes several recommendations:

Improve transparency:Require property tax bills to include information aboutevery parcel tax imposed, when the tax expires, whom to contact with questions,and more.

Provide structural consistency: The Legislature should equalize parcel tax ratesby adopting a uniform rate structure that local governments would have to follow,modeled after the successful Bradley-Burns Uniform Local Sales and Use Tax Law.

Make ballot materials objective:Require that parcel tax ballot questions, titlesand summaries be written by independent bodies, no longer allowing ballot

materials to be written by the very people who place the measure on the ballot.

The report found that parcel taxes vary dramatically from area to area, with vastlydifferent rates, definitions and structures. In some areas, the tax on one parcel may behundreds of dollars a year, while the tax on a nearby parcel is thousands of dollars a year,simply because local officials wanted to target a specific property owner with higher taxes.Examples include:

Davis. The city ofDavisimposes a parcel tax on industrial properties based in parton the number of people employed by the owner. (CalTax:This employment figurehas absolutely no place in a tax on property.) The tax generates $1.4 millionannually for park and recreation programs.

Isla Vista Park and Recreation District. TheIsla Vista Park and RecreationDistrictimposes a parcel tax of $67.65 per bedroom (defined as any room availablefor sleeping) for properties with one or more dwelling units, and $240 per non-residential unit. The tax, which generates more than $780,000 per year, does notcontain a sunset date.

Huntington Park.The city ofHuntington Parkimposes a parcel tax that contains42 different rates that vary depending on the use and classification of the property,as determined by the county assessor. Rate classifications include $501.01 perauto, creation/construction equipment, sales and services property and $796.98 for

department stores. The tax does not contain a sunset date, and the city is allowedto increase the rate each year.

Rancho Cucamonga Fire Protection District. TheRancho Cucamonga FireProtection Districtimposes a parcel tax ranging from $151.71 per unit forresidential structures to $151.71 per acre, plus $0.82 per square foot per structurefor commercial properties. The tax, which generates more than $6 million annually,was imposed under the Mello-Roos Act, and does not contain a sunset date.

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The current parcel tax system can leave property owners feeling like theyre in the WildWest, where anything goes, Mr. Gutierrez said. The California Tax Foundation studyprovides recommendations for common-sense reforms that will create an orderly, fairsystem for all taxpayers.

In addition to releasing the parcel tax study, the California Tax Foundation launched theCenter for Special Taxes,an online resource that houses more than 11,500 files relatingto parcel taxes, including the language of local ballot measures, ordinances, resolutionsand more.

GOVERNOR:Governor Signs CalTax-Sponsored Parcel Tax Transparency Bill

Governor Jerry Brown announced September 29 that he has signedAB 2109(Daly), aCalTax-sponsored bill that improves parcel tax transparency. AB 2109, supported byController John Chiang, will provide taxpayers with important information by requiring thecontroller to report annually on the imposition of each locally assessed parcel tax.

The information in the report must include: the type and rate of parcel tax; the number ofparcels subject to the tax; the number of parcels exempt from the tax; the sunset date, if

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any; the amount of revenue received; and the manner in which the revenue is beingused.

This bill requires each county, city, and special district that assesses a parcel tax toprovide any information required by the controller to complete the report.

Earlier this week, CalTax released Piecing Together Californias Parcel Taxes, the firstcomprehensive study on parcel taxes. AB 2109will ensure that taxpayers continue tohave access to data on parcel taxes.

The governor was busy signing and vetoing bills all month, especially in the days leadingup to his September 30 deadline for acting on legislation. Key actions since the publicationof the CalTaxReportsdated September 19 include:

Bills Signed By the Governor

Infrastructure and Revitalization Financing District Measure.AB 229(John Prez),

reviving many of the functions of redevelopment agencies, including the reauthorization ofspecified local entities to utilize partial property tax-increment financing (excludingschools) to fund specified projects, was signed by the governor on September 29.

Measure Allowing El Cerrito to Exceed Local Tax Limit.AB 1324(Skinner),authorizing the city of El Cerrito, in Contra Costa County, to impose a transactions (sales)and use tax for general purposes at an additional rate of up to 0.5 percent, exceeding the2 percent statutory cap, was signed by the governor on September 29. The tax hike wouldrequire voter approval. (CalTax:El Cerrito currently levies two district taxes: a 0.5percent tax for general purposes, and another 0.5 percent tax for street improvements,resulting in a total sales and use tax rate of 9.50 percent in the city. This bill authorizesanother 0.5 percent tax that would put the citys tax rate at 10 percent, tying with threeother cities for the highest in the state, and adding significantly to the cost of living anddoing business in the city. Measure R, which would implement the tax increase andprovide for an extension of the sunset, already has been placed on the citys November2014 ballot.)

Lumber Tax Exemption.AB 2031(Dahle), a CalTax-supported bill exempting retailersfrom the states lumber tax if they have less than $25,000 in lumber sales, was signed bythe governor on September 29.

Property Tax Postponement Program for Seniors and the Disabled.AB 2231(Gordon),reinstating the states property tax postponement program for seniors and

disabled homeowners that was suspended indefinitely in 2009, was signed by thegovernor on September 28. Only persons over 62 and disabled persons are eligible andtheir income must not exceed $39,000.

Income Tax Exclusion for Rebate for Government Payments for a Turf RemovalWater Conservation Program.AB 2434(Gomez), excluding from corporate andpersonal income taxes amounts received from a local water agency for a turf removalwater conservation program, was signed by the governor on September 28. Several localgovernments recently have established rebate programs to encourage reduced waterconsumption. For example, the Los Angeles Department of Water and Power offers a

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rebate based on each square foot of water-intensive turf removed. Approximately 2,500square feet of lawn had been removed by the end of July in the city. Likewise, the City ofSacramento recently launched a cash for grass" program that will provide rebates tohomeowners who replace their lawns with drought-tolerant landscaping. AssemblymanJimmy Gomez, author of the bill, said more people will now take advantage of the

rebates, knowing the rebates will not be taxed by the state.

Local Bond Transparency.AB 2551(Wilk), requiring bond issue proposals on localballots to include an estimate of the total debt service that would be required to be repaidif all the bonds are issued and sold, was signed by the governor on September 30. CalTaxsupported AB 2551because it establishes a minimum standard of transparency for thefiscal analysis of local bond measures.

Imposition of Taxes on Counterfeit Goods.AB 2681(Dababneh), imposing sales anduse tax on the purchase or use of counterfeit tangible personal property sold by a personconvicted of counterfeiting on or after the date of sale, was signed by the governor onSeptember 19. The bill was sponsored by the State Board of Equalization. (CalTax: Will a

purchaser of property by a person from a counterfeiter be subject to back taxes, penaltiesand interest by the board even if the purchaser did not know the property was counterfeitand the seller was a counterfeiter?)

FTB Omnibus Bill.AB 2754(Assembly Revenue and Taxation Committee), requiringSocial Security numbers to be listed on the tax return to claim the dependent exemptioncredit, mandating e-filing for certain business entities, and a CalTax-supported measureproviding conformity to federal tax provisions relating to charitable remainder trusts,among other things, was signed by the governor on September 19.

Use Tax Reporting.AB 2758(Assembly Revenue and Taxation Committee), a CalTax-

supported bill requiring that any payments submitted with a Franchise Tax Board returnwhere use tax liability is reported first must be applied to use tax obligations (as opposedto the FTB intercepting the money for a balance due at the FTB), was signed by thegovernor on September 25.

Paper Bag Charge.SB 270(Padilla), requiring California consumers to pay 10 cents perbag for specified paper bags, and also banning specified bags made of plastic, was signedby the governor on September 30. The provisions take effect July of 2015 for large storesand July of 2016 for small stores.

Some believe the 10-cent charge is a tax that requires a two-thirds vote of theLegislature, but an appellate court has said a charge by a store that does not go into

government coffers is not a tax, even if it is imposed by government action. A referendumhas already been filed by the opponents of the bill. They have 90 days to gather 504,760signatures. If it qualifies, the provisions of the bill will be suspended until after the 2016election, and perhaps permanently if the referendum passes.

Enhanced Infrastructure Financing Districts, With a 55 Percent Voter ApprovalRequirement for Bonds.SB 628(Beall), creating Enhanced Infrastructure FinancingDistricts, was signed by the governor on September 29. Among other things, the 25-page CalTax-opposed bill creating these new infrastructure financing districts provides:

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The district may use tax-increment financing to take property tax growth fromother jurisdictions, other than schools.

Bonds may be issued with 55 percent voter approval, rather than the currentlyrequired two-thirds. (CalTax:This provision raises constitutional questions. Article

XVI, Section 18 requires a two-thirds vote for local bonds other than school bonds.)

Funds may be spent for facilities outside the districts.

West Contra Costa Hospital Bailout.SB 883(Hancock), appropriating $3 million tothe West Contra Costa Health Care District as a bailout, was signed September 27 by thegovernor. Voters in the district have consistently turned down a local tax increase, so thebill sets a precedent in having a state bailout if locals will not support local funding or thehospital refuses to rein in costs.

Car Tax.SB 1183(DeSaulnier), a CalTax-opposed bill authorizing local governments toimpose a $5 vehicle registration surcharge to fund bicycle infrastructure development

and maintenance, was signed by the governor on September 20. The governorsDepartment of Finance opposed the bill.

Changes to PILOT Agreements.SB 1203(Jackson), prohibiting a local governmentfrom entering into a payment in lieu of taxes (PILOT) agreement with an owner of a low-income housing project, was signed by the governor on September 27. The bill wasintroduced after Ventura County Assessor Dan Goodwin revoked the welfare exemption forseveral nonprofits. (CalTax:There were two bills signed relating to PILOT agreements:this one and AB 1760 (Chau), creating confusion. Since SB 1203 was signed after AB1760, its provisions will prevail if there are any conflicts between the provisions of thebills.)

Using Cap-and-Trade Funds for Clean Trucks, Buses, Off-Road Vehicles andEquipment.SB 1204(Lara), authorizing funds collected from the cap-and-tradeprogram to be allocated to the California Clean Truck and Bus Program, to pay for zero-emission or near-zero-emission vehicles, was signed by the governor on September 21.

Income Tax Exclusion for Student Loan Forgiveness.SB 1271(Evans), declaringthat student loan amounts repaid by the U.S. secretary of education or canceled pursuantto Education Code Section 1098(e) are not to be subject to state income tax, was signedby the governor on September 29.

Cap-and-Trade Money for Low-Income Motorists.SB 1275(de Len), among other

things, establishing the Charge Ahead California Initiative directing the Legislature toencourage the use of cap-and-trade money to subsidize purchases of low-emissionvehicles by low-income motorists, was signed by the governor on September 21.

Requiring Evaluation Criteria for Future Tax Credits.SB 1335(Leno), requiringperformance measurement standards for any personal income tax credit or corporate taxcredit enacted on or after January 1, 2015, was signed by the governor on September29. (CalTax: Future bills can always waive the requirement.)

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Bills Vetoed by the Governor

Impact of Anti-Carbon Regulations on Food Supply.AB 278(Gatto), which wasamended and passed by both houses of the Legislature on the final day of session, withno one voting against the bill, was vetoed by the governor on September 25. The bill

directed the California Air Resources Board to consider the impact on global food supply ofits low-carbon fuel regulations, and to adopt policies that favor fuels with the highestpossible sustainability. The Milk Producers Council, a primary supporter of the bill, told theLegislature that Californias dairy families produce about 20 percent of the nations milk,and that in order to do that, they need a reliable supply of hay and grains to feed theircows. The council noted that in recent years, their reliable supply has been severelythreatened, as government energy policies, particularly those enacted by Congress andthe president, have resulted in more than 40 percent of the nations corn supply beingused to produce ethanol rather than being available to feed animals.

The governor found the additional analyses required by the bill unnecessary, stating in hisveto message, This bill does not add any new analysis to the work that the Air Board has

conducted in developing the state's policies on fuels. The Air Board will continue toincorporate a life-cycle analysis, including direct and indirect land use changes, as itmoves forward in implementing AB 32.

New Markets Tax Credit.AB 1399(Medina), a new markets tax credit was vetoedby the governor on September 29. The credit would have been available for investmentsin very low-income communities, and would have been administered by the GovernorsOffice of Business and Economic Development (GO-Biz) and the California Competes TaxCredit Allocation Committee, allowing the state to allocate up to $40 million in tax creditsannually.

The governor stated in his veto message that he liked the bill but for the cost, stating,This bill creates a new markets tax credit that will cost over time $200 million. Icertainly endorse programs that result in private investments to help low income areas,but a bill to spend this much should be considered with other priorities during the annualbudget.

Business Filing Reforms for Nonprofits.AB 1529(John Prez), a CalTax-supportedbill that would have, among other things, modified the dissolution/surrender process fornonprofit corporations; required the Franchise Tax Board to abate delinquent taxes,penalties, and interest; and allowed involuntary administrative dissolutions for a nonprofitcorporation if the entity has been suspended or forfeited by the FTB or secretary of statefor not less than 48 months; was vetoed by the governor on September 29.

The governor cited the expensive cost of a new computer system as his reason for vetoingthe bill, stating in his veto message, This bill would make it easier to dissolve a nonprofitcorporation. Implementing this bill, however, will require expensive reprogramming of anobsolescent computer system that will soon be replaced. It would be better to make thischange when the new computer system is being designed.

Creation of Community Redevelopment Authorities.AB 2280(Alejo), authorizingcertain local government entities to establish community revitalization and investment

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authorities with broad powers, including the ability to issue bonds and collect propertytax-increment revenue to fund certain public services, was vetoed by the governor onSeptember 29.

Although this is the second straight year that the governor has vetoed this CalTax-

opposed redevelopment bill, he expressed that he would be open to approving a similarbill in the future. The governor stated in his veto message, I applaud the author's effortsto create an economic development program, with voter approval, that focuses ondisadvantaged communities and communities with high unemployment. The bill, however,unnecessarily vests this new program in redevelopment law. I look forward to workingwith the author to craft an appropriate legislative solution.

Property Tax Agent Registration.AB 2415(Ting), generally requiring property taxagents, including attorneys, accountants, enrolled agents and others already subject toregulatory requirements, to register with the secretary of state and pay a $100 fee, or afee that the secretary of state determines to not exceed the cost of administration, everyother year; providing sanctions for violations of the registration requirements, including

requiring the secretary of state to issue a cease-and-desist order to property tax agentswho have had their license revoked or who have been convicted of specified crimes; andpreempting and superseding all local ordinances (like Los Angeles Countys) regarding theregistration of any individual who communicates directly or indirectly with any countyofficial for the purpose of influencing official action regarding a property tax assessment;was vetoed by the governor on September 29.

The governor stated in his veto message, The real property tax assessment system hasworked relatively well over a long period of years. There has been some seriousmisconduct in a limited number of cases, but that doesn't lay the predicate for yet anotherregistration program.

Property Tax Allocations.SB 69(Roth), revising the property tax allocations relating tothe vehicle license fee adjustment amount for lost dollars annually since 2011, whenstate legislators voted to divert vehicle-license fee revenue from cities to law-enforcementgrants, was vetoed by the governor on September 28. The change affected four new citiesin Riverside County: Eastvale, Menifee, Wildomar and Jurupa Valley. Jurupa Valley isfacing the specter of running out of money within two years and city leaders have takeninitial steps to disincorporate. I think this is a travesty, Councilwoman Laura Roughtonsaid. The four new cities are being singled out and treated differently than the other 478California cities and it is completely wrong. A knowledgeable observer in Sacramento saidthe veto makes it less likely that the state will see any new city incorporations.

The governor stated in his veto message, While it is true that the state's economy hasimproved markedly, and significant progress has been made in aligning revenues andexpenditures, I do not believe that it would be prudent to authorize legislation that wouldresult in long term costs to the general fund that this bill would occasion. (Source: Billanalysis, veto message and Riverside Press-Enterpriseof September 27)

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FRANCHISE TAX BOARD:

No Open Discussion of H y a t tCase At FTB Meeting

In its first meeting since the Nevada Supreme Courts unanimous September 22 rulingthat the California Franchise Tax Board committed fraud against inventor Gilbert Hyatt

and intentionally caused him emotional distress, the three-member FTB comprised ofDeputy State Controller Marcy Jo Mandel (representing Controller John Chiang), StateBoard of Equalization Chair Jerome Horton and Department of Finance Deputy DirectorEraina Ortega (representing Finance Director Michael Cohen) made no mention of thecase during the portions of the meeting that were open to the public.

While there was no public discussion of the case, a related case was on the agenda to bediscussed in closed session: Gilbert P. Hyatt v. John Chiang, et al., a federal suit filed byMr. Hyatt in April alleging that the FTB and BOE are violating his 14thAmendment dueprocess and equal protection rights by taking more than 20 years without completing theadministrative process in his high-profile income tax dispute.

In closed session, the FTB also discussed Comcon Production Services I Inc. v. FranchiseTax Board, a Los Angeles County Superior Court case that deals with unitary issuesbetween Comcast and QVC, and whether a termination fee is business or nonbusinessincome. (CalTax: A Notice of Entry of Judgment and Judgment were filed August 22 infavor of the FTB with respect to the termination fee, and in favor of the taxpayer on theunitary business issue).

Other action from the three-member boards third meeting of the year:

Regulatory Activity.The board voted unanimously to approve FTB staffs request toproceed with the formal regulatory process to adoptproposed 18 Cal. Code Regs. Sec.

18416.5,relating to implementation of an alternative communication method. Twointerested parties meetings were held by FTB staff before they made the request to theboard.

Under the terms of the proposed regulation, following a request from a taxpayer or thetaxpayers authorized representative, the FTB will provide notification to the taxpayer in apreferred electronic communication method that a notice, statement, bill or othercommunication is available for viewing in the taxpayer's limited access secure folder onthe FTB's website (MyFTB). This regulation also would establish rules for theimplementation of an alternative communication method that would allow the taxpayer orthe taxpayers authorized representative to file a protest, notification or othercommunication to the FTB via MyFTB.

FTB staff said that due to technology and budgetary constraints, not all notices will beimmediately available to all taxpayers, and different forms of electronic communicationcan be expected to become available at a later date as technology advances. Theregulation is expected to apply to elections made, and protests or other correspondencefiled, on or after July 1, 2015. (CalTax:In light of the ongoing problems with the FTBsPower of Attorney program that have been brought to the FTBs attention by manypractitioners and practitioner groups, we hope that the FTB will address these problems asthis regulation goes through the approval process).

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The board also unanimously approved FTB staffs request to proceed with the formalregulatory process to adoptproposed 18 Cal Code Regs. Secs. 25137-1 and 179514,addressing apportionment and allocation of income from partnerships.

STATE BOARD OF EQUALIZATION:

Cynthia Bridges Reports on Boards 2013-14 Accomplishments

At the Board of Equalizations September 23 meeting in Sacramento, Executive DirectorCynthia Bridges presented a7-page report on accomplishments in 2013-14.It isorganized with four goals: (1) Improve the Taxpayer Experience; (2) Maximize VoluntaryCompliance; (3) Invest in a Skilled, Motivated and Diverse Workforce; and (4) EnhanceOperational Effectiveness. Among other things, board meetings are now streamed live onmobile devices via the BOEs You Tube channel for the publics convenience. Anotheraccomplishment was the launching of boards Open Data portal, allowing public access tomany more board documents and data. For the first three months of its operation, therewere 2,852 visits to the site, but the BOE would like to hear from the public on how it is

working (see BOE Seeking Input on Open Data Portal). Also a new sales tax rate look-uptable is available on the boards website. This will be extremely useful to preventovercharging of local sales and use tax. In December, the board voted to end securitydeposit requirements for many taxpayers, resulting in release of 9,500 accounts totalingover $95 million.

In other action from the BOEs September 23 meeting in Sacramento:

State Auditor Says State Has Not Thoroughly Analyzed Costs of Benefits ofRelocating the BOE, But Savings Are Possible.The state auditorreleased a reportSeptember 25 stating that the BOE has not yet prepared a cohesive, properly supportedanalysis demonstrating that the benefits to the State of moving BOE to a new facilityoutweigh the costs. The auditor said that while there could be a net fiscal benefit, theBOE could not provide a strong rationale to support its estimate, and relied on aprojected annual growth rate that appears to be overstated.

The state auditors assessment of the State Board of Equalization's (BOE) and theCalifornia Department of General Services analysis of BOE's headquarters buildinghighlighted the following:

BOE has not yet prepared a cohesive, properly supported analysisdemonstrating that the benefits to the State of moving BOE to a new facilityoutweigh the costs.

BOE staff believes that by mirroring the Franchise Tax Board's horizontalmovement of tax documents, it will achieve gains similar to those it says FTBachieved, but does not have a strong rationale underlying its assumptions.

BOE cannot support some of its estimates in its analysis of the costs andbenefits of maintaining its current spatial configuration versus relocating andconsolidating its headquarters.

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Although it developed a methodology to estimate the lost productivity from itsemployees moving to, working at, and moving back from a temporary worklocation, BOE could not provide a strong rationale to support its estimate.

BOE's estimate of its future space needs relies on a projected annual growth

rate which appears to be overstated.

After we expanded on BOE's analysis using additional components and muchmore conservative assumptions, we believe there could be a net fiscal benefitfor the State to move BOE staff to a new facility.

Although General Services is responsible for overseeing the use of statefacilities, it has not determined whether maintaining ownership and repairingthe BOE building is in the best interest of the State and has no plans for usingor selling the building if BOE moves.

The audit was on the BOEs agenda to be discussed in closed session.

In a press release, however, Chairman Horton said: We are pleased that the CaliforniaState Auditor has examined the critical issues facing the Board of EqualizationsHeadquarters Building. As we all know, this building has been plagued with manycontinuing problems. I have long called for a comprehensive solution, including addressingall of the health and safety issues which have been identified, and in the long term, aconsolidation and relocation of the BOEs headquarters which will allow our workforce tocontinue to provide quality, first rate service to the public.

Sailboat Purchased Solely for Use in Mexico Not Subject to Use Tax.After alengthy discussion, the board ruled that a sailboat purchased in Point Richmond,California, on April 21, 2010, with the intent that it solely be used in Mexico is not subjectto use tax. Board staff argued it was taxable, because it had to stop in San Diego forrepairs, and was stored there for 10 days in order to join a flotilla, known as the Baja Ha-Ha that was headed for Mexico. When it reached its destination, it was moored in PuertoVallarta until it was sold in November 2011. Revenue and Taxation Code Section 6009.1exempts property purchased and stored in California for the purpose of subsequentlytransporting outside the state for use thereafter solely outside the state.

The boat was owned by the Robert Gage Lesnett Revocable Trust. Mr. Robert Lesnett,owner of the trust, told the board that he had purchased two other boats for use inCalifornia and paid use tax on each. He was miffed with the assessment because he calledthe boards advice number, presented the facts and was told the boat purchase would not

be taxable. Board staff subsequently assessed a tax on the purchase. He recommendedthat the board put a disclaimer on the advice line advising that taxpayers cannot rely onthe advice given and must get it in writing.

Board attorney Bradley Heller argued that the stop in San Diego for repairs and the 10day stay prior to joining the Baja Ha-Ha flotilla made the boat taxable. Mr. Lesnett saidthe delay to join the flotilla despite its name was solely for safety purposes. Boats need tosail together for safety purposes because there are no ports for most of the BajaPeninsula. It was not for merriment, he said.

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Voting to grant the taxpayers appeal were Board members George Runner, MichelleSteel, and Controllers representative Marcy Jo Mandel. Voting to deny the appeal wereBoard Chairman Jerome Horton and Board member Betty Yee.

Hazardous Substances Fees Going Up in January. Lynn Bartolo, acting head of the

boards special taxes and fees division, said that the various hazardous substances feeswill increase by 2.192 percent, beginning January 1, 2015. Some of the fee increases arein the thousands of dollars because the underlying fees are so huge. For example, theLand Disposal Facility Permit Application Fee for 2014 is $589,520, so the 2015 increasewill be $12,922.

INITIATIVE UPDATE:

CalTax Recommendations for the November Election

These are the official CalTax recommendations for the statewide measures that willappear on the November 4 ballot:

CalTax Recommendations for the 2014 Ballot

Prop. 1Water Bond. Authorizes $7.545 billion in bond funds for water quality,

water storage, and recycling, and environmental protection.Click here for

the analysis.

CalTax makes no

recommendation

Prop. 2

Changes to Rainy Day Fund. Proposition 2 strengthens the states Rainy

Day Fund, but also contains provisions that may diminish the effectiveness

of Californias budget reserve:

Limits the governors ability to withdraw funds from the Rainy DayFund in non-emergency situations by requiring a two-thirds vote

of the Legislature.

Specifies that 3 percent of general fund revenue be set aside in

most fiscal years, with half allocated to the Rainy Day Fund, and

half allocated to eliminate Californias so-called Wall of Debt.

Specifies that half of capital gains revenue exceeding a certain

percentage shall be allocated to the Rainy Day Fund.

May provide permanent, ongoing funding for public employee

pensions and other post-employment benefits.

Limits local school districts from maintaining and retaining a

significant budget reserve when the state establishes a statewide

Proposition 98 Rainy Day Fund.

Click here for the analysis.

CalTax makes no

recommendation

Prop. 45

Additional Government Regulatory Rules for Healthcare Coverage.Expands the California state insurance commissioners authority to set

insurance rates, requiring health insurers to submit rate change plans to

the state prior to modifying health insurance plans.Click here for the

analysis.

NO

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Prop. 46

Increased Healthcare Costs for Medical Malpractice, and

Practitioner Oversight.Allows consumers to sue health care providers,including doctors and hospitals, for medical malpractice up to $1.1 million.

Subjects doctors to drug and alcohol testing. Requires the California

Medical Board to suspend licenses of doctors found impaired while on

duty. Requires health care practitioners to consult a state prescriptiondrug database to review a patients drug history before prescribing a

controlled substance.Click here for the analysis.

NO

Prop. 47

Property and Drug Crime Sentence Reductions.Reduces sentencesfor non-violent and non-serious violations involving property, and for drug

crimes, from a felony sentence to a misdemeanor sentence. State savings

associated with the measure would be earmarked to schools and criminal

justice programs.Click here for the analysis.

CalTax makes no

recommendation

Prop. 48

Repeals Indian Casino Agreement in Madera County.Proposes torepeal AB 277, which ratified gaming compacts between the State of

California and the North Fork Rancheria of Mono Indians and the WiyotTribe. A yes vote on this referendum measure would enact the compact,

while a no vote would reject the compact.

CalTax makes no

recommendation

The California Taxpayers Association is a nonprofit, nonpartisan association formed in 1926 to protect taxpayers from

unnecessary taxes and to promote government efficiency. CalTax does not solicit or accept money in relation to its

positions on ballot measures.

In other news:

Opponents of Bag Ban Legislation Seek Repeal

Opponents of a new law requiring grocery stores and convenient stores to stop providing

customers with plastic carry-out bags and requiring stores to charge customers for single-use paper bags filed areferendumOctober 1.

The referendum, which was filed by Nielsen, Merksamer, Parinello, Gross and Leoni, LLP,would ask voters if Senator Alex Padillas SB 270 (Chapter 850, Statutes of 2014) shouldtake effect. If the electorate votes no on the law, then all but one provision of the billwould be repealed. Specifically, the referendum would keep a provision that appropriates$2 million from a recycling-related special fund to manufacturers that produce plasticreusable grocery bags. Originally, the bill would have taken effect January 1.

LOCAL TAXES:

S.F. Supervisors Approve Proposal for Parcel Tax for TransbayTransit Community Benefits District; Key Taxpayers NowOppose Levy

San Francisco County supervisors voted unanimously on September 23 to create theTransbay Transit Community Benefits District and submit a $1.4 billion district parcel taxto voters. Major developers, who will pay the tax and who had been working with the cityseeking a compromise on the proposal, announced opposition to the tax and threatened asuit against the city. The higher value of the properties is now causing the developers in

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the area to object to the higher proposed taxes. Adam Alberti, a spokesman for theTransbay Joint Powers Authority, said the law that authorizes the establishment of thedistrict, known as a Mello-Roos special tax, is designed to obtain community funding forpublic services such as transit infrastructure.

Taxpayers, including developers, property owners and public utilities, that own the land inthe district (south of Market to Tehama, and from Montgomery to Stewart) that surroundsthe transit center must vote by Dec. 29 on whether or not to accept the terms of theTransbay Transit Community Benefits District, Mr. Alberti said.

Alberti said the increased height zoning of the new developments, in addition to animprovement in the economy and tech companies seeking additional property, has a lot todo with why the tax burden is so much larger than originally estimated when thedevelopers first signed on. (See CalTaxReportsof September 19 for the proposed taxrates in the district.) (Sources: San Francisco Chronicleof September 24; Bay CityNewsof September 24)

PUBLIC EMPLOYEE PENSIONS:

Cities Can Trim Pension Liabilities Through Bankruptcy, CourtSays

Striking a major blow to the so-called sanctity of public employee pensions, onWednesday, a federal judge ruled that the United States Constitution allows the City ofStockton to curtail its public employee pension obligations when restructuring other debtsand liabilities.

In July 2012, the City of Stockton filed for Chapter 9 bankruptcy due to economic declines

following the collapse of the housing market. In 2013, a federal judge accepted theirbankruptcy application and exit plan and voters approved a sales tax increase. As the cityhas developed plans for recovery, the California Public Employees Retirement System(CalPERS) has argued that cities should be legally required to use all revenue to paypension debt before making retirement plan and benefit modifications.

The court disagreed. U.S. Bankruptcy Judge Christopher Klein said that Californias publicemployee retirement law is simply invalid in face of the U.S. Constitution.

If Stockton were to stop making payments on its pensions, CalPERS argued that it wouldhave to drop out of the state pension system, and a lien of $1.6 billion would be filedagainst the city. Judge Klein dismissed CalPERS claims noting: Why should I take that

lien seriously? He called the lien a golden handcuff and said that the bankruptcy codeallows the city to break its contract with CalPERS, as most contracts are routinely brokenin bankruptcy court.

A spokesman for CalPERS said: We disagree with the judges opinion on the issue ofpension impairment. This ruling is not legally binding on any of the parties in the Stocktoncase or as precedent in any other bankruptcy proceeding and is unnecessary to thedecision on confirmation of the city of Stocktons plan of adjustment.

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In summarizing the ruling, The New York Times said the decision upended the widelyheld belief that public workers pensions have a special status in California that makesthem impossible to cut, further chipping away at the idea that pensions are sacrosanct ina municipal bankruptcy. (Sources: The New York Times, Bloomberg, October 1.)

ASSESSORS:

Trinity County Assessment Practices Need Improvement

A State Board of Equalization assessment practices survey for Trinity County, released onSeptember 30, has identified a number of problems with respect to the small countysassessment practices. Assessor Deanna Bradford concurs with all 22 of the boardrecommendations and has or will be implementing them. The board notes that the reportaddresses the administration of the assessors office during the period Dave Hunt wasassessor (January 2011- August 2012), as well as an earlier administration of Ms.Bradford, who was assessor prior to Mr. Hunt.

According to the report, During our survey, we found that the assessor has effectiveprograms for business equipment valuation and aircraft. However, we found significantassessment problems throughout the remainder of the assessor's programs we reviewed.In the area of administration, we found that the assessor needs improvement in thefollowing programs: workload, staff property and activities, assessment appeals, disasterrelief, and exemptions. In the area of real property assessment, we found that theassessor needs improvement in the following programs: change in ownership, newconstruction, declines in value, California Land Conservation Act (CLCA) property, taxablepossessory interests, and mineral property. In the area of personal property and fixturesassessment, we found that the assessor needs improvement in the following programs:audit, business property statement, manufactured homes, and vessels.

Because it found so many significant assessment problems, the board will at a future datemake independent appraisals of selected properties in the county.

Among the problems identified:

The assessor applied an incorrect Proposition 13 inflation factor for 2011-12.Instead of the correct factor of 1.00753, the assessor used 1.01007, thusillegally raising the taxes of most property owners higher than the law allows.(Because the incorrect inflation factor was enrolled to the 2011-12 roll year, the2012-13 assessments will be wrong, and this will continue for future roll years.)

Properties that changed ownership were not reassessed even though the

property transfer did not qualify for an exclusion from reassessment. Some new construction was valued at permit value, rather than full market

value. The assessor did not have a formal program to identify Proposition 8 declines in

value. The assessor has not calculated the restricted values for Williamson Act

properties in many years. There were a number of problems with possessory interest assessments. The assessor failed to perform the minimum audits required by law.

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The assessor typically valued manufactured homes on rented or leased propertywithout excluding site value that may be in the purchase price.

The assessor did not send the annual vessel property statement to owners ofvessels costing $100,000 or more.

WASTE, FRAUD & MISMANAGEMENT:

Your Tax Dollars at Work

Mistakes at the Sacramento County Elections Office Will Cost Taxpayers Morethan $68,000. The Sacramento County elections office will have to spend more than$68,000 of taxpayer money in order to correct two mistakes that were made in theprinting of the sample ballot booklets sent to voters for the November 4 election. Themistakes made by the county comprised of: failure to include the state Democratic Partyslist of endorsed candidates in the sample ballot, and failure to print a candidate statementfrom one of the Sacramento City Council candidates. Sacramento County Registrar ofVoters Jill LaVine attributed the errors to a confusing mix of incoming information from

multiple sources, but was quoted by the Sacramento Bee as saying, Regardless of whathappened, it didnt get put in and were going to make it right.

The county originally planned to remedy the party endorsement issue by sendingpostcards to all registered Democrats in the county with a list of the Democratic Partysendorsed candidates. However, after an objection from Ted Wolter, chief of staff toRepublican Supervisor Roberta MacGlashan, that such a mailer would unfairly benefit oneparty over the others, the county revised its plan, and now will mail a card to all 700,000registered voters in the county. The revised cards will include the endorsement lists forthe Democratic, Republican, and the American Independent parties. The cards will cost$58,000 to print and $8,000 for postage.

In addition, because of the omission of the city council candidates statement, the countywill have to spend $2,500 in taxpayer funds to mail 22,000 additional cards that includestatements of all four candidates vying for the city council seat. The candidate whosestatement was left off the original ballot, Toni Colley-Perry, isnt sure its a fair remedy forthe other three candidates to get twice as much exposure to voters as she did byincluding their statements again on the new mailer. Colley-Perry had to initially pay thecounty $400 to have her statement printed on the sample ballot, only to have it left off.

This is a serious, serious thing, she said, Im flabbergasted basically. (Source:Sacramento Bee, October 1)

San Jose City Employee Used City Credit Card to Rent BMW.An audit found that

while most San Jose city workers are using their taxpayer-provided city credit cardsproperly, some are making questionable purchases.

The San Jose Mercury Newsreports: Consider one unnamed employee who used his cityof San Jose procurement card, or P-Card, to rent a brand new BMW for a couple weeksafter his own car got totaled, costing taxpayers $550. Then there are the City Hall workerswho charged taxpayers $10 delivery fees to have food and beverage delivered upstairsfrom the first-floor coffee cart at City Hall. Or the group of 28 city workers and delegateswho dropped $2,800 on dinner including $700 on alcohol at an expensive downtown

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restaurant and charged it to the public. And the city worker who splurged $2,250 total for10 VIP tickets for non-city employees at an awards dinner.

The report released by City Auditor Sharon Erickson tracked some of the $12 million inpurchases made over the past year by 900 city workers who have P-Cards, but did not

identify the workers.

The Finance Department, which oversees the P-Card program, says its looking into eachincident of presumed wrongdoing and has already taken away cards from some workersas a result of the audit, the Mercury Newsreported. The auditor made severalrecommendations to ensure closer scrutiny of the credit cards, most of which the city hasagreed to implement. (Source: San Jose Mercury News, September 19.)

Potpourri:

Symposia, Sightings, Salutes & Snafus

Clarification: Los Angeles County Assessment Roll Was Released in July.A storyabout the Los Angeles County assessment roll in the CalTaxReportsof September 19stated that a press release announcing the roll figures for 2014 was dated July 23, but notposted on the Los Angeles County Assessors Office website until later, and stated that

there were no press reports that would indicate that the document was released in July.The Assessors Office has provided CalTax with a copy of a City News Servicestoryindicating that the figures were released July 23.

The CalTaxReportsstory also stated that the office had released a preliminary estimatethat the roll increase would be 4.06 percent, and linked to a budget document from theLos Angeles County chief executive office that cited this figure and attributed it to theassessor. The assessors office provided CalTax with documentation showing that the

offices May forecast estimated an increase in the assessment roll of 5.05 percent, andtold CalTax that for budgeting purposes, the CEOs office utilized a more conservativeestimate.

State Treasurer Releases 2014 Debt Report.State Treasurer Bill Lockyer released the2014 Debt Affordability Report From Recession to Recovery this week. Mr. Lockyerstated that the report is the last of my tenure as State Treasurer. He cited the 2007-09recession as Californias most devastating economic downturn since the GreatDepression, which left state government confronting its worst fiscal crisis in generations.The report shows that bond debt service in fiscal year 2014-15 will consume 7.19 percentof state general fund revenues, and the state will sell $5.7 billion of bonds backed by the

general fund in 2014-15. It also shows that there was $92.23 billion in outstanding bonds,and $30.57 billion of authorized but unused bonds as of June 20, 2014.

State Controller Unveils One-Stop Access to K-12 Public EmployeeCompensation. State Controller John Chiang released on October 2 an expansion of hisoffices existing online tool to include salary, benefits and other compensation data for578,403K-12 public employees and school officials.The new online service shows that in2013, they earned more than $20.3 billion in total wages and nearly $5 billion in totalretirement and health costs.

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"After the City of Bell demonstrated how the absence of transparency and accountabilitycan breed fiscal mismanagement, we created a one-stop resource detailing compensationdata for every public official and employee, Mr. Chiang said. The update includes 578, or33 percent, of Californias 1,764 K-12 public school districts, charter schools and countyoffices of education. These 578 school agencies cover nearly 3.8 million, or 58 percent, of

the approximately 6 million K-12 students enrolled in agencies throughout the state.

According to the controllers new tool, the highest-paid of the 397 positions reported assuperintendents received $612,686 in total wages in 2013. The median total wage forsuperintendents was $152,024. One-quarter of all superintendents made at least$207,575, while the bottom quarter made less than $104,609. In all of the categories, thelower-paid positions, as reported, may have been partial-year or part-time positions.

Thepublicpay.ca.govupdate also includes public employees who work for the State, its 58counties, 482 cities, nearly 3,000 special districts, 24 California State Universitycampuses, 68 California Community College districts, and 11 University of Californiainstitutions. The site also includes 22,311 judicial and court employees of the Superior

Courts, Courts of Appeal, Supreme Court, Habeas Corpus Resource Center, Judicial CenterLibrary, Judicial Council, and the Commission on Judicial Performance.

TAX TRIVIA:

Which Author Once Compared Tax Collectors WithTaxidermists?

What famous author with ties to California once wrote, What is the difference between ataxidermist and a tax collector?

(Answer below.)

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Tax Trivia Answer: Mark Twain, The taxidermist takes only your skin.

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parcel taxes

Documents