Minutes

Tuesday, May 8, 2012

Hilton Sacramento – Arden West

2200 Harvard Street, Sacramento, CA 95815

Tel 1 (916) 922-4700

8:30 Activities began with sign-in, coffee/tea/pastries and a get acquainted period.

9:00 President Ed Price, Santa Barbara County

Meeting called to order

Attendees introduced themselves

Recognition of officers and Tax Manual committee members

9:15 Business Meeting

Meeting Minutes approval requested – Pam Elias, Riverside County

  • February 2012 Meeting Minutes – Approved

Treasurer’s Report – Erick Roeser , Sonoma County

  • Balances and meeting costs were provided

Principals acknowledged by Ed Price – 4 were present

Meeting cost saving measures mentioned by Ed Price – Possible reduction of multiple microphones would save $300. The cost of the morning pastries and beverages is $16 each. We may want to think about eliminating the morning food to trim costs. The cash flow is tight.

9:30Updates

Legislative Update by Douglas Olander, Yolo County- Handout provided with the status, location and calendar events for the following bills: AB 103, AB 1501, AB 1555, AB 1585, AB 1700, AB 2643, SB 654, SB 986, SB 1151, SB 1156, and SB 1157and SB 1335.

Technology Update – Ed Price stated that the technology update had no significant changes since the February 2012 report. There are currently approximately 15 counties in some form of major re-write or new system.

CALSACA Website Update by Marcia Salter, Auditor-Controller of Nevada County –They are working with spiral graphics. They now have the members for the Steering Committee. Each Auditor group is represented. A question was presented as to why we may not always receive some updates. Marcia stated sometimes when items are posted, people will check the “do not send to everyone button”. It was mentioned that the Property Tax group has the largest number of users which is about 200. Ed mentioned that if we want to start a new topic, please start a new subject line. Otherwise the discussion will get confusing.

SCO Reports -Ed Price asked is anyone had any recent audit reports. Calaveras County said they had received a recent report. Bob Campbell, Auditor-Controller of Contra Costa County mentioned the unitary ERAF issue. He stated that the legislative committee drafted clarifying legislation but they were looking for a sponsor. He also stated the SCO said they will not oppose this issue, stay tuned. As an alternative to the legislation we may want to change the guidelines to match what the SCO is stating on audit reports, per Bob. The issue is ERAF needs to come out of the unitary roll. The effects of this change could be many including the AB1290 calculations. The Standards Committee would need to approve the recommendation for the guidelines.

9:45 Tax Manual Update by John Beaver - A synopsis of changes were presented

10:00 State Department Updates

BOE Anna Marie Price – mentioned that Ralph Davis retired on April 30, 2012. David Young will take over for Ralph in the interim. Ralph used to report to David Young. David reports to Ken Thompson. Anna stated the primary point of contact for the BOE is to email:

Anna mentioned that for the consolidated counties the County Services Areas must have LAFCO inclusion in a letter, it will not be automatic anymore. GC 29210 (e) gives LAFCO the governance over organizations or reorganizations. The BOE wants to standardize the parent/child relationships so they are cleaning them up. Parents should have all the component units. In the past there were too many assumptions. For component schools the BLO can be removed with a letter requesting this change.

BOE Errol mentioned before the redevelopment dissolution there were 16 new or changes to projects, 11 had dates after June 28, 2011. Five of these remaining are not included on the 2012 roll. The change notices will say “VOID”. Sally asked if the new redevelopment bill 1566 would affect this voids. Ralph Davis said if 1566 passes it will be bound by statute. The former RDA may come back to recover their start up costs. The BOE will wait until this happens before making any changes.

BOE Rick stated that the Final disk for the change notices was wrapped up and was being mailed that morning.

BOE Ralph Davis (retired) answered a question about components and segregations. He stated that components and segregations were approved as a parent. There was a difference between the pre and post 1980 issued bonds. If the bond was paid off, please tell the BOE to remove on a letter, not form is necessary.

BOE Ken Thompson–Ken stated the preliminary roll was to be done by the end of June and the final would be ready by the end of July. He announced that Jim Santillan is not with his office; Jack McCool took over for Jim. Jack can be reached at 916-274-3296. Last year the BOE eliminated cartridges for the unitary roll. He announced that Orange County is the only County to get a new TRA 000-095. Contra Costa now has a 000-096 TRA that will have value in a few years. The 000-096 is a work around for redevelopment.

BOE Ken Thompson - Unitary Appeal Update – There are currently two lawsuits: Sprint and Verizon. The Sprint suit was filed in 2008. The BOE made a change in 2009 but the suit did not state any values that should be changing. The new suit may change the amounts slightly. No update given for the Verizon suit.

BOE Ken Thompson - The BOE system is getting re-done. The changes should be transparent to us but please communicate changes we would like to see to Ken.

10:30 Announcements

Andy Sisk, from Placer County was just promoted to the Auditor-Controller at their Board meeting. The vote was 5 to 0.

Pam Johnston of Sonoma County is retiring and relocating to Virginia.

Ralph Davis retired 4/30/2012.

10:45Break

11:00 How Others Find Property Tax Data Useful – Introduced by Sally. Presented by Paul Cowdery of Parcel Quest

Mr. Cowdery has 25 years experience. He has been with Parcel Quest since 2003. They work with: surveyors, consultants, auditors, consultants, assessors etc. He also presented to us in May 2006. Parcel Quest has 30 years of experience.

Property Tax estimation has a new game. Used to be simple with the guaranteed 2% increases in value plus turnover and new development

In 1978 Prop 13 passed. With it came the rule that the assessed value cannot go up more than 2% and the tax rate would remain at 1% unless new debt was approved. The value could only change for changes in ownership and new construction.

Prop 8 came along and allowed reductions by the Assessor for damages such as economic conditions. The Fiscal Effect was stated to be minor.

SB154 came along and changed the allocation with AB8

In 2007 the crash. The new game was the Prop 8 paradigm. New metrics needed. It is not just about foreclosures. Prop 8 can do 3 things.

  • They can return to the factored base year value
  • They can continue to lower the value
  • They can stay flat and eventually turnover

Prop 13 is steady, Prop 8 is volatile

Everyone wants an appeal. Appeals used to be the ones at risk for the assessed value. Appeals are expensive relative to Prop 8. Assessor has to reassess each Prop 8. CAMA systems automatically reset the values but they can’t be turned on until the last minute. Therefore the Assessor has trouble projecting the value.

In a sense we already have a split roll Prop 8/Prop 13

Samples provided

12:00 Lunch

1:00 Group picture

1:05 Updates on the State Budget and RDA Related Bills by Marianne O’Malley, LAO

The LAO has been around 70 years. It was set up as independent fiscal staff to review fiscal matters. In 1970 the voters gave them the responsibility of preparing the voter pamphlet. They have 50 staff.

She provided some background to ABx1 26 & ABx1 27. The original bill was a 2/3 vote but later bills were majority vote.

Originally they were trying to preserve all pass through. They were advised there was no way to do that with the majority vote

Under Prop 1A from 2004, the existing formulas cannot depart with a majority vote.

It was their understanding that from the take increment you take the ROPS then Auditor and Controller fees then Successor Agency fees then the remaining amount is the residual.

It is also their understanding that 100% pass through recipients should not get 110%

They agree that the legislation was not drafted perfectly. The DOF has a different impression of the legislation than the LAO.

Rebuttal – the original assumption was that 6 or 8 agencies would dissolve and most would go with the voluntary pay program under ABx1 27 but that blew-up

Currently there are 22 bills for redevelopment legislation. Most are spot bills and some are uniquely focused. The larger bills are SB 1151, 1156 and AB 1585.

Because of the budget situation the legislation does not want to talk about this.

The State budget problem is much bigger than originally projected in January.

The original thought was they would receive $2.1 billion in RDA funds.

With RDA there was 3 pots of resources

1)Unencumbered housing

2)RDA assets

3)Tax Increment

Redevelopment budget observations:

1)Assumed a full year

2)Cost to retire debt overstated

3)Administrative cost overlooked

4)Estimates of tax increment were too high

5)Time pressure is limiting the review

By netting the pass through they could increase revenue to K-14

1)DOF disagrees with this approach

2)Most counties opting to follow the DOF

The LAO never defined “certified”. This was assumed

The audit is due by July and the apportionment is due by June

The original thought on the ROPS is that the Successor Agencies would prepare, the Oversight Board would approve after eliminating items, the Auditor-Controller would review and eliminate items, and then the DOF would eliminate more if needed. But the Auditor review was delayed.

The DOF has a 3day/10day review period. They have sent over 200 letters.

Items that are ineligible are:

1)Cooperative agreements per 34178 (a) and 34171 (d)(2)

2)City obligations

The LAO said the thought was pass through payments were not to be honored but the DOF has an entirely different perspective.

Marianne requested all counties send their May 1 State report to her in Excel.

There has also been some discussion about clawing back the Dec/Jan and the DOF denials but for now there is not mechanically enough time.

State Budget: The Governor should have a revision by May 14. The LAO to review 15 days later. Then the legislation passes the budget June 15 by majority vote

SCO is making decisions regarding asset transfers. They are looking for clarity

Contact information for Marianne is: Phone (916) 319-8315 or Email:

1:50 CDE Request – Reporting of Actual June RPTTF Distribution.

The J29 6/1 due 6/10 might be codified and have to do again. Just need an Excel of revenue from trust fund to schools. J29 residuals are property tax revenue (line 13 or 14). They will be listed on the form where SERAF used to be as a work around for now. Whatever we did before keep doing for schools facilities.

1:55 The Case of the Escaped Direct Charges by Sally Zutter, El Dorado County (see handouts)

Added to the tax roll as Escaped Bills

Allowed on Secured v Unsecured when ownership change

2:40 ABx1 26- The Implementation Saga Continues – Questions and Answers with Chris Hill, DOF

ROPS letters will continue to come to the Auditor’s but now will include approvals as well as denials. They will not be posted to the website

The Successor Agency admin cost is 3% for FY 2012/13. This is the June 1, 2012 allocation.

Triage based for the larger ROPS. They will look at the larger items.

Pension/MOU items should only be listed when due and payable.

If the ROPS has no RPTTF then can the SA (Successor Agency) receive a cost allowance? Chris thought about it and replied on 5/10/12 with a no.

DOF has a 3 day window to respond on the ROPS

What is the purpose of the SA budget on the ROPS? Informative

With the Supreme Court delay the Dec/Jan payments had gone out. Whose role is it to reconcile the January ROPS to the January payment? The DOF is aware of this issue but did not provide and definitive guidance yet.

If the SA is negative when debts are compared to tax increment then they should not be claiming the $250k admin fee. Per the DOF, we can ask them to reconsider.

If items are denied on the ROPS or if the ROPS not filed, we are discouraged from paying them.

SAs cannot go back and catch up on their cost allowance.

For uneven payment the DOF is aware of this. The SA should allow for a reserve and claim now if needed.

If a project are reaches its debt limitation and extended it in 2011 for FY 12/13, is the ordinance effective? The DOF said the RDA is deleted before 12/13 so it is not valid.

What happens if the SA tries to sell the assets but no one wants to buy them (i.e., sewer)? Will they be forced to sell anyway? DOF should have an answer soon.

When a project area is about to run out of enforceable obligations, does pass through continue? Counsel is looking at that issue now.

What about the certification of the ROPS issue for the AUP since the external auditors won’t certify? The DOF defers this to the SCO

The League of California Cities sent a letter in support to follow the LAO even though the DOF has a different opinion. The DOF is working on updates to the DOF FAQs.

3:20 Break

3:35 Introduction to Chancellor of Community Colleges VIPs of Property Tax

Diane Brady from the California Community College Chancellor’s Office introduces Ed Monroe and Randy Fong from Apportionments.

Diane stressed that they have a $6 billion system with low staff.

They do not get prop 98 backfill like K-12

For colleges the fees are up and State funds are down. This year is particularly bad with the shortage of fees and decline in revenue. The fees went up but fewer students could pay.

They need the report of any excess revenues that could be coming from redevelopment.

The facility money is not property tax revenue

3:50 The Never Ending Story…More on ABx1 26…- SCO Updates & Questions and Answers.

SCOUpdates & Questions and Answers by Priscilla Moss, Steve Mar and Jeff Brownfield.

The AUP format is on their website

They are in the process of hiring 25 new auditors to audit the asset transfers list.

In the meantime, they are putting available resources on the asset transfer list and the regular audits of the county property tax system will slow down.

They expect to complete the audits of the assets transferred after 1/1/11 in the next 18 months. They realize that is a lengthy time, but don't see how it can be done sooner. It sounded like they plan to perform full blown audits, not just AUP type of activities.

They have received 210 of the 399 reports (so half) of assets transferred after 1/1/11 reporting. Approximately 120 of them look questionable (on the surface) for their asset transfers.

Need to list ALL assets on the assets transferred after 1/1/11 even if the value is negative or zero. This was a question asked by Sally Zutter since her city RDA says that no one wants some of their assets like sewer improvements because there is no funding available for maintenance and they are more of a liability than an asset. He said to list them anyway.

If any asset reporting is incorrect, they need to send an addendum to the SCO as soon as possible.

The more complete the asset reports are the quicker the SCO jobs will be and the cheaper the charge.

The SCO wants us to review the asset reporting for reasonableness, accuracy, and completeness, but theydon'twant us to audit it. So, for instance, there is no need to go look at the last audited financial statements or reporting made to the SCO for the FYE June 30, 2011 and then track thru to make sure the RDA reported all assets. Then the SCO said (repetitively) that we knew our local RDAs much better than the SCO does and that we would know with just a quick glance whether the assets reports have problems. We informed them that in most cases, most of us don't know anything about the RDA's financial situation, thus, we don't understand how we can perform the task that they are directing us to do without doing a full blown audit. The SCO says they understand that we don't necessarily have any better knowledge of a specific RDA's financial status than the SCO does, but that we should still have much better knowledge than they do because we are local to the RDA, so thus, we should be able to review the asset reports for accuracy and completeness without doing an audit because we are local to the RDA and know their financial statuses.