On July 15, 2011, AB 1265 was enacted into law with a retroactive effective date of January 1, 2011. AB 1265 provides an opportunity for counties to offset a portion of their loss of Williamson Act related subvention funds by implementing the AB 1265 provisions. On September 13, 2011, the Board implemented the provisions of AB 1265 for the year 2012, which had the following impacts as of January 1, 2012: (1) The implementation reduced a landowner’s Williamson Act property tax benefits, which in most instances resulted in an increase in property taxes to the landowner; (2) the implementation reduced the term of a Williamson Act contract from ten years to nine years; and (3) the implementation allowed increased revenues to be transferred directly into the County’s General Fund.
Additionally, if a landowner wanted to prevent the reduction in the term of his or her Williamson Act contract with its reduced level of property tax benefits, the landowner had the option to non-renew the contract. AB 1265 provides that a county will not modify or revalue a landowner’s contract unless the landowner is given at least 90 days’ notice of the opportunity to prevent the modification and revaluation by serving notice of non-renewal.
Pursuant to Resolution 2011-103, adopted by the Board on September 13, 2011 to facilitate implementation of AB 1265, a landowner is provided with at least 90 days’ notice of his or her opportunity to prevent the modification and revaluation by serving timely notice of non-renewal of his or her Williamson Act before the contract’s annual renewal date.
The Board’s implementation of AB 1265 on September 13, 2011 only applied to 2012. The Board implemented AB 1265 for 2013, 2014, 2015, 2016, and 2017.
By its terms, AB 1265 was set to expire effective January 1, 2016. However, the California Legislature adopted SB 1353 in 2014 which removed the January 1, 2016 expiration date and otherwise maintained the provisions of AB 1265 related to Williamson Act contracts.
The issue now before the Board is the implementation of AB 1265 and SB 1353 for 2018.
AB 1265/SB 1353 is a program that a county can use when state subvention funding falls to less than half of the county's "actual foregone general fund property tax revenue." In such a case, AB 1265/SB 1353 enables a county to shorten its ten year Williamson Act contracts to nine years. Landowners can "opt out" of this approach by non-renewing their Williamson Act contracts instead of accepting the shorter contract terms.
For landowners who accept the shorter term, the Assessor is required to make an addition to the assessed value that reflects the shorter term. The addition is statutorily mandated (under AB 1265/SB 1353) to be 10% of the difference between; (a) the full unrestricted value of the property under Proposition 13 or the market value, whichever is lower, and (b) the restricted value of the property under the Williamson Act.
This means that for every dollar in property taxes that a contracted landowner currently avoids by having their land under contract, AB 1265/SB 1353 requires that ten cents be paid annually to the County. None of the additional revenues generated by AB 1265/SB 1353 are to be shared with the State or other government entities.
For FY 2016-17, Shasta County’s actual foregone general fund property tax revenue from Williamson Act contracts was $228,507. The County received no monies from the State pursuant to the Open Space Subvention Act. As a result, the zero payment from the State of California pursuant to the Open Space Subvention Act, is less than one-half of the County’s actual foregone general fund property tax revenue.
The implementation of the AB 1265/SB 1353 provisions requires a majority vote of the Board of Supervisors. Its implementation will be suspended for any subsequent fiscal year in which the Williamson Act related subvention payment from the State for the previous fiscal year exceeds one-half of the foregone general fund property tax revenue that resulted from Williamson Act contracts.
If the Board decides to implement the AB 1265/SB 1353 provisions effective January 1, 2018, that decision only applies to 2018.
There are approximately 683 separate Assessor's Parcels in Shasta County that are subject to Williamson Act contracts. On July 28, 2017, a total of 683 landowner notices were mailed to all property owners of parcels restricted by a Williamson Act contract. The landowner list was generated from the latest version of the Assessor's data base. As required, the notification included the scheduled public hearing on August 22, 2017 at 9:00 a.m. (or as soon thereafter as may be heard) to consider adoption of the implementation of AB 1265/SB 1353 for 2018. The public hearing notice was published in The Record Searchlight on August 9, 2017.
Following this public hearing, should the Board decide to implement AB 1265/SB 1353, staff will once again mail out notifications as required, to inform landowners of the final decision and their right to file a notice of non-renewal.
Should the County choose to implement the AB 1265/SB 1353 provisions for 2018, the landowner’s options are: (1) Accept the new decreased 9-year term and associated 10% decrease in benefits; or, (2) File a Notice of Non-renewal, and accept the property tax consequences of escalating assessed valuation over the remaining term of the contract.
Non-renewal generally places a much higher financial burden on local landowners as assessed values will gradually return to their full unrestricted Proposition 13 amounts. In contrast, AB 1265 and SB 1353 allow landowners to retain 90% of the tax benefits that the Williamson Act currently affords them. For most, if not all, landowners, accepting the 9-year term and associated decrease in benefits would be significantly less of a financial burden than serving a notice of non-renewal.
The AB 1265/SB 1353 provisions do not apply to the following: (a) Contracts that have been non-renewed; (b) contracts with cities; (c) Open-space or agricultural easements; (d) scenic restrictions; (e) wildlife habitat contracts; (f) atypical term contracts, including, but not limited to, 20-year initial term contracts declining to 10 years, or re-encumbrances pursuant to Government Code Section 51295, if the county's board of supervisors determines the application of the AB 1265/SB 1353 provisions to them would be inequitable or administratively infeasible.
If the AB 1265/SB 1353 provisions are implemented by the Board of Supervisors for 2018, the Assessor's Office will be required to make the appropriate addition to the assessed values as of January 1, 2018, and the Auditor's Office and Tax Collector will be required to modify the Fiscal Year 2018-19 tax bills to reflect the assessment changes. The Department of Resource Management and the Assessor-Recorder's Office will process all notices of non-renewal that have been received.
Additionally, AB 1265/SB 1353 [Government Code Section 51244 (b)(2)] requires that in any year in which AB 1265/SB 1353 is implemented, the County shall record a notice that states the affected parcel number or numbers and current owner's names, or, alternatively, the same information for those parcels that are not affected.