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HomeMy WebLinkAboutstewardshipDecember 9, 2010 Members of the Butte County Board of Supervisors 25 County Center Drive Oroville, CA 95965 ~~ DEC i 6 ~~~~ OR01~11~, BAllFpF~~ • Stewardship COUCICI~ Dear Honorable Members of the Board , C The Pacific Forest and Watershed Lands Stewardship Council {Stewardship Council) is a private, nonprofit foundation responsible far overseeing the development and implementation of a plan for the permanent protection of aver 140,000 acres of watershed lands currently owned by Pacific Gas and Electric (PG&E} and located`in 22 different counties in California. The Stewardship Counci[ anticipates recommending the donation of a substantial portion ofi these watershed lands to public entities or qualified non-profit conservation organizations subject to the requirements of the PG&E Settlement Agreementand Stipulation that established the Stewardship Council. One of these requirements is that the totality of dispositions in each affected county be "tax neutral." with respect to property faxes. To facilitate the achievement of tax neutrality, the Stewardship Council has prepared draft guidelines that establish a standard methodology for addressing property tax neutrality on the watershed lands, and communicate the general principles and approach regarding the achievement of property tax neutrality. On December 2, 2010, the Stewardship Counci[ Board of Directors requested that staff issue these draft guidelines far public review and comment. Accordingly, we would greatly appreciate your county's review and comment on these draft guidelines. A copy ofi these draft guidelines is enclosed, and can also be found, along with additional information about the Stewardship Council's Land Conservation Commitment, on our website at www.st~wardshipcouncil.arcl. To comment on the draft guidelines, please send us your comments electronically or by regular mail no later than January 31, 2D11. Please send all a-mails pertaining fo this matter to the following address: comments3Ca7_stewardshipcouricil.org. Thank you for your time and interest. Sincerely, J ~ el Wagner ~irector of Finance Enclosure I5 N. Ellsworth Avenue Suite 140 G 5~ ateo, C~, j ~,o~s Phone (650 344 9072 Fox (650) 401 2140 www. stewardshipcouncil.org i jS lF~Y .. ., ~ .~ ~~~ .,. ,o ~~ Stewardship Council GUIDELINES FOR ACHIEVING PROPERTY TAX NEUTRALITY FOR PUBtlC REVIFWAND COMMENT INTRODUCT[ON The Settlement Agreement) and Stipulation2 that established the Land:Conservation Commitment require that the Land Conservation Plan being developed by the Stewardship Council provide property tax revenue, other equivalent revenue source,, or a lump sum payment, so that the totality of dispositions in each affected county will:be "tax neutral" for each county. Section 4.3 of Volume I of the Land Conservation Plan (~LCP) adopted b~-the Stewardship Council in November 2007 described the Stewardship Council's potential strategies and anticipated approach to achieving property tax neutrality at a programmatic level;;.. More recently, on September 17, 2009, the Stewardslup`Council adopted a funding policy. This policy further clarified the Stewardship Council's approach to property tax neutrality and identified the following potential vehicles to achieving this rEquirement: • Voluntary payment of property taxes by the new landowner:. • Lump-sum payment in satisfaction `of future tax revenues • Establishment of an endowment to fund a negotiated share of annual payments • Other in-lieu carnpens,ation as negotiated by tfie parties • Payment by PG&E:per theterms articulated in the Stipulation • Other consideration or benefit as negotiated by the parties BACKGROUND. _ ___. The watershed lands identified ~n tlie',Land.Canservatian Caznrnitment are subject to a valuation process conducted by the California'StateBoord of Equalization (SBE), rather than local county assessors. The SBE sets the taxation value of alI property owned or used by public utilities. Utility awned property is reassessed by the SBE every four years; therefore, the lands owned by PG&E are generally at or near their current market value.3 In California, property taxes are allocated among several different agencies and districts according to the subject"-property's Tax Rate Area (TRA). Typically, only a portion of the annual tax payments go to the county general fund, with the majority of taxes distributed to the county's ~ Opinion Mod~ing the Proposed Settlement Agreement of Pacific Gas & Electric Company, PGc~rE' Corporation and the Commission Staff, and Approving the Modified Settlement Agreement, December 18, 2003: http: //tivww. stewardshipcouncil. org/documents/Settlement_ 4 ~reement. pdf z Stipulation Resolving Issues Regarding the Land Conservation Commitment, September 25, 2003: httn://www.stewardshipcourrcil.org/documents/Stipulation flQreement.odf 3 Stewardship Council Land Conservation Plan, November 28, 2007 DRAFT Guidelines For Achieving Property Tax Neutrality Page 1 of 6 9?J13/2090 ~~ ~-t~:~Alq ~'d Sh l p. Council special districts (e.g., water and fire districts, school districts, libraries, and resource conservation districts). The SBE classifies real property owned by public utilities as either "unitary" or "non-unitary." Unitary property is defined as property necessary for an assessee's primary function. Non- unitaryproperty is property awned by the assessee, but not used as part of its primary function. The SBE generally assesses both unitary and non-unitary land using typical appraisal methods, such as comparable sales. PG&E is expected to retain the majority of lands and improvements' necessary for the future generation of power (i.e., unitary property). However, in some instances, PG&E may donate lands classified as unitary. Table 1 below lists the acreage and'annual'taxes for the watershed lands by county as presented in Volume T of the LCP. The`estiiriated total:tax;~iability that would be subject to tax neutrality will depend upon the total acreage transferred, and-the types of organization receiving lands. Table 1 -Property Taxes From Land Available for Donation3 _Codnty - Lands• Available #o~ Donation Unitary ~ faxes ~ (Annual) ~ Non Unitary Taxes Annual Total-Taxes (Anndal ~ '' AI ine 1,028 , $21;000 € $11,300 !' $32,300 Arnador 2,851 $'f:8,000 °$23,100 _^ .: $41,100 Butte 6,843 $49;700, $23;7,00';. ' $65,400 Calaveras _ , 1 ~ $1,900'- $300 $2,200 EI Dorado ~..:,<:,;.9 $1,10U:. $0 $1,100 Fresno 335 $17,200; $8,300 $25,500 Kern .443 $1,500 $0 $1,500 Lake 3;390 '"$37,OOQ;; ' $2,500 $39,500 Lassen 1 $33;800 $0 $33,800 Madera ~ ~- 70. $62,500 $116,600 $179,100 Mariposa ~ 0 <:;.' $100 $0 $100 Mendocino 1,823 ';;:` $25,000 $200 $25,200 Merced::::.. D $400 $D $400 Nevada`? " 4,095 $34,800 $41,600 $76,400 Placer ~ 4,693 $106,600 $176,800 $283,400 Plumas 5,329 $278,200 $98,300 $376,500 San Luis Obispo` .;~ `' 654 $D $2,800 $2,800 Shasta 37,127 $107,900 $138,500 $246,400 Tehama 1,412 $3,300 $7,600 $10,900 Tulare 29 $500 $2,000 $2,500 Tuolumne 1,337 $4,800 $16,900 ~ $21,700 Yuba ~ 59 $D $200 $200 Others 2,431 Total 74,593 $797,300 $670,700 $1,468,000 a This acreage includes lands within parcels that cross county boundaries DRAFT Guidelines For Achieving Property Tax Neutrality Page Z of G 12/13/2070 ~~ Stewardship Council PURPOSE OF PR~PQSED GUIDELINES The purpose of these guidelines is to establish a standard methodology for addressing property tax neutrality an lands located across 22 affected counties that are subject to the Land Conservation Commitment; and to communicate the general principles and approach regarding the achievement of property tax neutrality. Tlie Stewardship Council is seeking public input on the proposed`-guidelines from affected counties, special districts, and other interested stakeholders. - Following the completion of these guidelines, the Stew. air"dsl~uip' Council will develop a more specific methodology concerning other elements of property tax neutrality such:as: ,. • Determination of allocations between counties and'special, drstricts • Disbursement of funds after settlement amounts are calculated • Subsequent changes in property tax allocations and effects; oa:the Stewardship Council's tax neutrality payments • Effects of inflation and future appreciation of value on property tax'neutrality payments OVERARCHING ASSUMPTI(}NS These guidelines are .based on tlxe ~'flllowing three overarching assumptions: L Compensation for property taxes will be based on the current property faxes as paid by PG&E of the time of transfer. The Stewardship Council will address property tax neutrality based upon the most current property taxes paid by PG&E on tlielands being transferred at the time of the actual transfer of fee titli;`from PG&E to the selected donee. Due to the uncertain nature of timber harvests and similar activities, the Stewardship Council's commitment to`the:achievement of property tax neutrality does not extend to timber yield tax or any other taxes associated with the conversion of natural resources to revenues by the future landowner. 11. Property tax neufalify includes all property faxes assessed by fhe State Board of Egualizafion and disfributed between the affected county and special disfricfs The property taxes paid to counties are distributed among multiple agencies, including County General Funds, School and Fire Districts, Regional Conservation and Water Districts, and other special districts. DRAFT Guidelines FwAchieving . Property Tax Neutrality Page 3 of 6 12/13/2010 5~ 5~'~we~rd~hip Council The Stewardship Council's achievement of property tax neutrality applies to all property taxes that would be distributed directly to County General Funds; School and Fire Districts, Regional Conservation and Water Districts, and any other special districts as defined by the applicable Tax Rate Area. !!!. The Stewardship Councr"!'s tax neufrality commitment extends only to property tax revenues that remain with locally contro!!ed entitles. The Settlement and Stipulation direct the Stewardship Council to ensure that the effects of distributions be made tax neutral for the affected counties. Therefore, the Stewardship Council's property tax neutrality commitment will not apply to any portion `ofproperty tax payments that are subject to apportionment by the State of California. OPTIONS FOR FUNDING PROPERTY TAX NEUTRALITY PAYMENTS The Stewardship Council is currently considering two options for making tax neutrality.. payments: (1) a one-time lump-sum payment; or {2) fuaiding of a~,.independent tn~st+re to continue annual payments in lieu of taxes. Lump-sum payments Lump-sum payments in satisfaction of property tax neutrality would be calculated based upon the net present value of the current taxes as.,paid by PG&E at the tirn~ fihat lands are removed from the property tax rolls. The lump-sum pa~~aient would be calculated based upon the mast current assessed value and tax rate at the time of property transfer: The discount rate would be based upon reasonable rates of interest for long-term assets and liabilities. Lump-sum paymentfi tiyould be allocated based upon the applicable Tax Rate Area at the time of payment. The Stewai'dslup Council envisions makmg,these lump-sum payments as unrestricted payments in lieu of property taxes. Counties and special districts vsrould be free to determine the best use of the finds pursuant to tl~c needs;.of the county or special district. Annual payments The,$tewardship Council is researching the feasibility ofestablishing athird-party managed endowment. account to makeannual payments to affected counties and special districts in lieu of property taxes on donated lands. The endowment amount would be calculated based upon the net present value of:tfie,current taxes as paid by PG&E at the time that lands are removed from the property tax rolls; net of the, trustee's management and administrative fees. As envisioned, annual'-payments out of the endowment account would be calculated as a percentage of the account's value based upon a rolling average to be determined upon the selection of an endowment manager. Please note, under this approach annual payments maybe higher than the original tax payments in some years, and lower in others. Annual payments from the trustee would be unrestricted. DRAFT Gurdeiines ForAchieving Property Tax Neutrality Fage 4 of 8 12/13/2010 ~tewardshap Council ACCEPTANCE OF PROPERTY TAX NEUTRALITY PAYMENTS Prior to the disbursement of funding of property tax neutrality the Stewardship Council will ask affected counties and special districts to execute an agreement stipulating that the Stewardship Council's property tax neutrality has been fulfilled for each transaction. The Stewardship Council will work with affected counties and special districts to determine the exact form of acceptance that is acceptable to both parties. PROPOSED GUIDELINES BY DONATION SCENARIO The proposed guidelines described below are organized and presented'nndEr four different land donation scenarios: donation oflands to counties, state agencies; federal agencies, and Native American tribes and other tax-exempt organizations. The Stewardship Council expects that any intended payments foie property tax neutrality will be a consideration in the selection of donees for lands and in the development of transactional terms related to the preservation and enhancement of beneficial public values. SATISFACTION OF TAX NEUTRALITY WHEN LANDS ARE TRANSF~RRED.TO COUNTIES Transfer of lands with no associated revenues: • The value of the land interests donated will be considered "in lieu" payment of the county's share ofproperty_,,taxes on the affected parcel; • The Stewardship Council will .pay 1.00%`Of property tax neutrality related to special districts andfother "non county" recipients Transfer oflands -with .associated revenues'(i a existing leases and licenses, or Timber harvest revenues):; • The value of the land: interests donated will be considered "in lieu" payment of the county's share of property taxes on the affected parcel • The first use of revenues associated with the lands is to pay for special districts' share of taxes ~~ `~ • If revenues afire not suf#`~cient to cover all property taxes due to special districts, the Stewardship Council will pay for property tax neutrality related to special districts and other "non-county" recipients. • Any excess revenues after satisfaction of property tax neutrality will be available for enhanced management and improvements on the subject property. DRAFT Gulde!lnes ForAchleving Property Tax Neufra!!ty Page 5 of 6 12/13/20!0 • ~ ~ .. ~~ St~rnr~rdshop Cour~ci l SATISFACTION OF TAX NEUTRALITY WHEN LANDS ARE TRANSFERRED TO STATE AGENCIES • The Stewardship Council will pay I00% of property tax neutrality related to counties, special districts, and other "non-county" recipients when lands are transferred to state . agencies, unless the recipient agency is expressly obligated to pay property taxes bylaw and has a history of making such payments. SATISFACTION OF TAX NI=UTRALITY WHEN LANDS ARE TRANSFERRED TO FEDERAL AGENCIES • The Stewardship Council recognizes that lands transferred to federal agencies are typically subject to various revenue sharing programs intended to help compensate local governments for the provision of services on federal lands: Th® Stewardship Council's analysis of these programs indicates that the annual payments under these programs would yield only a fraction of the amount countiesand~special districts currently receive in property taxes from 1'G&E. • Therefore, the Stewardship Council will pay:1.00% of property tax neutrality related to counties, special districts, and other "non.-county" recipients when lands are transferred to federal agencies. SATISFACTION OF TAX NEUTRALITY WHEN LANDS ARE TRANSFERRED TO NATIVE AMERICAN TRIBES AND TAX-EXEMPT ORGANI~ATlONS'OTHER THAN COUNTIES AND STATE OR FEDERAL AGENCIES • The Stewardship Council will pay 100°!0 of property tax neutrality related to counties, special districts, and other "non-county" recipients when-lands are transferred to tax- exempt organizatioris.other than counties`and state or'federal agencies. • With respect to Native American tribes that, would have been able to place lands into trust but for the teims of the donation transaction;; the Stewardship Council will pay 100% of property tax neutrality related to.counties, special districts, and other "non-county" . ,::. rec~p~ex~ts. DRAFT Guidelines For Achieving - ~ ' Property Tax Neutrality Page 6 of 6 12/73/2010