Tax Equity Allocation.

Assembly Member Wallis proposes modifying California's Tax Equity Allocation (TEA) formula by removing certain property tax revenue reductions currently applied to qualifying cities' distributions. The legislation alters how county auditors calculate TEA payments by eliminating deductions related to tax revenue exchanges between the City of Rancho Mirage and community services districts.

The bill maintains the existing TEA framework, under which qualifying cities receive graduated percentage distributions over seven years, starting at 1% and increasing annually to 7% of eligible property tax revenues. County auditors would continue determining city eligibility based on whether their 1988-89 fiscal year property tax allocation was less than 7% of total property tax revenue, after accounting for redevelopment agency adjustments.

For Santa Clara County specifically, the legislation preserves special provisions enacted in 2006 that require proportional reductions to qualifying cities' allocations to offset impacts on educational funding. These include a five-year phase-out schedule beginning in 2015-16 that decrements the reduction percentage from 80% to zero, except during years when state education funding falls below certain constitutional thresholds.

The measure requires a two-thirds vote in each legislative chamber, as it would alter local agencies' proportional shares of property tax revenue. If the Commission on State Mandates determines the changes create state-mandated local costs, affected jurisdictions would be eligible for reimbursement through existing statutory mechanisms.