California 2018 GASB-77 Data


Where are the numbers?

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GASB 77, or Statement No. 77 of the Generally Accepted Accounting Principles (GAAP) set forth by the Governmental Accounting Standards Board (GASB), requires governments to disclose the amount of foregone tax revenue due to tax abatement programs.

Updated: October 10, 2019

A look at the 2018 Comprehensive Annual Financial Reports (CAFRs) of 486 general purpose governments and 1089 school districts in California revealed disappointing GASB 77 compliance outcomes. The percentage of local governments that had tax abatement disclosures in their financial statements is less than 4%. Twenty out of the 58 counties complied – less than half but still a much better rate than that of municipality and school district: 38 out of the 429 cities/towns for which 2018 CAFRs are available (out of 482 municipalities in total) disclosed, and just one out of 1,089 school districts did.

As for the actual amount of taxes abated, the 20 counties that complied with GASB 77 reported $85.8 million in foregone revenue, mostly as part of the William Act which aims to preserve agricultural land. Fresno County ranks number one at $38.6 million, followed by Kern County at $12.8 million. The taxes foregone by the 38 compliant cities and towns total $62.5 million. These abatements mostly take the form of direct economic assistance and tax rebates (particularly Sales and Use Tax and Transient Occupancy Tax). The City of Clovis reported losing $733,800 passively to Fresno County’s tax abatement programs.

The one compliant school district, La Honda-Pescadero Unified School District, lost $416,890 passively to agreements entered into by San Mateo County under the Williamson Act. Although the County of San Mateo supplied this information to the school district, the county itself did not make any GASB 77 disclosures. Last year, four school districts in Santa Clara County reported passive revenue losses totaling $354,462 with information provided by the county.

Given that over one-third of counties did report on tax abatements, it is puzzling that compliance among school districts is virtually zero. According to a research brief published by GASB, California’s counties and school districts are required to be GAAP-compliant, while the municipalities are not – though most large cities are GAAP-compliant by choice. With such a small percentage of reporting jurisdictions, it is difficult to gauge the cost of tax abatement programs. Assuming that all counties have at least one farmland security agreement, as is the case for the 20 compliant counties, and that the “size” of these contracts is roughly proportional to the population (often an indicator of governmental capacity), the crude estimate for total foregone revenue for all 58 counties would be over $400 million. Similar for all 482 municipalities, the estimate would be at least $275 million. Then there are the passive revenue losses, including those borne by the 1000+ school districts, which are difficult to estimate but likely substantial.

Moreover, the state of California is one of the seven states that failed to comply with GASB 77 in 2018. If the school districts did not comply due to lack of capacity or available information, the same explanation certainly does not apply to the government of the largest state in the US by population.

While California relies less on tax abatement programs for economic development than most other states – its property tax cap “Proposition 13” having put a serious damper on government revenue over the 40 years since its passage, there still exist costly tax abatement programs that taxpayers should be aware of, such as the Film and Television Tax Credit, the California Competes Tax Credit, and the Sales and Use Tax Exclusion Program, as well as the ones that affect local governments. Will 2019 herald better disclosures?

See the list of California localities that complied with GASB 77 in 2018.