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HomeMy WebLinkAboutItem 09b - Support Senate Bill 1352 STAFF REPORT OFFICE OF THE CITY MANAGER DATE: May 5, 2026 TO: Honorable Mayor and City Council FROM: Dominic Lazzaretto, City Manager By: Justine Bruno, Deputy City Manager SUBJECT: RESOLUTION NO. 7685 SUPPORTING SENATE BILL 1352 PROPERTY TAXATION: NEWLY CONSTRUCTED: RECONSTRUCTED PROPERTY (2025- 26) CEQA: Not a Project Recommendation: Adopt SUMMARY At the regular City Council Meeting on April 7, 2026, Council Member Cao received support from two City Council Members to consider a resolution supporting Senate Bill (“SB”) 1352, which supports the reconstruction of substantially damaged or destroyed properties through property tax relief. Properties north of the 210 Freeway in Arcadia are at elevated risk for wildfire, and, if passed, SB 1352 will make it easier for damaged properties to be reconstructed, encouraging rebuilding and reinvestment in the community. Resolution No. 7685 expresses the City Council’s support of Senate Bill 1352, which encourages rebuilding and reinvestment from property owners impacted by Governor-declared disasters. It is recommended that the City Council adopt Resolution No. 7685 supporting Senate Bill 1352 Property Taxation: Newly Constructed: Reconstructed Property (2025-26). BACKGROUND Adopted by California voters in 1978, Proposition 13 limits ad-valorem property taxes to 1% of assessed value and caps annual property tax increases to 2%, except when the property is sold, changes use or ownership, major improvements are Resolution No. 7685 – Support SB 1352 May 5, 2026 Page 2 of 4 undertaken, it declines in value, or receives a historical designation through a Mills Act abatement. Under existing law, new construction or reconstruction often leads to reassessment and higher property taxes. In recent years, California has experienced devastating wildfires like the 2025 Palisades and Eaton Fires, which resulted in a loss of 16,000 structures across Los Angeles County. The devastation of these natural disasters displaces families whose property has been destroyed and requires rebuilding. Senate Bill 1352 was introduced on February 20, 2026, authored by State Senator Suzette Martinez Valladares. Senate Bill 1352 is supported by the California Assessors’ Association, the California Taxpayers Association, the California Association of Realtors, and the Cities of Los Angeles and Malibu. At the April 7, 2026, City Council meeting, Council Member Cao received support from Mayor Wang and Mayor Pro Tem Cheng to consider a resolution in support of Senate Bill 1352. DISCUSSION The California Revenue and Taxation Code specifies if a property is substantially damaged or destroyed in a Governor-declared disaster, property owners may rebuild and retain their property’s tax value prior to its destruction, under certain circumstances. To be considered “substantially damaged or destroyed”, there must be more than a 50% loss in value, and reconstruction generally must occur within five years of the initial event. After reconstruction, damaged or destroyed property may maintain its most recent tax base if it is comparable in size, use, and function. When rebuilt, the property’s new value should not exceed 120% of its original (full cash) value. If these conditions are met, property owners are allowed to transfer their prior property tax base to the rebuilt structure on the same site. If the reconstructed property exceeds the 120% limit, the value beyond 120% is subject to reassessment at current rates. Senate Bill 1352 amends Section 70.5 of the Revenue and Taxation Code to define the meaning of “substantially equivalent” for properties damaged on or after January 1, 2025, and requires that the most favorable tax interpretation be applied. Under Resolution No. 7685 – Support SB 1352 May 5, 2026 Page 3 of 4 the proposed definition of “substantially equivalent”, homeowners rebuilding after wildfire damage would now be allowed to rebuild up to 110% of the original property size without triggering a reassessment. For properties being reconstructed between Fiscal Years 2026–27 and 2034–35, SB 1352 provides property owners with an additional mechanism to retain their previous base year value. Instead of only using the 120% original value rule, property owners would have the ability to reconstruct within 110% of the original size and still retain their pre-damage assessment. Furthermore, when determining the property’s base year value, the more favorable assessment must be utilized by the Assessor. Under SB 1352, a “qualified property” is one that was substantially damaged or destroyed by the 2025 Palisades Fire, Eaton Fire, Hurst Fire, Lidia Fire, Sunset Fire, or Woodley Fire, or the 2024 Mountain Fire or Franklin Fire, for which the Governor proclaimed a state of emergency. While the City was affected by the Eaton Fire in 2025, since none of Arcadia’s residential structures were “substantially damaged” from this wildfire, SB 1352 will not have a significant on Arcadia at this time. SB 1352 would provide direct benefit to Arcadia property owners if some new emergency affects properties in the future. Senate Bill 1352 is intended to provide more flexibility to rebuild, especially in a high- inflationary environment, as long as the property rebuild stays similar in size, use, and value. The bill is currently advancing through the Legislature, would apply to lien dates starting in 2025, and is intended to sunset by January 1, 2036. It is recommended that the City Council adopt Resolution 7685 to support Senate Bill 1352 Property Taxation: Newly Constructed: Reconstructed Property. ENVIRONMENTAL ANALYSIS Any property damage and new construction resulting from a Governor-declared disaster would be subject to applicable California Environmental Quality Act (“CEQA”) processes; however, the proposed resolution of support does not constitute a project under the CEQA, as it can be seen with certainty that it will have no impact on the environment. Resolution No. 7685 – Support SB 1352 May 5, 2026 Page 4 of 4 FISCAL IMPACT Senate Bill 1352 only applies to properties “substantially damaged or destroyed” in Governor-declared disasters and certain fires, and it is believed that no homes in Arcadia currently meet these requirements. As such, SB 1352 is not expected to have a direct impact on Arcadia, and any potential foregone property tax revenue would likely arise from future disaster events and subsequent amendments to the Revenue and Taxation Code. Under SB 1352, there is no reimbursement from the state for properties claiming this tax benefit. Property owners would still pay property taxes; they would just maintain their original assessed valuations prior to the emergency. For context, in Fiscal Year 2025-26, the City expects to receive $21,132,300 in property tax revenue. In recent years, property tax collections have grown anywhere from 3% - 6% annually. Considering that there are approximately 700 properties located in Arcadia’s Very High Fire Hazard Severity Zone that are subject to elevated wildfire risk, future amendments to Section 70.5 of the Revenue and Taxation Code would likely impact these properties and their affiliated property tax collections the most. With over 20,000 parcels citywide, the 700 properties would represent less than 3.5% of total property tax generators in Arcadia. Over time, it would be expected that rebuilt and expanded homes would have a greater financial benefit to the community than fire-damaged vacant sites. RECOMMENDATION If enacted, SB 1352 broadens the criteria for which properties can be reconstructed while maintaining their prior base year values, helping ensure property owners can rebuild without the added costs of a higher property tax bill. It is recommended that the City Council determine that this action is not a project under the California Environmental Quality Act (“CEQA”); and adopt Resolution No. 7685 supporting Senate Bill 1352 Property Taxation: Newly Constructed: Reconstructed Property (2025-26). Attachment No. 1: Resolution No. 7685