BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 10|
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THIRD READING
Bill No: SB 10
Author: Leno (D)
Amended: 5/28/09
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 6-4, 4/14/09
AYES: Lowenthal, DeSaulnier, Kehoe, Pavley, Simitian, Wolk
NOES: Huff, Ashburn, Harman, Hollingsworth
NO VOTE RECORDED: Oropeza
SENATE REVENUE & TAXATION COMMITTEE : 5-3, 4/22/09
AYES: Wolk, Alquist, Florez, Padilla, Wiggins
NOES: Walters, Ashburn, Runner
SENATE APPROPRIATIONS COMMITTEE : 7-5, 5/28/09
AYES: Kehoe, Corbett, DeSaulnier, Hancock, Leno, Oropeza,
Yee
NOES: Cox, Denham, Runner, Walters, Wyland
NO VOTE RECORDED: Wolk
SUBJECT : Vehicle license fee: local assessment
SOURCE : Author
DIGEST : This bill authorizes a county to place on the
ballot a measure to impose an additional assessment on
vehicles owned by residents of that county.
ANALYSIS :
CONTINUED
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Existing state law imposes a vehicle license fee (VLF),
which is in lieu of a personal property tax on California
motor vehicles, at a rate based on the taxable value of the
vehicle. The taxable value of a vehicle is established by
the purchase price of the vehicle, depreciated annually
according to a statutory schedule.
The VLF tax rate is currently 0.65 percent of the value of
a vehicle, but historically the rate has been two percent
of value, and effective May 19, 2009, the rate will be 1.15
percent, because of AB 3XXX (Evans), Chapter 18, Statutes
of 2009-10 Third Extraordinary Session.
AB 3XXX temporarily increases the VLF rate to 1.15 percent
and dedicates revenue from the portion of the increase from
0.65 percent to one percent to the state General Fund and
revenue from the additional increase of 0.15 percent to
specific local public safety programs. AB 3XXX's VLF rate
increase becomes effective for vehicle registrations on May
19, 2009 and expires on June 30, 2011.
For the taxpayer, VLF is deductible on both state and
federal income taxes.
This bill:
1. Authorizes the board of supervisors of any county, by a
two-thirds vote, to adopt an ordinance to place before
the voters in that county a measure to levy a local
assessment for general revenue purposes. The local
assessment will be placed on residents of the county for
the privilege of operating a vehicle or trailer coach
subject to the state VLF upon the public streets and
highways of the county.
2. Specifies that the assessment rate shall be equal to the
difference between the historical two percent state VLF
rate and the current state VLF rate. In 2010, when this
bill takes effect, this allows imposition of a local
assessment rate of 0.85 percent on the depreciated value
of a county's residents' vehicles (two percent minus the
state VLF of 1.15 percent). The resulting total VLF
imposed on residents of counties adopting the assessment
would be two percent (1.15 percent to the state, plus
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0.85 percent to the county). The bill provides for the
local assessment to adjust so that county residents will
always pay two percent, even after the state adjusts its
rate.
3. Requires that the ordinance proposing the assessment be
submitted to the electorate of the county and approved
by a majority of those voting.
4. Specifies an ordinance is valid if approved by a board
of supervisors and voters prior to the effective date of
the bill if both the following apply:
A. Any assessment imposed is not levied until at
least 90 days after the effective date of the bill.
B. The board of supervisors ratifies its adoption
of the ordinance after the effective of the bill
and prior to the first levy of the assessment.
5. Allows a county imposing the local assessment to impose
a lower rate for low-emission vehicles, as defined.
6. Requires any county imposing an assessment to contract
with the Department of Motor Vehicles (DMV) to collect
and administer the fee and to pay DMV for its initial
setup and programming costs.
7. Requires DMV to do all of the following:
A Collect the local assessment pursuant to a
contract with the county.
B. Deduct its costs from the assessments collected.
C. Report to the Franchise Tax Board (FTB) the
aggregate amount paid by each person paying the
local assessment authorized under this bill for the
prior quarter. The FTB in turn shall report to the
DMV state revenue losses resulting from taxpayers
deducting the local VLF assessments authorized by
this bill from their personal income tax and their
corporation taxes. DMV shall remit that amount to
the State Controller for deposit in the state
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General Fund, ensuring that the implementation of
this bill results in no loss of state revenue.
D. Transmit the collected revenues minus these
deductions to the counties imposing the assessments
as promptly as feasible.
8. Provides that the revenue generated by a local
assessment imposed in a county shall not supplant any
moneys that the state apportions to the county.
9. Specifies if a county or city and county levies an
assessment pursuant to the bill and has a reduction in
revenue derived from the assessment due to an increase
in the state rate, reimbursement by the state shall not
be made to the county or city and county for that loss
in revenue.
Background
Vote Requirements . The California Constitution prohibits
any local government from imposing, extending, or
increasing any "general tax" unless and until that tax is
submitted to the electorate and approved by a majority
vote. A special tax, in turn, may only be imposed if that
tax is approved by a two-thirds vote of the local
electorate. The California Constitution defines a general
tax as any tax imposed for general governmental purposes,
while the term "special tax" is defined as a tax imposed
for specific purposes. This bill authorizes a county board
of supervisors, by a two-thirds vote, to place before the
voters of the county, an ordinance to levy a local
assessment for general revenue purposes. As such, the
ordinance only needs to be approved by a majority of voters
and does not require the supermajority vote required for
special taxes.
Previous legislation
AB 799 (Leno) of 2005 and AB 1590 (Leno) of 2007 were both
very similar to this bill, except they applied only to the
City and County of San Francisco. AB 1590 was never taken
up in a Senate policy committee, and the governor vetoed AB
799. His veto message read in part:
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"Within hours of taking office in 2003, I signed an
Executive Order to reverse the car tax increase. That
action returned $4 billion to the people of
California. Putting that money back into the hands of
hard working Californians is one of the ways we have
helped our economy grow over the last three years.
"This measure would, in effect, reinstate the car tax
for the people of San Francisco. In fact, if the
vehicle license fee increase proposed by this bill
were enacted, the people of San Francisco could pay
more than twice the amount to register their vehicles
than anyone else in the state.
"As noted in my veto messages of prior years, I am not
opposed to modest increases in fees if such increases
are approved by the impacted voters and not addressed
in a piecemeal fashion. Although this bill requires
voter approval, it impacts only one county."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10
2010-11 2011-12 Fund
Maximum local ($1,483,250)
($4,711,500) Local
assessments
(revenue gain)
DMV programming/ $543 $112 Special*
admin (up-front costs paid by county,
ongoing costs deducted from
assessments collected)
Maximum tax revenue loss
$180,000$10,000 General
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from VLF taxpayer deductions
* Motor Vehicle Account
Staff notes that the local assessment revenue gain and tax
revenue loss shown here are based upon approval of the
assessment in every county in the state. Actual costs and
revenues would depend upon the number of counties approving
an assessment and the number of vehicles registered in
those counties. For purposes of example, if only San
Francisco (with 423,110 fee-paid vehicle registrations)
approved an assessment of two percent and the current VLF
is 1.15 percent, annual local revenues would be $43,147,220
and the estimated annual tax revenue loss in the first year
would be approximately $1.5 million. Tax revenue losses
are reimbursed to the General Fund in the following year
from revenues collected.
SUPPORT : (Verified 5/29/09)
California Communities United Institute
San Francisco Chamber of Commerce
San Francisco Firefighters, Local 798
San Francisco Labor Council
ARGUMENTS IN SUPPORT : The author's office notes that the
VLF is one of the largest sources of general-purpose tax
revenues for California's counties. These revenues fund
vital programs, including public safety, public health,
social services, fire protection, public works, and
cultural activities. Much of this revenue was lost when
the Governor signed an executive order in 2003 reducing the
VLF to the 0.65 percent rate.
The author's office states that key public services are
under constant budget pressures from both increasing costs
such as labor, fuel, and medical expenses, as well as from
expanding need for public services resulting from
homelessness, HIV/AIDS, and reduced state and federal
funding due to current economic conditions. The author's
office introduced this bill to grant the people of each
county the right of voter determination to levy a fee upon
themselves to fund vital services and thus give county
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voters a viable alternative to cutting services.
JJA:do 5/29/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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