BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: AB 1086 HEARING: 6/29/11 AUTHOR: Wieckowski FISCAL: No VERSION: 5-19-11 TAX LEVY: No CONSULTANT: Miller TRANSACTIOSN AND USE TAXES: ALAMEDA COUNTY Allows Alameda County to impose an additional sales tax that exceeds the current 2% rate. Background and Existing Law Existing state law authorizes local governments to impose, increase, or extend transactions and use taxes (also known as district taxes), up to a combined rate of all district taxes (cities, county, special districts) of 2% for the county. Cities and Counties may impose these taxes in increments of 0.25% and they may be used for any purpose as long as the tax is approved. These taxes must be placed on the ballot by the Board of Supervisors for the County or the City Council and approved by the voters. Proposition 218 amended Proposition 13 to require a majority vote of the people for a general tax and a 2/3 vote of the people for a special tax. Cities and Counties are required to contract with the State Board of Equalization (BOE) to perform all functions in the administration and operations of the ordinances imposing the Bradley-Burns local taxes and district taxes. Proposed Law Assembly Bill 1086 allows Alameda County to adopt an ordinance imposing a transactions and use tax for the support of countywide transportation programs at a rate of no more than 0.5% that would, in combination with all other transaction and use taxes, exceed the 2% limit established in existing law. AB 1086 -- 5/19/11 -- Page 2 The bill requires that the tax be adopted pursuant to the existing law. If the tax is not adopted by the electorate by November 6, 2012, the provisions of this bill shall be repealed as of January 1, 2014. The bill states that the Legislature finds and declares that a special law is necessary because of the unique fiscal pressures experienced in Alameda County in providing essential transportation programs. State Revenue Impact The costs associated with this bill will be absorbed by the tax. According to the BOE a 0.5% transactions and use tax in Alameda County can raises up to $141 million. Comments 1. Purpose of the bill . The author's office states that this bill is necessary because of the unique fiscal pressure in Alameda county in providing essential programs. The supporters of this bill further state that while Alameda County's current half-cent sales tax measure for transportation does not expire until 2022, approximately 95% of the projects that were identified in the expenditure plan for that measure have already been constructed and the sales tax revenue currently being generated is primarily dedicated to debt service on the bonds. In order to deliver transportation improvements for those who live, work and travel ain Alameda County, the county wants the option of asking the voters to approve an extension ot the existing tax for countywide transportation improvements. 2. 58 reasons for confusion . Business groups that oppose this measure state that it will further complicate the tax system in this state and that uniform rules of administration ensure that businesses operating in more than one county can easily understand what to tax and what not to tax. Assembly Actions AB 1086 -- 5/19/11 -- Page 3 Assembly Revenue & Taxation Committee:6-3 Assembly Floor: 49-26 Support and Opposition (00/00/11) Support : Metropolitan Transportation Commission. Opposition : California Taxpayers Association; Howard Jarvis Taxpayers Association.