BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 1492 HEARING: 4/18/12
AUTHOR: Leno FISCAL: Yes
VERSION: 4/9/12 TAX LEVY: No
CONSULTANT: Miller
LOCAL VOTER APPROVED VEHICLE LICENSE FEE
Authorizes the City & County of San Francisco to impose a
VLF based on voter approval.
Background and Existing Law
Existing state law imposes a VLF, 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 1.15% of the value of a
vehicle, but historically the rate has been 2% of value.
Until May 19, 2009, the rate was 0.65%, after the passage
of AB 3XXX (Evans, 2009) temporarily increased the VLF rate
to 1.15% and dedicated revenue from the portion of the
increase from 0.65% to 1% to the state General Fund and
revenue from the additional increase of 0.15% to specific
local public safety programs. AB 3XXX (Evans, 2009) VLF
rate increase became effective for vehicle registrations on
May 19, 2009 and expired on June 30, 2011.
For the taxpayer, VLF is deductible on both state and
federal income taxes.
Proposed Law
Senate Bill 1492 authorizes the City and County of San
Francisco to impose a vehicle license fee. The fee must
first be authorized by the Board of Supervisors by and then
be placed before the voters of that county for a vote.
This bill specifies that the assessment rate shall be equal
SB 1492 -- 4/9/12 -- Page 2
to the difference between the historical 2% state VLF rate
and the current state VLF rate. For example, in January,
2011, when this bill takes effect, assuming the taxes have
not been extended, this would allow a county to impose a
local assessment rate of 1.35% on the depreciated value of
a county's residents' vehicles (2% minus the state VLF of
.65%). The resulting total VLF imposed on residents of
counties adopting the assessment would be 2% (.65% to the
state, plus 1.35% to the county). The bill provides for
the local assessment to adjust so that county residents
would never pay more than a maximum 2% rate.
The bill specifies that any revenue generated by the local
VLF shall not supplant any moneys that the state
appropriates or apportions to the county.
State Revenue Impact
If the City and County of San Francisco were to impose the
tax it would generate as much as $60 million starting as
early as 2012 or 2013 and $60-90 million annually
thereafter.
Comments
1. Purpose of the bill . According to the author, "this
bill would give the City and County of San Francisco the
authority to implement a voter approved local assessment
(VALA), a fee on the value of motor vehicles registered in
the county, only after the Board of Supervisors has agreed
by a two-thirds vote to allow voters to consider it on a
countywide ballot. SB 1492 allows for voter determination
in these severely challenged fiscal times. A VALA could be
one of the most important tools available to San Francisco
voters to create livable communities when local services,
programs and resources are being cut or eliminated
altogether. By ensuring that the voters have the ability to
levy a fee upon themselves to fund vital services such as
police and fire protection, public health programs, and
public transit, SB 1492 gives county voters a viable
alternative to cutting services. This ability could help
the City and County generate upwards of $65 million in
revenue. The bill is supported by the San Francisco
Chamber of Commerce and the City and County of San
Francisco.
SB 1492 -- 4/9/12 -- Page 3
2. Fifth time is a charm . This bill has a long legislative
history. This is the fifth time a local VLF option has
been put forward, two of which were vetoed.
SB 1492 is almost identical to SB 223 (Leno, 2011) which
was vetoed by the Governor; the veto message stated:
"Before we embark on a piecemeal approach for one city, we
should try to fashion a broader revenue solution to our
state's fiscal crisis."
SB 10 (Leno, 2010) was similar to SB 223 (Leno, 2010) and
was held in the Assembly.
AB 799 (Leno) of 2005 and AB 1590 (Leno) of 2007 were both
very similar to this bill. AB 1590 was never taken up in a
Senate policy committee and the Governor vetoed AB 799.
Governor Schwarzenegger's veto message read in part:
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.
The Committee may wish to consider advancing a bill that
has been vetoed by two Governors if there is no substantial
difference or any indication that the Governor will be
differently disposed towards to the bill.
3. Taxpayers may be hurt . Opponents of the so-called "car
tax" criticize any program that increases the VLF, stating
that the tax hurts working class people and is a guise to
increase government spending overall. Opponents of this
SB 1492 -- 4/9/12 -- Page 4
bill state that a property tax should not exceed the 1%
real property tax rate as an "in-lieu" tax. The committee
may wish to consider whether this additional tax will be a
burden on taxpayers.
4. Yesterday seems so far away . AB 925 (Burton, 1993)
authorized the City and County of San Francisco to levy a
surcharge on the 2% VLF for purposes of public transit
financing so long as transit fares are not increased. The
fee would have required a 2/3 vote of the electorate. It
has never been enacted by the City and County. At the time
of its enactment in the Legislature, it was estimated that
the surcharge could have yielded over $300 million for the
City and County. However, the potential fee has
effectively been voided due to a recent increase in transit
fares. The Committee may wish to consider the importance
of these monies to the City and County of San Francisco.
5. Pass the buck to the feds. Since the IRS considers the
VLF to be in the nature of a property tax, the VLF is
deductible for both federal and state income tax purposes
which requires the federal government to offset some of the
cost to taxpayers. So for those who itemize deductions, up
to 40% of the additional VLF would effectively be borne by
the state and federal governments in the form of reduced
income tax payments. The same would be true of a local VLF
such as that proposed by this bill. The bill provides for
reimbursing the General Fund for this revenue loss from
amounts collected.
6. Double referral. This bill is double referred to the
Senate Committee on Transportation and Housing.
Support and Opposition (4/12/12)
Support : City & County of San Francisco; San Francisco
Chamber of Commerce.
Opposition : California Taxpayer's Association.