BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1492 (Leno) - Vehicle license fee: San Francisco assessment
Amended: April 9, 2012 Policy Vote: G&F 6-3, T&H 6-3
Urgency: No Mandate: No
Hearing Date: May 24, 2012 Consultant: Mark McKenzie
SUSPENSE FILE.
Bill Summary: SB 1492 would authorize the City and County of San
Francisco to impose a voter-approved local assessment on the
value of motor vehicles registered within its jurisdiction at a
rate that is equal to the difference between the statewide rate
of the vehicle license fee (VLF) and 2% of a vehicle's market
value.
Fiscal Impact:
One-time Department of Motor Vehicles (DMV) programming
costs of $115,000, paid in advance by San Francisco.
Ongoing DMV administrative costs of $112,000 would be
deducted from assessments collected.
Income tax revenue losses of $2.7 million in 2014-15, $1.6
million in 2015-16, and $200,000 in 2016-17. These losses
are a result of taxpayers deducting the increased VLF
amounts on income tax returns. Ongoing income tax losses
are reimbursed from fees collected, but there would be a
one-year delay between the tax year in which the VLF
deduction is claimed and reimbursement to the General Fund
from fee revenues, as provided in the bill.
Potential annual revenue gains of up to $128 million for
the City and County of San Francisco, assuming the maximum
local rate of 1.35% is imposed.
Background: Existing law imposes an annual vehicle license fee
(in lieu of a personal property tax) on all motor vehicles not
otherwise exempt. The VLF is calculated by multiplying the
depreciated value of the vehicle by a specified rate. Although
the current rate is 0.65 %, the rate had historically been 2% of
a vehicle's value up until 2004. The rate was temporarily set
at 1.15% from May 19, 2009 until July 1, 2011 as a result of AB
SB 1492 (Leno)
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3X 3 (Evans) 2009. There were approximately 466,448 fee paid
vehicles registered in San Francisco in 2011. According to
historical data from the State Controller's Office,
approximately 2.7% of the statewide VLF revenues are derived
from San Francisco, and the Department of Finance estimates that
the total value of registered vehicles statewide is $352
billion.
Proposed Law: SB 1492 would authorize the City and County of San
Francisco, upon approval by a 2/3 vote of the board of
supervisors and a majority of the electorate, to impose an
assessment on the value of motor vehicles registered in the
county. This local assessment rate would be equal to the
difference between 2% of a vehicle's value and the rate levied
by the state, and revenues collected would be for general
purposes. San Francisco would be required to contract with DMV
to collect and administer the fee. The bill would require San
Francisco to pay DMV for initial setup and programming costs,
and DMV would recover any ongoing administrative costs from
assessment revenues collected. An assessment approved by voters
between January 1 and June 30 would be operative the following
January 1, and those approved between July 1 and December 31
would be operative the following July.
Related Legislation: SB 223 (Leno), an identical bill to this
measure, was vetoed by Governor Brown last year. The veto
message included the following statement:
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.
In addition to last year's bill, the author has authored the
following substantially similar bills that would have authorized
a locally-approved vehicle assessment: SB 10 (Leno) 2009 died
on the Assembly Floor; AB 1590 (Leno) 2007 was held in the
Senate Revenue and Taxation Committee; AB 799 (Leno) 2005 was
vetoed by Governor Schwarzenegger, who viewed the bill as an
unfair burden on motorists; AB 1187 (Leno) 2004 failed passage
in the Senate Appropriations Committee. Another similar bill,
AB 1208 (Yee) 2005, was vetoed by Governor Schwarzenegger, who
indicated he believed fees should only be added with voter
approval.
SB 1492 (Leno)
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Staff Comments: Existing law provides that the VLF, which is
effectively a property tax on vehicles, is deductible for both
the state and federal income tax purposes. SB 1492 would
require DMV and the Franchise Tax Board (FTB) to develop a
reporting process that enables the department to provide timely
data to FTB indicating the amount of assessments paid in each
participating county. By January 1 of the second year following
the initial imposition of the assessment, FTB would estimate the
increased amount of tax revenue loss due to deductibility of
this additional assessment for state purposes. The estimated
state revenue loss for the prior year would be deducted by DMV
from the amount of fee revenue collected and deposited in the
General Fund.
FTB estimates a tax revenue loss as a result of increased VLF
tax deductions of approximately $2.7 million in 2014-15, $1.6
million in 2015-16, and $200,000 in 2016-17. Deductions claimed
in a fiscal year would be reimbursed to the General Fund from
revenues collected by DMV in the next fiscal year. For purposes
of this estimate, FTB assumes San Francisco would begin imposing
the assessment at the maximum 2% rate on July 1 2014, resulting
in deductions being claimed on 2014 tax returns that are filed
in 2015.
DMV would be required to administer the collection and
distribution of the fees on behalf of San Francisco. Initial
costs for programming the new fee into DMV's processing system
would be $115,231, with ongoing administrative costs that
include discount fees paid to credit card companies of $112,362
during the implementation year (half year costs) and $224,725 in
subsequent years. Initial costs would be paid up front by San
Francisco through a direct contract with DMV. Ongoing
administrative costs to DMV would be deducted from fees
collected prior to distribution to San Francisco.