BILL ANALYSIS Ó
SB 1492
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Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1492 (Leno) - As Amended: April 9, 2012
Policy Committee: Revenue and
Taxation Vote: 5-3
Local Government 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes the City and County of San Francisco to
impose an ordinance proposing a voter-approved local assessment
on specified vehicles. Specifically, this bill:
1)Requires the ordinance proposing the vehicle assessment to
meet the specified requirements of the bill and be approved by
a two-thirds vote of the board of supervisors and a majority
vote of the voters.
2)Requires any ordinance imposing a vehicle assessment to
include the following specific provisions stating that:
a) The vehicle assessment is to be imposed only on
residents of the city and county, for the privilege of
operating a vehicle or trailer coach on public highways in
the city and county.
b) The amount of the vehicle assessment is to be set at the
difference between 2% of the market value of a vehicle or
trailer and the current state vehicle license fee (VLF) and
cannot exceed 2% of a vehicle's market value.
1)The city and county is required to contract with the
Department of Motor Vehicles (DMV) to administer and collect
the vehicle assessment and the city and county must pay DMV
for the initial setup and programming costs identified by the
DMV.
2)Requires DMV to perform the functions necessary to establish
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and collect the vehicle assessment and to transmit to the
State Controller for deposit in the General Fund the amount
necessary to compensate for the loss incurred in the prior
year as the result of the deductions taken by the taxpayers
for the vehicle assessments under the personal income tax and
the corporation tax.
3)Provides that if the city and county impose a vehicle
assessment and experience a reduction in revenue because of an
increase in the VLF rate, including any offset to that rate,
the state will not reimburse the city and county, for that
loss in revenue.
4)Requires the Franchise Tax Board (FTB) to report to DMV an
estimate of the total amount of revenue lost to the state
resulting from deductions taken for taxes paid as a result of
the vehicle assessment having been imposed.
FISCAL EFFECT
A net city and county rate of 1.35% would produce approximately
$128 million for the City and County of San Francisco. This
estimate is based on a forecast by the Department of Finance of
an estimated gross value of automobiles in California of $352
billion and recent Controller figures on the proportion of VLF
revenues that derive from car registrations in San Francisco,
2.7%.
DMV would incur administrative costs exceeding $100,000
annually. These costs will be reimbursed from the proceeds of
the fee. FTB will incur some costs which are expected to be
minor and absorbable.
The fees paid are deductible from income taxes, resulting in a
loss to the General Fund. The bill requires that the state be
compensated for the loss. However, there will still be a state
revenue loss of approximately $3 million because the state will
have to wait a year before being reimbursed. The estimate of
the loss assumes the city and county tax is set at its maximum
rate of 1.35%
COMMENTS
1)Purpose. According to the author's office, the VLF is one of
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the state's largest sources of general-purpose tax revenues
and funds vital programs, including public safety, public
health, social services, fire protection, public works and
cultural activities. This bill would allow the City and
County of San Francisco the option to add a Voter Approved
Local Assessment to the VLF should the Board of Supervisors
approve the proposed ordinance with a 2/3 vote and the voters
approve it with a majority vote.
2)Background. The VLF was established by the Legislature in
1935 in lieu of a property tax on vehicles. The VLF is a
state tax levied on the purchase price of a vehicle, and
subsequently annually assessed against the vehicle's value
adjusted by a statutory depreciation schedule. Proposition
1A, approved by the voters in November 2004, requires that VLF
revenue from the existing 0.65% rate be allocated to support
local health, mental health and social services costs under
realignment, or, be otherwise allocated to local government.
For the taxpayer, VLF is deductible on both state and federal
income taxes.
The VLF tax rate is currently .65% of the value of a vehicle,
but historically the rate has been as high as 2%. 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. The AB 3XX VLF rate increase expired June 30, 2011.
3)General Tax vs. Special Tax . A tax is a general tax only when
its revenues are placed into the General Fund and are
available for expenditure for any and all governmental
purposes. A general tax must be approved by a majority vote
of the electorate, whereas a special tax may be imposed only
with the approval of two-thirds vote of the local voters. SB
223 authorizes a local county board of supervisors, by a
two-thirds vote, to place before the county voters, an
ordinance to levy a local vehicle assessment for general
revenue purposes, rather than a specified purpose. As such,
the ordinance only needs to be approved by a majority of the
county voters and does not require the supermajority vote
otherwise required for special taxes.
4)Vote requirements . Article XIIIA of the California
Constitution is clear that any change in a state statute that
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results in taxpayers paying a higher tax must be approved by a
two-thirds vote of the Legislature. The bill only authorizes
the City and County of San Francisco to place before voters an
ordinance that would enact the tax, it is a majority of the
voters that would approve the tax. Because subsequent
approval is required, legislative counsel has keyed this bill
a majority vote.
5)Previous legislation . A substantially similar bill, SB 223
(Leno) of 2011, was vetoed by Governor Brown, citing a desire
for a broader revenue solution to the state's fiscal problems.
Several similar bills have been introduced, SB 10 (Leno,
2009), AB 799 (Leno, 2005) and AB 1590 (Leno, 2007) would have
applied only to the city and county of San Francisco. SB 10
died on the Assembly floor, AB 799 was vetoed by Governor
Schwarzenegger and AB 1590 was held in Senate Revenue and
Taxation Committee.
SB 653 (Steinberg, 2011) authorized local governments to enact
a local VLF, income tax, various excise taxes and a local oil
severance tax. SB 653 was held on the Senate floor.
6)Support . Proponents of this bill state that counties face
serious budget deficits, which threaten many vital health,
welfare and public services. Under existing law, counties
have few options to implement broad-based revenue measures to
fill the looming budget gaps. Proponents argue that SB 223
would allow communities that are willing to pay more money for
local services to do so, without forcing the same of residents
in other areas. This bill would create a tool for local
governments to continue to provide the level of public
services residents demand.
7)Opposition . The California Taxpayers Association argues the
bill will double the car tax for San Francisco and that
California motorists already are overburdened with vehicles
fees and taxes, including the highest sales tax and highest
gasoline tax. They note this bill does not address the
governor's veto message. They also contend that this measure
must be approved by a two-thirds vote of the Legislature to be
constitutionally valid as it results in taxpayers paying
higher taxes.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081
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