BILL ANALYSIS Ó
SB 1492
Page 1
SENATE THIRD READING
SB 1492 (Leno)
As Amended August 22, 2012
Majority vote
SENATE VOTE :22-16
LOCAL GOVERNMENT 6-3 REVENUE AND TAXATION 5-3
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|Ayes:|Alejo, Bradford, Campos, |Ayes:|Perea, Beall, Cedillo, |
| |Davis, Gordon, Hueso | |Fuentes, Gordon |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Smyth, Knight, Norby |Nays:|Harkey, Fletcher, |
| | | |Nestande |
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APPROPRIATIONS 12-5
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|Ayes:|Gatto, Blumenfield, | | |
| |Bradford, Charles | | |
| |Calderon, Campos, Davis, | | |
| |Fuentes, Hall, Hill, | | |
| |Cedillo, Mitchell, | | |
| |Solorio | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Donnelly, | | |
| |Nielsen, Norby, Wagner | | |
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SUMMARY : Enacts the Local Assessment Act, which authorizes the
City and County of San Francisco (City and County) to place on
the ballot a measure to impose an additional assessment on
vehicles owned by residents of that City and County.
Specifically, this bill :
1)Allows the board of supervisors of the City and County, by
ordinance, to impose a voter-approved local assessment for
general revenue purposes, if specified conditions are met,
including compliance with specified provisions of existing law
relating to voter approval of taxes, as follows:
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a) The ordinance proposing the assessment is approved by
two-thirds of all members of the board of supervisors;
b) The ordinance proposing the assessment is submitted to
the electorate of the City and County and is approved by a
majority vote of the voters voting on the ordinance;
c) The board of supervisors transmits to the Department of
Motor Vehicles (DMV) and the Franchise Tax Board (FTB) a
certified copy of the ordinance imposing that assessment
immediately after the results of the election are
certified; and,
d) The ordinance proposing the assessment does not create
different classes of vehicles (whether by type, size,
passenger capacity, value or cost, fuel consumption or any
other characteristic) for differential taxation (whether by
rate, method, assessment ratio, or any other means), except
for specified vehicle license fee exemptions contained in
current law.
2)Requires the ordinance imposing a voter-approved local
assessment to contain the following:
a) A provision that the assessment is imposed for the
privilege of a resident of the City and County to operate
upon the public highways a vehicle or trailer coach, the
registrant of which is subject to tax under Vehicle License
Fee Law;
b) A provision establishing the annual amount of the
assessment at a rate that equals the difference between the
following two rates:
i) 2% of the market value of the vehicle or trailer
coach; and,
ii) The rate, including any offset to that rate, set
forth in Vehicle License Fee Law for a vehicle or trailer
coach.
c) A provision that the rate established under the
provision described in b) is subject to both of the
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following:
i) That the rate may not exceed 2% of the market value
of the vehicle or trailer coach; and,
ii) That any adjustment that is required to be made to
the rate because of a change in the rate, or any offset
to that rate, set forth in Vehicle License Fee Law, shall
not take effect until the first day of the first fiscal
year that follows the fiscal year in which the change to
the rate or offset set forth in that part became
operative.
d) A provision that the assessment will begin to be imposed
as follows:
i) If the election in which the ordinance receives
voter approval occurs between
January 1 and June 30, on January 1 following that
election; or,
ii) If the election in which the ordinance receives
voter approval occurs between July 1 and December 31, on
July 1 following that election.
e) Provisions identical to those contained in Vehicle
License Fee Law (VLF) , insofar as they relate to vehicle
license fees and are applicable, except that the name of
the City and County as the taxing agency shall be
substituted for that of the state;
f) A provision that all amendments, subsequent to the
effective date of the voter-approved local assessment
ordinance, to the section of law relating to vehicle
license fees and not inconsistent with the provisions of
this bill shall automatically be incorporated into the
voter-approved local assessment ordinance; and,
g) A provision that requires the City and County to
contract with DMV, and requires the contract to contain
provisions in substance as follows:
i) A requirement that DMV perform all functions
incident to the administration and collection of the
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voter-approved local assessment;
ii) A provision specifying the manner in which refunds
as incorporated in the voter-approved local assessment
ordinance will be made and administered;
iii) A provision that requires the City and County to pay
DMV for the initial setup and programming costs
identified by DMV; and,
iv) A provision specifying how reimbursements to the
state will be made in compliance with 9), as described
below, after the inoperation or repeal of a
voter-approved local assessment.
3)States that any ordinance approved shall be valid and
enforceable, if approved by the board of supervisors and by
the voters prior to the effective date of this bill, but only
if both of the following apply:
a) Any assessment imposed pursuant to the approval of the
ordinance is not levied until at least 90 days after the
effective date of the bill; and,
b) The board of supervisors ratifies its adoption of the
ordinance after the effective date of the bill and prior to
the first levy of the assessment imposed pursuant to the
approval of the ordinance.
4)Requires DMV to do all of the following:
a) Collect the voter-approved local assessment, pursuant to
a contract with the City and County, and deposit it into
the San Francisco Vehicle Assessment Fund (which this bill
creates) within the State Treasury;
b) Calculate the costs of administering the voter-approved
local assessment;
c) From the assessments collected under a), calculate the
amount necessary to compensate the General Fund for the
estimated loss that is expected to occur in the next year
as a result of the deductions taken by taxpayers for the
VLF under the Personal Income Tax Law and the Corporation
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Tax Law, described in 7), and if necessary adjusted by a
revision of the estimated amount based on actual filings
and returns described in 8);
d) Transmit revenues derived from the assessments collected
under a) above to the City and County, as promptly as
feasible, and clarify the funds necessary to accomplish the
transfer of revenues will be continuously appropriated;
and,
e) Develop with FTB, a reporting process that enables DMV
to report to FTB in a timely manner the data necessary for
FTB to prepare the estimate of revenue loss from tax
deductions.
5)Provides that the bill's provisions should not be construed to
supplant any moneys that the state apportions to the City and
County, as specified.
6)Provides that reimbursement by the state shall not be made to
the City and County for loss in revenue due to a
voter-approved local assessment as specified.
7)Requires the FTB to report to DMV, on or before January 1 of
the year that follows a year in which an assessment was
imposed, and annually thereafter, an estimate of the total
amount of the revenue loss to the state from deductions taken
under the Personal Income Tax Law and the Corporation Tax Law
for taxes paid or incurred as a result of a tax being enacted
pursuant to the bill's provisions.
8)Requires the FTB to report to DMV, on or before January 1 of
the year that follows a year in which an assessment was
imposed, and annually thereafter, a revision of the applicable
estimate described in 7) based on actual filings and returns.
9)Specifies for any revisions to previous estimates made by the
FTB on or after January 1 following the inoperation or repeal
of a voter-approved local assessment pursuant to 7) or 8), the
following apply:
a) Requires the Controller to reimburse the City and County
from the San Francisco Vehicle Assessment Fund if FTB's
estimate as described in 7) exceeds the revision described
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in 8);
b) Requires the City and County to reimburse the state if
the estimate described in 7) is less than the revision of
the estimate described in 8); and,
c) Prohibits any revision of an applicable previous
estimate from being reported to the DMV and requires it to
be reported to the Controller.
10)States that this act shall be known, and cited, as the Local
Assessment Act.
11)Defines several terms related to the bill's provisions.
12)States that the Legislature finds and declares that a special
law is necessary because numerous groups in the City and
County have requested that authorization be granted for such
an assessment in the City and County.
EXISTING LAW :
1)Imposes a vehicle license fee (VLF), in lieu of a personal
property tax on California motor vehicles, based on the
taxable value of the vehicle.
2)Increases, temporarily, the VLF tax rate from 0.65% to 1.15%
of the value of a vehicle, which expired on June 30, 2011.
3)Prohibits a local government or district from imposing any
special tax unless and until the special tax is submitted to
the local government or district electorate and approved by a
two-thirds vote of the voters voting in an election on the
issue.
4)Prohibits a local government or district from imposing any
general tax unless and until such general tax is submitted to
the local government or district electorate and approved by a
majority vote of the voters voting in an election on the
issue.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, a net city and county rate of 1.35% will produce
approximately $128 million for the City and County. This
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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 the City and
County, 2.7%.
DMV will incur administrative costs exceeding $100,000 annually
which will be reimbursed from the proceeds of the fees. 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. However, DMV will reimburse the state
out of fee proceeds in the San Francisco Vehicle Assessment
Fund, eliminating any loss to the General Fund.
COMMENTS : 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. For the
taxpayer, VLF is deductible on both state and federal income
taxes.
The VLF tax rate is currently 0.65% of the value of a vehicle,
but historically it was 2% of the vehicle value and for a period
from May 2009 through July 2011, it was 1.15%. For the
taxpayer, the VLF is deductible on both state and federal income
taxes.
This bill, sponsored by the San Francisco Chamber of Commerce,
authorizes the board of supervisors of the City and County of
San Francisco, by a two-thirds vote, to adopt an ordinance to
place before the voters a measure to levy a local assessment for
general revenue purposes. This local assessment would 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. The bill requires
the ordinance proposing the assessment to be submitted to the
electorate of the City and County of San Francisco and approved
by a majority of those voting.
This bill specifies that the assessment rate shall be equal to
the difference between the historical 2% state VLF rate and the
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current state VLF rate. For example, when this bill takes
effect, assuming that taxes have not been extended, this would
allow the City and 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 the City and County 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.
This bill requires the City and County to contract with DMV to
collect and administer the fee and to pay DMV for its initial
setup and programming costs. DMV must collect the local
assessment and deposit into the San Francisco Vehicle Assessment
Fund, report to FTB and transmit the revenues to the City and
County. The bill specifies that any revenue generated by the
local VLF shall not supplant any moneys that the state
appropriates or apportions to the City and County.
According to the author, 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. The author notes that much of this
revenue was lost when Governor Schwarzenegger signed an
executive order in 2003 that reduced the VLF to the 0.65 % rate.
A substantially similar bill, SB 10 (Leno) of 2009, died on the
Assembly Floor. AB 799 (Leno) of 2005 and AB 1590 (Leno) of
2007, would have applied only to the City and County of San
Francisco. AB 799 was vetoed by Governor Schwarzenegger and AB
1590 failed to move out of the Senate Revenue and Taxation
Committee.
In 2011, the Assembly Local Government Committee heard SB 223
(Leno), which is substantially similar to this bill. SB 223 was
vetoed with the message that "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."
The Legislature may wish to ask what has changed since October
when Governor Brown issued that veto message, as it appears that
nothing in this bill addresses the "piecemeal approach" the
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governor found unacceptable in last year's bill. The author
argues that absent the inclusion of VLF in larger statewide
solutions the City and County should have the ability to place
this issue on the ballot locally.
Support arguments: Supporters argue that this bill grants the
people of the City and County of San Francisco the right to
determine whether to levy a fee upon themselves to fund vital
services. Additionally, this bill gives the City and County a
viable alternative to cutting services at a time when new
funding is scarce.
Opposition arguments: Opponents assert that California
motorists are overtaxed compared to the rest of the nation and
note that this bill would add to that problem. Increasing taxes
makes it more expensive to own or buy a car and exacerbate the
automobile industry's financial difficulties.
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958
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