BILL ANALYSIS Ó AB 210 Page 1 Date of Hearing: May 6, 2013 ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Raul Bocanegra, Chair AB 210 (Wieckowski) - As Amended: April 23, 2013 Majority vote. SUBJECT : Transactions and use taxes: County of Alameda and the County of Contra Costa SUMMARY : Extends the current authorization for Alameda County to adopt an ordinance imposing a transactions and use tax (TUT) for transportation programs and allows Contra Costa County to adopt a similar ordinance. Specifically, this bill : 1)Extends the sunset date from January 1, 2014 to December 31, 2020, allowing the County of Alameda to adopt an ordinance, conditioned upon voter approval, to propose the imposition of a TUT for the support of countywide transaction programs. 2)Allows the County of Contra Costa to adopt an ordinance proposing the imposition of a TUT for the support of countywide transportation programs at a rate of no more than 0.5% that, in combination with other specified taxes, exceeds the 2% statutory limitation. 3)Sets forth the following requirements for counties before enacting a TUT: a) The ordinance proposing the TUT must be adopted in accordance with the applicable voting approval requirement; b) The ordinance proposing the TUT must be submitted to the electorate and be approved by the voters pursuant to the California Constitution, Article XIIIC; and, c) The proposed TUT must conform to current law, other than Revenue and Taxation Code Section 7251. 4)Eliminates the current requirement that the ordinance be placed on the November general election ballot. 5)Finds and declares that a special law is necessary because of AB 210 Page 2 the unique fiscal pressures experienced in the Counties of Alameda and Contra Costa in providing essential transportation programs. EXISTING LAW : 1)Authorizes cities and counties, under the Bradley-Burns Uniform Local Sales and Use Tax (SUT) Law, to impose local SUT. [Revenue & Taxation Code (R&TC), commencing with Section 7200]. 2)Imposes a tax for the privilege of selling tangible personal property at retail upon every retailer in the local jurisdiction, or purchased outside the jurisdiction for use within the jurisdiction, at a rate of 1%. Of the 1% tax, 75% is allocated for city and county operations and 25% is allocated to the county transportation funds. (R&TC Section 7202). 3)Provides counties and cities, under the TUT Law and the Additional Local Taxes Law, with the authority to impose district taxes under specified conditions. (R&TC Section 7251 and 7280). 4)Provides that counties and cities may impose a district tax for general purposes and special purposes at a rate of 0.125%, or multiple thereof, if the ordinance imposing the tax is approved by the required percentage of voters in the city or county. (R&TC Section 7285). 5)Allows the County of Alameda to adopt an ordinance imposing a TUT not to exceed 0.5% for the support of countywide transportation programs at a rate that would, in combination with all other TUTs, exceed the 2% limit established in existing law, if all the following conditions are met: a) The local government entity adopts an ordinance proposing the TUT by any applicable voting requirements; b) The ordinance proposing the TUT is submitted to the electorate on the November 6, 2012, general election ballot and is approved by two-thirds of the voters voting on the ordinance; and, c) The TUT must conform to the TUT Law. (R&TC Section AB 210 Page 3 7291). 6)Provides that the authority for the County of Alameda to adopt an ordinance to impose a TUT that exceeds the combined statutory rate of 2% shall only remain in effect until January 1, 2014. (R&TC Section 7292). 7)Provides that the combined rate of all taxes imposed in accordance with the TUT law in any county may not exceed 2%. (R&TC Section 7251). FISCAL EFFECT : Assuming a January 1, 2015 voter-approved measure in the County of Alameda, this bill would generate $66 million in fiscal year (FY) 2014-15 and $140 million in FY 2015-16. Assuming a January 1, 2015 voter-approved measure in the County of Contra Costa, this bill would generate $34 million in FY 2014-15 and $72 million in FY 2015-16. COMMENTS : 1)The author has provided the following statement in support of this bill: This bill allows Alameda County and Contra Costa County to adopt an ordinance imposing a transactions and use tax for the support of countywide transportation programs at a rate that would, in combination with all other transactions and use taxes, exceed the 2% limit in existing law, if a countywide ballot measure is approved by voters before December 31, 2020. The recent passage of two citywide sales tax measures has occurred remaining local sales tax capacity in Alameda County. In addition, the Great Recession substantially reduced sales tax revenue in the county, causing a decrease in funds available for transportation improvements. The Governor signed AB 1086 in 2011, allowing Alameda County to put a transportation measure on the November 2012 ballot. Measure B1 was supported by an overwhelming majority of voters, 66.53 percent, but fell .14% short of reaching the two-thirds threshold. Given that the clear majority of voters support continued improvements to meet the county's vast transportation needs, the Alameda County Transportation Commission is seeking approval to take another ballot measure before voters prior to 2020. AB 210 Page 4 More than half of all San Francisco Bay commuters go into Alameda County every workday. The Port of Oakland is the nation's fifth-largest container port and two-thirds of truck trips in the region go through the county. AB 210 will help Alameda County meet the transportation needs of its residents, businesses, students and commuters. Contra Costa County is also at the statutory limit of 2 percent. The Contra Costa County Transportation Authority (CCTA) is developing a 2014 update to its Countywide Comprehensive Transportation Plan. The work plan was expanded last October to include a significant public input component. This transportation plan may provide key information that could inform a countywide transportation expenditure plan. Contra Costa is one of 19 self-help counties working to upgrade its transportation infrastructure. 2)Proponents of this measure state: Existing law allowed Alameda County to exceed the existing 2% local sales tax cap if the transportation expenditure plan was approved on the November 2012 ballot. Unfortunately, Measure B1 fell 720 votes short of passage with 66.53% voting in favor. AB 210 would allow Alameda County to try again. The Alameda [County Transportation Commission] [Alameda CTC] has worked tirelessly to update the Countywide Transportation Plan and the Transportation Expenditure Plan (TEP) that became Measure B1. With significant support demonstrated for Measure B1, the Alameda CTC plans to try again. However, to seek an augmentation, the existing 2% local sales tax limit will prevent the enactment of the sales tax if it is approved by the voters. In Alameda County the cities of San Leandro and Union City enacted local sales taxes, occupying the remaining local sales tax capacity. AB 210 would allow a countywide transportation sales tax to be enacted if it is approved by 2/3 of the voters. 3)Opponents of this measure state: While the measure acknowledges the constitutionally AB 210 Page 5 mandated local voting requirements (as required by Proposition 13 and 218), we are concerned about the precedent it sets to begin to allow counties to increase taxes beyond existing law. Note that California now levies the highest state sales and use [tax] in the nation and the local "add ons" only render this highly regressive tax even more regressive. The argument that this bill would simply grant more local control by letting local voters decide the issue is a bit ironic given that a similar bill by the author (AB 1086, 2011) was signed by Governor Schwarzenegger in order to ultimately send a sales tax proposal, Measure B1, to the ballot in 2012. The measure was defeated in November. Thus it appears that the voters have already spoken. To resurrect this issue so soon after the election would be a waste of county resources. 4)Committee Staff Comments: a) Background : AB 1086 (Wieckowski), Chapter 327, Statutes of 2011, enacted the authorization statute for Alameda County to impose a district tax for transportation purposes that would be excluded from the 2% combined rate limitation. The one-time exemption from the 2% limitation was needed for several reasons, primarily because the City of Union approved an additional 0.5% tax, which became effective on April 1, 2011. In combination with existing county district taxes, the County of Alameda had already reached the 2% limitation. This one-time exemption was only for Alameda County and should have applied if two-thirds of voters, voting in the November 6, 2012, election agreed. Measure B1 was placed on the November 6, 2012 ballot in Alameda County. According to the author, Measure B1 was supported by an overwhelming majority of voters, but fell 0.14% short of the required two-thirds threshold. The author states that a majority of voters clearly support the need to fund transportation improvements. AB 210 would allow the Alameda County Transportation Commission, once again, to take another similar ballot measure to the voters. AB 210 Page 6 b) Back to the Voters : This bill would allow the Counties of Alameda and Contra Costa to adopt an ordinance proposing the imposition of a TUT. Opponents claim that AB 210 is not needed because the public has already spoken, deciding not to pass Measure B1. However, the voters of Alameda County may have simply been displeased with the Transportation Expenditure plan as outlined by the Alameda County. The enactment of AB 210 would allow the County of Alameda to modify future transportation plans to better serve its population and to present a new proposal to the voters. c) Contra Costa County : The March 18th amendments added Contra Costa County to this measure. In November 2012, voters within the City of Moraga approved an additional 1% tax effective April 1, 2013. As a result, any new countywide tax would push Contra Costa County over the 2% limit and require an exemption. SB 566 (Scott), Chapter 709, Statutes of 2003, increased the cap on total allowable TUT rates to 2%. The rationale for a 2% combined rate limitation is unclear to committee staff since several large counties are currently exempt from the limitation. Instead of introducing individual county legislation, the Legislature may wish to consider increasing the cap or eliminating it all together. d) Double-referral : This bill was heard in the Assembly Committee on Local Government on April 3, 2013, and passed out of that Committee on a vote of 7 to 2. REGISTERED SUPPORT / OPPOSITION : Support Alameda County Transportation Commission Contra Costa County Transportation Authority Metropolitan Transportation Commission Opposition California Taxpayers Association Howard Jarvis Taxpayers Association AB 210 Page 7 Analysis Prepared by : Carlos Anguiano / REV. & TAX. / (916) 319-2098