BILL ANALYSIS Ó
AB 1521
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Date of Hearing: May 21, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1521 (Fox) - As Introduced: January 16, 2014
Policy Committee: Local
GovernmentVote:9 - 0
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill modifies the amount of property tax in lieu of vehicle
license fees (VLF) allocated to counties and cities to include
changes in the assessed valuation within inhabited annexed
areas. Specifically, this bill:
1)Provides that the VLF adjustment amount formula in existing
law, which excludes the assessed valuation in an area upon
annexation, for 2006-07 and thereafter, applies until 2013-14.
2)Establishes a formula to calculate the VLF adjustment amount
for 2014-15, that includes the percentage change from 2005-06
to 2014-15, in the gross taxable assessed valuation within the
jurisdiction, which includes the assessed valuation of annexed
territory.
3)Establishes a formula to calculate the VLF adjustment amount
for 2015-16 and each year thereafter that includes the
percentage change from the immediately preceding year to the
current year in gross taxable assessed valuation.
4)Provides that the VLF adjustment amount for Orange County as
determined for 2013-14, 2014-15, and for 2015-16, shall be
increased by $53 million and specifies the calculation of the
VLF adjustment amount for Orange County shall be based on the
prior year amount that reflects the full amount of the
one-time increase of $53 million.
FISCAL EFFECT
AB 1521
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On-going cost in the range of $5 million (GF) to backfill
property tax reductions to schools.
COMMENTS
1)Purpose . According to the author, AB 1521 addresses the
disproportionate impact the 2011 budget trailer bill (SB 89)
had on communities that had annexed inhabited territories.
Local governments had funded such annexations through an
increased share of Motor Vehicle License Fee (MVLF) revenue.
In an effort to fund realignment, SB 89 shifted approximately
$150 million of MVLF revenue to the Local Law Enforcement
Services Account. This resulted in a disproportionate impact
on newly incorporated cities and cities that had annexed
inhabited territories, which forced many cities to enact
public safety cuts."
2)Background . Current law imposes the VLF in lieu of personal
property tax on California motor vehicles, at a rate based on
the taxable value of the vehicle. The state collects and
allocates the VLF revenues, minus administrative costs, to
cities and counties. In 1998, the VLF rate was reduced and
the state General Fund backfilled the lost revenues to cities
and counties.
As part of the 2004-05 budget agreement, the Legislature
enacted the VLF/property tax swap, which replaced the backfill
from the state General Fund with property tax revenues that
otherwise would have gone to schools through the Education
Revenue Augmentation Fund (ERAF). The state General Fund then
backfilled schools for the lost ERAF money. The budget
agreement, however, did not provide compensating
property-tax-in-lieu-of-VLF for future new cities or for
annexations to cities where there was pre-existing
development, making future annexations and incorporation
problematic because of the substantial financial losses.
The temporary remedy to address the lack of
property-tax-in-lieu-of-VLF for annexations and incorporations
after the budget agreement on August 5, 2004, came in the form
of AB 1602 (Laird), Chapter 556, Statutes of 2006. AB 1602
specified that a city that annexes, or an unincorporated area
that incorporates, as specified, will receive special
allocations from a portion of the remaining VLF revenues.
AB 1521
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In 2011, SB 89 (Budget and Fiscal Review Committee), Chapter
35, Statutes of 2011, redirected VLF revenues away from newly
incorporated cities, annexations and diverted funds to the
Local Law Enforcement Account to help fund public safety
realignment. SB 89 also allocated $25 million to DMV in
2011-12 for administrative costs and increased the basic
vehicle registration fee from $31 to $43.
This action eliminated over $15 million in MVLFA revenues in
2011-12 from four newly incorporated cities (Menifee,
Eastvale, Wildomar, and Jurupa Valley), as well as over $4
million from cities (Chico, San Ramon, Santa Clarita,
Temecula, Fontana, San Jose, Porterville, Tulare and Visalia)
that have annexed inhabited areas.
3)Related Legislation . SB 69 (Roth), 2014 contains a similar
adjustment for newly incorporated cities. That bill is
pending in the Assembly Rules Committee.
4)Prior Legislation .
a) SB 56 (Roth, 2013) and AB 677 (Fox, 2013) both contained
VLF adjustments amounts similar to the provisions in this
bill for annexations, but included adjustments for city
incorporations as well. SB 56 (Roth) was held on the Senate
Appropriations Committee's Suspense File. AB 677 (Fox) was
referred to, but never heard by, the Assembly Local
Government Committee.
b) SB 1566 (Negrete McLeod, 2012) and AB 1098 (Carter,
2012) also would have reallocated VLF revenues to newly
incorporated cities and to cities that annexed inhabited
territory. SB 1566 was held on the Senate Appropriations
Committee's Suspense File. AB 1098 was amended during the
last two days of the 2011-12 legislative session to contain
SB 1566's provisions. The Governor vetoed AB 1098.
Analysis Prepared by : Jennifer Swenson / APPR. / (916)
319-2081