BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 1521
Author: Fox (D) et al.
Amended: 8/4/14 in Senate
Vote: 27 - Urgency
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/25/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De León, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 75-0, 5/27/14 - See last page for vote
SUBJECT : Local government finance: property tax revenue
allocations:
vehicle license fee adjustments
SOURCE : Author
DIGEST : This bill changes the formulas for calculating annual
vehicle license fee (VLF) adjustment amounts to account for
territory annexed to cities since 2004.
ANALYSIS : In lieu of a property tax on motor vehicles, the
state collects an annual VLF and allocates the revenues, minus
administrative costs, to cities and counties. In 1998, the
Legislature began cutting the VLF rate from 2% to 0.65% of a
vehicle's value. The State General Fund backfilled the lost VLF
revenues to cities and counties.
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As part of the 2004-05 budget agreement, the Legislature enacted
the "VLF-property tax swap" (SB 1096, Senate Budget Committee,
Chapter 211, Statutes of 2004), which replaced the State General
Fund backfill with property tax revenues that otherwise would
have gone to schools through the Educational Revenue
Augmentation Fund (ERAF). This replacement funding is known as
the "VLF adjustment amount." The State General Fund backfills
schools for their lost ERAF money.
This bill, in the 2014-15 fiscal year, requires county auditors
to calculate vehicle license fee adjustment amounts (VLFAA) for
cities, counties, and cities and counties using a specified
formula that reflects the percentage change from the 2004-05
fiscal year to the 2014-15 fiscal year in assessed property
values within the city, county, or city and county.
For the 2015-16 fiscal year, and for each fiscal year
thereafter, this bill requires county auditors to calculate the
VLFAA for a city, county, or city and county by adjusting the
prior year's VLFAA amount to reflect the year-to-year change in
assessed property values within the jurisdiction of the city,
county, or city and county.
This bill makes non-substantive conforming changes to state law
relating to the calculation of Orange County's vehicle license
fee adjustment amount.
This bill also includes double-jointing language to avoid
chaptering conflicts with SB 69 (Roth).
Comments
When the Legislature cut the VLF rate, the amount of VLF revenue
available to a city as the result of annexing an inhabited area
also was reduced. The VLF-property tax swap did not compensate
cities for this reduction. Cities only receive additional
property tax revenues in lieu of lost VLF based on the future
growth of assessed valuation in the annexed area.
In response, advocates for cities asked the Legislature to
reallocate a portion of existing cities' remaining VLF funds to
cities that annex inhabited areas to help make city annexations
financially feasible. In response, the Legislature passed AB
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1602 (Laird, Chapter 556, Statutes of 2006), which changed the
allocation of VLF funds to replace the VLF revenues for
annexations that were lost under the VLF-property tax swap.
Governor Brown's 2011 Realignment Proposal shifted several state
programs and commensurate revenues to local governments. The
Legislature passed SB 89 (Senate Budget and Fiscal Review
Committee, Chapter 35, Statutes of 2011), which recalculated the
Department of Motor Vehicle's administration fund to $25 million
and increased vehicle license registration by $12 per vehicle to
offset DMV's loss of general Fund dollars. SB 89 also
eliminated the $153 million in VLF revenues allocated to cities
and shifted those revenues to fund public safety realignment.
Proposition 30 (2012) amended the Constitution to permanently
dedicate a portion of the sales tax and VLF to local governments
to pay for the programs realigned in 2011-12.
Related Legislation
This bill's VLFAA formula for city annexations is nearly
identical to language in SB 56 (Roth, 2013), which died in the
Senate Appropriations Committee. This year, SB 69 (Roth, 2014)
contains provisions that replicate SB 56's VLFAA formula for
cities that are incorporated after 2004.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
One-time, permanent shift of approximately $5 million in
property tax revenues in 2014-15 from the ERAF in certain
counties to cities that have annexed inhabited areas since
2004. The General Fund will generally backfill the reductions
from ERAF to replace funding that will otherwise go to schools
pursuant to Proposition 98 minimum funding guarantees. The
initial $5 million General Fund backfill payments would
increase each year thereafter at the property tax growth rate.
To the extent that revisions to the formulas for allocating
VLF adjustment amounts removes a disincentive for other cities
to annex inhabited territory, the General Fund impacts could
increase in the future.
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Unknown state reimbursable costs to county officials to adjust
property tax allocation formulas to account for city
annexations going back to 2004 (General Fund). It is unlikely
that counties would file a claim for reimbursement for these
one-time costs.
SUPPORT : (per Senate Governance and Finance Committee analysis
of 6/25/14; unable to reverify at time of writing)
Association of California Cities - Orange County
California Association of Local Agency Formation Commissions
California Contract Cities Association
Cities of: Eastvale, Fontana, Indian Wells, Jurupa Valley, Lake
Elsinore,
La Mirada, La Quinta, Menifee, Murrieta, Norco, Palm Desert,
Santa Clarita, Temecula, Visalia, and Wildomar
League of California Cities
Orange County
Orange County Local Agency Formation Commission
Placer County Local Agency Formation Commission
Riverside Local Agency Formation Commission
San Bernardino County Local Agency Formation Commission
San Diego County Local Agency Formation Commission
Santa Clarita Valley Chamber of Commerce
Southwest California Legislative Council
Western Riverside Council of Governments
ASSEMBLY FLOOR : 75-0, 5/27/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Dickinson, Eggman, Fong, Fox, Frazier, Beth
Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Perea, John A. Pérez, V. Manuel Pérez,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, Atkins
NO VOTE RECORDED: Daly, Donnelly, Patterson, Quirk-Silva,
Vacancy
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AB:nl 8/18/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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