BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2119| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2119 Author: Stone (D), et al. Amended: 5/14/14 in Assembly Vote: 21 SENATE GOVERNANCE & FINANCE COMMITTEE : 5-2, 6/11/14 AYES: Wolk, Beall, DeSaulnier, Hernandez, Liu NOES: Knight, Walters ASSEMBLY FLOOR : 50-22, 5/19/14 - See last page for vote SUBJECT : Local taxes: transactions and use taxes SOURCE : Author DIGEST : This bill authorizes a county board of supervisors to levy, increase, or extend a transactions and use tax, for general or specific purposes, within the unincorporated area of the county. ANALYSIS : Proposition (Prop) 62 (1986) and Prop 218 (1996) require voter approval for new and increased local taxes. Prop 62 added statutes to the Government Code that prohibit a local government from imposing: A special tax unless the special tax is submitted to the electorate of the local government and approved by a two-thirds vote. A general tax unless the general tax is submitted to the CONTINUED AB 2119 Page 2 electorate of the local government and approved by a majority vote. Prop 218 amended the California Constitution to define the difference between general taxes and special taxes and impose voter approval requirements that are similar to Prop 62's statutory provisions. Counties can only impose taxes that state law specifically authorizes them to impose. With some exceptions, state law generally grants counties the power to impose taxes only in their unincorporated areas. The Transactions and Use Tax Law authorizes a county to levy a transactions and use tax throughout the county's entire territory, at a rate of 0.125%, or multiples of 0.125%. A transactions and use tax is imposed on the total retail price of any tangible personal property and the use or storage of such property when sales tax is not paid. The tax is added on to, and administered in tandem with, the combined state and local sales and use tax rate. An ordinance imposing a county-wide transactions and use tax must be approved either by a majority of county voters, if the tax is for general purposes, or by two-thirds of county voters, if the tax is for special purposes. This bill allows a county's board of supervisors to levy, increase, or extend a general-purpose transactions and use tax either: Throughout the entire county, if the tax is approved by a majority vote of qualified voters of the entire county, or Within the unincorporated area of the county if the tax is approved by a majority vote of qualified voters of the unincorporated area. This bill directs that a county must use revenues from a general-purpose transactions and use tax only for general purposes within the area for which the tax was approved by the qualified voters. This bill allows a county's board of supervisors to levy, increase, or extend a special-purpose transactions and use tax either: CONTINUED AB 2119 Page 3 Throughout the entire county, if the tax is approved by a two-thirds vote of qualified voters of the entire county, or Within the unincorporated area of the county if the tax is approved by a two-thirds vote of qualified voters of the unincorporated area. This bill directs that a county must use revenues from a special-purpose transactions and use tax only for specific purposes within the area for which the tax was approved by the qualified voters. Comments In many counties throughout the state, more than half of their territory is in unincorporated areas, making those counties responsible for financing a large amount of infrastructure. Unlike some other statutes that authorize counties to impose taxes only within their unincorporated areas, existing law only authorizes a county to impose an add-on transactions and use tax rate throughout the entire county. This bill allows counties to introduce a sales tax measure that will be applied to unincorporated areas, spent on the infrastructure of those unincorporated areas, and voted on by the qualified voters of those areas. By allowing county supervisors to limit the geographic area in which a county transactions and use tax applies, this approach mirrors existing law for other county taxes. Additionally, when cities impose a transactions and use tax, only voters who reside in the area where the tax is going to be imposed get to vote on that tax. This bill makes the approval process for county transactions and use taxes comparable to the current process for approving city transactions and use taxes. FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No SUPPORT : (Verified 6/11/14) AFSCME California State Association of Counties California Tax Reform Association Counties of Humboldt, Monterey, San Luis Obispo, and Santa Cruz CONTINUED AB 2119 Page 4 OPPOSITION : (Verified 6/11/14) California Taxpayers Association Howard Jarvis Taxpayers Association ARGUMENTS IN SUPPORT : Supporters argue that many counties in California have half or more of their county in unincorporated areas, making those counties responsible for a large amount of infrastructure without much taxing authority. This bill will give residents who live outside of cities the same rights to levy their own sales tax as those who live in them. ARGUMENTS IN OPPOSITION : Opponents argues that a tax measure approved by the board of supervisors should apply evenly to all county residents and that this bill could also prove to be cumbersome for businesses to administer as there would now be different tax rates across the county. ASSEMBLY FLOOR : 50-22, 5/19/14 AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chesbro, Dababneh, Daly, Dickinson, Eggman, Fong, Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hagman, Hall, Roger Hernández, Holden, Jones-Sawyer, Levine, Lowenthal, Mullin, Pan, Perea, John A. Pérez, V. Manuel Pérez, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams, Yamada, Atkins NOES: Allen, Bigelow, Chávez, Conway, Dahle, Donnelly, Fox, Beth Gaines, Gorell, Grove, Harkey, Jones, Linder, Logue, Maienschein, Melendez, Muratsuchi, Patterson, Quirk-Silva, Wagner, Waldron, Wilk NO VOTE RECORDED: Achadjian, Cooley, Mansoor, Medina, Nazarian, Nestande, Olsen, Vacancy AB:k 6/12/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED AB 2119 Page 5 CONTINUED