BILL ANALYSIS Ó
SB 69
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Date of Hearing: August 6, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 69 (Roth) - As Amended: June 16, 2014
Policy Committee: Local
GovernmentVote:9 - 0
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill establishes a vehicle license fee (VLF) adjustment
amount for cities that incorporated after January 1, 2004, and
on or before January 1, 2012.
FISCAL EFFECT
On-going costs in the range of $15 million (GF) to backfill
property tax reductions to schools.
COMMENTS
1)Purpose . According to the author, SB 69 addresses the
disproportionate impact the 2011 budget trailer bill (SB 89)
had on cities that incorporated after January 1, 2004, and on
or before January 1, 2012. These incorporations were funded,
in part, 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. The author notes that
by abruptly cutting the allocation of VLF funds to newly
incorporated cities, the realignment shift in 2011
disproportionally endangered the fiscal viability of
communities that rely on VLF revenues. For example, for the
City of Jurupa Valley which incorporated within days of the
passage of SB 89, the anticipated VLF revenues represented 47%
of its General Fund budget.
This bill impacts only the four cities that incorporated
during the timeframe in the bill, Jurupa Valley, Eastvale,
Menifee, and Wildomar, all in Riverside County. The bill
SB 69
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establishes a base year VLF adjustment amount for these cities
for FY 2014-15 to replicate funds that existed for new cities
prior to 2004.
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, was contained in
AB 1602 (Laird), Chapter 556, Statutes of 2006. AB 1602
specified that a city that annexes, or an unincorporated area
that incorporates, will receive special allocations from a
portion of the remaining VLF revenues.
In 2011, SB 89 (Budget and Fiscal Review Committee), Chapter
35, Statutes of 2011, redirected VLF revenues away from newly
incorporated cities and 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 MVLF revenues in
2011-12 for 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 had annexed
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inhabited areas.
3)Related Legislation . AB 1521 (Fox), 2014 contains a similar
adjustment for cities that annexed inhabited areas. That bill
is pending in the Senate Appropriations 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 city incorporations, but included adjustments for
annexations 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, but was subsequently vetoed by the
Governor.
Analysis Prepared by : Jennifer Swenson / APPR. / (916)
319-2081