BILL ANALYSIS Ó
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UNFINISHED BUSINESS
Bill No: SB 69
Author: Roth (D), et al.
Amended: 8/18/14
Vote: 21
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : 76-0, 8/20/14 - See last page for vote
SUBJECT : Local government finance: property tax revenue
allocation:
vehicle license fee adjustment
SOURCE : Author
DIGEST : This bill provides a city incorporating after January
1, 2004, and on or before January 1, 2012, with property tax in
lieu of vehicle license fees (VLF).
Assembly Amendments delete the Senate version dealing with
school finance. This bill currently establishes a vehicle
license adjustment amount for a city incorporating after January
1, 2004, and on or before January 1, 2012.
ANALYSIS : Existing 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
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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.
This bill:
1. Establishes a vehicle license adjustment amount for a city
incorporating after January 1, 2004, and on or before January
1, 2012, as follows:
A. A formula to calculate the base year VLF adjustment
amount for fiscal year (FY) 2014-15 which uses the
population of the incorporating city, times the sum of the
most recent VLF adjustment amount for all cities in the
county, divided by the sum of the population of all the
cities in the county; and
B. A formula to calculate the VLF adjustment amount for
the 2015-2016 FY, and each FY thereafter, that includes
the percentage change from the immediately preceding FY to
the current FY in gross taxable assessed valuation.
2. Contains chaptering out language to avoid conflicts with AB
1521 (Fox).
Comments
This bill establishes a base year VLF adjustment amount for FY
2014-15 for cities that incorporated after January 1, 2004, and
on or before January 1, 2012, to replicate funds that existed
for new cities prior to 2004. In each subsequent FY, the VLF
adjustment amount for these cities would be the jurisdiction's
annual change in the assessed valuation which is the same
formula used to calculate the VLF adjustment amount for other
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cities. This bill will only impact four cities, Jurupa Valley,
Eastvale, Menifee, and Wildomar, which all incorporated during
the timeframe contained in the bill. This bill does not provide
a VLF adjustment amount for cities incorporating after January
1, 2012.
Prior/Related Legislation
AB 1521 (Fox, 2014) contains a similar adjustment for cities
that annexed inhabited areas.
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 was held on the Senate Appropriations Committee's
Suspense File. AB 677 was referred to, but never heard by, the
Assembly Local Government Committee.
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Assembly Appropriations Committee, there are
on-going costs in the range of $15 million (General Fund) to
backfill property tax reductions to schools.
SUPPORT : (Verified 8/20/14)
Association of California Cities Orange County
California Contract Cities Association
Cities of Eastvale, Indian Wells, La Quinta, La Mirada, Lake
Elsinore, Murrieta, Norco, Palm Desert, and Temecula
Greater Riverside Chambers of Commerce
League of California Cities
Local Agency Formation Commission Orange County
Local Agency Formation Commission San Bernardino
League of California Cities, Riverside County Division
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Riverside Local Agency Formation Commission
Southwest California Legislative Council
Western Riverside Council of Governments
ARGUMENTS IN SUPPORT : According to the author:
In 2011, one of the steps the Legislature took to close the
state's massive budget gap was to pass Senate Bill 89 which
eliminated Vehicle License Fee (VLF) revenue allocated to
newly incorporated cities and annexed areas.
As a result, four newly incorporated cities in Riverside
County - Eastvale, Jurupa Valley, Menifee and Wildomar - lost
critical funding.
The situation for the City of Jurupa Valley is especially
urgent, as VLF funding was eliminated only days before the
city incorporated. The residents had voted for cityhood based
on state VLF money being available for the new city.
Jurupa Valley now faces disincorporation, potentially forcing
Riverside County to provide essential services to residents
which the County has not budgeted for.
While ongoing funding is critical to stabilize new cities and
annexations, VLF revenue is no longer available as a funding
source for cities due to the passage of Proposition 30 (2012),
which requires that VLF funds be used exclusively for criminal
justice realignment.
Cities play a vital role in fulfilling many of the state's
policy goals which include achieving smart growth objectives,
promoting transportation and infrastructure investments,
meeting affordable housing needs, and realizing greenhouse gas
reduction goals.
SB 69 utilizes a county's Educational Revenue Augmentation
Fund (ERAF). If the funds are fully used, the school share of
ERAF will be used to make up the difference. This will be
fully reimbursed by the state's general fund so there is no
impact on schools.
ASSEMBLY FLOOR : 76-0, 8/20/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
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Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gorell, Gray,
Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,
Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.
Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Donnelly, Gordon, Grove, Vacancy
AB:m 8/20/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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