BILL ANALYSIS Ó
ACA 4
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Date of Hearing: July 13, 2015
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Philip Ting, Chair
ACA 4
(Frazier) - As Introduced February 27, 2015
2/3 vote.
SUBJECT: Local government transportation projects: special
taxes: voter approval
SUMMARY: Lowers, from two-thirds to 55%, the voter approval
threshold for a local government to impose, extend, or increase
a special tax to fund "local transportation projects" under its
jurisdiction. Specifically, this constitutional amendment:
1)Authorizes a local government to impose, extend, or increase a
special tax to fund "local transportation projects" under its
jurisdiction, as may otherwise be authorized by law, with the
approval of 55% of the voters voting on the proposition.
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2)Provides that a special tax to fund "local transportation
projects" is not deemed to have been increased if it is
imposed at a rate not higher than the maximum rate previously
approved in the manner required by law.
3)Defines a "local transportation project" as the planning,
design, development, financing, construction, reconstruction,
rehabilitation, improvement, acquisition, lease, operation, or
maintenance of local streets, roads, and highways, state
highways and freeways, and public transit systems.
4)Provides that this constitutional amendment shall become
effective immediately upon approval by the voters and shall
apply to any local measure imposing, extending, or increasing
a special tax for the funding of local transportation projects
that is submitted at the same election.
EXISTING LAW:
1)Classifies any tax a local government imposes as either a
"general tax" or a "special tax". (Cal. Const., art. XIII C,
§ 2(a).)
2)Defines a "general tax" as any tax imposed for general
governmental purposes. (Cal. Const., art. XIII C, § 1(a).)
3)Defines a "special tax" as any tax imposed for specific
purposes, including a tax imposed for specific purposes, which
is placed into a general fund. (Cal. Const., art. XIII C, §
1(d).)
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4)Prohibits a local government from imposing, extending, or
increasing a general tax unless that tax is submitted to the
electorate and approved by a majority vote. (Cal. Const.,
art. XIII C, § 2(b).)
5)Prohibits special purpose districts or agencies, including
school districts, from levying a general tax. (Cal. Const.,
art. XIII C, § 2(a).)
6)Prohibits a local government from imposing, extending, or
increasing a special tax unless that tax is submitted to the
electorate and approved by a two-thirds vote. (Cal. Const.,
art. XIII C, § 2(d).)
7)Authorizes a city, county, or special district, by a
two-thirds vote of its electorate, to impose a special tax
within that city, county, or special district, except an ad
valorem tax on real property or a transactions or sales tax on
the sale of real property. (Cal. Const., art. XIII A, § 4)
8)Caps the maximum amount of any ad valorem tax on real property
at one percent of the property's full cash value. (Cal.
Const., art. XIII A, § 1(a).) This limitation, however, does
not apply to ad valorem taxes or special assessments to pay
the interest and redemption charges on bonded indebtedness
incurred by a school district, community college district, or
county office of education for the construction,
reconstruction, rehabilitation, or replacement of school
facilities, approved by 55 percent of the voters of the
district or county. (Cal. Const., art. XIII A, § 1 (b)(3).)
Any such proposition must include specified accountability
requirements, including an annual, independent performance
audit.
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FISCAL EFFECT: Unknown
COMMENTS:
1)The author has provided the following statement in support of
this measure:
Voters in nineteen counties throughout California have
voted to impose special taxes for local transportation
projects and programs in their county. Collectively, these
counties generate between $3 billion and $4 billion
annually - money that is used for transportation projects
as identified and prioritized by each county and ratified
by the voters.
These counties, referred to as "self-help counties," have
consistently provided reliable and stable funding for
transportation-funding that far outstrips state and federal
funding on an annual basis.
They also have in place:
Extensive accountability measures.
Local elected oversight on taxpayer's dollars.
Expenditure plans that explicitly detail how
funds will be spent, allowing the public to fully
understand where their local transportation [dollars]
go.
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Despite the success of these self-help counties, a
two-thirds voter approval threshold is a near-impossible
hurdle for other counties that are aspiring to be self-help
counties. As a result, these counties are deprived of
much-needed funding for transportation infrastructure,
maintenance, and operations.
ACA 4 gives hope to aspiring counties and to existing
self-help counties whose existing special transportation
tax is due to expire. If ACA 4 secures the necessary votes
for passage, any county with a special transportation tax
on the ballot at the same time [needs] to achieve the 55%
threshold to be successful. Local control. Local
opportunity. That's what ACA 4 provides.
1)This constitutional amendment is supported by the California
Transportation Commission, which notes the following:
The useful life of the existing system, which represents
decades of major investments, is placed at risk due to the
lack of necessary funding to meet basic maintenance,
operation and rehabilitation needs. Congestion in urban
areas, safety and unexpected delays in rural areas, and
growing challenges of freight movement are only a few
examples of the compelling issues facing California's
transportation agencies. Our existing transportation
system continues to deteriorate while demand increases,
adversely affecting mobility, commerce, quality of life,
the environment and the operational efficiency of key
transportation assets.
Sales tax investments, directed towards local
transportation needs, have proven to provide tremendous
benefit to the overall state transportation system. Funds
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generated from sales tax measures serve to reduce
congestion, improve public transportation, and enable local
governments to better address the critical transportation
needs of the state.
2)This constitutional amendment is opposed by the California
Chamber of Commerce, which notes the following:
Our primary concern with ACA 4 is that it provides blanket
authority to the local government to impose nearly any type
of "special tax" with a reduced voter threshold of only
fifty-five percent. There are few parameters or
restrictions under which a "special tax" may be imposed
under ACA 4, other than the revenue must be used for
transportation projects and the "special tax" cannot be an
ad valorem or a transaction tax on real property. With
such broad discretion in the type or scope of "special tax"
to impose, we are concerned that it could lead to targeted
taxes at the local level against unpopular taxpayers,
industries, products, or property. Specifically, under ACA
4, a parcel tax could be disproportionately directed at
commercial property within the local jurisdiction, thereby
potentially undermining the protections in place under
Proposition 13 and discriminating against commercial
property versus residential.
3)Committee Staff Comments
a) A brief overview of voter-approval requirements for
local taxes : For most of California's history, local
governments could raise taxes by a vote of the governing
board. Beginning in 1978, voters approved a series of
constitutional amendments that established voter-approval
requirements for new local taxes. Specifically,
Proposition 13 (1978) greatly constrained the ability of
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local governments to raise property tax rates and required
all new local government "special taxes" to be approved by
two-thirds of voters. Proposition 62 (1986) and
Proposition 218 (1996), in turn, required new "general
taxes" to be approved by a majority of voters, and extended
voter-approval requirements to other property-related
levies not covered by Proposition 13. Finally, Proposition
26 (2010) broadened the definition of a "tax" to include
some levies previously considered fees or charges,
resulting in a wider application of voter-approval
requirements.
b) Proposition 39 as precedent : This constitutional
amendment appears at least loosely modeled after
Proposition 39 of 2000, which amended the California
Constitution to allow school facility bond measures to be
approved by 55% (rather than two-thirds) of the voters in
local elections. Proposition 39 also allowed property
taxes to exceed the 1% limit in order to repay the bonds.
Proposition 39 provided that this lowered vote threshold
would apply only if the local bond measure submitted to
voters included the following:
i) A requirement that the bond funds can be used only
for construction, rehabilitation, equipping of school
facilities, or the acquisition or lease of real property
for school facilities;
ii) A specific list of school projects to be funded and
certification that the school board has evaluated safety,
class size reduction, and information technology needs in
developing the list; and,
iii) A requirement that the school board conduct annual,
independent financial audits until all bond funds have
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been spent.
Despite being opposed by groups such as the Howard Jarvis
Taxpayers Association, which argued the lower vote
threshold was unnecessary and would lead to higher property
taxes, Proposition 39 passed with roughly 53.4% of the vote
on November 7, 2000.
c) Direct democracy in action : In June 2014, California
voters decided over 140 local measures; among these were 85
measures seeking approval for taxes or bonds. A July 2014
report issued by local finance expert Michael Coleman noted
that, "[c]onsistent with results in prior elections,
majority vote tax measures fared much better than
supermajority measures." At the time of the report's
release, only one majority vote measure was trailing at the
polls. While roughly two out of three supermajority
measures passed in the June 2014 election, the report noted
that, typically, only about one-half of two-thirds
supermajority measures succeed.
Solano County notes that it is one of many counties
throughout California that has not been able to obtain
voter approval for a countywide local sales tax for
transportation purposes due to the two-thirds vote
requirement. On two separate occasions, Solano County
received the support of over 60% of voters for a local
countywide sales tax for transportation, but not the
two-thirds required for passage. The Solano Transportation
Authority has been forced to manage scarce local revenues
by phasing transportation projects over several years,
which results in a longer project construction period with
increased impacts on surrounding communities, including
disruption to local businesses.
d) Is there a rhyme or reason ? Ideally, a state's
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requirements for approving local tax measures should be
easy for residents to understand and reflect overarching
objectives regarding citizen involvement in local taxation
decisions. As the Legislative Analyst's Office (LAO) has
noted, however, California's voter-approval process for
local tax measures is both complex and "does not appear to
follow any particular set of unifying principles." In
evaluating potential changes to California's voter-approval
requirements, the LAO has suggested the state begin by
considering what objectives voter-approval requirements are
designed to fulfil and evaluate potential changes based on
whether or not they serve these purposes. Specifically,
the LAO has suggested that the Legislature may wish to
consider the following questions:
i) Should voter-approval requirements vary based on the
use of the revenue?
ii) Should voter-approval requirements vary across local
governments?
iii) How should voter-approval requirements for revenue
measures to repay infrastructure bonds or other long-term
debt differ from requirements for revenues raised for
local government operations, if at all?
iv) What objectives does the existing distinction
between general taxes and special taxes achieve?
The current supermajority vote requirement makes it more
difficult for local governments to impose taxes for
specific purposes like transportation. The two-thirds
threshold essentially empowers a minority of voters to
block revenue measures that have been approved both by
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their elected representatives and, in many cases, a
majority of their fellow citizens.
e) California's transportation infrastructure : On October
28, 2014, the biennial California Statewide Local Streets
and Roads Needs Assessment<1> was released, with alarming
results. The report noted that the condition of the system
that makes up more than 80% of California's roadways is on
the path to failure. In addition, the survey found that
pavement conditions are declining and that existing funding
levels are insufficient to repair or maintain streets,
roads, bridges, sidewalks, storm drains, and traffic signs.
The report noted that deferring this crucial work will
likely double the cost of repairs in the future and impede
efforts to reduce greenhouse gas emissions and other air
pollutants. Finally, the report estimated that, in the
next 10 years, the local system will have a $78.3 billion
funding shortfall.
f) Prior legislative effort : This constitutional amendment
is substantially identical to ACA 23 (Perea), introduced in
the 2011-12 Regular Session. ACA 23 (Perea) passed the
Assembly Committee on Local Government by a vote of 6 to 3,
passed the Assembly Committee on Appropriations by a vote
of 12 to 5, and died on the Inactive File.
g) Double-referral : This constitutional amendment was
double-referred to the Assembly Committee on
Transportation, which passed this constitutional amendment
by a vote of 10 to 5 on April 27, 2015. The Assembly
Committee on Transportation analysis notes the following:
--------------------------
<1> This report is a collaboration between the California State
Association of Counties, the League of California Cities, and
the state's regional transportation planning agencies.
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i) Since 1923, California has relied heavily on gas
taxes to support both local streets and the state highway
system. Gas taxes have the benefit of being fairly
inexpensive to administer and, until recently, have
served as a reasonably equitable means of distributing
the tax burden amongst drivers in rough proportion to
their use of the roadway system.
ii) The gas tax is no longer a viable or sustainable
revenue source.
iii) According to the Institute on Taxation and Economic
Policy, two important developments have combined to
reduce greatly the functionality of the gas tax: (a) the
purchasing power of gas tax revenues has declined
significantly due to inflation; and, (b) Improvements in
vehicle fuel efficiency have cut directly into gas tax
revenues by allowing drivers to travel greater distances
with less gasoline.
REGISTERED SUPPORT / OPPOSITION:
Support
ACT, Southern California
AIA Los Angeles
Alameda-Contra Costa Transit District
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Alameda County Transportation Commission
American Society of Civil Engineers Region 9
Apostolic Faith Center
Atkinson Contractors
California Asphalt Pavement Association
California Association of Councils of Governments
California Greenworks, Inc.
California Kids IAQ
California State Association of Counties
California Transit Association
California Transportation Commission
Capitol Corridor Joint Powers Authority
Circulate San Diego
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City of Camarillo
City of Concord
City of Fairfield Councilmember Rick Vaccaro
City of Fairfield Mayor Harry T. Price
City of Fairfield Vice-Mayor Chuck Timm
City of Indian Wells
City of Lomita
City of San Jose
City of Santa Monica
City of Suisun City
City of West Hollywood
Civic Resource Group
Clean Air Now
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Climate Resolve
Coalition For A Safe Environment
Coalition for Clean Air
Community Dreams
Community Health Councils
Council of Infill Builders
Cubic
Culver City Mayor Meghan Sahli-Wells
Diverse Strategies for Organizing
El Grove Chamber of Commerce
FAST
Gary Shelton Consulting
Glendale City Employees Association
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Global Green
Green Commuter
HDR
IBEW Local 11
Ironworkers Local 433
JMB Realty
Kal Krishnan Consultant Services
Laborers Local 300
L.A. Business Council
L.A. County Federation of Labor
L.A./Orange County Building & Construction Trades Council
LA River Revitalization Corp.
League of California Cities
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Los Angeles Area Chamber of Commerce
Los Angeles - San Diego - San Luis Obispo Rail Corridor Agency
Board of Directors
Los Angeles Walks
Los Angeles World's Fair
MNS Engineers
Move LA
Natural Resources Defense Council
Occidental College Urban & Environmental Policy Institute
Organization of SMUD Employees
Parsons Brinkerhoff
Sacramento Metropolitan Chamber of Commerce
San Bernardino Public Employees Association
San Francisco Municipal Transportation Agency
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San Luis Obispo County Employees Association
Santa Clara Valley Transportation Authority
Santa Cruz County Regional Transportation Commission
Santa Cruz Metropolitan Transit District
Santa Monica Spoke
SENER Engineering & Systems Inc.
Sieroty Company, Inc.
Solano County Board of Supervisors
Solano Transportation Authority
South Bay Cities Council of Governments
Southern California Transit Advocates
The Transit Coalition
Town of Danville
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Transform
Transportation Agency for Monterey County
Transportation Authority of Marin
Tristan Management and Consulting
Valley Industry and Commerce Association
Ventura County Transportation Commission
Westside Center for Independent Living
Opposition
Air Logistics Corporation
Apartment Association of Greater Los Angeles
Associated Builders and Contractors of California
California Association of Realtors
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California Chamber of Commerce
California Manufacturers & Technology Association
California Retailers Association
California Tank Lines Inc.
California Taxpayers Association
Chemical Transfer Co.
Howard Jarvis Taxpayers Association
National Federation of Independent Business
Orange County Business Council
Orange County Taxpayers Association
Santa Barbara Rental Property Association
Solano County Taxpayers Association
Southwest California Legislative Council
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Superior Tank Wash Inc.
West Coast Leasing, LLC
Analysis Prepared by:M. David Ruff / REV. & TAX. / (916)
319-2098