BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 366 |Hearing |6/29/16 |
| | |Date: | |
|----------+---------------------------------+-----------+---------|
|Author: |Bonta |Tax Levy: |No |
|----------+---------------------------------+-----------+---------|
|Version: |6/14/16 |Fiscal: |No |
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|Consultant|Bouaziz |
|: | |
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Transactions and use taxes: City of Alameda
Allows the City of Alameda to adopt an ordinance proposing the
imposition of a transactions and use tax that exceeds the 2%
statutory limitation.
Background
State law imposes a sales and use tax (SUT) on the sale,
storage, or use of tangible personal property unless exempted by
state law. Cities and Counties may increase the SUT rate up to
2% as a transactions and use tax for either specific or general
purposes with voter approval as required by the California
Constitution.
The current state SUT is 7.5%, but beginning January 1, 2017,
the state SUT rate on tangible personal property will be 7.25%
and imposed as follows:
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| | | |
| Rate | Jurisdiction | Purpose/Authority |
| | | |
|-------+--------------------+--------------------------------|
| | | |
|3.9375%|State (General |State general purposes |
| |Fund) | |
AB 366 (Bonta) 6/14/16 Page 2
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| | | |
|-------+--------------------+--------------------------------|
| |Local Revenue Fund | |
|1.0625%|2011 |Realignment of local public |
| | |safety services |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local |Local governments to fund |
| |Revenue Fund) |health and welfare programs |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local Public |Local governments to fund |
| |Safety Fund) |public safety services |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 1.25% |Local (City/County) | |
| | | |
| | | |
| |1.00% City and |City and county general |
| |County |operations. |
| | | |
| |0.25% County | |
| | |Dedicated to county |
| | |transportation purposes |
| | | |
| | | |
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Transactions & Use Tax
Existing law allows cities and counties to impose additional
sales and use taxes, called transactions and use taxes (TUT), up
to a combined 2% rate, with voter approval. The tax must be
imposed in increments of 0.125%. In rare cases, the Legislature
allows local agencies to exceed the 2% cap.
Proposed Law
AB 366 (Bonta) 6/14/16 Page 3
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Assembly Bill 366 allows the City of Alameda to adopt an
ordinance proposing the imposition of a transactions and use tax
for the support of citywide programs and services, at a rate of
no more than 0.50% that, in combination with other specified
taxes, exceeds the 2% statutory limitation.
AB 366 requires the City of Alameda to meet the following
criteria before imposing the tax:
The ordinance proposing the transactions and use tax
must be adopted in accordance with the applicable voting
approval requirement;
The ordinance must be submitted to the electorate and be
approved by the voters after January 1, 2017 and before
January 1, 2025; and,
The proposed tax must conform to current law.
AB 366 finds and declares that a special law is necessary
because of the unique fiscal pressures experienced in the City
Alameda.
State Revenue Impact
Assuming voters approve the tax authorized by the proposed law,
the Board of Equalization (BOE) estimates this bill would
generate approximately $4.1 million annually for the City of
Alameda
Comments
1. Purpose of the bill. According to the author, "The City of
Alameda is seeking the ability to submit to the voters in a
future election an increase in the sales and use tax rate up to
an additional .5%. This could potentially take Alameda's tax
rate to 10%. The ability for Alameda to go to the voters with
this request is necessary because the city faces unique fiscal
pressures that warrant a tax increase. Alameda is an island
city with specific needs related to its infrastructure, public
services, and proximity to the San Francisco Bay. In order to
ensure that there is adequate time for the measure to be ready
AB 366 (Bonta) 6/14/16 Page 4
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for the November 2018 election, there are many significant
milestones that need to be met to give the city a chance at
successfully passing the measure. "
2. Transactions and Use Tax Law. Cities and counties are
authorized to impose additional TUT to the state's SUT rate,
subject to voter approval as required by the California
Constitution, which provides that general purpose taxes require
majority voter approval and taxes restricted for a specified use
require two-thirds voter approval. According BOE, as of April
1, 2016, 4 of 48 county-imposed taxes are general taxes and 44
are special taxes, with 30 dedicated for transportation
purposes. There are 157 city-imposed taxes: 127 general purpose
and 30 special purpose taxes.
Generally, TUT may be imposed in 0.125% increments, up to a
total of 2% within the county. However, the Legislature has
granted several exemptions to the 2% cap, subject to voter
approval, as local jurisdictions where both the county and
cities within the county impose TUT may otherwise easily exceed
the cap. These jurisdictions include the City of El Cerrito,
County of Alameda, County of Contra Costa, County of San Mateo,
Transportation Agency for Monterey County, and the Los Angeles
Metropolitan Transportation Authority (MTA).
3. Existing cap. SB 566 (Scott, 2003) imposed the uniform 2%
cap for both cities and counties, in response to at least five
bills a year seeking to impose the tax. The cap set an upper
limit on the local rate, as California's sales and use tax rate
is very high relative to other states. Last year, AB 464
(Mullin and Gordon) attempted to raise the cap to 3%, however,
Governor Brown vetoed the bill, stating:
"This bill would raise, on a blanket basis, the limit on
local transactions and use tax for all counties and cities
from two percent to three percent. Although I have approved
raising the limit for individual counties, I am reluctant
to approve this measure in view of all the taxes being
discussed and proposed for the 2016 ballot."
4. High rate. Eight cities in California already impose the
highest sales and use tax rate in the state. An additional 0.5%
in the City of Alameda will make nine cities with a double digit
sales and use tax rate. Unfortunately, this will
AB 366 (Bonta) 6/14/16 Page 5
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disproportionately impact low income individuals and families
that generally pay a higher percentage of their income in sales
and use tax.
5. Alameda County. On November 4, 2014, 70.76% of Alameda
County voters approved an additional 0.50% TUT via Measure BB to
fund transportation improvements for 30 years, the first tax in
the county levied in excess of the 2% cap. As such, Alameda
County is currently at its 2.5% countywide cap, which is why the
City of Alameda needs authorization to impose an additional TUT.
6. Prior Legislation. AB 210 (Wieckowski, 2013), extended the
authority of Alameda County and authorized Contra Costa County,
until December 31, 2020, to impose TUT in excess of the 2%
countywide cap if approved by voters.
7. Special legislation. The California Constitution prohibits
special legislation when a general law can apply (Article IV,
§16). AB 366 contains findings and declarations explaining the
need for legislation that applies only to the City of Alameda.
Assembly Actions
Not relevant to this version of this bill.
Support and
Opposition (6/22/16)
Support : City of Alameda.
Opposition : California Taxpayers Association.
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