BILL ANALYSIS Ó
AB 366
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CONCURRENCE IN SENATE AMENDMENTS
AB
366 (Bonta)
As Amended June 14, 2016
Majority vote
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|ASSEMBLY: | |(June 2, 2015) |SENATE: |25-11 |(August 15, |
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(vote not relevant)
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|COMMITTEE VOTE: |5-3 |(August 25, |RECOMMENDATION: |concur |
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(L. Gov.)
Original Committee Reference: HEALTH
SUMMARY: Allows the City of Alameda to adopt an ordinance
proposing the imposition of a transactions and use tax that
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exceeds the 2% statutory limitation.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Allow the City of Alameda to impose a transactions and use tax
for general purposes at a rate of no more than 0.5% that
would, in combination with all other transaction and use
taxes, exceed the 2% limit established in existing law, if all
the following conditions are met:
a) The city adopts an ordinance proposing the transactions
and use tax by any applicable voting requirements;
b) The ordinance proposing the transactions and use tax is
approved by the voters voting on the ordinance in
accordance with California Constitution Article XIII C, and
the election on the ordinance proposing the tax may occur
on or after January 1, 2017; and,
c) The transactions and use tax conforms to the
Transactions and Use Tax Law, as specified.
2)Provide, if the ordinance proposing the transactions and use
tax is not approved, that the provisions of the bill shall be
repealed as of January 1, 2025.
3)Find and declare that a special law is necessary because of
the unique fiscal pressures in the City of Alameda.
EXISTING LAW:
1)Authorizes cities and counties to impose a local sales and use
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tax.
2)Authorizes cities and counties to impose transactions and use
taxes.
3)Prohibits, in any county, the combined rate of all taxes
imposed in accordance with Transactions and Use Tax Law from
exceeding 2%.
4)Authorizes Alameda County and Contra Costa County to adopt an
ordinance imposing a transactions and use tax not to exceed
0.5% for the support of countywide transportation programs at
a rate that would, in combination with all other transaction
and use taxes, exceed the 2% limit established in existing
law, if all the following conditions are met:
a) The local government entity adopts an ordinance
proposing the transactions and use tax by any applicable
voting requirements;
b) The ordinance proposing the transactions and use tax is
submitted to the electorate and is approved by two-thirds
of the voters voting on the ordinance; and,
c) The transactions and use tax conforms to the Transaction
and Use Tax Law.
5)Provides that the authority for Alameda County and Contra
Costa County to adopt an ordinance to impose a transactions
and use tax that exceeds the combined statutory rate of 2%
shall only remain in effect until December 31, 2020.
FISCAL EFFECT: None
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COMMENTS:
1)Transactions and Use Taxes. Existing law authorizes cities
and counties to impose transactions and use taxes in 0.125%
increments in addition to the state's 7.5% sales tax provided
that the combined rate in the county does not exceed 2%.
Transactions and use taxes are taxes 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. These
types of taxes may be levied as general taxes (majority vote
required), which are unrestricted, or special taxes
(two-thirds vote required), which are restricted for a
specified use.
The Transactions and Use Tax law authorizes the adoption of
local add-on rates to the combined state and local sales tax
rate. The law has been amended multiple times to authorize
specific cities, counties, special districts and county
transportation authorities to impose a transactions and use
tax, if voters approve the tax. Currently, 20 counties have
transactions and use taxes for public transportation or
transit.
Prior to 2003, cities lacked the ability to place transactions
and use taxes before their voters without first obtaining
approval by the Legislature to bring an ordinance before the
city council, and, if approved at the council level, to the
voters. This was remedied by SB 566 (Scott), Chapter 709,
Statutes of 2003. SB 566 also contained provisions to
increase a county's transactions and use tax cap because of
the possibility that certain counties were going to run out of
room under their caps, if cities within those counties
approved transactions and use taxes.
Because of the interaction between city-imposed and
county-imposed transactions and use taxes, the concern that
counties will run into the 2% cap still applies today.
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Currently, the Counties of Alameda, Contra Costa, Los Angeles,
and San Mateo have reached the 2% limit, and the Counties of
Marin, San Diego, and Sonoma are near the 2% limit. The
Legislature has granted several exemptions to the 2% cap,
including to several counties to allow an additional
countywide transactions and use tax for transportation
purposes.
2)Bill Summary. This bill provides an exemption to the City of
Alameda from the 2% transactions and use tax combined rate cap
that is currently in statute. This bill authorizes the City
of Alameda to adopt an ordinance to propose the imposition of
a transactions and use tax for general purposes at a rate of
no more than 0.5%, and with the appropriate voter approval
pursuant to the California Constitution, which requires a
majority vote for transaction and use taxes for general
purposes. If the ordinance proposing the transactions and use
tax is not approved by voters by January 1, 2025, the
provisions of the bill would be repealed as of that same date.
According to the City of Alameda, the sponsor of this bill,
the City is considering placing a measure on the 2018 or 2020
ballot.
3)Prior Legislation. In 2011, the Legislature provided a
one-time exemption for Alameda County from the 2% transactions
and use tax combined rate cap [AB 1086 (Wieckowski), Chapter
327, Statutes of 2011]. After a ballot measure in Alameda
County fell narrowly short of the necessary two-thirds vote,
the Legislature extended the authority for Alameda County to
adopt an ordinance imposing a transactions and use tax from
January 1, 2014, to December 31, 2020, and authorized Contra
Costa County to adopt an ordinance imposing a transactions and
use tax in the same manner as Alameda County [AB 210
(Wieckowski), Chapter 194, Statutes of 2013]. In November of
2014, voters in Alameda County passed Measure BB, a
transactions and use tax at 0.5% to fund transportation
improvements for 30 years. AB 1665 (Bonilla), Chapter 45,
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Statutes of 2016, removes the existing authority granted to
Alameda County and Contra Costa County to impose an additional
transactions and use tax, subject to voter approval, and
instead, grants Contra Costa County's existing authority to
the Contra Costa Transportation Authority.
AB 464 (Mullin) of 2015 would have increased the countywide
transactions and use tax combined cap from 2% to 3%, but was
vetoed by the Governor.
4)Support Arguments. The City of Alameda argues that this bill
"would allow voters to decide if they want to increase taxes
to fund City services that are critical to maintaining
Alameda's quality of life. If the City is successful and the
Sales Tax rate does not otherwise change, this could
potentially bring the City's Sales Tax rate to 10%."
5)Opposition Arguments. Howard Jarvis Taxpayers Association
argues "Radically different tax rates across different
counties also make it more difficult for businesses to remain
compliant with the law. Counties need to learn to balance
their budgets and control pension excesses. We simply cannot
justify increased regressive taxation upon hard working
families."
Analysis Prepared by:
Misa Lennox / L. GOV. / (916) 319-3958 FN:
0004932
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