BILL ANALYSIS Ó
AB 448
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Jimmy Gomez, Chair
AB
448 (Brown) - As Introduced February 23, 2015
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Urgency: Yes State Mandated Local Program: YesReimbursable:
Yes
SUMMARY: This bill modifies the amount of property tax in lieu
of vehicle license fees (VLF) allocated to counties and cities
to include changes in the assessed valuation within inhabited
annexed areas. Specifically, this bill:
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1)Provides that the VLF adjustment amount formula in existing
law, which excludes the assessed valuation in an area upon
annexation, for the 2006-07 fiscal year to the 2014-15 fiscal
year, inclusive.
2)Establishes a formula to calculate the VLF adjustment amount
for 2015-16, that includes the percentage change from 2004-05
to 2015-16, in the gross taxable assessed valuation within the
jurisdiction, which includes the assessed valuation of annexed
territory.
3)Establishes a formula to calculate the VLF adjustment amount
for 2016-17 and each year thereafter that includes the
percentage change from the immediately preceding year to the
current year in gross taxable assessed valuation.
4)Provides that the VLF adjustment amount for Orange County as
determined for the 2013-14 fiscal year, shall be increased by
$53 million and specifies that for the 2014-15 fiscal year and
each fiscal year thereafter, the calculation of the VLF
adjustment amount for Orange County shall be based on the
prior year amount that reflects the full amount of the
one-time increase of $53 million.
FISCAL EFFECT:
On-going cost in the range of $5 million (GF) to backfill
property tax reductions to schools.
COMMENTS:
1)Purpose. According to the author, "The City of Fontana has
lost $800,000 dollars as a result of SB 89 (see explanation
below). Fontana annexed unincorporated areas in San
Bernardino County after 2004 and as a result does not have the
funds to provide public safety services to the area. This
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bill will restore funding to cities that were negatively
affected by SB 89."
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 General
Fund backfill with local 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, came in the form
of AB 1602 (Laird), Chapter 556, Statutes of 2006. AB 1602
specified that a city that annexes, or an unincorporated area
that incorporates, as specified, will receive special
allocations from a portion of the remaining VLF revenues.
In 2011, SB 89 (Budget and Fiscal Review Committee), Chapter
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35, Statutes of 2011, redirected VLF revenues away from newly
incorporated cities, 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 MVLFA revenues in
2011-12 from 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 have annexed inhabited areas.
3)Related Legislation. SB 25 (Roth), pending in the Senate
Appropriations Committee, would allocate VLF revenues to newly
incorporated cities and is substantially similar to SB 69
(Roth) of 2014.
4)Prior Legislation.
a) AB 1521 (Fox) of 2014, nearly identical to this bill,
would have modified the amount of VLF allocated to
counties and cities to include changes in the assessed
valuation within annexed areas. AB 1521 was vetoed by the
Governor. In his veto message, the Governor remarked, "?I
do not believe that it would be prudent to authorize
legislation that would result in long term costs to the
general fund that this bill would occasion."
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b) SB 69 (Roth) of 2014, which was vetoed by the
Governor, would have provided a city incorporating after
January 1, 2004, and on or before January 1, 2012, with
property tax in lieu of VLF. The Governor's veto message
was similar to that of AB 1521, citing long term costs to
the general fund.
c) SB 56 (Roth) of 2013 and AB 677 (Fox) of 2013, both
contained VLF adjustments amounts for both annexations and
city incorporations, similar to the provisions AB 1521 for
annexations and SB 69 in 2014. 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.
d) 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. The Governor vetoed AB 1098.
Analysis Prepared by:Jennifer Swenson / APPR. / (916)
319-2081
AB 448
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