BILL ANALYSIS Ó AB 1665 Page 1 Date of Hearing: April 25, 2016 ASSEMBLY COMMITTEE ON REVENUE AND TAXATION Sebastian Ridley-Thomas, Chair AB 1665 (Bonilla) - As Introduced January 14, 2016 Majority vote. Non-fiscal. SUBJECT: Transactions and use taxes: County of Alameda, County of Contra Costa, and Contra Costa Transportation Authority SUMMARY: Extends the sunset date on the authority of Alameda County and Contra Costa County to impose an additional transactions and use tax (TUT), subject to voter approval, and shifts Contra Costa County's existing or extended authority to impose the TUT to the Contra Costa Transportation Authority (CCTA). Specifically, this bill: 1)Extends the sunset date from December 31, 2020 to December 31, 2024, on the existing authority granted to Alameda County to adopt an ordinance to impose a TUT for county transportation programs at a rate of no more than 0.5%, subject to voter approval, that exceeds the combined statutory rate of 2%. 2)Extends and shifts to the CCTA the existing authority granted AB 1665 Page 2 to Contra Costa County to adopt an ordinance in the same timeframe and manner as Alameda County to impose a TUT. 3)Finds and declares that a special law is necessary because of the unique fiscal pressures being experienced in the County of Alameda and by the CCTA in providing essential transportation programs. EXISTING LAW: 1)Authorizes cities and counties, under the Bradley-Burns Uniform Local Sales and Use Tax (SUT) Law, to impose local SUT for the privilege of selling tangible personal property (TPP) at retail in the local jurisdiction, or purchasing TPP outside the local jurisdiction for use within the local jurisdiction. 2)Authorizes cities, counties, or other authorized governmental entities to impose TUT for general or special purposes, in addition to SUT, at a rate of 0.125% or multiples of 0.125%, if approved by the requisite threshold of voters. 3)Prohibits, in any county, the combined rate of all TUT from exceeding 2%. 4)Authorizes Alameda County and Contra Costa County to adopt an ordinance imposing a TUT not to exceed 0.5% for the support of countywide transportation programs at a rate that would, in combination with other TUT, exceed the 2% limit established in existing law, if the all the following conditions are met: a) The local government entity adopts an ordinance proposing the TUT by any applicable voting approval AB 1665 Page 3 requirement; b) The ordinance proposing the TUT is submitted to the electorate and approved by voters pursuant to Article XIII C of the California Constitution governing voter approval for local tax levies; and, c) The TUT conforms to existing law governing TUTs. 5)Provides that the authority for Alameda County and Contra Costa County to adopt an ordinance imposing TUT in excess of the combined statutory rate of 2% shall only remain in effect until December 31, 2020. FISCAL EFFECT: Unknown COMMENTS: 1)Author's Statement : The Author has provided the following statement in support of this bill: In light of the severe state funding shortfall for transportation, it is imperative that local governments, agencies and their constituents have the ability to generate additional funding to plan and bring forth critical transportation projects. AB 1665 will streamline this process, making local governments more efficient so voters can weigh-in on the transportation issues of the county. Simply put, this bill will allow CCTA to continue the great work they have been known to accomplish, while meeting the precise needs of Contra Costa County and its residents. AB 1665 Page 4 2)Arguments in Support : Proponents of this bill state that "this bill provides an opportunity for Contra Costa voters to support transportation investments consistent with an adopted Transportation Expenditure Plan that could help our community advance our competitive edge, improve mobility, and meet the State's ambitious environmental goals." 3)Arguments in Opposition : Opponents of this bill state that "California already has the highest sales and use tax rate in the country." Extending the sunset date on the TUT in Alameda County and Contra Costa County "increases the cost of doing business" and "imposes a regressive tax on disadvantaged communities." 4)Transactions and Use Tax Law : Cities and counties are authorized to impose additional TUT to the state's 7.5% SUT rate, subject to a vote of the People. General purpose taxes require majority voter approval and special purpose taxes restricted for a specified use require two-thirds voter approval. According to the State Board of Equalization (BOE), as of January 1, 2016, 4 of 48 county-imposed taxes are general purpose taxes and 44 are special purpose taxes with 30 dedicated for transportation purposes. 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). AB 1665 Page 5 5)Alameda County : This bill extends the existing authority granted to Alameda County to impose TUT in excess of the 2% countywide cap if an ordinance is submitted and approved by voters prior to December 31, 2024. However, 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; the extension of the sunset date has no practical effect on county taxpayers at this time. 6)Contra Costa Transportation Authority : This bill also extends the existing authority granted to Contra Costa County to impose TUT in excess of the 2% countywide cap if an ordinance is submitted and approved by voters prior to December 31, 2024. This bill also shifts the authorization to impose TUT from the county to the CCTA, similar to authorization granted to transportation authorities on behalf of other counties. The CCTA was formed by voters in 1988 to lead Contra Costa County's transportation efforts and manage funds generated by Measure C, a 0.50% TUT approved by voters that same year for transportation purposes. The CCTA also manages funds generated by Measure J, approved by voters in November 2004 to extend the TUT for another 30 years. According to the author, CCTA is considering bringing forth a transportation tax measure to county voters, but cannot do so directly under current law - instead, Contra Costa County must first adopt an ordinance to present a tax to voters and then work with the BOE to delegate administrative responsibilities from the county to CCTA. This bill transfers the authority to seek TUT voter approval to the local jurisdiction that would ultimately administer the tax proceeds if approved by two-thirds of voters. Since plans to ask voters for a new tax are already under way, however, the Committee may wish to consider whether CCTA needs an additional four years to put AB 1665 Page 6 forth its ordinance. 7)Double Referral : This bill was double-referred to the Assembly Committee on Local Government, which passed this bill on April 6, 2016, with a vote of 6-3. For additional discussion of local government issues, please refer to the analysis prepared by the Assembly Committee on Local Government. 8)Related Legislation : SB 705 (Hill), Chapter 579, Statutes of 2015, authorized San Mateo County and the Transportation Agency for Monterey County, until January 1, 2026, to impose TUT in excess of the 2% countywide cap if approved by voters. SB 767 (De Leon), Chapter 580, Statutes of 2015, authorized MTA to impose TUT in excess of the 2% countywide cap if approved by voters. 9)Prior Legislation : AB 210 (Wieckowski), Chapter 194, Statutes of 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. REGISTERED SUPPORT / OPPOSITION: Support California-Nevada Conference of Operating Engineers AB 1665 Page 7 Contra Costa County Board of Supervisors Contra Costa Transportation Authority Opposition California Taxpayers Association Analysis Prepared by:Irene Ho / REV. & TAX. / (916) 319-2098