BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1665 |Hearing |6/22/16 |
| | |Date: | |
|----------+---------------------------------+-----------+---------|
|Author: |Bonilla |Tax Levy: |No |
|----------+---------------------------------+-----------+---------|
|Version: |5/9/16 |Fiscal: |No |
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|Consultant|Bouaziz |
|: | |
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Transactions and use taxes: County of Alameda, County of
Contra Costa, and Contra Costa Transportation Authority
Shifts Contra Costa County's existing authority to impose
transactions and use taxes to the Contra Costa Transportation
Authority.
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 |
AB 1665 (Bonilla) 5/9/16 Page 2
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| |Fund) | |
| | | |
|-------+--------------------+--------------------------------|
| |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.
Current law authorizes Alameda County and Contra Costa County to
impose a district tax for countywide transportation programs at
a capped rate of 0.5%, which in combination with other district
taxes, would exceed the 2% limitation established in existing
AB 1665 (Bonilla) 5/9/16 Page 3
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law if:
Alameda County and Contra Costa County adopt an
ordinance proposing the district tax by any applicable
voting requirements.
The proposed ordinance is submitted to the electorate
and is approved by two-thirds of the voters voting on the
ordinance.
The district tax conforms to the Transactions and Use
Tax Law.
Proposed Law
Assembly Bill 1665 removes the existing authority granted to
Alameda County and Contra Costa County, and instead authorizes
the Contra Costa Transportation Authority (CCTA) to adopt an
ordinance to impose a TUT, subject to voter approval, that
exceeds the combined statutory rate of 2% until December 31,
2020.
AB 1665 provides any ordinance previously adopted under the
authority in existing law for Alameda and Contra Costa Counties
to adopt an additional TUT may continue in effect.
The bill contains an urgency clause and states that it is
necessary for this bill take effect immediately in order to
ensure the residents of Contra Costa County have adequate
transportation services.
AB 1665 finds and declares that a special law is necessary
because of the unique fiscal pressures experienced in Alameda
County and by the Contra Costa Transportation Authority in
providing essential transportation programs.
State Revenue Impact
Unknown.
Comments
1. Purpose of the bill. According to the author, "In light of
the severe state funding shortfall for transportation, it is
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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."
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. 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).
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. 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."
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4. High rate. Eight cities in California already impose the
highest sales and use tax rate in the state. An additional 0.5%
will expand the number of cities with a double digit sales and
use tax rate. Unfortunately, this will 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.
6. Contra Costa County. This bill shifts the authorization to
impose TUT from Contra Costa County to 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 Contra Costa County voters
in November 2004, to extend the TUT for another 30 years.
Presently, CCTA is moving forward with proposing 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 State Board of Equalization to delegate
administrative responsibilities from the county to CCTA. This
bill transfers the authority to seek TUT voter approval to CCTA
if approved by two-thirds of voters. Since plans to ask Contra
Costa County voters for a new tax are already under way, the
author has included an urgency measure in the bill to ensure
state law is enacted in time to allow CCTA to propose the TUT
measure to its voters.
7. 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.
8. Incoming! The Senate Transportation and Housing Committee
approved AB 1655 by a vote of 11-0 on June 14, 2016.
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9. Special legislation. The California Constitution prohibits
special legislation when a general law can apply (Article IV,
§16). AB 1665 contains findings and declarations explaining the
need for legislation that applies only to the County of Alameda
and the Contra Costa Transportation Authority.
Assembly Actions
Assembly Local Government 6-3
Assembly Revenue and Taxation6-0
Assembly Floor 77-0
Support and
Opposition (6/15/16)
Support : Bay Area Council; Contra Costa County Board of
Supervisors; Contra Costa Transportation Authority;
California-Nevada Conference of Operating Engineers; San
Francisco Bay Area Rapid Transit District.
Opposition : Unknown.
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