BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 25|
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VETO
Bill No: SB 25
Author: Roth (D), et al.
Amended: 8/28/15
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 4/8/15
AYES: Hertzberg, Nguyen, Bates, Beall, Hernandez, Lara, Pavley
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SENATE FLOOR: 40-0, 6/1/15
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Runner,
Stone, Vidak, Wieckowski, Wolk
SENATE FLOOR: 40-0, 9/2/15
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson,
Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning,
Moorlach, Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Runner,
Stone, Vidak, Wieckowski, Wolk
ASSEMBLY FLOOR: 79-0, 9/1/15 - See last page for vote
SUBJECT: Local government finance: property tax revenue
allocation: vehicle license fee adjustments
SOURCE: Author
SB 25
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DIGEST: This bill changes the formulas for calculating annual
vehicle license fee adjustment amounts for four cities that
incorporated after 2004.
ANALYSIS:
Existing law:
1)Imposes the vehicle license fee (VLF) in lieu of personal
property tax on California motor vehicles, at a rate based on
the taxable value of the vehicle.
2)Funds public safety realignment programs with VLF revenues
that, before the passage of SB 89 (Committee on Budget and
Fiscal Review, Chapter 35, Statutes of 2011), would have been
allocated to four cities that incorporated after January 1,
2004.
This bill:
1)Establishes a vehicle license adjustment amount for a city
incorporating after January 1, 2004, and on or before January
1, 2012, as follows:
a) A formula to calculate the base year VLF adjustment
amount for fiscal year (FY) 2015-16 which uses the
population of the incorporating city, times the sum of the
most recent VLF adjustment amount for all cities in the
county, divided by the sum of the population of all the
cities in the county; and
b) A formula to calculate the VLF adjustment amount for the
2016-2017 FY, and each FY thereafter, that includes the
percentage change from the immediately preceding FY to the
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current FY in gross taxable assessed valuation.
Background
In 1998, the Legislature began cutting the VLF rate from 2% to
0.65% of a vehicle's value. The State General Fund backfilled
the lost VLF revenues to cities and counties. As part of the
2004-05 budget agreement, the Legislature enacted the
"VLF-property tax swap," which replaced the VLF backfill from
the State General Fund with property tax revenues that otherwise
would have gone to schools through the Educational Revenue
Augmentation Fund (ERAF). This replacement funding is known as
the "VLF adjustment amount." The State General Fund backfills
schools for their lost ERAF money.
The VLF-property tax swap did not reallocate extra property tax
revenues to cities that were not in existence when the State was
compensating cities for the difference between the 2% and 0.65%
VLF rates. As a result, new cities received less VLF funding
than they would have if they had incorporated before the
VLF-property tax swap.
Advocates for cities asked the Legislature to reallocate a
portion of existing cities' remaining VLF funds to new cities to
help make new city incorporations financially feasible. In
response, the Legislature passed AB 1602 (Laird, Chapter 556,
Statutes of 2006), which changed the allocation of VLF funds to
restore the VLF revenues for city incorporations that were lost
under the VLF-property tax "swap." AB 1602's formula allocated
$50 per capita adjusted annually for growth.
Governor Brown's 2011 Realignment Proposal shifted the
responsibility for some state public safety programs to local
governments. The Legislature passed SB 89, which re-calculated
the Department of Motor Vehicle's administration fund to $25
million and increased vehicle license registration by $12 per
vehicle to offset DMV's cut budget. SB 89 also eliminated VLF
revenues allocated to cities and shifted those revenues to fund
public safety realignment. Proposition 30 (2012) amended the
Constitution to permanently dedicate a portion of the sales tax
and VLF to local governments to pay for the programs realigned
in 2011-12.
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Four new cities incorporated after the Laird bill enacted new
VLF funding allocations for new cities and before those
allocations were repealed. The City of Wildomar incorporated on
July 1, 2008. The City of Menifee incorporated on October 1,
2008. The City of Eastvale incorporated on October 1, 2010.
Most recently, the City of Jurupa Valley officially incorporated
on July 1, 2011, only two days after SB 89 repealed the VLF
allocation formulas for new cities.
Advocates for cities argue that SB 89's elimination of VLF
allocations creates fiscal hardships for cities that
incorporated with the expectation that they would receive VLF
revenues under the formulas enacted by the 2006 Laird bill.
Comments
By abruptly eliminating VLF allocations for recently
incorporated cities, SB 89 pulled the rug out from under four
cities that chose to incorporate based, in part, on the
expectation that they would receive VLF funding under the
formulas enacted by the 2006 Laird bill. After SB 89's
enactment, each of the four cities had to make substantial cuts
to vital public services that would have been funded by VLF
allocations. In the City of Jurupa Valley, SB 89's fiscal
effect was particularly severe, resulting in a loss of 46% of
the city's first year General Fund revenues and a 26% loss of
General Fund revenues in subsequent years. This bill helps to
rebalance the four cities' finances by restoring some
VLF-related funding.
Related/Prior Legislation
SB 69 (Roth, 2014), which contained provisions that were nearly
identical to this bill's VLFAA formula for cities that
incorporated after 2004, was vetoed by Governor Brown.
SB 56 (Roth, 2013) and AB 677 (Fox, 2013) both contained VLF
adjustments amounts similar to the provisions in this bill for
city incorporations, but included adjustments for annexations as
well. SB 56 was held on the Senate Appropriations Committee's
Suspense File. AB 677 was referred to, but never heard by, the
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Assembly Local Government Committee.
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, but was
subsequently vetoed by the Governor.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Senate Appropriations Committee this bill would
result in an annual General Fund impact of about $16.7 million
in 2015-16, which would grow each year thereafter by the
property tax growth rate.
SUPPORT: (Verified10/29/15)
California Association of Local Agency Formation Commissions
California Police Chiefs Association
California Professional Firefighters
California State Association of Counties
Cities of Fontana, Menifee, Jurupa Valley and Wildomar
Contra Costa Local Agency Formation Commission
League of California Cities
Orange County Local Agency Formation Commission
Riverside County Board of Supervisors
Riverside Sheriffs Association
San Diego Local Agency Formation Commission
San Mateo Local Agency Formation Commission
Southwest California Legislative Council
OPPOSITION: (Verified10/29/15)
None received
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GOVERNOR'S VETO MESSAGE:
I am returning Senate Bill 25 without my signature.
This bill allows four cities that incorporated after
January 1, 2004 and before January 1, 2012 to receive
additional property tax revenue through a redistribution of
Vehicle License Fee revenue.
My signature of SB 107 provides approximately $24 million
dollars in fiscal relief to these four cities. This bill
results in additional long term costs to the general fund
that the state's budget cannot afford.
ASSEMBLY FLOOR: 79-0, 9/1/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gray,
Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones,
Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low,
Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin,
Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Atkins
NO VOTE RECORDED: Gordon
Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
11/4/15 14:01:19
**** END ****
SB 25
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