BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 533  


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          Date of Hearing:  August 19, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          SB 533  
          (Pan) - As Amended July 6, 2015


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          |Policy       |Local Government               |Vote:|9 - 0        |
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          |             |Revenue and Taxation           |     |5 - 3        |
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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          Yes


          SUMMARY:


          This bill repeals and replaces the statutory prohibition on  
          local agencies entering into agreements that result in the  
          payment, transfer, diversion, or rebate of sales and use tax  
          revenues under the Bradley-Burns Uniform Local Sales and Use Tax  
          Law (Bradley-Burns), prohibiting agreements that reduce the  
          Bradley-Burns revenues that another local agency would receive  
          absent the agreement when a retailer continues to maintain a  








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          physical presence within that other local agency.  The bill  
          specifies the prohibition does not apply to mutual tax revenue  
          sharing agreements among local agencies where the agreement does  
          not result in payment of revenues to a retailer, and certain  
          other narrow exceptions.


          The bill further requires a local agency entering into an  
          agreement that would reduce the Bradley-Burns revenues received  
          by another local agency to notify the affected local agency 60  
          days prior to ratification and post the proposed agreement to  
          its website 30 days prior to ratification, as well as post to  
          its website any other agreements that reduce the Bradley-Burns  
          revenues another local agency would receive absent the  
          agreement, including agreements entered into before January 1,  
          2016 that remain in effect.


          FISCAL EFFECT:


          No impact to state revenues; possible, though very likely minor,  
          reimbursable state mandate costs to local agencies for providing  
          required notifications.


          COMMENTS:


          1)Purpose.  According to the author and sponsor, this bill  
            eliminates the current exception for retailers that have  
            expanded operations into another jurisdiction and conduct  
            comparable operations there.  The author and sponsor contend  
            this exception allows local agencies to agree with retailers  
            to rebate the retailers' sales tax if the retailers agree to  
            book sales tax in the new local agencies' jurisdiction,  
            thereby depriving the retailers' original local agency of  
            sales tax revenue.









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            The sponsor, the City of West Sacramento, recently experienced  
            a significant decrease in sales tax revenue from a local  
            business as a result of such an agreement.  Supporters argue  
            this change is necessary to maintain the sales tax revenue  
            that funds the infrastructure and services needed to support  
            those retail operations, and to provide transparency to local  
            agencies and taxpayers with respect to future agreements .


          2)Diverting the Tax Stream.  Bradley-Burns sales taxes are  
            allocated among local agencies based on the place of sale of  
            taxable transactions.  The Revenue and Tax Code specifies the  
            "place of sale" for purposes of local sales tax is the place  
            of business of the retailer.  Regulations adopted by the Board  
            of Equalization specify that for retailers with more than one  
            place of business in the state, the place of sale for any  
            given transaction is the location where the "principal  
            negotiations are conducted." 


            The distribution of Bradley-Burns revenue based on the place  
            of sale gives local agencies an incentive to make land use  
            decisions that favor revenue-generating uses for land.  With  
            the increasing importance of sales tax revenue relative to  
            property tax revenue following the enactment of Proposition  
            13, local agencies may seek strategic solutions to boost sales  
            tax revenues, and sales tax rebate agreements to attract  
            retail have become popular.  Michael Coleman, a local  
            government finance commentator, estimates those incentive  
            agreements rebate 50-85% of sales tax revenue to corporations.  
             Statewide, an estimated average of 15-20% of aggregate  
            Bradley-Burns sales tax revenues are rebated to corporations. 


          3)Opposition.  San Bernardino County argues SB 533 unnecessarily  
            prohibits legitimate economic incentives that can be used to  
            encourage local businesses to expand and upgrade, generating  
            net tax revenue and jobs for local communities.  The county  








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            believes the bill has the potential to encourage lawsuits  
            against local agencies from other agencies claiming revenue  
            losses, leading to complications and uncertainty over future  
            economic development.








          Analysis Prepared by:Joel Tashjian / APPR. / (916)  
          319-2081