BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 705


                                                                    Page  1





          Date of Hearing:  September 8, 2015 


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                              Brian Maienschein, Chair


          SB  
          705 (Hill) - As Amended September 3, 2015


          SENATE VOTE:  Vote not relevant


          SUBJECT:  Transactions and use taxes: County of San Mateo:  
          Transportation Agency for Monterey County.


          SUMMARY:  Allows San Mateo and Monterey County to impose a  
          transactions and use tax at a specified amount for the support  
          of countywide transportation programs that would, in combination  
          with other taxes, exceed the statutory limit of 2%.   
          Specifically, this bill:  


          1)Allows San Mateo County, in accordance with the requirements  
            of the Bay Area County Traffic and Transportation Fund Act, to  
            impose a transactions and use tax for the support of  
            countywide transportation programs at a rate of no more than  
            0.5% that would, in combination with all other transactions  
            and use taxes, exceed the 2% limit established in existing  
            law.  


          2)Provides, if the ordinance in San Mateo County proposing the  
            transactions and use tax is not approved, that the provisions  
            of the bill shall be repealed as of January 1, 2026.  








                                                                     SB 705


                                                                    Page  2







          3)Allows Monterey County to impose a transactions and use tax  
            for the support of countywide transportation programs at a  
            rate of no more than 0.375% that would, in combination with  
            all other transactions and use taxes, exceed the 2% limit  
            established in existing law, if all of the following  
            conditions are met:


             a)   The Transportation Agency for Monterey County adopts an  
               ordinance proposing the transactions and use tax by an  
               applicable voting approval requirement;


             b)   The ordinance proposing the transactions and use tax is  
               submitted to the electorate and is approved by the voters  
               voting on the ordinance in accordance with California  
               Constitution Article XIII C; and,


             c)   The transactions and use tax conforms to the  
               Transactions and Use Tax Law, as specified. 


          4)Provides, if the ordinance in Monterey County proposing the  
            transactions and use tax is not approved, that the provisions  
            of the bill shall be repealed as of January 1, 2026.  


          5)Finds and declares that a special law is necessary and that a  
            general law cannot be made applicable because of the unique  
            fiscal pressures experienced by the San Mateo County  
            Transportation Authority and by the Transportation Agency for  
            Monterey County in providing essential transportation  
            programs.  


          FISCAL EFFECT:  None.








                                                                     SB 705


                                                                    Page  3







          





          COMMENTS:  


          1)Bill Summary.  This bill provides an exemption to San Mateo  
            and Monterey Counties from the 2% transactions and use tax  
            combined rate cap that is currently in statute.  This bill  
            authorizes San Mateo County to impose of a transactions and  
            use tax to support countywide transportation programs at a  
            rate of no more than 0.5% in accordance with the requirements  
            of the Bay Area County Traffic and Transportation Funding Act.  
             Additionally this bill authorizes Monterey County to impose a  
            transactions and use tax to support countywide transportation  
            programs at a rate of no more than 0.375%, and with the  
            appropriate voter approval pursuant to the California  
            Constitution.  If the ordinance proposing the transactions and  
            use tax is not approved by voters by January 1, 2026, the  
            provisions of the bill would be repealed as of that same date.


          2)Author's Statement.  According to the author, this bill "will  
            provide for much needed capacity to allow the local  
            transportation agencies within the respective counties to  
            consider placing a measure before voters to consider, in order  
            to alleviate traffic congestion and infrastructure needs."





          3)Transactions and Use Taxes.  Existing law authorizes cities  
            and counties to impose transactions and use taxes in 0.125%  








                                                                     SB 705


                                                                    Page  4





            increments in addition to the state's 7.5% sales tax, provided  
            that the combined rate in the county does not exceed 2%.   
            Transactions and use taxes are taxes imposed on the total  
            retail price of any tangible personal property and the use or  
            storage of such property when sales tax is not paid.  These  
            types of taxes may be levied as general taxes (majority-vote  
            required), which are unrestricted, or special taxes  
            (two-thirds vote required), which are restricted for a  
            specified use.  The Transactions and Use Tax law authorizes  
            the adoption of local add-on rates to the combined state and  
            local sales tax rate.  The law has been amended multiple times  
            to authorize specific cities, counties, special districts and  
            county transportation authorities to impose a transactions and  
            use tax, if voters approve the tax.  


            Prior to 2003, cities lacked the ability to place transactions  
            and use taxes before their voters without first obtaining  
            approval by the Legislature to bring an ordinance before the  
            city council, and, if approved at the council level, to the  
            voters.  This was remedied by SB 566 (Scott), Chapter 709,  
            Statutes of 2003.  SB 566 also contained provisions to  
            increase a county's transactions and use tax cap because of  
            the possibility that certain counties were going to run out of  
            room under their caps, if cities within those counties  
            approved transactions and use taxes.  


            Because of the interaction between city-imposed and  
            county-imposed transactions and use taxes, the concern that  
            counties will run into the 2% cap still applies today.   
            Currently, the Counties of Alameda, Contra Costa, Los Angeles,  
            and San Mateo have reached the 2% limit, and the Counties of  
            Marin, San Diego, and Sonoma are near the 2% limit.  


            According to the Board of Equalization, as of April 1, 2015,  
            there are 202 local jurisdictions (city, county, and special  
            purpose entity) imposing a transactions and use tax for  








                                                                     SB 705


                                                                    Page  5





            general or specific purposes.  Of the 202 jurisdictions, 48  
            are county-imposed taxes and 154 are city-imposed taxes.  Of  
            the 48 county-imposed taxes, 44 are imposed for special  
            purposes.  Of the 154 city-imposed taxes, 124 are general  
            purpose taxes and 30 are special purpose taxes. 


          4)Exemptions to the 2% Cap.  The Legislature has previously  
            granted exemptions to the 2% statutory cap for transactions  
            and use taxes to support countywide transportation programs  
            for Los Angeles, Alameda, and Contra Costa counties.  


            AB 1086 (Wieckowski), Chapter 327, Statutes of 2011, allowed a  
            one-time exemption for Alameda County from the 2% transactions  
            and use tax combined rate cap.  AB 210 (Wieckowski), Chapter  
            194, Statutes of 2013, extended the authority for Alameda  
            County to adopt an ordinance imposing a transactions and use  
            tax from January 1, 2014, to December 31, 2020, and allowed  
            Contra Costa County to adopt an ordinance imposing a  
            transactions and use tax in the same manner as Alameda County.  
             


            SB 314 (Murray), Chapter 785, Statutes of 2003, originally  
            enacted provisions that authorized the Los Angeles County  
            Metropolitan Transportation Authority (MTA) to impose a 0.5%  
            transactions and use tax, not subject to the 2% cap for no  
            more than six and one-half years, for specific transportation  
            projects and programs.  The authority to put a tax measure on  
            the ballot was never used.  AB 2321 (Feuer), Chapter 302,  
            Statutes of 2008, modified those provisions to allow MTA to  
            impose a transactions and use tax for 30 years.  SB 767 (De  
            León), pending in the Senate Appropriations Committee, and AB  
            338 (Hernández), pending in the Transportation Committee,  
            would both authorize MTA to impose an additional countywide  
            0.5% transactions and use tax.  










                                                                     SB 705


                                                                    Page  6





            Additionally, AB 1324 (Skinner), Chapter 795, Statutes of  
            2014, allowed the City of El Cerrito to adopt an ordinance to  
            impose a transactions and use tax not to exceed 0.5% for  
            general purposes that would, in combination with other taxes,  
            exceed the statutory limit of 2%.  


            AB 464 (Mullin) of 2015, would have increased the countywide  
            transactions and use tax combined rate cap from 2% to 3%  
            statewide.  AB 464 was vetoed by the Governor.  In his veto  
            message, the Governor remarked, "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."  


          5)Arguments in Support.  Supporters argue that this bill will  
            provide the capacity to allow for local decision makers to  
            weigh their options in addressing transportation needs  
            locally.  


          6)Arguments in Opposition.  Opposition argues that this bill  
            continues to authorize a deeply regressive sales tax and that  
            the length of time the bill provides to allow voters to  
            approve the tax is unwarranted.  





















                                                                     SB 705


                                                                    Page  7



























          REGISTERED SUPPORT / OPPOSITION:




          Support


          California State Association of Counties


          Cities of Carmel-by-the-Sea, Del Rey Oaks, Gonzales, Greenfield,  
          King City, Marina, Monterey,  Pacific Grove, Salinas, Sand City,  
          Seaside, Soledad


          City/County Association of Governments of San Mateo County








                                                                     SB 705


                                                                    Page  8







          Friends of CalTrain


          Monterey County Board of Supervisors


          Monterey-Salinas Transit District


          San Mateo County Economic Development Association


          Santa Cruz County Regional Transportation Commission




          Opposition


          Howard Jarvis Taxpayers Association




          Analysis Prepared by:Misa Lennox / L. GOV. / (916)  
          319-3958