BILL ANALYSIS                                                                                                                                                                                                    Ó

                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

          |Bill No:  |SB 767                           |Hearing    | 4/22/15 |
          |          |                                 |Date:      |         |
          |Author:   |De León                          |Tax Levy:  |No       |
          |Version:  |2/27/15                          |Fiscal:    |Yes      |
          |Consultant|Bouaziz                                               |
          |:         |                                                      |

                              TRANSACTIONS AND USE TAX

          Allows the Los Angeles County Metropolitan Transportation  
          Authority to adopt an ordinance proposing the imposition of a  
          transactions and use tax that exceeds the 2% statutory  

           Background and Existing Law

           The state sales and use tax rate is 7.50% as detailed below and  
          is generally imposed on all tangible personal property unless  
          specifically exempt.  Cities and Counties may increase the sales  
          and use tax rate up to 2% as a transactions and use tax for  
          either specific or general purposes with a vote of the people. 

                  |       |                    |                                |
                  | Rate  |    Jurisdiction    |       Purpose/Authority        |
                  |       |                    |                                |
                  |       |                    |                                |
                  |3.9375%|State (General      |State general purposes          |
                  |       |Fund)               |                                |
                  |       |                    |                                |


          SB 767 (De León) 2/27/15                                Page 2  
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                  |       |                    |                                |
                  |1.0625%|Local Revenue Fund  |Realignment of local public     |
                  |       |2011                |safety services                 |
                  |       |                    |                                |
                  |       |                    |                                |
                  |       |                    |                                |
                  |       |                    |                                |
                  | 0.25% |State (Fiscal       |Repayment of the Economic       |
                  |       |Recovery Fund)      |Recovery Bonds                  |
                  |       |                    |                                |
                  |       |                    |                                |
                  | 0.25% |State (Education    |Schools and community college   |
                  |       |Protection Account) |funding                         |
                  |       |                    |                                |
                  |       |                    |                                |
                  | 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          |
                  |       |                    |                                |
                  |       |                    |                                |
                  | 1.00% |Local (City/County) |City and county general         |
                  |       |                    |operations. Dedicated to county |
                  |       |                    |transportation purposes         |
                  |       |0.75% City and      |                                |
                  |       |County              |                                |
                  |       |                    |                                |
                  |       |0.25% County        |                                |
                  |       |                    |                                |
                  | 7.50% |Total Statewide     |                                |
                  |       |Rate                |                                |
                  |       |                    |                                |


          SB 767 (De León) 2/27/15                                Page 3  
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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, 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.  The Los Angeles County Metropolitan Transportation  
          Authority (MTA) had authority to levy a half-cent transaction  
          and use tax not subject to the 2% countywide cap for six and a  
          half years (SB 314, Murray, 2003).  However, MTA didn't put the  
          measure authorized by that bill to the voters.  In 2008, the  
          Legislature reauthorized MTA to place the half-cent transactions  
          and use tax for 30 years not subject to the cap; however, the  
          measure required MTA to adopt an expenditure plan prior to  
          submitting the ordinance to the voters (AB 2321, Feuer, 2008).   
          In November, 2008, Los Angeles County voters approved the tax  
          measure, Measure R.  

          Two years ago, the Legislature authorized MTA to impose a  
          permanent transactions and use tax (AB 1446, Feuer, 2012).  That  
          measure required MTA to update its expenditure plan prior to  
          submitting the ordinance to the voters.  However, Los Angeles  
          County voters didn't approve that tax.  

          Beginning April 1, 2014, there will be 178 local jurisdictions  
          (city, county, and special purpose entity) imposing a district  
          tax for general or specific purposes.  Of the 178 jurisdictions,  
          44 are county-imposed taxes and 134 are city-imposed taxes.  

          Presently, the district tax rates vary from 0.10 percent to 1  
          percent.  Generally, the combined state, local and district tax  
          rates range from 7.625 to 9.50 percent. Currently, in Los  
          Angeles County the cities of La Mirada, Pico Rivera, and South  
          Gate all have a rate of 10%.  

           Proposed Law

           Senate Bill 767 allows Los Angeles County Metropolitan  


          SB 767 (De León) 2/27/15                                Page 4  
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          Transportation Authority (MTA) to adopt an ordinance proposing  
          the imposition of a transactions and use tax for the  
          transportation-related projects and programs, at a rate of no  
          more than 0.50%. The bill allows MTA to exceed the 2% statutory  
          limitation by 1%.

          SB 767 requires the ordinance imposing the tax to include: 

                 An expenditure plan that lists the transportation  
               projects and programs to be funded.

                 A provision limiting MTA's administration cost  
               reimbursement to 1.5% of the tax revenue.

                 A resolution adopted by the MTA board submitting the  
               ordinance to the voters.

                 A provision allowing MTA to incur bonded indebtedness.

          The ordinance must be submitted to the electorate and approved  
          by two-thirds of the voters pursuant to subdivision (d) of  
          Section 2 of Article XIIIC of the California Constitution.


          State Revenue Impact

           No estimate.


           1.  Purpose of the bill.   According to the author, "Los Angeles  
          is one of the nation's most congested transportation corridors,  
          and with a projected population growth of more than one and a  
          half million people in the next 30 years, congestion will only  
          worsen unless investments are made to improve mobility.  At the  
          state level, investments to preserve California's transportation  
          system have not been sufficient to meet demand. In real terms,  
          funding has diminished while the demand and the cost to maintain  
          and operate the transportation system have soared.  Traditional  
          fuel tax revenues are not keeping pace with inflation, and the  


          SB 767 (De León) 2/27/15                                Page 5  
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          proliferation of fuel-efficient cars and alternative fuel  
          vehicles, among other factors, are reducing this funding.  Los  
          Angeles has made efforts in recent years to raise additional  
          revenues for transportation projects through sales tax  
          increases.  In 2008, Los Angeles County voters recognized the  
          need for increased transit investments and highway improvements,  
          and approved Measure R.  Over the next 30 years, it is projected  
          Measure R will generate $36 billion for congestion relief  
          progress.  While Measure R will dramatically change mobility  
          throughout Los Angeles, the projects funded by the measure do  
          not encompass all of the transportation need in the  
          region-further investment is necessary. Residents, local  
          governments, and transportation leaders in the region believe  
          there are thousands of worthy projects, particularly transit  
          projects, which will not be funded by Measure R.  An additional  
          half-cent sales tax will allow Los Angeles County to further  
          expand its transit system, address key highway needs around the  
          county, support local agency transportation programs, and  
          improve the Metrolink service.     

          2.  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.  This year, AB 464 (Mullin and Gordon) seeks to do  
          just that, by raising the cap to 3%. 

          3.  High rate.   Three cities in Los Angeles County already impose  
          the highest sales and use tax rate in the state.  The 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.

          4.  Related legislation.   AB 338 (Hernandez), which is nearly  
          identical to SB 767, provides that a 0.5% tax must be imposed  
          for a period not to exceed 30 years, and a percentage of the net  
          revenues are to be allocated for bus and rail operations.  The  
          bill is set to be heard in Assembly Local Government on April  
          27, 2015.

           Support and  
          Opposition   (4/16/15)


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           Support  : ACT; California Asphalt Pavement Association; CALPIRG;  
          CH2MHILL; Climate Resolve; Community Health Councils; DE  
          Architects; Endangered habitats League; Environment California;  
          Eric Garcetti, Mayor of Los Angeles; FAST; Green Communications  
          Initiative; HDR; IBEW Local11; IUOE Local 12; Jacobs; Kal  
          Krishnan Consultant Services; 


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          LAANE; Laborers Local 300; Los Angeles Area Chamber of Commerce;  
          Los Angeles Community College District (LACCD); Los Angeles  
          County Bike Coalition; Los Angeles County Business Federation;  
          Los Angeles County Federation of Labor; Los Angeles County  
          Metropolitan Transportation Authority (LA Metro); Los Angeles  
          County Museum of Art (LACMA); Los Angeles River Revitalization  
          Corporation; Los Angeles River Revitalization Corporation; Los  
          Angeles Urban League; Los Angeles Walks; Los Angeles/Orange  
          County Building and Construction Trades Council; Meghan  
          Sahli-Wells, Mayor of Culver City; Metropolitan Pacific Capitol,  
          Inc.; MNS Engineers  Mobility 21; Move LA; NRDC; Pacifica  
          Services Inc.; Parsons Brinkerhoff; SCANPH; SENER Engineering &  
          Systems Inc.; SKANSKA; Southern California Association of  
          Governments (SCAG); Southern California Transit Advocates;  
          Stantec; Subway to the Sea Coalition; Transpo Group; V&A  
          Incorporated; Westchester Neighborhood Association; Westside  
          Center for Independent Living.

           Opposition  :  California Taxpayers Association (CalTax); Howard  
          Jarvis Taxpayers Association.

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