BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 767| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 767 Author: De León (D), et al. Amended: 6/1/15 Vote: 21 SENATE TRANS. & HOUSING COMMITTEE: 8-0, 4/14/15 AYES: Beall, Cannella, Allen, Galgiani, Leyva, McGuire, Mendoza, Wieckowski NO VOTE RECORDED: Bates, Gaines, Roth SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 4/22/15 AYES: Hertzberg, Beall, Hernandez, Lara, Pavley NOES: Nguyen, Moorlach SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 SUBJECT: Los Angeles County Metropolitan Transportation Authority: transactions and use tax SOURCE: Author DIGEST: This bill authorizes the Los Angeles County Metropolitan Transportation Authority (LACMTA) to impose by ordinance an additional local, countywide, one-half-cent sales tax. Senate Floor Amendments of 6/1/15 align this new taxing authority with requirements in existing law for the extension of LACMTA's existing taxing authority enacted last year in SB 1037 (Hernandez, Chapter 196, Statutes of 2014). SB 767 Page 2 ANALYSIS: Existing law: 1)Allows cities and counties to impose beyond the state sales tax 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%. 2)Permits a county board of supervisors to create a countywide transportation authority to plan and fund transportation projects within the county. These transportation authorities may impose a local sales tax for transportation purposes, if the tax ordinance is within statutory limits and abides by restrictions on local taxes contained in the California Constitution. Counties that have chosen to tax themselves for transportation purposes call themselves "self-help" counties because they have approved measures to help themselves address their own transportation problems. Instead of asking voters to impose a local sales tax for transportation purposes under the generic authority in existing law, some counties have specific authorization to propose a measure to increase the sales tax for transportation purposes. For example, the Legislature has passed specific legislation authorizing Los Angeles County to propose to the voters an increase in the local sales tax for transportation. Voters have approved three separate measures in Los Angeles County, for a total sales tax rate of 1.5% dedicated to transportation purposes. This bill: 1)Allows LACMTA to exceed the 2% statutory limitation on local transactions and use taxes by 1%. 2)Authorizes LACMTA to impose by ordinance an additional local, countywide, one-half-cent sales tax for a period to be determined by LACMTA. 3)Requires LACMTA to adopt the ordinance and submit the proposal to the voters. SB 767 Page 3 4)Specifies that the ordinance only becomes operative if approved by two-thirds of the voters voting on the measure. 5)Requires the ordinance imposing the tax to contain all of the following: a) An expenditure plan that lists the projects and programs to be funded from the tax. b) Provisions conforming to existing requirements for the imposition of a sales tax, except the limitation that the combined sales tax rate cannot exceed 2%. c) Provisions limiting LACMTA's administration costs to 1.5%. d) A requirement that net revenues must be used for projects and programs in the expenditure plan. 6)Requires the expenditure plan to include the most recent cost estimates for each project, the approximate schedule during which LACMTA anticipates making funds available for each project and program, and the expected completion dates for each project. 7)Requires LACMTA to develop a transparent process to determine the most recent cost estimates, as well as to post the expenditure plan on its website at least 30 days before submitting the measure to the voters. 8)Requires the expenditure plan to be included in LACMTA's Long Range Transportation Plan within one year of the date the measure is approved by voters. Comments Purpose. In 2008, L.A. County voters recognized the need for additional transportation investments and approved Measure R to fund both increased transit options and highway improvements. While Measure R will dramatically change mobility throughout L.A. County, the author states that the projects funded by the Measure do not encompass all of the transportation needs in the region. Residents, local governments, and transportation leaders in the region believe that there are thousands of worthy SB 767 Page 4 projects which will not be funded by Measure R. The author contends that an additional one-half-cent sales tax will allow L.A. County to further expand its transit system, address key highway needs around the county, support local agency transportation programs, and improve regional rail service. L.A. County measure history. L.A. County currently has in place three separate one-half-cent sales taxes for transportation purposes (for a total of 1.5 cents per dollar spent). The first two one-half-cent taxes were initiated in 1981 and 1991 under terms of special legislation and after local voter approval, and have no expiration date. In 2008, the Legislature passed and the governor signed AB 2321 (Feuer, Chapter 302), which authorized LACMTA to place before the voters an ordinance to increase the local transportation sales tax by another one-half cent for 30 years. The statute required LACMTA to adopt an expenditure plan prior to submitting the ordinance to the voters, and identified 18 projects to be included in that expenditure plan. AB 2321 required LACMTA to include in the expenditure plan the anticipated completion date for each project. In November 2008, LACMTA placed the sales tax ordinance, referred to as Measure R, on the ballot, and 67% of the voters approved the Measure. At the time voters approved Measure R, LACMTA estimated that the 30-year program would raise about $40 billion. Because of the recession and general economic malaise that followed that vote, LACMTA adjusted its revenue estimates downward and now only expects the sales tax measure to generate about $36 billion. To address this funding shortfall, LACMTA began a search for additional revenue or funding mechanisms to meet its transportation needs. In 2012, the Legislature passed and the governor signed AB 1446 (Feuer, Chapter 806), which authorized LACMTA to place before the voters an ordinance to either eliminate or extend Measure R's 30-year sunset date. The measure, put before the voters in November 2012, failed to achieve the two-thirds majority necessary for passage. Instead of seeking to extend Measure R, the author of this bill is authorizing LACMTA to propose to voters another half-cent sales tax. This new authorization would not contain the required projects of past measures, nor the restrictions of past legislation, but is somewhat a "clean slate" from which LACMTA SB 767 Page 5 can build a new expenditure plan and funding prioritization. Project selection concerns. In 1998, the Legislature created the Metro Gold Line Foothill Extension Construction Authority to oversee the construction of a light rail system from Los Angeles to Claremont. This Authority has nearly completed the project to Azusa, but lacks funding to complete the project all the way to Claremont. The Authority would like to be included in the expenditure plan for this new sales tax measure, thereby securing the funding necessary to complete its project. In a letter to the author, the Authority expresses concern that LACMTA staff may give priority to new projects at the expense of projects that have been previously approved. The author has expressed a desire for the local process to determine the projects to be included in the expenditure plan instead of the Legislature making that determination. Related Legislation Similar to this bill, AB 338 (R. Hernandez), currently pending in the Assembly Appropriations Committee, authorizes LACMTA to impose an additional countywide sales tax measure, with a few significant differences. First, AB 338 limits the length of the measure's term to no longer than 30 years, whereas this bill allows LACMTA to determine the length of the measure's term. Second, AB 338 requires LACMTA to notify the Legislature prior to amending the adopted expenditure plan. Finally, AB 338 allocates an undetermined percentage of the revenue raised by the potential measure to bus and rail operations. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No SUPPORT: (Verified6/2/15) Amalgamated Transit Union Amalgamated Transit Union Local 1277 Association for Commuter Transportation, Southern California Avvantt Partners California Asphalt Pavement Association CALPIRG CH2MHILL SB 767 Page 6 City of Culver City Climate Resolve Community Health Councils DE Architects Endangered Habitats League Environment California Eric Garcetti, Mayor of Los Angeles Fixing Angelenos Stuck in Traffic Green Communications Initiative Hatch Mott McDonald HDR International Brotherhood of Electrical Workers Local 11 International Union of Operating Engineers Local 12 Jacobs Engineering Group Kal Krishnan Consultant Services LAANE Laborers International Union Local 300 Los Angeles Area Chamber of Commerce Los Angeles Community College District Los Angeles County Bike Coalition Los Angeles County Business Federation Los Angeles County Federation of Labor Los Angeles County Metropolitan Transportation Authority Los Angeles County Museum of Art 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 Natural Resources Defense Council Pacifica Services Inc. Parsons Brinkerhoff railLA SENER Engineering & Systems Inc. SKANSKA Solutions International Southern California Association of Governments Southern California Association of Nonprofit Housing Southern California Contractors Association SB 767 Page 7 Southern California Transit Advocates Stantec State Building and Construction Trades Council Subway to the Sea Coalition Transpo Group V&A Incorporated Westchester Neighborhood Association Westside Center for Independent Living OPPOSITION: (Verified6/2/15) California Taxpayers Association Howard Jarvis Taxpayers Association ARGUMENTS IN SUPPORT: According to the proponents, this bill grants LACMTA the flexibility to impose an additional transportation transaction and use tax at a rate of 0.5%, subject to voter approval and adoption of an expenditure plan. Given Southern California's significant transportation needs, supporters of this bill suggest that it is a common-sense approach to address funding needs in a transparent and accountable way. ARGUMENTS IN OPPOSITION: Opponents argue that this bill sets a negative taxation precedent because it would exempt the tax from the existing 2% cap for local sales taxes. Also, a sales tax increase is highly regressive, and therefore it seems unwise to authorize additional tax increases. Prepared by:Eric Thronson / T. & H. / (916) 651-4121 6/2/15 22:47:34 **** END **** SB 767 Page 8