BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 767


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          Date of Hearing:  July 1, 2015


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                              Brian Maienschein, Chair


          SB  
          767 (De León) - As Amended June 1, 2015


          SENATE VOTE:  24-13


          SUBJECT:  Los Angeles County Metropolitan Transportation  
          Authority: transactions and use tax.


          SUMMARY:  Authorizes the Los Angeles County Metropolitan  
          Transportation Authority (MTA), subject to voter approval, to  
          impose an additional transactions and use tax at a rate of 0.5%.  
           Specifically, this bill:  


          1)Authorizes MTA to impose a transactions and use tax at a rate  
            of 0.5% that is applicable to the incorporated and  
            unincorporated areas of Los Angeles County.  


          2)Requires the ordinance imposing the tax to contain an  
            expenditure plan that lists the transportation projects and  
            programs to be funded by the tax and requires the expenditure  
            plan to include all of the following:


             a)   The most recent cost estimates for each project and  
               program identified in the expenditure plan;








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             b)   The identification of the accelerated cost, if  
               applicable, for each project and program in the expenditure  
               plan; 


             c)   The approximate schedule during which the MTA  
               anticipates funds will be available for each project and  
               program; and,


             d)   The expected completion dates for each project and  
               program within a three-year range.  


          3)Requires the ordinance imposing the tax to contain the  
            following:


             a)   A provision conforming the ordinance to the existing  
               Transaction and Use Tax Law, except the 2% combined  
               transactions and use tax cap;


             b)   A provision that limits MTA's administrative costs to  
               1.5% of total net revenues; and,


             c)   A requirement that the net revenues from the tax,  
               defined to mean the total tax revenues, as specified, be  
               used by MTA to fund transportation projects and programs  
               identified in the expenditure plan.  


          4)Requires MTA to do the following:


             a)   Develop a transparent process to determine the most  








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               recent costs; and,


             b)   Post the expenditure plan, at least 30 days before  
               submitting the ordinance, as specified under 5), below, on  
               its Internet Web site in a prominent manner.  


          5)Requires the ordinance to be adopted by the MTA board, which  
            shall also adopt a resolution that submits the ordinance to  
            the voters. 


          6)Specifies that the ordinance only becomes operative, if  
            approved by two-thirds 


          of the voters voting on the measure, pursuant to Article XIII C  
            of the California Constitution.  
          7)Requires, if the voters approve the ordinance, the expenditure  
            plan included as an exhibit to the ordinance to be included in  
            the revise and updated Long-Range Transportation Plan (LRTP)  
            within one year of the date the ordinance takes effect.  


          8)Requires the LRTP to also include capital projects and  
            programs adopted by each subregion that are submitted to MTA  
            for inclusion in the LRTP, if the cost and schedule details  
            are provided by the subregions in a manner consistent with the  
            requirements of the plan.  States that inclusion of a capital  
            project or program in the LRTP is not a commitment or  
            guarantee that the project or program will receive any future  
            funding.  


          9)Defines "subregion" to have the same meaning as that term as  
            defined in the LRTP process in effect as of January 1, 2008.  










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          10)Allows MTA to incur bonded indebtedness payable from the net  
            revenues of the tax.  


          11) Requires the tax authority granted by this bill to be  
            imposed, pursuant to the existing Transactions and Use Tax  
            Law, notwithstanding the 2% combined transactions and use tax  
            cap.  


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.  
           


          COMMENTS:  


          1)Transaction and Use Taxes.  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, which are unrestricted, or special taxes, 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.   



            Existing state law authorizes cities and counties to impose  
            transactions and use taxes in 0.125% increments in addition to  
            the state's 7.5% sales tax provided that the combined rate in  
            the county does not exceed 2%.  The Legislature has granted  
            several exemptions to the 2% cap, including to several  
            counties to allow an additional countywide transaction and use  
            tax for transportation purposes.  








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          2)Prior Legislation.  SB 314 (Murray), Chapter 785, Statutes of  
            2003, originally enacted provisions that authorized 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.   
            AB 2321 additionally required MTA to adopt an expenditure plan  
            prior to submitting a transactions and use tax to the voters  
            and to include specified projects and programs in its  
            Long-Range Transportation Plan.  In November 2008, more than  
            67% of Los Angeles County voters approved this tax in a ballot  
            measure known as Measure R.  Measure R, in addition to Measure  
            C (1990) and Proposition A (1980), are the three 0.5%  
            countywide transactions and use taxes that provide the  
            majority of MTA's funding.  


            AB 1446 (Feuer), Chapter 806, Statutes of 2012, authorized  
            MTA, subject to voter approval, to extend the existing  
            transactions and use tax (Measure R) for an unlimited amount  
            of time, allowing MTA to determine a sunset date, if any.  AB  
            1446 also required MTA to update its expenditure plan prior to  
            submitting the tax measure to the voters.  However, the  
            measure put before Los Angeles County voters in November 2012  
            failed to achieve the two-thirds threshold necessary for  
            passage.  SB 1037 (Hernández), Chapter 196, Statutes of 2014,  
            requires MTA to update its expenditure plan and Long-Range  
            Transportation Plan before placing another transactions and  
            use tax measure before the voters.  


            According to the Board of Equalization, Los Angeles County has  
            14 transaction and use taxes, three county-wide taxes for  
            transportation purposes and 11 city-wide taxes.  Despite the  
            statutory exemption for MTA's transactions and use tax, Los  








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            Angeles County has reached the 2% cap.  


          3)Bill Summary.  This bill authorizes MTA to impose by ordinance  
            an additional 0.5% transactions and use tax, subject to  
            two-thirds voter approval, pursuant to the California  
            Constitution.  The transaction and use tax authorized by this  
            bill is not subject to the 2% cap in existing law.  


            Additionally, this bill aligns the taxing authority with  
            substantially similar requirements established in existing law  
            by SB 1037 (Hernández) for the extension of MTA's existing  
            transactions and use tax (Measure R).  This bill requires the  
            expenditure plan included in the ordinance imposing the tax to  
            include the following: (1) cost estimates for each project and  
            program, using a transparent process; (2) accelerated costs of  
            each of the plan's projects and programs, if applicable; (3)  
            an approximate schedule for when MTA anticipates funds will be  
            available for each project and program; and, (4) expected  
            completion dates for each project and program.  Additionally,  
            this bill requires the revised and updated LRTP to include the  
            expenditure plan if voters approve the ordinance within one  
            year of the date the ordinance takes effect.  The LRTP also  
            must list capital projects and programs adopted by each  
            subregion that are submitted to MTA for inclusion.  The bill  
            notes that including cost estimates does not mean the project  
            is guaranteed funding. 


            This bill is sponsored by MTA.


          4)Author's Statement.  According to the author, "Los Angeles is  
            one of the nation's most congested transportation corridors in  
            the nation. According to the Texas Transportation Institute's  
            2012 Mobility Report, an auto commuter in Los Angeles spends  
            an average of 61 hours delayed in traffic per year, costing  
            about $1,300 per year in lost time and wasted fuel due to  








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            congestion. These numbers will increase as the county's  
            population will grow by one and a half million people in the  
            next 30 years. 


            "At the state level, investments to preserve California's  
            transportation system have not been sufficient to meet demand.  
            Consequently, Los Angeles and other counties have raised  
            additional revenues for transportation projects through sales  
            tax increases. Although there continues to be an unmet need  
            for transportation funding, LA County has reached its  
            transactions and use tax limit and requires exemption from the  
            State and the authority to raise the sales tax for  
            transportation funding.


            "In 2008, the Los Angeles County voters recognized the need  
            for additional transportation investments, both for increased  
            transit options and highway/road improvements, and approved  
            Measure R.  Over the next 30 years, it is projected Measure R  
            will generate $40 billion for congestion relief progress.  
            Measure R is transforming Los Angeles County. The transit and  
            highway projects now being constructed will relieve congestion  
            and improve air quality. The Los Angeles Economic Development  
            Council estimated in 2008 that Measure R projects will create  
            166,000 jobs.


            "While Measure R will dramatically change mobility throughout  
            Los Angeles, 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 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."  









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          5)Related Legislation.  This bill is substantially similar to AB  
            338 (Hernandez), which is currently pending in the Senate  
            Transportation and Housing Committee.  AB 338 would also  
            authorize MTA to impose an additional countywide 0.5%  
            transactions and use tax, but contains several differences to  
            this bill.  This bill allows MTA to determine the length of  
            the transactions and use tax and AB 338 establishes a 30-year  
            limit.  Additionally, this bill does not contain several of  
            the provisions in AB 338, including the requirement that the  
            expenditure plan must contain a measure to ensure equity  
            between regions, the dedicated percentage of revenue to bus  
            and rail operations, or the requirement that MTA must notify  
            the Legislature prior to adopting amendments to the adopted  
            expenditure plan.  


            AB 464 (Mullin), currently pending on the Senate Floor, seeks  
            to raise the overall statewide transactions and use tax rate  
            cap from 2% to 3%.  The authority granted by this bill is  
            exempted from the 2% cap; however, if AB 464 were signed into  
            law the authority granted by this bill would not be exempted  
            from the 3% cap.  


          6)Conflicting Legislation.  Provisions of this bill conflict  
            with AB 338 (Hernández) and may need amendments to address the  
            conflict, should both bills continue to move through the  
            legislative process.  


          7)Arguments in Support.  The Los Angeles County Metropolitan  
            Transportation Authority states, "Currently, the Los Angeles  
            Metropolitan Transit Authority is deciding whether to pursue a  
            ballot measure to provide funding for additional  
            transportation investments.  This option is not possible  
            without this legislation.  Regardless of eventual decision  
            made by the board, your legislation is essential to ensuring  
            that all options to cut traffic, reduce smog, and increase  








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            mobility are available to the people of Los Angeles."  


          8)Arguments in Opposition.  The California Taxpayers Association  
            states, "Although the bill's intent to advance funding for  
            transportation projects may be meritorious, any increase in  
            the sales and use tax rate would only add to what is already  
            one of the most regressive taxes in the state; and  
            disproportionately impacts California's most vulnerable  
            residents, making it more difficult for them to budget and  
            purchase everyday necessities." 


          9)Double-Referral.  This bill is double-referred to the  
            Transportation Committee.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Los Angeles County Metropolitan Transportation Authority  
          [SPONSOR]


          ACT, Southern California


          Avvantt Partners


          Amalgamated Transit Union


          California Asphalt Pavement Association








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          CALPIRG


          CH2M HILL


          Climate Resolve


          Community Health Councils


          DE Architects


          Endangered Habitats League


          Environment California


          FAST


          Green Communications Initiative


          Hatch Mott MacDonald


          HDR


          International Brotherhood of Electrical Workers (IBEW), Local 11


          International Union of Operating Engineers (IUOE), Local 12








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          Jacobs 


          Kal Krishnan Consultant Services


          Laborers Local l300


          Los Angeles Alliance for a New Economy (LAANE)


          Los Angeles Area Chamber of Commerce


          Los Angeles County Business Federation


          Los Angeles Community College District


          Los Angeles County Bicycle Coalition


          Los Angeles County Federation of Labor


          Los Angeles County Museum of Art (LACMA)


          Los Angeles / Orange Counties Building and Construction Trades  
          Council


          Los Angeles Urban League










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          Los Angeles Walks


          L.A. River Revitalization Corporation


          Mayor Eric Garcetti, City of Los Angeles


          Mayor Meghan Sahli-Wells, Culver City


          Metropolitan Pacific Capital, Inc.


          MNS Engineers, Inc.



           Support (continued)


           


          Mobility 21


          Move LA


          National Resources Defense Council (NRDC)


          Pacifica Services, Inc.


          Parsons Brinkerhoff









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          SENER Engineering & Systems, Inc.


          SKANSKA


          Southern California Association of Governments


          Southern California Association of NonProfit Housing (SCANPH)


          Southern California Transit Advocates


          Stantec


          Subway to the Sea


          Transpo Group


          V&A Incorporated


          Westchester Neighborhood Association
          Westside Center for Independent Living




          Opposition


          California Taxpayers Association









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          Howard Jarvis Taxpayers Association




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