BILL ANALYSIS
AB 799
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Date of Hearing: April 6, 2005
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Simon Salinas, Chair
AB 799 (Leno) - As Introduced: February 18, 2005
SUBJECT : Local vehicle license fee: San Francisco.
SUMMARY : Authorizes the Board of Supervisors of the City and
County of San Francisco to impose a vehicle license fee (VLF) on
vehicles operated by residents of San Francisco.
Specifically, this bill :
1)Authorizes the Board of Supervisors of the City and County of
San Francisco (San Francisco), by a 2/3 vote of the board, to
place before its voters a measure to levy an additional VLF
rate on vehicles owned by residents for general revenue
purposes.
2)Requires that the ordinance proposing the fee be submitted to
the electorate and approved by a majority of those voting.
3)Specifies that the total VLF rate, including any offset to
that rate, as provided, shall be 2% of the market value of the
vehicle.
4)Requires San Francisco to contract with the Department of
Motor Vehicles (DMV) to collect and administer the fee.
5)Requires the Franchise Tax Board (FTB) to notify the State
Controller of any state revenue losses resulting from
taxpayers deducting the local VLF fees authorized by this bill
for purposes of the Personal Income Tax Law and the
Corporation Tax Law.
6)Reduces San Francisco's VLF adjustment amount to cover these
reported losses as well as FTB's administrative costs.
EXISTING LAW imposes a VLF which is in lieu of a personal
property tax on all California motor vehicles at a rate of .65%
of the value of the vehicle.
FISCAL EFFECT : Unknown
COMMENTS :
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1)The bill is intended to provide the City and County of San
Francisco with authorizing language to impose a local-option
vehicle license fee. The fee would be imposed at a rate equal
to the difference between the historical 2% state tax rate and
the current rate actually paid to the state by vehicle owners
(0.65%) - in other words, a tax rate of 1.35% on the
depreciated value of the San Francisco residents' vehicles.
The resulting total fee imposed on San Francisco residents
would be 2%. The ordinance providing for this increase would
have to be approved by a 2/3 vote of the board of supervisors
before it can be placed on the ballot for voter approval by
the electorate of San Francisco. Since the revenue from the
fee would
be used for general revenue purposes, rather than a specified
purpose, the ordinance requires approval by a majority of
those voting. The fee would be administered by DMV under
contract with San Francisco, and DMV's costs would be
recovered from revenue generated by the fee.
2)Since the Internal Revenue Service considers the VLF to be in
the nature of a property tax, the VLF is deductible for both
federal and state income tax purposes. For those who itemize
deductions, up to 40% of the additional VLF would effectively
be borne by the state and federal governments in the form of
reduced income tax payments. The same would be true of a
local VLF such as that proposed by this bill. This bill
requires FTB to report these losses to the State Controller.
This amount would be deducted from VLF backfill remitted to
San Francisco. The purpose of this provision is to ensure
that the State General Fund is made whole for any losses
arising from additional income tax deductions claimed by San
Francisco residents because of the additional VLF rate. The
General Fund is reimbursed in arrears for this loss.
3)According to the author, the VLF is one of San Francisco's
largest sources of general-purpose tax revenues. These
revenues fund vital city programs, including public safety,
public health, social services, fire protection, public works
and cultural activities. If San Francisco chooses to use this
VLF option, an estimated $60 million would be brought in,
above and beyond what San Francisco currently receives. Any
enactment of San Francisco's local option VLF is applicable
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only up to 2% of the depreciated value of residents' vehicles.
This measure does not apply in the event that the state rate
meets or exceeds that 2%. The author asserts that by ensuring
that the people of the City and County have the ability to
control their own revenues, this proposal gives San Francisco
voters a viable alternative to cutting services at a time when
the City and County is facing a severe budget shortfall.
4)Related legislation:
a) AB 1187 (Leno), which failed passage in the Senate
Appropriations Committee in 2004, was substantially similar
to this bill. AB 1187 was not heard in the Assembly in
this form.
b) AB 925 (Burton), Chapter 966, Statutes of 1993,
authorized the City and County of San Francisco to levy a
surcharge on the 2% VLF, for purposes of public transit
financing, so long as transit fares are not increased. The
fee would have required a 2/3 popular vote and the
surcharge was estimated to yield over $300 million for the
City and County at the time of its enactment. However, it
has never been enacted by the City and County, and
according to the author, the authority has been voided by a
recent transit fare increase.
5)This bill has been double-referred to both the Committees on
Local Government as well as Revenue and Taxation.
REGISTERED SUPPORT / OPPOSITION :
Support
City and County of San Francisco [SPONSOR]
San Francisco Planning and Urban Research Association
Transportation for a Livable City
Opposition
AB 799
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None on file
Analysis Prepared by : Mark McKenzie / L. GOV. / (916)
319-3958