BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 10
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: leno
VERSION: 4/13/09
Analysis by: Carrie Cornwell FISCAL: yes
Hearing date: April 14, 2009
SUBJECT:
Vehicle license fee: local assessment
DESCRIPTION:
This bill authorizes a county to place on the ballot a measure
to impose an additional assessment on vehicles owned by
residents of that county.
ANALYSIS:
Existing state law imposes a vehicle license fee (VLF), which is
in lieu of a personal property tax on California motor vehicles,
at a rate based on the taxable value of the vehicle. The taxable
value of a vehicle is established by the purchase price of the
vehicle, depreciated annually according to a statutory schedule.
The VLF tax rate is currently 0.65 percent of the value of a
vehicle, but historically the rate has been two percent of
value, and effective May 19, 2009, the rate will be 1.15
percent, because of
AB 3XXX (Evans), Chapter 18, Statutes of 2009-10 Third
Extraordinary Session.
AB 3XXX temporarily increases the VLF rate to 1.15% and
dedicates revenue from the portion of the increase from 0.65
percent to one percent to the state General Fund and revenue
from the additional increase of 0.15 percent to specific local
public safety programs. AB 3XXX's VLF rate increase becomes
effective for vehicle registrations on May 19, 2009 and expires
June 30, 2013, if the voters approve Proposition 1A, the budget
stabilization constitutional amendment, on the May 19th ballot.
SB 10 (LENO) Page 2
If the voters reject Proposition 1A, both components of the rate
increase will expire two years sooner on June 30, 2011.
For the taxpayer, VLF is deductible on both state and federal
income taxes.
This bill :
1.Authorizes the board of supervisors of any county, by a
two-thirds vote, to adopt an ordinance to place before the
voters in that county a measure to levy a local assessment for
general revenue purposes. The local assessment would be placed
on residents of the county for the privilege of operating a
vehicle or trailer coach subject to the state VLF upon the
public streets and highways of the county.
2.Specifies that the assessment rate shall be equal to the
difference between the historical two percent state VLF rate
and the current state VLF rate. In 2010, when this bill takes
effect, this would allow imposition of a local assessment rate
of 0.85 percent on the depreciated value of a county's
residents' vehicles (2% minus the state VLF of 1.15%). The
resulting total VLF imposed on residents of counties adopting
the assessment would be two percent (1.15 percent to the
state, plus 0.85 percent to the county). The bill provides for
the local assessment to adjust so that county residents would
always pay two percent, even after the state adjusts its rate.
3.Requires that the ordinance proposing the assessment be
submitted to the electorate of the county and approved by a
majority of those voting.
4.Allows a county imposing the local assessment to impose a
lower rate for low-emission vehicles, as defined.
5.Requires any county imposing an assessment to contract with
the Department of Motor Vehicles (DMV) to collect and
administer the fee and to pay DMV for its initial setup and
programming costs.
6.Requires DMV to do all of the following:
i) Collect the local assessment pursuant to a contract with
the county;
SB 10 (LENO) Page 3
ii) Deduct its costs from the assessments collected;
iii) Report to the Franchise Tax Board (FTB) the
aggregate amount paid by each person paying the local
assessment authorized under this bill for the prior
quarter. The FTB in turn shall report to the DMV state
revenue losses resulting from taxpayers deducting the local
VLF assessments authorized by this bill from their personal
income tax and their corporation taxes. DMV shall remit
that amount to the State Controller for deposit in the
state General Fund, ensuring that the implementation of
this bill results in no loss of state revenue; and
iv) Transmit the collected revenues minus these
deductions to the counties imposing the assessments as
promptly as feasible.
7.Provides that the revenue generated by a local assessment
imposed in a county shall not supplant any moneys that the
state apportions to the county.
COMMENTS:
1)Purpose . The author notes that the VLF is one of the largest
sources of general-purpose tax revenues for California's
counties. These revenues fund vital programs, including
public safety, public health, social services, fire
protection, public works, and cultural activities. Much of
this revenue was lost when the Governor signed an executive
order in 2003 reducing the VLF to the 0.65 percent rate.
The author states that key public services are under constant
budget pressures from both increasing costs such as labor,
fuel, and medical expenses, as well as from expanding need for
public services resulting from homelessness, HIV/AIDS, and
reduced state and federal funding due to current economic
conditions. The author introduced this bill to grant the
people of each county the right of voter determination to levy
a fee upon themselves to fund vital services and thus give
county voters a viable alternative to cutting services.
2)Previous legislation . AB 799 (Leno) of 2005 and AB 1590 (Leno)
of 2007 were both very similar to this bill, except they
applied only to the City and County of San Francisco.
AB 1590 was never taken up in a Senate policy committee, and
SB 10 (LENO) Page 4
the governor vetoed
AB 799. His veto message read in part:
Within hours of taking office in 2003, I signed an
Executive Order to reverse the car tax increase. That
action returned $4 billion to the people of California.
Putting that money back into the hands of hard working
Californians is one of the ways we have helped our
economy grow over the last three years.
This measure would, in effect, reinstate the car tax for
the people of San Francisco. In fact, if the vehicle
license fee increase proposed by this bill were enacted,
the people of San Francisco could pay more than twice the
amount to register their vehicles than
anyone else in the state.
As noted in my veto messages of prior years, I am not
opposed to modest increases in fees if such increases are
approved by the impacted voters and not addressed in a
piecemeal fashion. Although this bill requires voter
approval, it impacts only one county.
3)Constitutionality . The California Constitution prohibits any
local government from imposing, extending, or increasing any
"general tax" unless and until that tax is submitted to the
electorate and approved by a majority vote. A special tax, in
turn, may only be imposed if that tax is approved by a
two-thirds vote of the local electorate. The California
Constitution defines a general tax as any tax imposed for
general governmental purposes, while the term "special tax" is
defined as a tax imposed for specific purposes. This bill
authorizes a county board of supervisors, by a two-thirds
vote, to place before the voters of the county, an ordinance
to levy a local assessment for general revenue purposes. As
such, the ordinance only needs to be approved by a majority of
voters and does not require the supermajority vote required
for special taxes.
4)Double referral . The Rules Committee referred this bill to
both the Transportation and Housing Committee and to the
Revenue and Taxation Committee. Therefore, should this bill
pass this committee, it will be referred to the Senate Revenue
and Taxation Committee.
POSITIONS: (Communicated to the Committee before noon on
SB 10 (LENO) Page 5
Wednesday,
April 8, 2009)
SUPPORT: California Communities United Institute
San Francisco Chamber of Commerce
OPPOSED: None received.