BILL ANALYSIS
SB 10
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Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 10 (Leno) - As Amended: July 8, 2009
Policy Committee: Revenue and
Taxation Vote: 6-2
Transportation 9-5
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes counties to impose a vehicle license fee
upon approval of two-thirds of the board of supervisors and a
majority of local voters. The bill also:
1)Specifies that the assessment rate shall be equal to the
difference between the historical 2% state VLF rate and the
current statewide VLF rate. This would translate into a rate
of .85% in 2010 (the difference between 2% and the current
statewide rate of 1.15%), and 1.35% after May 2011 (when the
recently enacted 0.5% increase in the statewide rate expires.)
The local rate could vary in future years depending on
statewide rate increases.
2)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.
3)Requires that a portion of local VLF taxes be transferred to
the GF to offset state revenue losses arising from the
deductibility of VLF payment on state income tax returns. The
transfers would be based on estimates made by the Franchise
Tax Board using information from the DMV regarding local VLF
payments.
4)Becomes effective January 1, 2010, and the increases would
become operative when a majority of voters in a county approve
an ordinance passed by the Board of Supervisors imposing the
assessment. If voter approval occurs between January 1 and
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June 30, the bill would become operative on the following
January. If the approval occurs in an election between July 1
and December 31, the bill would be operative the next July 1.
FISCAL EFFECT
1)Revenue Impacts . The impact of this measure depends on how
many counties approve the VLF rate increase. As an
illustration, if all 58 counties adopted the increase to 2% in
July 2011:
a) Local VLF revenues would increase $3.8 billion annually
beginning in 2011-12.
b) The reduction in state personal income tax liabilities
(because of increased VLF itemized deductions on state
income tax returns) would be about $180 million beginning
in 2011-12. Under the bill, the GF would be reimbursed for
the losses arising from the increased VLF deductions, but
with a one year lag. Thus, the GF would experience a
one-time loss of about $180 million in 2011-12, and ongoing
reductions of about $10 million per year.
c) If just the City and County of San Francisco (the
sponsor) adopted this increase, the comparable effects
would be $43 million local revenue increase and a first
year GF revenue loss of $1.5 million.
d) Administration costs . The DMV would incur one time
costs of up to $543,000 and ongoing costs of $112,000 to
administer the program. Up front costs would be reimbursed
by counties implementing the local VLF increase and ongoing
costs would be deducted from VLF assessments.
2)Though the measure does not preclude the state from levying a
higher statewide VLF to help it address its budgetary
problems, its passage would make it more difficult to do so.
This is because, under the proposed funding mechanism, any
increase in state fees would result in an automatic reduction
in local VLF funds available to support local programs.
COMMENTS
1)Background . Existing law imposes a VLF, which is in lieu of a
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personal property tax on California motor vehicles, at a rate
based on the taxable value of the vehicle. Historically since
2001, the VLF rate had been 0.65% of the depreciated value of
a vehicle, with the proceeds allocated to counties and used
for a variety of local purposes. Vehicles registered between
May 19, 2009 and June 30, 2011 are subjected to an additional
0.5% rate [ABx3 3 (Evans), Chapter 18, Statutes of 2009], for
a combined rate of 1.15%. Of the 0.5% increase, 0.35% is
deposited in the state GF, and the remaining 0.15% is
dedicated to specific local public safety programs. After June
30, 2011, the rate is scheduled to revert to 0.65%.
2)Rationale . The proponents of this bill (the City and County of
San Francisco) state that counties face serious budget
deficits that threaten many vital health, welfare, and public
services. This bill is intended to provide local governments
and voters with an option for funding these local public
services.
3)Opponents of this bill (including the Alliance of Automobile
Manufacturers) object to (a) VLF increases that place the rate
further above the general property tax rate of 1%, and (b) the
use of higher VLF taxes for purposes unrelated to
transportation.
4)Related legislation . AB 1342 (Evans), introduced in the
current legislative session, authorizes counties, under
specified circumstances, to adopt a local PIT, a local VLF, or
both. AB 1342 is pending in the Assembly Revenue and Taxation
committee. AB 1590 (Leno), introduced in the 2007-08
Legislative Session, and AB 799 (Leno), introduced in the
2005-06 Legislative Session, were similar to this bill, but
applied only to the City and County of San Francisco. AB
1590 was held in Senate Revenue and Taxation, and AB 799 was
vetoed by the Governor.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081