BILL ANALYSIS
SB 138
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Date of Hearing: July 6, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
SB 138 (Liu) - As Amended: June 25, 2009
Majority vote. Fiscal committee.
SENATE VOTE : 22-17
SUBJECT : Local taxes: graffiti.
SUMMARY : Increases the maximum amount of local graffiti
prevention tax that could be levied by local governments on
aerosol paint containers and repeals the existing authorization
for local governments to levy that tax on other products.
Specifically, this bill :
1)Increases from $0.10 to $0.25 the maximum amount of tax that
may be imposed by a city, county, or city and county for the
privilege of selling at retail, within its jurisdiction,
aerosol paint containers.
2)Deletes the existing definition of "aerosol paint container"
and, instead, provides that "aerosol paint container" means a
pressurized coating product containing pigments and resins
that dispenses product ingredients by means of a propellant
and is packaged in a disposable can for hand-held application
or for use in specialized equipment for ground traffic or
ground marking applications.
3)Specifies that the term "aerosol paint container" does not
include aerosol lubricants, mold releases, automotive
underbody coatings, electrical coatings, cleaners, belt
dressings, antistatic sprays, layout fluids and removers,
adhesives, maskants, rust converters, dyes, ink, leather
preservatives, and cleaners.
4)Deletes the authorization for the levy of tax by local
governments for containers of other marking instruments,
certain felt tip markers, and other marking substances.
5)Removes the existing definitions of "felt tip marker",
"marking substance", and "marking instrument".
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6)Provides that the graffiti prevention tax, including the
increase in the rate proposed by this bill, is not subject to
the 2% maximum combined rate cap.
7)Requires any jurisdiction implementing the local graffiti
prevention tax to provide retailers of aerosol paint
containers the option to store or display the products in an
area continuously observable by employees or an area not
accessible to the public without employee assistance.
EXISTING LAW :
1)Authorizes cities and counties to levy the Bradley-Burns
Uniform Local Sales & Use Tax [Revenue and Taxation Code
(R&TC) Part 1.5 (commencing with Section 7200) Division 2].
2)Authorizes local governments, including cities and counties,
to impose, increase, or extend a transactions and use tax
('TUT' or 'district taxes'), under specified conditions. TUTs
are identical in nature to the sales and use tax (SUT). [R&TC
Part 1.6 (commencing with Section 7251)].
3)Authorizes local agencies to impose additional local taxes,
under the Additional Local Taxes Law [R&TC Part 1.7
(commencing with Section 7285)].
4)Allows a city or county, or a city and county, to enact an
ordinance, subject to approval of 2/3 vote of the electors
voting on the measure, to levy a tax on the privilege of
selling at retail, within its jurisdiction, aerosol paint
containers, containers of any other marking substance, felt
tip markers that have a flat or angled writing surface of
one-half inch or greater, or any other marking instruments.
(R&TC Section 7287).
5)Specifies that the rate of that tax may not exceed $0.10 per
aerosol paint container or container of other marking
substance and may not exceed $0.05 per felt tip marker or
other marking instrument. (R&TC Section 7287).
6)Defines "aerosol paint container" as any aerosol container,
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regardless of the material from which it is made, which is
adapted or made for the purpose of spraying paint capable of
defacing property.
7)Defines "felt tip marker" as any broad-tipped indelible marker
or similar implement containing ink that is not water-soluble.
8)Defines "marking substance" and "marking instrument" as any
substance or instrument, other than aerosol paint containers
and felt tip markers, which could be used to draw, spray,
paint, or mark, including, but not limited to, shoe polish
applicators.
9)Specifies that the proceeds from the imposition of the
graffiti tax may be used only on graffiti prevention and
removal, or for educational programs for at-risk youth to
combat graffiti vandalism in all its forms.
FISCAL EFFECT : Unknown.
COMMENTS :
1)Author's statement . The author states that "I ask for your
'aye' vote on SB 138. This bill amends the Revenue and
Taxation Code, which already allows cities [and] counties to
ask voters if they want to approve a tax for graffiti removal.
"Current state law allows cities [and] counties to place on the
ballot a tax up to 10 cents per spray can or 5 cents for each
permanent marker. Funding must be dedicated to graffiti
removal. The Legislature approved this section nearly 20
years ago, and the maximum tax amounts should be adjusted to
reflect current needs.
"Two-thirds of voters must approve any such measure placed on
city or county ballots.
"Graffiti damages private and public property, requires costly
cleanup and harms the quality of life in our communities.
a) The City of Los Angeles spends $7.6 million each year
from the General Fund on graffiti-fighting efforts.
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b) Los Angeles officials spent up to $30 million on
graffiti removal and tagging suppression from 2002 to 2006.
c) The California Department of Transportation in 2007
spent about $5 million on graffiti removal in Los Angeles
and Ventura counties.
"Local government leaders, law enforcement, and community
groups have worked together to develop successful
graffiti-prevention programs. Criminal penalties were
increased. Nonetheless, problems persist.
"Local governments need additional funding for graffiti
cleanup efforts."
2)Background . Under existing law, cities and counties may impose
SUTs (local taxes) under the Bradley-Burns Uniform Local Sales
and Use Tax Law, which requires that the rate of tax be fixed
at 1% of the sales price of tangible personal property (TPP)
sold at retail in the local jurisdiction or purchased outside
that jurisdiction for use within it.
Local governments also are authorized, by the TUT Law and the
Additional Local Taxes Law to levy "district" taxes, for
general or special purposes, subject to voter approval,
provided that the combined rate of tax in the county does not
exceed 2%. In general, district taxes levied under these
provisions are levied based on a percentage of the sales price
of the TPP. Beginning July 1, 2009, 132 local jurisdictions,
including cities, counties, and special purpose entities,
impose a district tax for general or specific purposes. Some
cities and counties have more than one district tax, while
others have none. Because the combined rate of all district
taxes imposed within a county cannot exceed 2%, the current
maximum combined state, local, and district rate is 10.75%
(The City of South Gate and the City of Pico Rivera apply this
maximum rate).
3)The Local Graffiti Tax . In addition to the district taxes
levied as a percentage of the sales price, the Additional
Local Taxes Law authorizes cities and counties to levy a
graffiti prevention tax for the privilege of selling at retail
aerosol paint containers, containers of any other marking
substance, specified felt tip markers and other making
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instruments. (R&TC, commencing with Section 7287, Chapter 3).
Apparently, the authorization for this tax was needed to help
local governments to clean up graffiti. According to a League
of California Cities survey, the cleanup costs vary from
$1,500 to $3.8 million per year, depending on the
jurisdiction. The graffiti prevention tax may be levied only
if the local agency governing board enacts an ordinance that
is approved by at least 2/3 of qualified voters.
4)The purpose of this bill . As discussed, cities and counties
are already authorized to impose a general or special tax,
including a graffiti prevention tax, up to a total combined
rate of 2% in the county. Although the authorization for the
imposition of the local graffiti tax has been in existence
since 1991, no local jurisdiction has ever levied the graffiti
prevention tax. The proponents of this bill state that only
few local agencies have tried to enact this tax because the
maximum amounts are too low to generate revenue sufficient to
offset graffiti abatement costs. With higher amounts, more
local agencies would have the incentive to place this tax on
the ballot. Furthermore, the increased maximum amount of the
graffiti tax will help local governments to keep pace with the
increasing cost of labor and materials used for graffiti
abatement. The opponents of this bill, however, argue that,
given the recent state tax increases, now is not the time to
propose additional costs on California businesses and
consumers.
5)The 2% Cap . Local governments often find it difficult to make
up for decreases in state revenues with increases in local
revenues because cities and counties have limited authority to
raise revenues, and local special taxes require a 2/3 vote of
the electorate. Furthermore, the interaction between
city-imposed and county-imposed district taxes may cause some
counties to run out of room under the 2% maximum combined rate
of tax. When a city imposes a TUT or another special district
tax, that tax counts toward the county's cap. Because this
bill suspends the 2% cap for purposes of the graffiti
prevention tax, a city or a county may be more willing to put
that tax on the ballot knowing that it will not affect the
local government's ability to ask for tax increases on other
important local programs in the future.
6)Board of Equalization's (BOE) administrative costs and
concerns. Cities and counties are required to contract with
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BOE to administer district taxes. If a city or a county were
to adopt a graffiti prevention tax pursuant to this measure,
it would be required to contract with, and reimburse BOE for,
the actual administrative costs associated with the new tax.
Costs for preparation and administration of this tax could be
higher than other district taxes since the graffiti tax is
unlike other district taxes. BOE staff estimates that the
administrative costs assessed to the existing county special
taxing jurisdiction in 2007 range from $18,000 for Inyo County
to $2.6 million for Orange County, with the highest
administrative costs of $6.1 million attributable to the Los
Angeles County Transportation Commission.
BOE staff also highlights an additional accounting burden on
retailers associated with the graffiti prevention tax. The
retailers would be required to segregate sales of the specific
items for proper reporting and a separate computer program may
be required to account, and to provide a receipt to customers,
for the graffiti tax.
7)Similar Legislation .
AB 1646 (DeSaulnier), introduced in the 2007-08 Legislative
Session, would authorize counties to impose a TUT at a rate of
0.25%, or multiple thereof, not to exceed a maximum of 1%, for
county health purposes. AB 1646 was held in the Senate
Revenue and Taxation Committee.
SB 264 (Alquist), Chapter 430, Statutes of 2007, authorized
the Santa Clara Valley Transportation Authority to impose a
TUT at a rate of 0.125% for transit facilities and services.
AB 2321 (Feuer), Chapter 302, Statutes of 2008, extended from
6 years to 30 years the period within which a voter-approved
0.5% local transportation sales tax in Los Angeles County may
be imposed.
REGISTERED SUPPORT / OPPOSITION :
Support
Office of the Mayor Antonio R. Villaraigosa, City of Los Angeles
League of California Cities
City of Murrieta, Gary Thomasian, Mayor
Association for Los Angeles Deputy Sheriffs
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Riverside Sheriffs Association
Opposition
California Taxpayers' Association
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098