BILL ANALYSIS �
REVISED
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1446 HEARING: 7/3/12
AUTHOR: Feuer FISCAL: Yes
VERSION: 6/19/12 TAX LEVY: No
CONSULTANT: Miller
LA COUNTY MTA: TRANSACTIONS & USE TAX
Authorizes the LA MTA to place an ordinance before the
voters to extend Los Angeles' Measure R % Transactions &
Use Tax indefinitely.
Background and Existing Law
Existing state law authorizes cities and counties to impose
transactions and use taxes in 0.125% increments in addition
to the state's 7.25% sales tax provided that the combined
rate in the county does not exceed 2%. The law requires
approval by the Board of Supervisors and voter approval
(2/3 for special taxes majority vote for general taxes) for
the ordinance. Depending on the terms of the ordinance,
some of the transactions and use taxes sunset, while others
don't.
SB 314 (Murray, 2003) authorized MTA to levy an additional
% transaction and use tax not subject to the 2% countywide
cap for six and a half years, but MTA never put the measure
to the voters. AB 2321 (Feuer, 2008) reauthorized MTA to
place the % transactions and use tax for 30 years before
the voters subject to the cap. MTA must allocate 20% of
the sales tax revenue for bus operations and 5% for rail
operations. The law authorizes MTA to incur bonded
indebtedness, and requires MTA to adopt an expenditure plan
prior to submitting the ordinance to the voters. Existing
law identifies 18 projects that MTA must include in the
expenditure plan and in its Long Range Transportation Plan.
Although state law identifies the minimum level of funding
for each project, MTA is allowed to increase funds to a
project if any funds are available after debt service
AB 1446 -- 6/19/12 -- Page 2
payments. The expenditure plan must also anticipate the
completion date for each project.
MTA placed a sales tax ordinance, referred to as Measure R,
on the November 2008 ballot. 67% of the voters approved
the increase. Under its terms, the % is in effect from
July 1, 2009 through June 30, 2039. Los Angeles County
Transportation Commission has two additional %
transactions and use taxes still in effect one enacted on
April 1, 1991 and one enacted on July 1, 1982.
AB 1086 (Wieckowski, 2011) allows the County of Alameda to
impose a % transactions and use tax on the November, 2012
ballot only for the support of countywide transportation
programs that, also not subject to the countywide 2% cap.
Los Angeles County has three transactions and use taxes.
Seven Los Angeles cities have additional taxes explained
below. Only the MTA tax (bold and highlighted) has an
expiration date and is not subject to the 2% statutory cap:
--------------------------------------------------------------------
| Los Angeles | Los Angeles County |0.50% |04/01/91| |
| County | Transportation Commission | | | |
| | (LATC) | | | |
|--------------+------------------------------+------+--------+------|
| | Los Angeles County |0.50% |07/01/82| |
| | Transportation Commission | | | |
| | (LACT) | | | |
|--------------+------------------------------+------+--------+------|
| | Los Angeles County Metro |0.50% |07/01/09|6/30/3|
| | Transportation Authority | | | 9 |
| | (LAMTA) | | | |
|--------------+------------------------------+------+--------+------|
| Inglewood | City of Inglewood Vital City |0.50% |04/01/07| |
| city |Services Transactions and Use | | | |
| | Tax (IGWD) | | | |
|--------------+------------------------------+------+--------+------|
| Avalon city | City of Avalon Municipal |0.50% |10/01/00| |
| | Hospital and Clinic Tax | | | |
| | (AMHC) | | | |
|--------------+------------------------------+------+--------+------|
| South Gate | City of South Gate |1.00% |10/01/08| |
| city | Transactions and Use Tax | | | |
| | (SGTE) | | | |
AB 1446 -- 6/19/12 -- Page 3
|--------------+------------------------------+------+--------+------|
|El Monte city |City of El Monte Transactions |0.50% |04/01/11| |
| | and Use Tax (EMGF) | | | |
|--------------+------------------------------+------+--------+------|
| | City of So. El Monte Vital |0.50% |04/01/11| |
| | City Services Protection | | | |
| | Transactions and Use Tax | | | |
| | (SEMT) | | | |
|--------------+------------------------------+------+--------+------|
| Pico Rivera | City of Pico Rivera |1.00% |04/01/09| |
| city | Transactions and Use Tax | | | |
| | (PCRV) | | | |
|--------------+------------------------------+------+--------+------|
| Santa Monica | City of Santa Monica |0.50% |04/01/11| |
| city | Transactions and Use Tax | | | |
| | (STMA) | | | |
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Proposed Law
Assembly Bill 1446 authorizes MTA to place a permanent %
transactions and use tax before the voters, subject to a
2/3 voter approval. In placing the new ordinance before
the voters, MTA also changes the existing building
requirements as follows:
1. Updates its expenditure plan prior to submitting
the ordinance to the voters. The update shall include
an estimated cost for each project and program;
identification of the schedule that MTA believes the
funds will be available for projects, and the expected
completion date for each project.
2. Authorizes MTA to incur bonded indebtedness payable
from the revenue from the new sales tax.
3. Requires proceeds from the Measure R bonds and the
new tax proposed by AB 1446 be used to accelerate the
completion of projects authorized in AB 2321 (Feuer,
2008) and in MTA's adopted expenditure plan for
Measure R.
4. Continues the set aside of 20 percent of sales tax
revenue for bus operations in Los Angeles County and 5
percent for rail transit operations.
5. Requires MTA, upon the completion of the specified
projects and the payment of outstanding debt service,
to spend unencumbered sales tax revenue on other
projects in its Long Range Transportation Plan.
AB 1446 -- 6/19/12 -- Page 4
State Revenue Impact
According to the BOE, in 2010-11, LAMTA received over $600
million from the % transactions and use tax. That number
should continue to climb as taxable sales in the region are
expected to increase.
Comments
1. Purpose of the bill . The author provides the following
statement: "Assembly Bill 1446 is intended to give LA
County voters the opportunity to extend the duration of a
local source of funding for an ambitious program of
transportation infrastructure projects that will transform
the Los Angeles region. The anticipated new revenue can be
bonded against to build projects in Metro's LRTP sooner.
In 2008, Assembly Bill 2321 authorized Metro to adopt a
cent sales tax in Los Angeles County upon approval of the
voters. When Los Angeles County voters approved the tax,
known as Measure R, to fund construction of specified
transportation projects, they also approved an expenditure
plan that spread the costs of those projects over the
30-year duration of the tax. Currently more than 90 Metro
and local projects are in planning, environmental or
construction stages thanks to Measure R revenues. Since
2008, the nation, the State of California and Los Angeles
County have been plunged into a deep recession, with
unemployment, especially in the construction sector,
stunningly high. In addition, traffic congestion is
increasing as the Los Angeles region's population continues
to grow. The region needs more transportation options to
accommodate more than 3 million additional residents
anticipated over the next three decades from birthrate
alone. Efforts are underway to obtain federal loans
secured by Measure R revenues to expedite the construction
of Measure R projects. While these efforts may yet
succeed, under all circumstances additional Measure R
revenues will be necessary to accelerate Measure R projects
to the maximum extent. The Los Angeles Economic
Development Council estimated in that Measure R projects
alone will create 166,000 jobs. The sooner these projects
can be built, the sooner people can get back to
work-helping the economy of the Los Angeles region (and the
state) rebound, enhancing the delivery of goods and
AB 1446 -- 6/19/12 -- Page 5
services, and improving the region's environment and
quality of life.
AB 1446 only pertains to Los Angeles County. This bill will
not change the project list detailed in existing law, and
every area of the County will benefit (see attached list).
All Measure R rail, highway, bus and other projects will be
accelerated at the same rate, without prioritizing any one
category."
2. Is 30 years permanent enough ? AB 2321 (Feuer, 2008)
was heard in the Senate Revenue & Taxation Committee, the
predecessor to this committee, and allowed the LA MTA to
impose a % sales tax for thirty years not subject it to
the 2% countywide cap. When Measure R was adopted, MTA
estimated that the 30-year program would generate about $40
billion. With the economic downfall, MTA estimates that
Measure R will only generate $38 billion. When Los Angeles
Mayor Antonio Villaraigosa proposed to accelerate the
construction of all 12 rail transit projects so that they
would be completed in 10 years and not the usual 30 years,
MTA began a search for additional revenue or funding
mechanisms. This bill endeavors to solve the problem of
insufficient revenue by removing the sunset on Measure R.
Should the voters approve a new sales tax without a sunset,
MTA may be able to issue additional debt and take advantage
of the federal credit assistance program such as the
Transportation Infrastructure Finance and Innovation Act
(TIFIA). The Committee may wish to consider whether to
make this tax permanent, especially as it is exempt from
the 2% cap.
3. Precedent setting . SB 314 (Murray, 2003) was the first
bill to exempt the transactions and use tax from the 2%
countywide limit followed by an extension of that law from
AB 2321 (Feuer, 2008) and then again by AB 1086
(Wieckowski, 2011). The Committee may wish to consider
whether continuing to exempt special, targeted taxes from
the countywide cap is a good precedent.
4. Transportation & Housing Committee . The Senate Committee
on Transportation & Housing heard the issues related to
transportation in this bill on June 26th. The analysis
states that the bill keeps the MTA as a referee among
competing projects.
AB 1446 -- 6/19/12 -- Page 6
5. Twice bitten . This bill passed out of the Senate
Transportation & Housing Committee on June 26th with a vote
of 7-2. The issues related to the MTA expenditures and
requirements were heard under that committee's
jurisdiction. In that Committee the author agreed to take
a technical amendment to amend the bill to ensure that
Section 310350.5 (b) (B) (iv) remains operative after the
Measure R program of projects is completed to clarify that
the street and road set aside remains.
Assembly Actions
Assembly Local Government : 7-1
Assembly Transportation :11-1
Assembly Appropriations Committee:13-4
Assembly Floor: 54-17
AB 1446 -- 6/19/12 -- Page 7
Support and Opposition (6/28/12)
Support : American Council of Engineering Companies;
American Jewish Committee; California Chamber of Commerce;
California Labor Federation, AFL-CIO; City of Santa Monica;
Los Angeles Area Chamber of Commerce; Los Angeles Business
Council; Los Angeles County Federation of Labor, AFL-CIO;
Move LA; Sierra Club California; South Bay Cities Council
of Governments; Southern California Contractors
Association; State Building and Construction Trades Council
of California, AFL-CIO; The Associated General Contractors.
Opposition : CalTax; City of Cerritos; Howard Jarvis
Taxpayers Association; Metro Gold Line Foothill Extension
Construction Authority.
.