BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 223|
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THIRD READING
Bill No: SB 223
Author: Leno (D)
Amended: As introduced
Vote: 21
SENATE TRANSPORTATION & HOUSING COMM : 6-3, 03/29/11
AYES: DeSaulnier, Kehoe, Lowenthal, Pavley, Rubio,
Simitian
NOES: Gaines, Harman, Huff
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 04/27/11
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
NOES: Huff, Fuller, La Malfa
SENATE APPROPRIATIONS COMMITTEE : 6-2, 05/26/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Runner
NO VOTE RECORDED: Emmerson
SUBJECT : Vehicle license fee: local assessment
SOURCE : Author
DIGEST : 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
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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.
Historically, the VLF rate was two percent of value.
Since May 19, 2009, the VLF tax rate has been 1.15 percent
of the value of a vehicle. AB 3XXX (Evans), Chapter 18,
Statutes of 2009-10 Third Extraordinary Session,
temporarily increased the VLF rate from 0.65% to the 1.15%
rate and dedicated 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 expires on June 30 of this year.
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 2012, when this
bill takes effect, this could allow imposition of a local
assessment rate of 1.35 percent on the depreciated value
of a county's residents' vehicles (2% minus the state VLF
of 0.65%). The resulting total VLF imposed on residents
of counties adopting the assessment would be two percent
(0.65 percent to the state, plus 1.35 percent to the
county). The bill provides for the local assessment to
adjust so that county residents would always pay two
percent, even if the state were to adjust its rate.
3.Requires that the ordinance proposing the assessment be
submitted to the electorate of the county and approved by
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a majority of those voting.
4.Permits a board of supervisors to adopt the ordinance and
the voters to vote on a local assessment prior to this
bill taking effect, provided that the assessment is not
levied until 90 days after the effective date of the bill
and the board ratifies its adoption of the ordinance
after the bill takes effect, but prior to the first levy
of the assessment.
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:
A. Collect the local assessment pursuant to a contract
with the county;
B. Deduct its costs from the assessments collected;
C. Report to the Franchise Tax Board (FTB) data so
that FTB in turn can report to DMV state revenue
losses resulting from taxpayers deducting the local
VLF assessments authorized by this bill from their
personal income tax and their bank and 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
D. Transmit the collected revenues minus these
deductions to the counties imposing the assessments as
promptly as feasible.
1.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
Constitutionality . The California Constitution prohibits
any local government from imposing, extending, or
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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.
Prior Legislation
Last session, the author carried SB 10 (Leno), which was
nearly identical to this bill, and which ultimately died on
the Assembly floor. In two previous sessions, the author
carried two similar bills while he was serving in the
Assembly. They were AB 799 (Leno) of 2005 and AB 1590
(Leno) of 2007. Both of these applied only to the City and
County of San Francisco rather than to counties throughout
the state. AB 1590 was never taken up in a Senate policy
committee, and Governor Schwarzenegger vetoed AB 799.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Maximum local assessments ($2,288,250) ($4,576,500)
Local
(revenue gain)
DMV programming/admin $543 $112
Special*
(up-front costs paid by county,
ongoing costs deducted from
assessments collected)
Maximum tax revenue loss $85,000
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General
from VLF taxpayer deductions
* Motor Vehicle Account
Senate Appropriations staff indicates that the local
assessment revenue gain and tax revenue loss shown here are
based upon approval of the assessment in every county in
the state at the maximum rate. Actual costs and revenues
would depend upon the number of counties approving an
assessment, the rate of the assessment, and the number of
vehicles registered in those counties. For purposes of
example, if only San Francisco (with 470,349 fee-paid
vehicle registrations) approved an assessment of 2% (1.35%
local on top of the 0.65% VLF, annual local revenue gains
would be $68,479,589 and the estimated annual tax revenue
loss in the first year would be approximately $3.8 million.
Tax revenue losses are reimbursed to the General Fund in
the following year from revenues collected.
SUPPORT : (Verified 5/27/11)
San Francisco Chamber of Commerce (source)
California State Association of Counties
California Tax Reform Association
City and County of San Francisco
San Francisco Labor Council
OPPOSITION : (Verified 5/27/11)
Alliance of Automobile Manufacturers
California State Automobile Association
California New Car Dealers Association
California Taxpayers Association
Engineering and Utility Contractors Association
ARGUMENTS IN SUPPORT : According to the author's office,
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
Governor Schwarzenegger signed an executive order in 2003
reducing the VLF to the 0.65 percent rate.
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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. By granting the people of each county the
right of voter determination to levy a fee upon themselves
to fund vital services, this bill gives county voters a
viable alternative to cutting services.
ARGUMENTS IN OPPOSITION : The California New Car Dealers
Association opposes this bill because it asserts that
California motorists are already overburdened with hidden
vehicle fees and because it could result in 58 (one for
each county) different VLF rates. With a large number of
VLF rates, the association expresses concern that effective
compliance would be virtually impossible for dealers to
achieve, as varying VLF rates would add to the complexity
of purchasing a new car.
JJA:nl 5/27/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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