BILL ANALYSIS �
SB 223
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Date of Hearing: June 22, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 223 (Leno) - As Introduced: February 9, 2011
SENATE VOTE : 23-15
SUBJECT : Voter-approved local assessment: vehicles.
SUMMARY : Enacts the Local Assessment Act, which authorizes a
county to place on the ballot a measure to impose an additional
assessment on vehicles owned by residents of that county.
Specifically, this bill :
1)Allows the board of supervisors of a county (including a city
and county) to, by ordinance, impose a voter-approved local
assessment for general revenue purposes, if specified
conditions are met, including compliance with specified
provisions of existing law relating to voter approval of
taxes, as follows:
a) The ordinance proposing the assessment is approved by
two-thirds of all members of the board of supervisors;
b) The ordinance proposing the assessment is submitted to
the electorate of the county and is approved by a majority
vote of the voters voting on the ordinance; and,
c) The board of supervisors transmits to the Department of
Motor Vehicles (DMV) and the Franchise Tax Board (FTB) a
certified copy of the ordinance imposing that assessment
immediately after the results of the election are
certified.
2)Requires the ordinance imposing a voter-approved local
assessment to contain the following:
a) A provision that the assessment is imposed for the
privilege of a resident of the county to operate upon the
public highways in the county a vehicle or trailer coach,
the registrant of which is subject to tax under Vehicle
License Fee Law; and,
b) A provision establishing the annual amount of the
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assessment at a rate that equals the difference between the
following two rates:
i) Two percent (2%) of the market value of the vehicle
or trailer coach; and,
ii) The rate, including any offset to that rate, set
forth in Vehicle License Fee Law for a vehicle or trailer
coach.
c) A provision that the rate established under the
provision described in b) is subject to both of the
following:
i) That the rate may not exceed 2% of the market value
of the vehicle or trailer coach; and,
ii) That any adjustment that is required to be made to
the rate because of a change in the rate, or any offset
to that rate, set forth in Vehicle License Fee Law, shall
not take effect until the first day of the first fiscal
year that follows the fiscal year in which the change to
the rate or offset set forth in that part became
operative.
d) A provision that the assessment will begin to be imposed
as follows:
i) If the election in which the ordinance receives
voter approval occurs between
January 1 and December 31, on January 1 following that
election;
ii) If the election in which the ordinance receives
voter approval occurs between July 1 and December 31, on
July 1 following that election.
e) Provisions identical to those contained in Vehicle
License Fee Law, insofar as they relate to vehicle license
fees and are applicable, except that the name of the county
as the taxing agency shall be substituted for that of the
state.
f) A provision that all amendments, subsequent to the
effective date of the voter-approved local assessment
ordinance, to the section of law relating to vehicle
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license fees and not inconsistent with the provisions of
this bill shall automatically be incorporated into the
voter-approved local assessment ordinance.
g) A provision that requires the county to contract with
DMV, and requires the contract to contain provisions in
substance as follows:
i) A requirement that DMV perform all functions
incident to the administration and collection of the
voter-approved local assessment;
ii) A provision specifying the manner in which refunds
to a licensee pursuant to Part 5, as incorporated in the
voter-approved local assessment ordinance will be made
and administered; and,
iii) A provision that requires the county to pay DMV for
the initial setup and programming costs identified by
DMV.
3)States that any ordinance approved shall be valid and
enforceable, if approved by the board of supervisors and by
the voters prior to the effective date of this bill, but only
if both of the following apply:
a) Any assessment imposed pursuant to the approval of the
ordinance is not levied until at least 90 days after the
effective date of the bill; and,
b) The board of supervisors ratifies its adoption of the
ordinance after the effective date of the bill and prior to
the first levy of the assessment imposed pursuant to the
approval of the ordinance.
4)Requires DMV to do all of the following:
a) Collect the voter-approved local assessment pursuant to
a contract with the county;
b) Deduct its costs in administering the voter-approved
local assessment from the assessments collected;
c) From the assessments collected under a), transmit to the
Controller for deposit in the General Fund the amount
reported from deductions taken under the Personal Income
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tax Law and the Corporation Tax Law for taxes paid or
incurred as a result of a the vehicle tax imposed under the
bill's provisions;
d) Transmit revenues derived from the assessments collected
under a) above to the county as promptly as feasible; and,
e) To develop with FTB, a reporting process that enables
the DMV to report to the FTB in a timely manner the data
necessary for FTB to prepare the estimate of revenue loss
from tax deductions.
5)Provides that the bill's provisions should not be construed to
supplant any moneys that the state apportions to the county,
as specified.
6)Provides that reimbursement by the state shall not be made to
the county for loss in revenue due to a voter-approved local
assessment as specified.
7)Requires FTB to report to DMV, on or before January 1 of the
second year that follows a year in which an assessment was
imposed, an estimate of the total amount of the revenue loss
to the state for the prior year resulting from deductions
taken under the Personal Income Tax Law and the Corporation
Tax Law for taxes paid or incurred as a result of the bill's
provisions.
8)States that this act shall be known, and cited, as the Local
Assessment Act.
9)Defines several terms related to the bill's provisions.
EXISTING LAW :
1)Imposes a vehicle license fee (VLF), in lieu of a personal
property tax on California motor vehicles, based on the
taxable value of the vehicle.
2)Increased, temporarily, the VLF tax rate from 0.65% to 1.15%
of the value of a vehicle, which is set to expire on June 30,
2011.
3)Prohibits a local government or district from imposing any
special tax unless and until the special tax is submitted to
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the local government or district electorate and approved by a
two-thirds vote of the voters voting in an election on the
issue.
4)Prohibits a local government or district from imposing any
general tax unless and until such general tax is submitted to
the local government or district electorate and approved by a
majority vote of the voters voting in an election on the
issue.
FISCAL EFFECT : According to the Senate Appropriations Committee,
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 approved an assessment of 2%, annual local
revenue gains would be approximately $68 million and the
estimated annual tax revenue loss in the first year would be
approximately $3.8 million, and would be reimbursed to the
General Fund in the following year from collected revenues.
COMMENTS :
1)Existing state law imposes a VLF, 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 1.15% of the value of a vehicle,
but historically the rate has been 2% of value. Until May 19,
2009, the rate was 0.65%, after the passage of AB 3XXX (Evans,
2009) temporarily increased the VLF rate to 1.15% and
dedicated revenue from the portion of the increase from 0.65%
to 1% to the state General Fund and revenue from the
additional increase of 0.15% to specific local public safety
programs. AB 3XXX (Evans, 2009) VLF rate increase became
effective for vehicle registrations on May 19, 2009, and
expires on June 30, 2011, unless the Legislature extends the
tax.
For the taxpayer, VLF is deductible on both state and federal
income taxes.
2)This bill, sponsored by the San Francisco Chamber of Commerce,
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authorizes the board of supervisors of any county, including
the city and county of San Francisco, by a two-thirds vote, to
adopt an ordinance to place before the voters a measure to
levy a local assessment for general revenue purposes. This
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. The bill requires the ordinance proposing the
assessment to be submitted to the electorate of the county and
approved by a majority of those voting.
This bill specifies that the assessment rate shall be equal to
the difference between the historical 2% state VLF rate and
the current state VLF rate. For example, when this bill takes
effect, assuming that taxes have not been extended, this would
allow a county to impose a local assessment rate of 1.35% on
the depreciated value of a county's residents' vehicles (2%
minus the state VLF of .65%). The resulting total VLF imposed
on residents of counties adopting the assessment would be 2%
(.65% to the state, plus 1.35% to the county). The bill
provides for the local assessment to adjust so that county
residents would never pay more than a maximum 2% rate.
This bill requires any county imposing an assessment to
contract with DMV to collect and administer the fee and to pay
DMV for its initial setup and programming costs. DMV must
collect the local assessment, report to FTB and transmit the
revenues to the counties.
The bill specifies that any revenue generated by the local VLF
shall not supplant any moneys that the state appropriates or
apportions to the county.
3)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. The author
notes that much of this revenue was lost when Governor
Schwarzenegger signed an executive order in 2003 that reduced
the VLF to the 0.65 % rate.
4)A substantially similar bill, SB 10 (Leno, 2009), died on the
Assembly Floor. AB 799 (Leno, 2005) and AB 1590 (Leno, 2007)
would have applied only to the city and county of San
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Francisco. AB 799 was vetoed by Governor Schwarzenegger.
5)Support arguments: Supporters argue that this bill grants the
people of each county the right to determine whether to levy a
fee upon themselves to fund vital services. Additionally,
this bill gives counties a viable alternative to cutting
services at a time when new funding is scarce.
Opposition arguments: The California New Car Dealers
Association (CNCDA) asserts that California motorists are
already overburdened with hidden vehicle fees. CNCDA is
concerned that the bill may result in 58 different rates for
each county, making implementation difficult.
6)This bill is double-referred to the Revenue and Taxation
Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
San Francisco Chamber of Commerce �SPONSOR]
California State Association of Counties
California Tax Reform Association
City and County of San Francisco
Glendale City Employees Association
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
Opposition
Alliance of Automobile Manufacturers
Automobile Club of Southern California
California Chamber of Commerce
California New Car Dealers Association
California-Nevada Conference of Operating Engineers
California State Automobile Association
CalTax
Howard Jarvis Taxpayers Association
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
SB 223
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