BILL ANALYSIS �
SB 223
Page 1
SENATE THIRD READING
SB 223 (Leno)
As Amended August 31, 2011
Majority vote
SENATE VOTE :23-15
LOCAL GOVERNMENT 6-3 REVENUE & TAXATION 5-3
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|Ayes:|Skinner, Bradford, |Ayes:|Perea, Beall, Charles |
| |Campos, Davis, Gordon, | |Calderon, Cedillo, Gordon |
| |Hueso | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Smyth, Knight, Norby |Nays:|Donnelly, Harkey, |
| | | |Nestande |
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APPROPRIATIONS 11-6
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|Ayes:|Fuentes, Blumenfield, | | |
| |Bradford, Charles | | |
| |Calderon, Campos, Davis, | | |
| |Hall, Hill, Lara, | | |
| |Mitchell, Solorio | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Harkey, Donnelly, Gatto, | | |
| |Nielsen, Norby, Wagner | | |
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SUMMARY : Enacts the Local Assessment Act, which authorizes the
City and County of San Francisco (City and County) to place on
the ballot a measure to impose an additional assessment on
vehicles owned by residents of that City and County.
Specifically, this bill :
1)Allows the board of supervisors of the City and County, by
ordinance, to 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:
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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 City and 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.
d) The ordinance proposing the assessment does not create
different classes of vehicles (whether by type, size,
passenger capacity, value or cost, fuel consumption or any
other characteristic) for differential taxation (whether by
rate, method, assessment ratio, or any other means), except
for specified vehicle license fee exemptions contained in
current law.
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 City and County to operate
upon the public highways 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
assessment at a rate that equals the difference between the
following two rates:
i) 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:
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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; or,
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 City
and 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
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 City and 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;
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ii) A provision specifying the manner in which refunds
as incorporated in the voter-approved local assessment
ordinance will be made and administered; and,
iii) A provision that requires the City and 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 City and 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
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 City and 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.
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5)Provides that the bill's provisions should not be construed to
supplant any moneys that the state apportions to the City and
County, as specified.
6)Provides that reimbursement by the state shall not be made to
the City and 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, and annually thereafter, 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.
10)States that the Legislature finds and declares that a special
law is necessary because numerous groups in the City and
County have requested that authorization be granted for such
an assessment in that City and County.
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)Increases, temporarily, the VLF tax rate from 0.65% to 1.15%
of the value of a vehicle, which expired 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
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.
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FISCAL EFFECT : According to the Assembly Appropriations
Committee, DMV will incur approximately $500,000 initially to
set up the fee collection, with ongoing costs of $100,000
annually. These will be reimbursed from the fee proceeds. FTB
will incur some costs which are expected to be minor and
absorbable.
Because the fees paid are deductible from income taxes, there
will be a state revenue loss of approximately $3 million, which
will be paid back from the fee collections in the subsequent
year, assuming the tax is set at its maximum rate of 1.35%. A
net city and county rate of 1.35% will produce approximately $65
million for the City and County of San Francisco. This estimate
is based on a forecast by the Department of Finances of an
estimated gross value of automobiles in California of $340
billion and recent DMV figures on the proportion of car
registrations in San Francisco.
COMMENTS : 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. For the
taxpayer, VLF is deductible on both state and federal income
taxes.
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%, but after the passage of AB 3 X3
(Evans) of 2009, the rate temporarily increased 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.
This bill, sponsored by the San Francisco Chamber of Commerce,
authorizes the board of supervisors of 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 City and County of San Francisco and approved
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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 the City and 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 the City and County 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 the City and County 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 City and County.
According to the author, 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.
The most recent amendments remove the opposition of the Alliance
of Automobile Manufacturers. These amendments specify that the
ordinance proposing the local assessment cannot result in
differential taxation by creating different classes of vehicles
(whether by type, size, passenger capacity, value or cost, fuel
consumption, or any other characteristic), thereby ensuring a
uniform rate is applicable to specified private passenger
vehicles.
A substantially similar bill, SB 10 (Leno) of 2009, died on the
Assembly Floor. AB 799 (Leno) of 2005 and AB 1590 (Leno) of
2007, would have applied only to the City and County of San
Francisco. AB 799 was vetoed by Governor Schwarzenegger and AB
1590 failed to move out of the Senate Revenue and Taxation
Committee.
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Support arguments: Supporters argue that this bill grants the
people of the City and County of San Francisco the right to
determine whether to levy a fee upon themselves to fund vital
services. Additionally, this bill gives the City and County 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.
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958 FN: 0002419