BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 223|
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VETO
Bill No: SB 223
Author: Leno (D), et al.
Amended: 8/31/11
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
SENATE FLOOR : 23-15, 06/01/11
AYES: Alquist, Calderon, Corbett, De Le�n, DeSaulnier,
Evans, Hancock, Hernandez, Kehoe, Leno, Lieu, Liu,
Lowenthal, Padilla, Pavley, Price, Rubio, Simitian,
Steinberg, Vargas, Wolk, Wright, Yee
NOES: Anderson, Berryhill, Blakeslee, Cannella, Correa,
Dutton, Fuller, Gaines, Harman, Huff, La Malfa, Runner,
Strickland, Walters, Wyland
NO VOTE RECORDED: Emmerson, Negrete McLeod
ASSEMBLY FLOOR : 44-30, 9/7/11 - See last page for vote
SENATE FLOOR : 22-15, 9/9/11
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AYES: Alquist, Calderon, Corbett, De Le�n, DeSaulnier,
Hancock, Hernandez, Kehoe, Leno, Lieu, Liu, Lowenthal,
Padilla, Pavley, Price, Rubio, Simitian, Steinberg,
Vargas, Wolk, Wright, Yee
NOES: Anderson, Berryhill, Blakeslee, Cannella, Correa,
Dutton, Emmerson, Fuller, Gaines, Harman, Huff, Runner,
Strickland, Walters, Wyland
NO VOTE RECORDED: Evans, La Malfa, Negrete McLeod
SUBJECT : Vehicle license fee: local assessment
SOURCE : Author
DIGEST : This bill authorizes the City and County of San
Francisco to place on the ballot a measure to impose an
additional assessment on vehicles owned by residents of
that county.
Assembly Amendments apply the bill only to the City and
County of San Francisco, and require the ordinance
proposing the assessment 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.
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
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
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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. 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:
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.
1. 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
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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:
2% of the market value of the vehicle or
trailer coach; and,
The rate, including any offset to that rate,
set forth in Vehicle License Fee Law for a vehicle
or trailer coach.
A. A provision that the rate established under the
provision described in #B is subject to both of the
following:
That the rate may not exceed 2% of the market
value of the vehicle or trailer coach; and,
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.
A. A provision that the assessment will begin to be
imposed as follows:
If the election in which the ordinance receives
voter approval occurs between January 1 and December
31, on January 1 following that election; or,
If the election in which the ordinance receives
voter approval occurs between July 1 and December
31, on July 1 following that election.
A. 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.
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B. 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.
C. A provision that requires the City and County to
contract with DMV, and requires the contract to
contain provisions in substance as follows:
A requirement that DMV perform all functions
incident to the administration and collection of the
voter-approved local assessment;
A provision specifying the manner in which
refunds as incorporated in the voter-approved local
assessment ordinance will be made and administered;
and,
A provision that requires the City and County
to pay DMV for the initial setup and programming
costs identified by DMV.
1. 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.
1. 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;
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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.
1. 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.
2. 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.
3. 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.
4. States that this act shall be known, and cited, as
the Local Assessment Act.
5. Defines several terms related to the bill's
provisions.
6. 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.
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Comments
Constitutionality . The California Constitution prohibits
any local government from imposing, extending, or
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 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
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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.
SUPPORT : (Unable to reverify - per Assembly Revenue and
Taxation
Committee analysis of 7/6/11)
San Francisco Chamber of Commerce (source)
California State Association of Counties
California Tax Reform Association
City and County of San Francisco
OPPOSITION : (Unable to reverify - per Assembly Revenue
and Taxation Committee analysis of 7/6/11)
Alliance of Automobile Manufacturers
California State Automobile Association
California New Car Dealers Association
California Taxpayers 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.
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
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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.
GOVERNOR'S VETO MESSAGE:
"I am returning Senate Bill 223 without my signature.
This bill permits the City and County of San Francisco
to enact a voter-approved local assessment on vehicles
registered to a San Francisco address.
Before we embark on a piecemeal approach for one city,
we should try to fashion a broader revenue solution to
our state's fiscal crisis."
ASSEMBLY FLOOR : 44-30, 9/7/11
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Blumenfield,
Bonilla, Bradford, Brownley, Butler, Charles Calderon,
Campos, Carter, Cedillo, Chesbro, Davis, Dickinson, Eng,
Feuer, Fong, Fuentes, Gordon, Hall, Hayashi, Roger
Hern�ndez, Hill, Hueso, Huffman, Lara, Bonnie Lowenthal,
Ma, Mendoza, Mitchell, Monning, Pan, Perea, Skinner,
Solorio, Swanson, Torres, Wieckowski, Williams, Yamada,
John A. P�rez
NOES: Achadjian, Bill Berryhill, Buchanan, Conway, Cook,
Donnelly, Fletcher, Beth Gaines, Garrick, Gatto, Grove,
Hagman, Halderman, Harkey, Huber, Jeffries, Jones,
Knight, Logue, Mansoor, Miller, Morrell, Nestande,
Nielsen, Norby, Olsen, Silva, Smyth, Valadao, Wagner
NO VOTE RECORDED: Block, Furutani, Galgiani, Gorell, V.
Manuel P�rez, Portantino
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JJA:nl 1/4/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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