BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 1324 HEARING: 6/18/14
AUTHOR: Skinner FISCAL: No
VERSION: 6/11/14 TAX LEVY: No
CONSULTANT: Bouaziz
TRANSACTIONS AND USE TAXES: CITY OF EL CERRITO AND THE
COUNTY OF CONTRA COSTA
Allows the City of El Cerrito and Contra Costa County to
adopt an ordinance proposing the imposition of a
transactions and use tax that exceeds the 2% statutory
limitation.
Background and Existing Law
Sales Tax
The state sales and use tax rate is 7.50% as detailed below
and is generally imposed on all tangible personal property
unless specifically exempt. Cities and Counties may
increase the sales and use tax rate up to 2% as a
transactions and use tax for either specific or general
purposes with a vote of the people.
-------------------------------------------------------------
| | | |
| Rate | Jurisdiction | Purpose/Authority |
| | | |
|-------+--------------------+--------------------------------|
| | | |
|3.9375%|State (General |State general purposes |
| |Fund) | |
| | | |
|-------+--------------------+--------------------------------|
| | | |
|1.0625%|Local Revenue Fund |Realignment of local public |
| |2011 |safety services |
| | | |
| | | |
| | | |
AB 1324 -- 06/11/14 -- Page 2
|-------+--------------------+--------------------------------|
| | | |
| 0.25% |State (Fiscal |Repayment of the Economic |
| |Recovery Fund) |Recovery Bonds |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.25% |State (Education |Schools and community college |
| |Protection Account) |funding |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local |Local governments to fund |
| |Revenue Fund) |health and welfare programs |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 0.50% |State (Local Public |Local governments to fund |
| |Safety Fund) |public safety services |
| | | |
|-------+--------------------+--------------------------------|
| | | |
| 1.00% |Local (City/County) |City and county general |
| | |operations. Dedicated to county |
| | |transportation purposes |
| |0.75% City and | |
| |County | |
| | | |
| |0.25% County | |
|-------+--------------------+--------------------------------|
| | | |
| 7.50% |Total Statewide | |
| |Rate | |
| | | |
-------------------------------------------------------------
Transactions & Use Tax
Existing law allows cities and counties to impose
additional sales and use taxes, called transactions and use
taxes, up to a combined 2% rate, with voter approval. The
tax must be imposed in increments of 0.125%.
Beginning April 1, 2014, there will be 178 local
jurisdictions (city, county, and special purpose entity)
imposing a district tax for general or specific purposes.
AB 1324 -- 06/11/14 -- Page 3
Of the 178 jurisdictions, 44 are county-imposed taxes and
134 are city-imposed taxes.
Currently, the district tax rates vary from 0.10 percent to
1 percent. The combined state, local and district tax
rates range from 7.625 to 9.50 percent, with the exception
of the cities of La Mirada, Pico Rivera, and South Gate
(10%) in Los Angeles County.
Proposed Law
Assembly Bill 1324 allows the City of El Cerrito and Contra
Costa County to adopt an ordinance proposing the imposition
of a transactions and use tax for the support of citywide
and countywide programs and services, respectively, at a
rate of no more than 0.50% that, in combination with other
specified taxes, exceeds the 2% statutory limitation.
AB 1324 requires counties to meet the following criteria
before imposing the tax:
1. The ordinance proposing the transactions and use
tax must be adopted in accordance with the applicable
voting approval requirement;
2. The ordinance must be submitted to the electorate
and be approved by the voters pursuant to the
California Constitution, Article XIIIC on or after
November 4, 2014 and before January 1, 2022; and,
3. The proposed tax must conform to current law and is
imposed on or after January 1, 2015.
AB 1324 finds and declares that a special law is necessary
because of the unique fiscal pressures experienced in the
City of El Cerrito and the County of Contra Costa in
providing public services.
State Revenue Impact
None
AB 1324 -- 06/11/14 -- Page 4
Comments
1. Purpose of the bill . According to the author, "The
City of El Cerrito was hit particularly hard by the
recession and the local economy is still struggling to
recover. As a result, local property values have declined.
The sluggish economy, diminished revenues from reduced
property assessments, the loss of redevelopment, store
relocations, and other factors are forcing the city to
reduce services. The County of Contra Costa faces
comparable financial struggles. AB 1324 allows the citizens
of El Cerrito and Contra Costa to separately vote on a
sales tax increase in order to fund the level of service
they desire from their local governments."
2. Existing cap . SB 566, (Scott, 2003) imposed the
uniform 2% cap for both cities and counties, in response to
at least five bills a year seeking to impose the tax. The
cap set an upper limit on the local rate, as California's
sales and use tax rate is very high. AB 2321 (Feuer, 2008)
expanded the cap for Los Angeles, AB 1086 (Wieckowski,
2011) expanded the cap for Alameda with a sunset, and AB
210 (Wieckowski, 2012) extended the cap for Alameda and
allowed Contra Costa to adopt a similar ordinance. The
Committee may wish to consider expanding the overall limit
instead of the piecemeal approach offered in this bill.
Assembly Actions
Assembly Transportation 10-5
Assembly Local Government6-2
Assembly Appropriations 12-5
Assembly Floor 46-24
Support and Opposition (06/12/14)
Support : City of El Cerrito; City of El Cerrito City
Manager Scott Hanin; Contra Costa County Board of
Supervisors; El Cerrito Fire Department.
Opposition : California Taxpayers Association; Howard
AB 1324 -- 06/11/14 -- Page 5
Jarvis Taxpayers Association.