BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1324|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: AB 1324
Author: Skinner (D), et al.
Amended: 8/7/14 in Senate
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 5-2, 6/18/14
AYES: Wolk, Beall, DeSaulnier, Hernandez, Liu
NOES: Knight, Walters
ASSEMBLY FLOOR : Not relevant
SUBJECT : Transactions and use taxes: City of El Cerrito:
County of Contra Costa
SOURCE : City of El Cerrito
DIGEST : This bill allows the City of El Cerrito to adopt an
ordinance proposing the imposition of a transactions and use tax
that exceeds the 2% statutory limitation.
Senate Floor Amendments of 8/7/14 remove Contra Costa County
from the bill.
Senate Floor Amendments of 6/30/14 are technical, deleting
incorrect cross-references and replacing them with correct
cross-references.
ANALYSIS : 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
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must be imposed in increments of 0.125%.
This bill:
1.Allows the City of El Cerrito 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.
2.Requires counties to meet the following criteria before
imposing the tax:
A. The ordinance proposing the transactions and use tax
must be adopted in accordance with the applicable voting
approval requirement;
B. 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
C. The proposed tax must conform to current law and is
imposed on or after January 1, 2015.
1.Finds and declares that a special law is necessary because of
the unique fiscal pressures experienced in the City of El
Cerrito in providing public services.
Comments
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. Of the 178 jurisdictions,
44 are county-imposed taxes and 134 are city-imposed taxes.
Currently, the district tax rates vary from 0.10% to 1%. The
combined state, local and district tax rates range from 7.625 to
9.50%, with the exception of the cities of La Mirada, Pico
Rivera, and South Gate (10%) in Los Angeles County.
Prior Legislation
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SB 566, (Scott, Chapter 709, Statutes of 2003) imposed the
uniform 2% cap for both cities and counties. AB 2321 (Feuer,
Chapter 302, Statutes of 2008) expanded the cap for Los Angeles,
AB 1086 (Wieckowski, Chapter 327, Statutes of 2011) expanded the
cap for Alameda with a sunset. AB 210 (Wieckowski, Chapter 508,
Statutes of 2012) extended the cap for Alameda and allowed
Contra Costa to adopt a similar ordinance.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 8/7/14)
City of El Cerrito (source)
City of El Cerrito, City Manager Scott Hanin
El Cerrito Fire Department
El Cerrito Police Department
El Cerrito Public Works Department
OPPOSITION : (Verified 8/7/14)
California Taxpayers Association
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT : 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. In the wake of this news,
the citizens of El Cerrito made it known that they want to pay
to keep city services at their current levels. Polling on the
proposal to keep city services at their current levels indicates
it is far more popular than reducing city services.
Allowing local governments to ask voters to approve increases in
sales taxes above local limits is common, and was done as
recently as 2013 (AB 210, Wieckowski). Ab 1324 will allow the
voters of El Cerrito to determine the level of service they
desire from their local government.
ARGUMENTS IN OPPOSITION : The California Taxpayers Association
states, "El Cerrito currently levies two district taxes, a 0.5%
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tax for general purposes, and another 0.5% tax for street
improvements. Authorizing another 0.5% tax under this bill,
along with another countywide tax, would put El Cerrito's tax
rate at 10.50%.
"Currently, California has the highest sales and use tax rate in
the country, with the state rate of 7.5% and the authorization
of local governments to add additional sales and use taxes,
caped at a combined rate of 2%.
"AB 1324 sets a dangerous precedent that would lead to
additional sales and use taxes to be imposed that further bypass
the 2% cap. Limits on taxes exist for a reason. If local
governments become exempt from the limits, the limits become
meaningless. Under existing law, if the Legislature determines
that the 2% cap is too low, then the Legislature may raise the
limit of all local governments in the state. However, unless
the legislature decides to raise the cap statewide, local
governments should not be given special permission to exceed the
limit."
AB:e 8/8/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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