BILL ANALYSIS �
AB 2119
Page 1
Date of Hearing: April 9, 3014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 2119 (Stone) - As Introduced: February 20, 2014
SUBJECT : Local taxes: transactions and use taxes.
SUMMARY : Authorizes a county board of supervisors to levy,
increase, or extend a transactions and use tax, for general or
specific purposes, within the unincorporated area of the county.
Specifically, this bill :
1)Authorizes a county board of supervisors to levy, increase, or
extend a transactions and use tax for general or specific
purposes, within the unincorporated area of the county, as
specified.
2)Requires the revenues derived from the imposition of a
transactions and use tax, for general or specific purposes, to
only be used within the area for which the tax was approved by
the qualified voters.
EXISTING LAW :
1)Authorizes cities and counties to impose a local sales and use
tax.
2)Authorizes cities and counties to impose a transactions and
use taxes.
3)Authorizes a county board of supervisors to levy, increase, or
extend a transactions and use tax for general purposes at a
rate of 0.125% or a multiple thereof. Requires an ordinance
proposing the tax to be approved by a two-thirds vote of the
board of supervisors and the tax to be approved by a majority
of qualified voters.
4)Authorizes a county board of supervisors to levy, increase, or
extend a transactions and use tax for specific purposes at a
rate of 0.125%, or a multiple thereof. Requires an ordinance
proposing the tax to be approved by a two-thirds vote of the
board of supervisors, and the tax to be approved by a
two-thirds vote of the qualified voters. Requires the
ordinance to include an expenditure plan describing the
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specific projects for which the revenues from the tax may be
expended.
5)Prohibits, in any county, the combined rate of all taxes
imposed in accordance with Transactions and Use Tax Law from
exceeding 2 %.
FISCAL EFFECT : None
COMMENTS :
1)Purpose of this bill . This bill authorizes a county board of
supervisors to levy, increase, or extend a transactions and
use tax within the unincorporated area of the county for
specific or general purposes. This bill is author-sponsored.
2)Author's statement . According to the author, "In many
counties in California, half or more of the county is an
unincorporated area, as opposed to incorporated cities,
marking those counties responsible for a large amount of
infrastructure. This bill will allow counties to introduce a
sales tax measure, the revenues of which would be applied, to
unincorporated areas, spent on the infrastructure of those
unincorporated areas, and voted on by the qualified voters of
those areas."
3)Transactions and use taxes . Transactions and use taxes are
taxes imposed on the total retail price of any tangible
personal property and the use or storage of such property when
sales tax is not paid. These types of taxes may be levied as
general taxes, which are unrestricted, or special taxes, which
are restricted for a specified use. The Transactions and Use
Tax law authorizes the adoption of local add-on rates to the
combined state and local sales tax rate. The law has been
amended multiple times to authorize specific cities, counties,
special districts and county transportation authorities to
impose a transactions and use tax, if voters approve the tax.
Prior to 2003, cities lacked the ability to place transactions
and use taxes before their voters without first obtaining
approval by the Legislature to bring an ordinance before the
city council, and, if approved at the council level, to the
voters. This was remedied by SB 566 (Scott), Chapter 709,
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Statutes of 2003. SB 566 also contained provisions to
increase a county's transactions and use tax cap because of
the possibility that certain counties were going to run out of
room under their caps if cities within those counties approved
transactions and use taxes.
Existing state law authorizes cities and counties to impose
transactions and use taxes in 0.125% increments in addition to
the state's 7. 5% sales tax provided that the combined rate in
the county does not exceed 2%. This bill does not make any
changes to those increments, cap, or the voter thresholds for
specific or general purpose transaction and use taxes in
existing law.
According to the Board of Equalization, beginning April 1,
2014 there will be 178 local jurisdictions (city, county, and
special purpose entity) imposing a transactions and use tax
for general or specific purposes. Of the 178 jurisdictions,
44 are county-imposed taxes and 134 are city-imposed taxes.
Of the 44 county-imposed taxes, 30 are imposed for
transportation purposes.
4)Other taxes imposed in unincorporated areas . Current law
authorizes counties to levy several types of taxes in the
unincorporated area of county including a transient occupancy
tax and a business license tax. Additionally, in 1990, the
Legislature granted county boards of supervisors the authority
to levy a utility users tax (UUT) on the consumption of
electricity, gas, water, sewer, telephone, telegraph, and
cable television services in the unincorporated area of the
county. However, only Alameda, Los Angeles, and Sacramento
Counties levy a UUT using this statute. In November 2008,
voters in the unincorporated area of Los Angeles County
approved Measure U to impose a UUT in the unincorporated area
of the County. In June 2008, voters county-wide in Alameda
County approved Measure F to extend a UUT in the
unincorporated area of the County. The ballot pamphlet
stated, "Although the existing tax is collected only in the
unincorporated areas of the County, a county-wide vote on the
question of extending the amending tax is required by Article
XIIIC, Section 2, of the California Constitution and
Government Code sections 53722 and 53723."
Due to the inconsistent application of elections for a UUT
imposed on the unincorporated area of a county at the local
level, the Committee may wish to consider if the same result
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may occur for a transactions and use tax in the unincorporated
area of a county as granted by this bill.
5)Policy considerations .
a) Intent . This bill requires that the revenues derived
from the imposition of a transactions and use tax shall
only be used for the specific or general purposes within
the area where the tax was approved by the qualified
voters. Given the prior example in Alameda County and
possibility that a transactions and use tax could pass
county-wide without passage in all individual cities, this
language could be seen to create further confusion over
where the revenue could be spent. The Committee may wish
to ask the author to clarify this language in this bill to
better reflect the intent which is to ensure that the
transactions and use tax revenue can only be used in the
unincorporated area that voted to impose it.
b) Fiscalization of land use . The Committee may wish to
consider if the passage of this bill will have larger
implications on the development of retail in the
unincorporated areas of counties. Since the passage of
Proposition 13, the reduction of property tax revenues to
local governments has placed much greater importance on
sales tax revenue. Given the greater importance of sales
tax revenue as opposed to other priorities, like affordable
housing or open space and agricultural lands, the committee
may wish to consider if this bill further exacerbates the
fiscalization of land use. The Committee may wish to
consider if this bill could increase retail and commercial
development in the unincorporated counties and if that goes
against broader smart growth and sustainable long term land
use planning policies in the state.
c) Success of tax in unincorporated area . Several counties
have not reached the statutory 2% cap, therefore the
Committee may wish to consider why some of the counties in
support of this bill have not levied a county-wide
transactions and use tax, and if this bill will increase
their likelihood to succeed by placing a tax measure on the
ballot only in the unincorporated area of the county.
d) Other financial tools . The Committee may wish to ask
the author and supporters why existing financial tools
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available for infrastructure needs within a county are not
sufficient.
6)Arguments in support . Supporters argue that many counties in
California have half or more of their county in unincorporated
areas, making those counties responsible for a large amount of
infrastructure without much taxing authority. This bill will
give residents who live outside of cities the same rights to
levy their own sales tax as those who live in them.
7)Arguments in opposition . Opposition argues that a tax measure
approved by the board of supervisors should apply evenly to
all county residents and that this bill could also prove to be
cumbersome for businesses to administer as there would now be
different tax rates across the county.
8)Double-referral . This bill is double-referred to the Revenue
and Taxation Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
California State Association of Counties
Glendale City Employees Association
Monterey County
Organization of SMUD Employees
San Bernardino Public Employees Association
San Luis Obispo County Board of Supervisors
San Luis Obispo County Employees Association
Opposition
California Taxpayers Association
Howard Jarvis Taxpayers Association
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958