HomeMy WebLinkAbout2003-05-27 - AGENDA REPORTS - AB1221 SALES/USE TAX REVENUES (2)CONSENT CALENDAR
CITY OF SANTA CLARITA
AGENDA REPORT
City Manager Approval:
Item to be presented by:
Agenda Item:
DATE: May 27, 2003
SUBJECT: STATE LEGISLATION: AB 1221 (STEINBERG)
DEPARTMENT: City Manager
RECOMMENDED ACTION
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The City Council Legislative Committee recommends an "opposed" position to Assembly Bill 1221.
Statements of opposition will be transmitted to Assembly Member Steinberg, Santa Clarita's state
legislative delegation, appropriate legislative committees, Governor Davis and the League of Cities.
BACKGROUND
Assembly Bill 1221 (Steinberg -D -Sacramento) seeks to reduce by 50% city and county sales and use
tax revenues. Property tax revenue from counties' Educational Revenue Augmentation Fund (ERAF)
would be used to backfill sales tax revenues lost by cities and counties. The bill is a poor attempt to
address two issues of statewide concern: 1) reforming the dysfunctional state/local fiscal relationship;
and 2) promoting construction of housing throughout California. If AB 1221 is enacted into law, the
City of Santa Clarita will lose a critical revenue source with no guarantee of being made financially
whole by the State of California.
This bill enacts the California Balanced Communities Act of 2003. AB 1221 would reduce by 50% the
amount of sales tax which cities receive, from the current level of 1.0% to 0.5% effective July 1, 2004.
The measure further provides that beginning in Fiscal Year 2004/05, the amount of loss in sales tax to
an individual city shall be made up by the state in the form of increased receipt of property tax. The
bill is designed to be "revenue neutral" for cities during the first year. The growth rates of sales tax and
property tax will determine whether the swap of sales tax for property tax is beneficial to a particular
jurisdiction. In general, assuming no significant change in land use patterns, if sales tax revenue grows
faster than property tax revenue, then the state and counties will benefit at the expense of cities. If the
sales tax revenue grows slower than property tax revenue, cities will benefit at the expense of the state
and counties.
The bill is designed to equalize the fiscal impacts to cities of various land use decisions. Competition
for sales tax generators has caused many cities throughout California to discourage or ignore residential
construction in favor of retail and commercial developments which generate sales tax. This trend
concerns many state lawmakers and the California Department of Housing and Community
Development, who are seeking to increase housing stock throughout the state. AB 1221 seeks to create
an environment in which all developments are relatively equal in their ability to provide revenue to the
approving jurisdiction.
Cities throughout the state and the League of California Cities are concerned that enactment of AB
1221 will be financially devastating. Many cities, like Santa Clarita, are reliant upon a strong sales tax
base and have developed a community infrastructure which creates that financial base. The transfer of
sales tax money to the state in return for a promise of property tax money is unacceptable to such cities
in the absence of strong constitutional guarantees to maintain a reliable revenue stream. The Vehicle
License Fee experience, whereby a constitutionally guaranteed source of local revenue can have the
revenue stream reduced by the state, and then the state will not stand behind a guarantee to make cities
financially whole, creates precedent and suspicion at the local level that the state will not keep its
promises. In the current state of financial crisis, local governments cannot afford to give away a solid
revenue source, like sales tax, without an iron -clad guarantee from the state that cities will remain
financially whole to provide critical local services.
While most would agree with the bill's proponents that there needs to be reform of both California
housing law and institutions, and reform of the state/local fiscal relationship, AB 1221 clearly creates
no tangible benefit for cities. The City of Simi Valley has specifically requested that the City of Santa
Clarita join them in opposing this measure. Assembly Member Richman has indicated that he will not
support AB 1221. The City Council Legislative Committee has reviewed AB 1221 and recommends
an "opposed" position.
ALTERNATIVE ACTIONS
1. Support AB 1221.
2. Take no position on AB 1221 and direct staff to monitor the bill.
3. Suggest that the author consider amendments to the legislation.
4. Other action as determined by the City Council.
FISCAL IMPACT
Adoption of the recommended action will not result in any additional fiscal impact to the City of Santa
Clarita. Staff time associated with preparation of materials and conduct of communications with
Members of the California Legislature is included within the adopted 2002/03 City Budget.
ATTACHMENTS
Assembly Bill 1221 (as amended April 21, 2003)
AMENDED IN ASSEMBLY APRIL 21, 2003
AMENDED IN ASSEMBLY MARCH 25, 2003
'U'FORMA LEGISLATURE -2003-N REGULAR SESSION
ASSEMBLY BILL No. 1221
Introduced by Assembly Members Steinberg and Campbell
(Principal coauthor: Assembly Member Montanez)
(Coauthors: Assembly Members Leno, Lieber, MuUin, and
Wiggins)
February 21, 2003
An act to amend Section 29530 of the Government Code, to amend
Sections 6051, 6201, 7202, and 7203 of, and to add Section 97.68 to,
the Revenue and Taxation Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 1221, as amended, Steinberg. Taxatiou.
(1) Existing property tax law requires the county auditor, in each
fiscal year, to allocate property tax revenue to local jurisdictions in
accordance with specified formulas and procedures, and generally
requires that each jurisdiction be allocated an amount equal to the total
of the amount of revenue allocated to that jurisdiction in the prior fiscal
year, subject to certain modifications, and that jurisdiction's portion of
the annual tax increment, as defined. Existing property tax law also
reduces the amount'; of ad valorem property tax revenue that would
otherwise be annually allocated to the county, cities, and special
districts pursuant to these general allocation requirements by requiring,
for purposes of determining property tax revenue allocations in each
county for the 1992-93 and 1993-94 fiscal years, that the amounts of
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property
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property tax revenue deemed allocated in the prior fiscal year to the
county, cities, and special districts be reduced in accordance with
certain formulas. It requires that the revenues not allocated to the
county, cities, and special districts as a result of these reductions be
transferred to the Educational Revenue Augmentation Fund in that
county for allocation to school districts, community college districts,
and the county office of education.
The Bradley -Burns Uniform Local Sales and Use Tax Law
authorizes a county to impose a local sales and use tax at a rate of 11/4%,
and similarly authorizes a city, located within a county imposing such
a tax rate, to impose a local sales tax rate of I% that is credited against
the county rate. Existing law requires a city, county, or city and county
imposing a local sales and use tax pursuant to the Bradley -Burns
Uniform Local Sales and Use Tax Law to contract with the State Board
of Equalization to administer the local sales and use tax. Existing law
also requires the board, at least twice during each calendar quarter, to
transmit local sales and use tax revenue to the city, county, or city and
county in which the revenue was collected.
This bill would, on and after July 1, 2004, prohibit a city from
imposing a sales and use tax under the Bradley -Bums Uniform Local
Sales and Use Tax Law at a rate in excess of /z of I% and prohibit a
county from imposing sales and use tax under that law at a rate in excess
of 3/4 of M.
This bill would also, for the 2004-05 fiscal year, increase the amount
of ad valorem property tax revenue deemed allocated to a county or city
in the 2003-04 fiscal year by that county or city's reimbursement
amount, as defined, and correspondingly decrease the amount of ad
valorem property tax revenue allocated to a county's Educational
Revenue Augmentation Fund by the countywide adjustment amount, as
defined. This bill would also require the board to make certain
calculations and to notify county auditors of these calculations. This bill
would render inoperative other provisions of the bill if a specifiedie
statute is amended in a manner that reduces the amount of ad valorem
property tax revenue that is allocated to cities and counties under the
bill. This bill would also make conforming changes to corresponding
provisions. By imposing new duties upon local tax officials in the
annual allocation of ad valorem property tax revenues, this bill would
impose a state -mandated local program.
(2) The California Constitution requires for each fiscal year that a
minimum amount of money, computed under one of 3 formulas, be set
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aside from all state revenues for the support of school districts and
community college districts.
This bill would state the intent of the Legislature that the state
maintain its aggregate funding obligations under these provisions.
(3) The Sales and Use Tax Law provides for the levy of a state sales
and use tax upon the gross receipts from the sale in this state of, or the
storage, use, or other consumption in this state of, tangible personal
property.
This bill would, on and after July 1, 2004, increase the sales and use
tax rate under that law by 1/2 of 1 %.
This bill would result in a change in state taxes for the purpose of
increasing revenues within the meaning of Section 3 of Article XIII A
of the California Constitution, and thus would require for passage the
approval of 2/3 of the membership of each house of the Legislature.
(4) The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the state.
Statutory provisions establish procedures for making that
reimbursement, including the creation of a State Mandates Claims Fund
to pay the costs of mandates that do not exceed $1,000,000 statewide
and other procedures for claims whose statewide costs exceed
$1,000,000.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these statutory
provisions.
Vote: 2/3. Appropriation: no. Fiscal committee: yes. State -mandated
local program: yes.
The people of the State of California do enact as follows:
1 SECTION 1. This act shall be known and may be cited as the
2 California Balanced Communities Act of 2003.
3 SEC. 2. Section 29530 of the Government Code is amended
4 to read:
5 29530. (a) If the board of supervisors so agrees by contract
6 with the State Board of Equalization, the board of supervisors shall
7 establish a local transportation fund in the county treasury and
8 shall deposit in the fund all revenues transmitted to the county by
9 the State Board of Equalization under Section 7204 of the Revenue
10 and Taxation Code, which are derived from that portion of the
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I taxes imposed by the county at a rate in excess of 1 percent, and
2 on and after July 1, 2004, in excess of one-half of 1 percent,
3 pursuant to Part 1.5 (commencing with Section 7200) of Division
4 2 of that code, less an allocation of the cost of the services of the
5 State Board of Equalization in administering the sales and use tax
6 ordinance related to the rate in excess of 1 percent, and on and after
7 July 1, 2004, in excess of one-half of 1 percent, and of the Director
8 of Transportation and the Controller in administering the
9 responsibilities assigned to him or her in Chapter 4 (commencing
10 with Section 99200) of Part 11 of Division 10 of the Public
11 Utilities Code.
12 (b) Any interest or other income earned by investment or
13 otherwise of the local transportation fund shall accrue to and be a
14 part of the fund.
15 . SEC. 3. Section 97.68 is added to the Revenue and Taxation
16 Code, to read:
17 97.68. (a) Notwithstanding any other provision of this
18 chapter, for purposes of annual ad valorem property tax revenue
19 allocations in the 2004-05 fiscal year, all of the following apply:
20 (1) The total amount of ad valorem property tax revenue
21 deemed allocated to a county in the 2003-04 fiscal year shall be
22 increased by the county reimbursement amount.
23 (2) The total amount of ad valorem property tax revenue
24 deemed allocated to a city in the 2003-04 fiscal year shall be
25 increased by that city's city reimbursement amount.
26 (3) The total amount of ad valorem property tax revenue
27 deemed allocated to a county's Educational Revenue
28 Augmentation Fund in the 2003-04 fiscal year shall be reduced by
29 the countywide adjustment amount.
30 (b) For the 2004-05 fiscal year and each fiscal year thereafter,
31 ad valorem property tax revenue allocations made pursuant to
32 Section 96.1 shall fully incorporate the allocation adjustments
33 required by this section.
34 (c) Any reduction resulting from subdivision (a) in the amount
35 of ad valorem property tax revenue deposited in a county's
36 Educational Revenue Augmentation Fund shall be applied
37 exclusively to reduce the amount of revenue allocated from that
38 fund to school districts and county offices of education, and may
39 not be applied to reduce the amount of revenue allocated from that
40 fund to community college districts.
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1 (d) For purposes of this section:
2 (1) "City reimbursement amount" means the difference
3 between the following two amounts:
4 (A) The amount of revenue that a city would have received
5 pursuant to Section 7204 in the 2003-04 fiscal year if that city had
6 imposed a sales and use tax at a rate of one-half of 1 percent.
7 (B) The amount of revenue that the city received pursuant to
8 Section 7204 in the 2003-04 fiscal year.
9 (2) "County reimbursement amount" means the difference
10 between the following two amounts:
11 (A) The amount of revenue that the county would have
12 received pursuant to Section 7204 in the 200349 fiscal year if that
13 county had imposed a sales and use tax at a rate of three-quarters
14 of 1 percent.
15 (B) The amount of revenue that the county received pursuant
16 to Section 7204 in the 2003-04 fiscal year.
17 (3) "Countywide adjustment amount" means the combined
18 total amounts determined pursuant to paragraphs (2) and (3) for
19 the county and each city in that county.
20 (4) The board shall make the calculations specified in
21 paragraphs (1) and (2), and shall notify the auditor of each county
22 of these amounts on or before July 14, 2004.
23 SEC. 4. Section 6051 of the Revenue and Taxation Code is
24 amended to read:
25 6051. For the privilege of selling tangible personal property
26 at retail a tax is hereby imposed upon all retailers at the rate of 21/2
27 percent of the gross receipts of any retailer from the sale of all
28 tangible personal property sold at retail in this state on or after
29 August 1, 1933, and to and including June 30, 1935, and at the rate
30 of 3 percent thereafter, and at the rate of 21/2 percent on and after
31 July 1, 1943, and to and including June 30, 1949, and at the rate
32 of 3 percent on and after July 1, 1949, and to and including July
33 31, 1967, and at the rate of 4 percent on and after August 1, 1967,
34 and to and including June 30, 1972, and at the rate of 33/4 percent
35 on and after JulT, 1, 1972, and to and including June 30, 1973, and
36 at the rate of 4 /4 percent on and after July 1, 1973, and to and
37 including September 30, 1973, and at the rate of 33/4 percent on
38 and after October 1, 1973, and to and including March 31, 1974,
39 and at the rate of 43/4 percent to and including June 30, 2004, and
40 at the rate of 51/4 percent on and after July 1, 2004.
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1 SEC. 5. Section 6201 of the Revenue and Taxation Code is
2 amended to read:
3 6201. An excise tax is hereby imposed on the storage, use, or
4 other consumption in this state of tangible personal property
5 purchased from any retailer on or after July 1, 1935, for storage,
6 use, or other consumption in this state at the rate of 3 percent of the
7 sales price of the property, and at the rate of 21/2 percent on and
8 after July 1, 1943, and to and including June 30, 1949, and at the
9 rate of 3 percent on and after July 1, 1949, and to and including July
10 31, 1967, and at the rate of 4 percent on and after August 1, 1967,
11 and to and including June 30, 1972, and at the rate of 3 3/q percent
12 on and after July 1, 1972, and to and including June 30, 1973, and
13 at the rate of 43/4 percent on and after July 1, 1973, and to and
14 including September 30, 1973, and at the rate of 33/4 percent on
15 and after October 1, 1973, and to and including March 31, 1974,
16 and at the rate of 43/4 percent to and including June 30, 2004, and
17 at the rate of 51/4 percent on and after July 1, 2004.
18 SEC. 6. Section 7202 of the Revenue and Taxation Code is
19 amended to read:
20 7202. The sales tax portion of any sales and use tax ordinance
21 adopted under this part shall be imposed for the privilege of selling
22 tangible personal property at retail, and shall include provisions in
23 substance as follows:
24 (a) A provision imposing a tax for the privilege of selling
25 tangible personal property at retail upon every retailer in the
26 county at the rate of 11/4 percent, and on and after July 1, 2004,
27 three-quarters of 1 percent, of the gross receipts of the retailer from
28 the sale of all tangible personal property sold by that person at
29 retail in the county.
30 (b) provisions identical to those contained in Part 1
31 (commencing with Section 6001), insofar as they relate to sales
32 . taxes, except that the name of the county as the taxing agency shall
33 be substituted for that of the state and that an additional seller's
34 permit shall not be required if one has been or is issued to the seller
35 under Section 6067.
36 (c) A provision that all amendments subsequent to the effective
37 date of the enactment of Part 1 (commencing with Section 6001)
38 relating to sales tax and not inconsistent with this part, shall
39 automatically become a part of the sales tax ordinance of the
40 county.
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1 (d) A provision that the county shall contract prior to the
2 effective date of the county sales and use tax ordinances with the
3 State Board of Equalization to perform all functions incident to the
4 administration or operation of the sales and use tax ordinance of
5 the county. A*Y-sdek This contract shall contain a provision that
6 the county agrees to comply with the provisions of Article 11
7 (commencing with Section 29530) of Chapter 2 of Division 3 of
8 Title 3 of the Government Code.
9 (e) A provision that the ordinance may be made inoperative not
10 less than 60 days, but not earlier than the first day of the calendar
11 quarter, following the county's lack of compliance with Article 11
12 (commencing with Section 29530) of Chapter 2 of Division 3 of
13 Title 3 of the Government Code or following an increase by any
14 city within the county of the rate of its sales or use tax above the
15 rate in effect at the time the county ordinance was enacted.
16 (f) A provision that the amount subject to tax shall not include
17 the amount of any sales tax or use tax imposed by the State of
18 California upon a retailer or consumer.
19 (g) A provision that there is exempted from the sales tax 80
20 percent of the gross receipts from the sale of tangible personal
21 property, other than fuel or petroleum products, to operators of
22 aircraft to be used or consumed principally outside the county in
23 which the sale is made and directly and exclusively in the use of
24 the aircraft as common carriers of persons or property under the
25 authority of the laws of this state, the United States, or any foreign
26 government.
27 (h) A provision that any person subject to a sales and use tax
28 under the county ordinance shall be entitled to credit against the
29 payment of taxes due under that ordinance the amount of sales and
30 use tax due to any city in the county; provided, that the city sales
31 and use tax is levied under an ordinance including provisions in
32 substance as follows:
33 (1) A provision imposing a tax for the privilege of selling
34 tangible personal property at retail upon every retailer in the city
35 at the rate of 1 percent or less, and on and after July 1, 2004,
36 one-half of 1 percent or less, of the gross receipts of the retailer
37 from the sale of all tangible personal property sold by that person
38 at retail in the city and a use tax of 1 percent or less of purchase
39 price upon the storage, use or other consumption of tangible
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I personal property purchased from a retailer for storage, use or
2 consumption in the city.
3 (2) Provisions identical to those contained in Part 1
4 (commencing with Section 6001), insofar as they relate to sales
5 and use taxes, except that the name of the city as the taxing agency
6 shall be substituted for that of the state (but the name of the city
7 shall not be substituted for the word "state" in the phrase "retailer
8 engaged in business in this state" in Section 6203 nor in the
9 definition of that phrase in Section 6203) and that an additional
10 seller's permit shall not be required if one has been or is issued to
11 the seller under Section 6067.
12 (3) A provision that all amendments subsequent to the effective
13 date of the enactment of Part 1 (commencing with Section 6001)
14 relating to sales and use tax and not inconsistent with this part, shall
15 automatically become a part of the sales and use tax ordinance of
16 the city.
17 (4) A provision that the city shall contract prior to the effective
18 date of the city sales and use tax ordinance with the State Board of
19 Equalization to perform all functions incident to the
20 administration or operation of the sales and use tax ordinance of
21 the city which shall continue in effect so long as the county within
22 which the city is located has an operative sales and use tax
23 ordinance enacted pursuant to this part.
24 (5) A provision that the storage, use or other consumption of
25 tangible personal property, the gross receipts from the sale of
26 which has been subject to sales tax under a sales and use tax
27 ordinance enacted in accordance with this part by any city and
28 county, county, or city in this state, shall be exempt from the tax
29 due under this ordinance.
30 (6) A provision that the amount subject to tax shall not include
31 the amount of any sales tax or use tax imposed by the State of
32 California upon a retailer or consumer.
33 (7) A provision that there are exempted from the computation
34 of the amount of the sales tax the gross receipts from the sale of
35 tangible personal property to operators of aircraft to be used or
36 consumed principally outside the city in which the sale is made and
37 directly and exclusively in the use of the aircraft as common
38 carriers of persons or property under the authority of the laws of
39 this state, the United States, or any foreign government.
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1 (8) A provision that, in addition to the exemptions provided in
2 Sections 6366 and 6366.1, the storage, use, or other consumption
3 of tangible personal property purchased by operators of aircraft
4 and used or consumed by the operators directly and exclusively in
5 the use of the aircraft as common carriers of persons or property
6 for hire or compensation under a certificate of public convenience
7 and necessity issued pursuant to the laws of this state, the United
8 States, or any foreign government is exempt from the use tax.
9 SEC. 7. Section 7203 of the Revenue and Taxation Code is
10 amended to read:
11 7203. The use tax portion of any sales and use tax ordinance
12 adopted under this part shall impose a complementary tax upon the
13 storage, use or other consumption in the county of tangible
14 personal property purchased from any retailer for storage, use or
15 other consumption in the county. That tax shall be at the rate of 11/4
16 percent, and on and after July 1, 2004, three-quarters of 1 percent,
17 of the sales price of the property whose storage, use or other
18 consumption is subject to the tax and shall include:
19 (a) Provisions identical to the provisions contained in Part 1
20 (commencing with Section 6001), other than Section 6201 insofar
21 as those provisions relate to the use tax, except that the name of the
22 county as the taxing agency enacting the ordinance shall be
23 substituted for that of the state (but the name of the county shall
24 not be substituted for the word "state" in the phrase "retailer
25 engaged in business in this state" in Section 6203 nor in the
26 definition of that phrase in Section 6203).
27 (b) A provision that all amendments subsequent to the date of
28 seeh the ordinance to the provisions of the Revenue and Taxation
29 Code relating to the use tax and not inconsistent with this part shall
30 automatically become a part of the ordinance.
31 (c) A provision that the storage, use or other consumption of
32 tangible personal property, the gross receipts from the sale of
33 which has been subject to sales tax under a sales and use tax
34 ordinance enacted in accordance with this part by any city and
35 county, county, or city in this state, shall be exempt from the tax
36 due under this ordinance.
37 (d) A provision that the amount subject to tax shall not include
38 the amount of any sales tax or use tax imposed by the State of
39 California upon a retailer or consumer.
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1 (e) A provision that, in addition to the exemptions provided in
2 Sections 6366 and 6366.1, the storage, use, or other consumption
3 of tangible personal property, other than fuel or petroleum
4 products, purchased by operators of aircraft and used or consumed
5 by the operators directly and exclusively in the use of the aircraft
6 as common carriers of persons or property for hire or
7 compensation under a certificate of public convenience and
8 necessity issued pursuant to the laws of this state, the United States
9 or any foreign government is exempt from 80 percent of the use
10 tax.
11 SEC. 8. It is the intent of the Legislature in enacting this act
12 that the state maintain its aggregate funding obligations under
13 Section 8 of Article XVI of the California Constitution.
14 SEC. 9. If Section 97.68 of the Revenue and Taxation Code
15 is amended in a manner that results in a reduction in the amount
16 of ad valorem property tax revenue that is allocated to a city or
17 county pursuant to this act, Sections 2, 3, 4, 5, 6, 7, and 8 of this
18 act shall cease to be operative.
19 SEC. 10. Notwithstanding Section 17610 of the Government
20 Code, if the Commission on State Mandates determines that this
21 act contains costs mandated by the state, reimbursement to local
22 agencies and school districts for those costs shall be made pursuant
23 to Part 7 (commencing with Section 17500) of Division 4 of Title
24 2 of the Government Code. If the statewide cost of the claim for
25 reimbursement does not exceed one million dollars ($1,000,000),
26 reimbursement shall be made from the State Mandates Claims
27 Fund.
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