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California State Association of Counties

CSAC Bulletin Article

Government Finance and Operations 05/06/2011

May 6, 2011 Jean Kinney Hurst Geoffrey Neill

Local Taxes

SB 653 (Steinberg) – Support
As Amended on April 27, 2011

SB 653, by Senate President pro Tem Darrell Steinberg, would grants counties new taxing authority within limits set by the Constitution.

SB 653 would allow communities that are willing to pay more money for local services to do so, and do so with a revenue source that is appropriate for those communities, without forcing the same of residents in other areas. This is true local control, which counties support.

Specifically, SB 653 would allow counties and school districts to impose the following taxes: personal income, transactions and use, vehicle license fees, oil severance, and excise taxes on products such as cigarettes, alcohol, and sweetened drinks.

The Senate Governance and Finance Committee passed SB 653 on a party-line vote, with one member not voting, at its hearing on Wednesday, May 4. The Senate Appropriations Committee will consider it on Monday, May 16.

SB 223 (Leno) – Support
As Introduced on February 9, 2011

SB 223, by Senator Mark Leno, would authorize each county to place a measure before voters to impose an assessment on vehicles owned by that county’s residents.

Like SB 653 above, SB 223 would allow communities that are willing to pay more money for local services to do so, without requiring the same of residents in other areas. CSAC supports local control; counties believe that each community should be able to decide for itself what level of services its government provides and the appropriate method of funding them.

The two percent vehicle license fee rate, which would be the maximum aggregate rate allowed under SB 223, is the rate Californians were accustomed to paying for decades. SB 223 goes beyond the current constitutional vote requirements by requiring a 2/3 vote of the Board of Supervisors to place such a measure before voters.

The Senate Appropriations Committee will consider SB 223 at its hearing next Monday, May 9.

Senior Tax Deferral Program

AB 1090 (Blumenfield) – Support
As Introduced on February 18, 2011

AB 1090, by Assembly Member Bob Blumenfield, would allow counties, at their option, to implement the County Deferred Property Tax Program for Senior Citizens and Disabled Citizens, allowing qualified property owners to defer their property taxes until the property changes hands. The state eliminated the statewide version of the program in the February 2009 budget agreement.

The state’s Senior Citizen’s Property Tax Postponement Program offered income-eligible seniors and the disabled the opportunity to postpone their property tax payments in exchange for full repayment with interest when their home changes owners. The program had a minimal start-up cost and in most years generated revenue for the state General Fund. Unfortunately, in large part due to the recent recession and housing crisis, the program failed to pay for itself in 2007-08 and 2008-09, making it a target for elimination given the state’s budget crisis.

CSAC, along with county assessors, auditor-controllers, and treasurer-tax collectors, has worked with Assembly Member Blumenfield, the State Controller’s Office, and the State Treasurer’s Office to improve the program and ensure it is fully self-funded. AB 1090 would even allow counties to retroactively defer taxes back to the elimination of the statewide program.

Some have raised concerns about the priority lien status of the deferred property taxes. Counties strongly endorse the priority lien as a long-standing practice for collecting local taxes and assessments. The tax deferral program authorizes deferral and later payment of property taxes, thus the appropriate placement of the lien is first lien status.

The Assembly Revenue and Taxation Committee passed AB 1090 at its hearing on May 2. The vote was along party lines, with one member of each party not voting. The bill now moves to the Assembly Floor.

Validating Acts

SBs 191, 192, and 193 (Committee on Governance and Finance – Support
As Amended on May 2, 2011

SBs 191, 192, and 193, by the Senate Governance and Finance Committee, would retroactively cure the minor errors and omissions that public officials make throughout the year. In turn, this will give investors confidence in public agencies’ securities and therefore lead to lower interest rates for state and local bonds. They do not correct fraud, corruption, or unconstitutional acts. These “validating acts” are traditionally noncontroversial and receive “aye” votes from all legislators, since with their passage everyone wins.

However, when Senator Wolk presented the validating acts last Wednesday in the Assembly Local Government Committee, Vice Chair Alejo asked for amendments to all three bills. Mr. Alejo said that he was concerned about the actions taken by some redevelopment agencies in recent months in reaction to the Governor’s proposal to end redevelopment agencies. He worried that the validating acts might be used inappropriately to attempt to protect questionable asset transfers and interagency borrowing. Mr. Alejo’s amendments removed redevelopment agencies from the bills’ protections. The Assembly Local Government Committee adopted Mr. Alejo’s amendments on a 7-0 vote. In reaction, the California Redevelopment Agency withdrew its earlier support for the three bills.

The Assembly Local Government will consider these three bills as amended at its hearing next Wednesday, May 11.

Tax Exemptions

SB 516 (Correa) – Oppose Unless Amended
As Introduced on February 17, 2011

SB 516, by Senator Lou Correa, would discount the value of a trade-in motorcycle from the sales price of a new motorcycle when calculating sales tax. The bill would exempt the state from reimbursing local agencies for their lost revenue.

Unilaterally using county revenue to favor these purchases during times of such fiscal stress seems ill-considered at best. If favoring these purchases is an issue of statewide concern, as passing this bill would indicate, then the state should be willing to use statewide revenues to reimburse counties for their losses, as provided by statute.

The Senate Governance and Finance Committee will consider SB 516 at its hearing next Wednesday, May 11.

SB 686 (Padilla) – Oppose Unless Amended
As Introduced on February 18, 2011

SB 686, by Senator Alex Padilla, would exempt from sales taxes property purchased for use in biotechnology manufacturing. It would exempt the state from reimbursing local agencies for their lost revenue.

Again, unilaterally using county revenue to favor these purchases during times of such fiscal stress seems ill-considered. If favoring these purchases is an issue of statewide concern, the state should be willing to use statewide revenues to reimburse counties for their losses, as provided by statute.

Over the past three years, counties have laid off thousands of employees, furloughed many more, and eliminated services, despite growing needs in safety net services, all in response to historic declines in their major revenue sources. To, at the same time, further erode county revenues with unreimbursed exemptions such as the one contemplated in SB 686 adds insult to injury.

The Senate Governance and Finance Committee will consider SB 516 at its hearing next Wednesday, May 11.

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CSAC Bulletin Article
May 6, 2011 Jean Kinney Hurst Geoffrey Neill

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