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AGENDA TITLEff Adopt Resolution Opposing Assembly Bill 1221 (Steinberg and Campbell)
Regarding Property and Sales Tax Shifts
MEETING DATE: May 21, 2003
PREPARED BY- Deputy City Manager
RECOMMENDED ACTION That Council adopt a Resolution opposing Assembly Bill
1221 (Steinberg and Campbell).
BACKGROUND INFORMATION The following summary is provided by the League of
California Cities (LCC) regarding AB 1221:
"AB 1221 (Steinberg, Campbell) has been moved from the Assembly Appropriations Committee calendar
for May 14, 2001 The new hoaring date is likely to be either May 21 or 28. The bill is considered an
`p autornatic" candidate for the committee's "Suspense File" because of its fiscal impacts. The deadline for
the Appropriations Committee to report all bills (including those on the Suspense File) to the floor is May
30, 2003.
AB 122.1 swaps half of loci government sales tax revenues for an equal amount (dollar -for- dollarA of
property taxes, The authors' stated intent for the bill is to reduce the incentive for local governments to
chase sales tax dollars at the expense of other land uses.
The League remains opposed to the measure, unless amended to provide constitutional protection for
local government revenues. The bill has a number of other additional issues that also need to be
addresaod-"
The City of Lodi relies on sales tax and property tax to fund general services for the community. Sales
tax estimates for FY 03-04 are $8.7 million and property tax revenues are expected to be $6.4 million. A
preliminary analysis of the potential impact of AS 1221 on the City of Lodi indicates that the City would
lose an estimated $3 million over the next five years. in addition, AB 1221 shifts the local control of tax
revenues to the State with no constitutional guarantees against future such actions.
Attached for Council's information is a copy of the Current Bill Status and a copy of the Amended (April
21, 2003) version of AB 1221,
Funding, None Tha"n"i"l—kk yo
Jane Keeter
Dep ty City Manager
Attachments
APPROVED:
AB I Vlcounoorn,dlc 05/1
AB 1.221 Assembly Bill - StatLIS
CURRENT BILL STATUS
MEASURE : A,B. No. 1221
AUTHORS} } : Steinberg and Campbell. (Principal coauthor: Mantanez)
(Coauthors: Leno, Lieber, Mullin, and Wiggins)
TOPIC I Taxation.
HOUSE LOCATION : RSM
+LAST AMENDED DATE : 04/21/2003
TYPE 01w' BILL
Active
Non -Urgency
-Non-Appropriat ions
2/3 Vote Required
State -Mandated Local Program
Fiscal
Non -Tax Levy
LAST HIST, AC,r. DATE: 04/29/2003
LA2T HIST. PiC'I°10N From committee: Do pass, and re-refer to Com- on APPR
Re-referred. (Ayes 4. Noes 0.) (April 2 8).
COMM, LOCATTON : ASM APPROPRIATIONS
COMM, ACTION DATE : 05/09/2003
COMM. ACTION Set, first hearing. Hearing cancelled at the request of
author
TITLE I Au 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,
reltingt,,) taxat,,.on
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B 1221 Assembly Bill - AMENDED
BILL NUMBER: AS 12.21 AMENDED
BILL, TEXT
;AMENDED IN ASSEMBLY APRIL 21, 2003
AMENDED IN ASSEMBLY MARCH 25, 2003
LNTRODUC;ED BY Assembly Members Steinberg and Campbell
(Prince pat coauthor, Assembly Member Montanez)
(Coautluozs: Assembly- Members Lena, Lieber, Mullin, and
Wiggins)
FEBRUARY 21., 2003
An act to amend Section 29530 of the Government Code, to amend
Sections. 6051, 6201, 7262, and 7203 of, and to add Section 97.58 to,
the Revenue and Taxation Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 1221, as amended, Steinberg. Taxation.
,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
jurLsdiction's portion. of the annual tax increment, as defined.
Existing property tax law also reduces the amounts 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
1.993-94. fiscal years, that the amounts of 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 localsales 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 1% that, is credited
agal-nst 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, Ex.ist5.ng law also requires the board, at least twice during
each calendar quarter, to transmit local sales anduse tax revenue to
the city, county, or city and county in which the revenue was
collected.
This bili would, on and after July 1, 2004, prohibit a city from
:imposing a sales and rise tax under the Bradley -Burns Uniform Local
Sales and Use Tax Law at a rate in excess of 1/2 of 14 and prohibit a
county from imposing sales and use tax under that law at a rate in
excess of 3/4 of 1.%.
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
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AB 1221 Assembly Bill -ANIENDED
-.ertain uaiculatiolls and to notify county auditors of these
calcuiaLions. This bill would render inoperative other provisions of
he bill if a specified --&4a-te 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 fiiL.. 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
• minimum amount of money, computed under one of 3 formulas, be set
'de
•
a-, 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
sa._ es 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 11%.
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
Leg,4slature.
(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 -cars of mandates that do not exceed $1,000,000 statewide
and other piocedures 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:
SECTION 1. This act shall be known and may be cited as the
California Balanced Communities Act of 2003.
SEC. 2. Section 29530 of the Government Code is amended to read:
29530, fa) If the board of supervisors so agrees by contract with
the State Board of Equalization, the board of supervisors shall
establish a local transportation fund in the county treasury and
shall deposit in the fund all revenues transmitted to the county by
the State Board of Equalization tinder Section 7204 of the Revenue and
Taxation Code, which are derived from that portion of the taxes
imposed by the county at a rate in excess of 1 percent, and on and
after July 1, 2004, in excess of one-half of 1 percent, pursuant to
Part 1.5 (cammencing with Section 7200) of Division 2 of that code,
less an allocation of the cost of the services of the State Board of
Equalization in administering the sales and use tax ordinance related
to the rate in excess of 1 percent, and on and after July 1, 2004,
in excess of one-half of I percent, and of the Director of
Transportation and the Controller in administering the
responsibilities assigned to him or her in Chapter 4 (commencing with
Section 99200) of Part II of Division TO of the Public Utilities
code
(b) Any interest or other income earned by investment or otherwise
of the local transportation fund shall accrue to and be a part of
the fund.
SEC. 3. Section 97.68 is added to the Revenue and Taxation Code,
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AB 1221 ,assembly Bill - AMENDED
to :. e a a :
97.68. (a) Notwithstanding any other provision of this chapter,
for purposes of annual ad valorem property tax revenue allocations in
the 2004-05 fiscal year, all of the following apply:
ill The total amount of ad valorem property tax. revenue deemed
allocated to a county in the 2003-04 fiscal year shall be increased
by the county reimbursement amount.
(2) The total amount: of ad valorem property tax revenue deemed
allocated to a city in the 2003-04 fiscal year shall be increased by
that city's city rermsuwrsement amount,
iii The total amount of ad valorem property tax revenue deemed
allocated to a county's Educational Revenue Augmentation Fund in the
2003-04 fiscal year shall be reduced by the countywide adjustment
amount,
(b) For the 2004-05 fiscal year and each fiscal year thereafter,
ad valorem property tax revenue allocations made pursuant to Section
96.1 shall. fully ;incorporate the allocation adjustments required by
this section.
(c) Any reductionresulting from subdivision (a) in the amount of
ad -valorem property tax revenue deposited in a county's Educational
Revenue Augmentation Fund shall be applied exclusively to reduce the
amount of revenue allocated from that fund to school districts and
county offices of education, and may not be applied to reduce the
amount of revenue allocated from that fund to community college
districts.
(d) For purposes of this section:
(1) "City reimbursement amount" means the difference between the
following two amounts:
(A) The amount of revenue that a city would have received pursuant
to Section 7204 in the 2003-04 fiscal year if that city had imposed
a :ales and use tax at a rate of one-half of 1 percent.
(H) The amount of revenue that the city received pursuant to
Section 7204 in the 2003-04 fiscal year.
(2) "County .reimbursement amount" means the difference between the
following two. amounts:
(A) The amount of revenue that the county would have received
Pursuant . to Section 7204 in. the 2003-04 fiscal year if that county
had imposed a. sales and use tax at a rate of three-quarters of 1
percent..
(a) The amount of revenue that the county received pursuant to
Section 7204 in the 2003-04 fiscal vear.
(3) "Countywi.de adjustment amount" means the combined total
amounts determined pursuant to paragraphs (2) and (3) for the county
and each city in that county.
(rte) The board shall make the calculations specified in paragraphs
(1) and (2), and shall notify the auditor of each county of these
amounts onor before July 14, 2004.
SEC. 4, Section 6051 of the Revenue and Taxation Code is amended
to read:
6051. For the privilege of selling tangible personal property at
retail a tax is hereby imposed upon all retailers at the rate of 21/2
percent of the gross receipts of any retailer from the sale of all
tangible personal property sold at retail in this state on or after
August 1, 1933, and to and including June 30, 1935, and at the rate
of 3 percent thereafter, and at the rate of 21/2 percent on and after
July 1, 1943, and to and including June. 30, 1949, and at the rate of
3 percent on and after July 1, 1949, and to and including July 31,
1957, and at the rate of 4 percent on and. after August 1, 1967, and
to and lnciuding June 30, 1972, and at the rate of 33/4 percent on
and after truly 1, 1972, and to and including June 30, 1973, and at
the rate of 43/4 percent on and after, July 1, 1973, and to and
including September 30, 1973, and at the rate of 33/4 percent on and
after October 1, 1973, and to and including March 31, 1974, and at
the .ate of 43/4 percent +ro and including June 30, 2004, and at the
rate of 51,'4 percent on and after July 1, 2004,
SEC. 5, Section 6201 of the Revenue and Taxation Code is amended
to read:
5201. An excise tax is hereby imposed an the storage, use, or
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AB 1221 Assembly Bill - AMENDED
other consumption in this state of tangible personal. property
purchased from any retailer on or after July 1, 1935, for storage,
use, or other consumption in this state at the rate of 3 percent of
the sales price of the property, and at the rate of 21/2 percent on
and after July 1, 1943, and to and including June 30, 1949, and at
the rate of 3 percent on and after July 1, 1949, and to and including
July 31, 1967, and at the rate of 4 percent on and after August 1,
1967, and to and including June 30, 1972, and at the rate of 3 3/4
percent on and after July 1 1972, and to and including June 30,
1973, and at the rate of 43/4 percent on and after July 1, 1973, and
to and including September 30, 1973, and at the rate of 33/4 percent
on and. after October 1, 1973, and to and including March 31, 1974,
and at the rate of 43/4 percent to and including June 30, 2004, and
at the nate of 51'14 percent on and after July 1, 2004.
SEC. 6, Section 7202 of the Revenue and Taxation Code is amended
to read:
7202. The sales tax portion of any sales and use tax ordinance
adopted under this part shall be imposed for the privilege of selling
tangible personal property at retail, and shall include provisions
in substance as follows:
(a) A provision imposing a tax for the privilege of selling
tangible personal property at retail upon every retailer in the
county at the rate of 11/4 percent, and on and after July 1, 2004,
three-quarters of 1 percent, of the gross receipts of the retailer
from the sale of all tangible personal property sold by that person
at retail in the county,
(b) Provisions identical to those contained in Part 1 (commencing
with Section 6001), insofar as they relate to sales taxes, except
that the. name of the county as the taxing agency shall be substituted
for that of the state and that an additional seller's permit shall.
not be required if one has been or is .-issued to the seller under
Section 6067.
{c) A provision that all amendments subsequent to the effective
date of the enactment of part 1 (commencing with Section 6001)
rel.ati.ng to sales tax and not inconsistent with this part, shall
automatically become a part of the sales tax ordinance of the county.
(d) A provision that the county shall contract prior to the
effective date of the county sales and use tax ordinances with the
State Board of Equalization to perform all functions incident to the
administration or operation of the sales and use tax ordinance of the
county. 'This contract shall
contain a provision that the county agrees to comply with the
provisions of Article 11 (commencing with Section 29530) of Chapter 2
of Division 3 of Title 3 of the Government Code.
e) A provisionthat the ordinance may be made inoperative not
less than. 60 days, but not earlier than the first day of the calendar
quarter, following the county's lack of compliance with Article 11
(commencing with Section 29530) of Chapter 2 of Division 3 of Title 3
of the Government Code or following an increase by any city within
the county of the rate of its sales or use tax above the rate in
effect at the time the county ordinance was enacted.
(f) A provision that the amount subject to tax shall not include
the amount of any sales tax or use tax imposed by the State of
California upon a retailer or consumer.
(g) A provision that there is exempted from the sales tax 80
percent of the gross receipts from the sale of tangible personal
property, other than fuel or petroleum products, to operators of
aircraft to be used or consumed principally outside the county in
which the sale is made and directly and exclusively in the use of the
aircraft as common carriers of persons or property under the
authority of the laws of this state, the United States, or any
foreign government.
(h) A provision that any person subject- to a sales and use tax
under the county ordinance shall be entitled to credit against the
payment of taxes due under that ordinance the amount of sales and use
tax due to any city in the county; provided, that the city sales and
use tax is levied under an ordinance including provisions in
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AB 1221 Assembly Bill - AMENDED
substance as follows:
(1) A provision imposing a tax for the privilege of selling
tangible. personal property at retail upon every retailer in the city
at the rate of. 1. percent or less, and on and after July 1, 2004,
ane -half of 1 percent or less, of the gross receipts of the retailer
from the sale of all tangible personal property sold by that person
at retail in the city and a use tax of 1 percent or less of purchase
price upon the storage, use or other consumption of tangible personal
property purchased from a retailer for storage, use or consumption
in the city.
i2) Provisions identical to those contained in Part S (commencing
with Section 6001?, insofar as they relate to sales and use taxes,
except that the name of the city as the taxing agency shall be
substituted for that of the state (but the name of the city shall not
be substituted for the word "state" in the phrase "retailer engaged
in business in this state,, in Section 6203 nor in the definition of
that phrase in Section 6203) and that an additional seller's permit
shall not be required zf one has been or is issued to the seller
under Section 6067.
13) A provisionthat all amendments subsequent to the effective
data of the enactment of pari. 1 (commencing with Section 6001)
relating to sales and use tax and not inconsistent with this part,
shall automatically become a part of the sales and use tax ordinance
of the city.
;4) A provision that the city shall contract prior to the
effective date of the city sales and use tax ordinance with the State
Board of Equalization to perform all functions incident to the
administration or operation of the sales and use tax ordinance of the
city which shallcontinue in effect so long as the county within
which the city is located has an operative sales and use tax
ordinance enacted pursuant_ to this parr_.
(s) A provision that the storage, use or other consumption of
tangible personal property, the gross receipts from the sale of which
has been subject to sales tax under a sales and use tax ordinance
enacted in accordance with this part by any city and county, county,
or czty in this state, shall be exempt from the tax due under this
ordinance.
(6) A provision that the amount subject to tax shall not include
the amount of any sales tax or use tax imposed by the State of
California upon a retaileror consumer.
M A provision that there are exempted from the computation of
the amountt of the sales tax the gross receipts from the sale of
tangible personal property to operators of aircraft to be used or
consumed principally outside the city in which the sale is made and
directly and exclusively in the use of the aircraft as common
carriers of persons or property under the authority of the laws of
this state, the United States, or any foreign government.
{8) A provision that, in addition to the exemptions provided in
Sections 6366 and 6366.1, the storage, use, or other consumption of
tangible personal property purchased, by operators of aircraft and
used or consumed by the operators directly and exclusively in the use
of the .aircraft as common carriers of persons or property for hire
or compensation under a certificate of public convenience and
necessity issued pursuant to the laws of this state, the United
States, or any foreign government is exempt from the use tax.
SEC, 7. Section '7203 of the Revenue and Taxation Code is amended
to read
7203. 'Fue use tax portion of any sales and use tax ordinance
._adopted under this part shall impose a complementary tax upon the
storage, use or other consumption in the county of tangible personal.
property purchased from any retailer for storage, use or other
consumption inthe county. That tax shall be at the rate of 11/4
percent, and on and after July 1, 2004, three-quarters of 1 percent,
of the sales price of the property whose storage, use or other
consumption is subject to the tax and shall include:
(a) Provisions identical to the provisions contained in Part 1
(commencing with Section 5001), other than Section 6201 insofar as
those provisions relate to the use tax, except that the name of the
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AB 12.21 Assembly Bill - AMENDED
county' as the taxing agency enacting the ordinance shall be
substituted for that of the state )but the name of the county shall
not be substituted for the word "state" in the phrase "retailer
engaged in business in this state" in Section 6203 nor in the
definition of that phrase in Section 6203).
(b) A provision that all amendments subsequent to the date of
the ordinance to the provisions of
the Revenue and Taxation Code relating to the use tax and not
inconsistent - with this part: shall automatically become a part of the
ordinance.
(c) A provision that the storage, use or other consumption of
tangible personal property, the gross receipts from the sale of which
has been subject to safes tax under a sales and use tax ordinance
enacted in accordance with this part by any city and county, county,
or city in this state, shall be exempt from the tax due under this
ordinance.
;d} A provision that the amount subject to tax shall not include
the amount of any sales tax or use tax imposed by the State of
California upon a retailer or consumer.
(e) A provision that, Ain addition to the exemptions provided in
Sections 6360" and 6366.1, the storage, use, or other consumption of
tangible personal property, other than fuel or petroleum products,
purchased by operators of aircraft and used or consumed by the
operators directly and exclusively in the use of the aircraft as
common carriers of persons or property for hire or compensation under
a certificate of public convenience and necessity issued pursuant to
the: laws of this state, the United States or any foreign government
is exempt from 80 percent of the use tax.
SEC. 8. It is the intent of the Legislature in enacting this act
that the state maintain its aggregate- funding obligations under
Section 8 of article XVI of the California. Constitution.
SEC, 9. if Section 47.68 of the Revenue and Taxation Code is
amended in a manner thatresults in a reduction in the amount of ad
valorem property tax revenue that is allocated to a city or county
pursuant to this act, Sections 2, 3, 4, 5, 6, 7, and 8 of this act
shall, cease to be operative.
SEC. 10. Notwithstanding Section 7.7610 of the Government Code, if
the Commission on State Mandates determines that this act contains
costs mandated by the state, reimbursement to local agencies and
school districts for those costs shall be made pursuant to Part 7
(commencing with Section 17500) of Division 4 of Title 2 of the
Government Code. If the statewide cost of the claim for
.e:i.mbursement does not exceed one million dollars ($1,000,000),
reimbursement shall be made from the State Mandates Claims Fund.
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RESOLUTION NO,2003-94
A RESOLUTION OF THE LODI CITY COUNCIL
WHEREAS, AB 1221 swaps half of local government sales tax revenues for an equal
amount (dollar -for -dollar) of property taxes. The authors' stated intent for the bill is to reduce the
incentive for local governments to chase sales tax dollars at the expense of other land uses;
and
WHEREAS, the League of California Cities remains opposed to the measure, unless
amended to provide constitutional protection for local government revenues, The bill has a
number of other additional issues that also need to be addressed, and
WHEREAS, the City of Lodi relies on sales tax and property tax to fund general services
for the community. Sales tax estimates for fiscal year 2003-04 are $8.7 million and property tax
revenues are expected to be $6.4 million. A preliminary analysis of the potential impact of AB
1221 on the City of Lodi indicates that the City would lose an estimated $3 million over the next
five years. in addition, AS 1221 shifts the local control of tax revenues to the State with no
constitutional guarantees against future such actions.
NOW, THEREFORE, BE IT RESOLVED, that the Lodi City Council does hereby oppose
AB 1221 relating to property and sales tax shifts.
Dated: May 21, 2003
I hereby certify that Resolution No. 2003-94 was passed and adopted by the Lodi City
Council in a regular meeting held May 21, 2003, by the following vote:
AYES: COUNCIL MEMBERS - Hansen, Howard, and Land
NOES: COUNCIL MEMBERS - Beckman
ABSENT: COUNCIL MEMBERS - Mayor Hitchcock
ABSTAIN: COUNCIL MEMBERS - None
SUSAN J. BLAC{STON
City Clerk