HomeMy WebLinkAbout8.1 VehicleLicenseFeeShiftFile# 660-40
CITY CLERK
AGENDA STATEMENT
CITY COUNCIL MEETING DATE: February 4, 2003
SUBJECT: Opposition to Shift in Vehicle License Fees
Report Prepared by: Christopher L. Foss
Economic Development Director
ATTACHMENTS: 1. Draft Resolution opposing VLF Shift
2. Draft Letters opposing VLF Shift
3. Assembly Bill X1 4 (Wesson)
RECOMMENDATION:/~ d~l) Adopt resolution urging the California Legislature to reject
/ ~L/V Ii ?vemor Davis proposed shift of Local VLF Revenues and (2)
Authorize the Mayor to sign and send letter opposing Shift in
Vehicle License Fees and support for AB X1 4 (Wesson)
FINANCIAL STATEMENT: Based upon the League of Califomia Cities estimate, the shi~ if
approved, could result in a loss of $636,588 in FY 2002-03 and $1,406,923 in FY 2003-04 to the City of
Dublin.
DESCRIPTION: Prior to 1935, cities and counties in California collected property
taxes on motor vehicles to fund essential city services. In 1935, the California Legislature enacted the
Vehicle License Fee (VLF) Act, which replaced the property tax on vehicles with a fee charged against the
value of the motor vehicle. In 1986, the voters of California overwhelmingly approved Proposition 47,
which pledged the proceeds of the VLF to fund city and count3' services.
In 1998, the California Legislature approved legislation that created a VLF tax holiday in which the
Legislature decided to use of a portion of the State's budget surplus to reduce VLF payments owed by
vehicle owners. Th~s amount, which is known as an "offset", has grown to be 67.5% of the VLF amount
owed. The legislation also included a section that committed the State's General Fund to pay local
governments an amount in lieu of the reduced VLF payment known as "VLF Backfill." The 1998
legislation and subsequent actions contain clear provisions that state, when insufficient funds are available
to be transferred from the General Fund to fully fund the VLF revenue offsets and backfill, the amount of
the VLF offset shall be reduced and VLF payments increased. In essence, the Legislature wanted to make
sure that the cities and counties are fully compensated for their VLF revenues.
In an attempt to balance the multi-billion dollar State of Cali£omia budget deficit over the next 18 months,
Governor Davis is proposing to divert $4 billion in local VLF backfill payments. This diversion v, dll have ·
a detrimental effect on both city and county operations, as the VLF backfill revenues are estimated by the
League of California Cities to account for approximately $1,406,923 in FY 2003-04.
COPIES TO:
ITEM NO. _~_
The current VLF law requires, in the event there are insufficient moneys in the General Fund for the
Controller to fully reimburse local governments for losses resulting from the vehicle license fee offset,
that the offset amount be reduced in proportion to the shortfall in funding to reimburse local governments
for those losses.
Existing law does not designate the person or agency responsible for making the determination of whether
there are sufficient moneys in the General Fund to make these reimbursements. Assembly Bill X1 4
(Wesson) would require that the Director of Finance make the same determination of whether there are
insufficient moneys in the General Fund for the Controller to fully reimburse local governments for losses
resulting from the vehicle license fee offsets. AB X1 4 would clarify that the term "General Fund," as
used with reference to the vehicle license fee offset.
The proposed resolution (Attachment A) and proposed letter (Attachment B) urge Governor Davis and the
California Legislature to support legislation that would restore the Vehicle License Fee to an amount
necessary to reduce the VLF backfill.
RECOMMENDATION: Staff recommends that the City Council: (1) Adopt the proposed
resolution urging the Califomia Legislature to reject Governor Davis's proposed shift of local VLF
revenues; and (2) authorize the Mayor to sign and send the attached letter opposing Governor Davis'
proposed shift of Vehicle License Fees and indicate the City Council's support of AB X1 4 (Wesson).
RESOLUTION NO. - 03
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
URGING THE CALIFORNIA LEGISLATURE TO REJECT
THE GOVERNOR'S PROPOSED SHIFT OF LOCAL VLF REVENUES
AND TO HONOR THE 1998 COMMITMENT TO RESTORE THE VLF
WHEREAS, prior to 1935, cities and counties collected property taxes on motor vehicles to fund
essential local public health and safety services; and
WHEREAS, in 1935, the Legislature first enacted the Vehicle License Fee (VLF) Act, replacing
the property tax on vehicles with a 1.75 percent fee charged against the value of the motor vehicle; and
WHEREAS, in 1948, the rate of the VLF was increased to 2 percent of the value of the vehicle;
and
WHEREAS, in t 986, the voters voted overwhelmingly to constitutionally dedicate the proceeds of
the VLF to fund city and county services; and
WHEREAS, in 1998, a period of strong economic growth, the Legislature approved the use of a
portion of the rapidly growing state General Fund to reduce the VLF payments of vehicle owners. This
mount, known as the "offset", grew in future years to a 67.5 percent offset against the amount owed.
The amount paid to local governments in lieu of the reduced VLF payment is known as the "VLF
backfill"; and
WHEREAS, the 1998 legislation and subsequent enactments contain clear provisions that when
insufficient funds are available to be transferred from the General Fund to fully fund the offsets and
backdSIl amount that the VLF offset shall be reduced and VLF payments increased; and
WHEREAS, revenues derived from the VLF and backfill are of critical importance in funding
vital local public health and safety services; and
WHEREAS, any failure by the Legislature to maintain the VLF backfill or restore the VLF will
cause widespread disruption in local government services essential to the well-being of California citizens
and their cities and counties; and
WHEREAS, Governor Davis' proposal to divert $4 billion in local VLF backfill payments over
the next 17 months fails to honor the 1998 commitment and is a direct assault on local services that wilt
be felt by every California resident; and
WHEREA& shifting $4.2 billion in locally controlled revenues for local services is neither
equitable nor fair. No state program or department has been asked to shoulder such a disproportionate
share of the budget pain. These cuts come on top of the nearly $5 billion each year that is transferred
from local services to fund state obligations.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
DUBLIN, CALIFORNIA, that if the state General Fund can no longer afford the expense of part or all of
the VLF "backfill" that the Legislature and Governor of California are hereby respectfully urged to
implement the provisions of current law providing for the reduction of the VLF offset in bad economic
times and to restore the VLF in an amount necessary to reduce thc VLF backfill; and
BE IT FURTHER RESOLVED, that the City of Dublin hereby expresses its profound
appreciation to the legislators who support such VLF restoration legislation.
PASSED, APPROVED AND ADOPTED on this 4th day of February, 2003, by thc following
vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Mayor
ATTEST:
City Clerk
K2/G/24-03/reso-vtf. doc (Item $.1)
February 5, 2003
The Honorable Ellen M. Corbett
Califomia State Assembly
State Capitol
P. O. Box 942849
Sacramento, CA 94249-0001
Dear Assemblywoman Corbett:
On behalf of the Dublin City Council, I am writing to urge you to keep a promise---one
the legislature made to the people of California and its cities and counties five years ago.
It was made in 1998 when the Vehicle License Fee (VLF) reduction was enacted during
better economic times. The promise was simple: if the state could no longer afford to
fund the VLF reduction, the VLF would be restored so vital city and county public health
and safety services would not be threatened.
Since 1935 cities and counties have received the VLF in lieu of locally collected property
taxes on vehicles. VLF revenues constitute nearly $2 million a year in the City of Dublin.
The VLF, therefore, is a critical component of funding these vital City services.
In 1986 the voters by an 81.8% margin passed Proposition 47, pledging the proceeds of
the VLF to funding local government services. The 1998 law that created the VLF tax
holiday did not change this policy; it simply committed the state general fund to
financing an offset against the VLF payment obligation of a vehicle owner. The same law
provides for the restoration of the VLF if insufficient funds are available in the state
general fund to afford the VLF "offset". By all indications, that time has come.
In the near future, you will have the chance to keep the promise made by the 1998
legislature and found in state law. On behalf of the Dublin City Council, I strongly urge
you to reject the Governor's proposed raid of more than $4 billion in Vehicle License Fee
(VLF) backfill payments to cities and counties and to support legislation to restore the
VLF if the state general ftmd can no longer afford the VLF tax holiday.
We recognize that during these difficult times, sacrifices are necessary. But raiding more
than $4 billion in VLF backfill funds would disproportionately shift the state's fiscal
problems onto our local governments and would jeopardize essential locally delivered
public health and safety programs and services. Clearly, a state grab of VLF funds will
leave many localities with no option but to take police officers and firefighters off the
street or reduce public health and safety programs, services and equipment.
Attachment 2 A
In the five years of state budget surpluses, local governments did not receive a
proportionate benefit or any significant funding increases. Instead, local governments and
our local services continued providing more than $4 billion each year to fund state
obligations. Raiding an additional $4 billion in VLF backfill payments over the next 18
months is neither equitable nor fair. No state program or department has been asked to
shoulder such a disproportionate share of the budget pain.
In light of the state's current economic climate, I urge you to support legislation such as
Assembly Bill X1 4 that would guarantee VLF revenues to the cities and counties. It's the
right thing to do, and it keeps the promise made in 1998.
Sincerely,
Janet Lockhart
Mayor
G:\Chris\Legislation 2002\VLF letter 2003.doc
February 5, 2003
The Honorable Tom Torlakson
California State Senate
State Capitol Building, Room 5061
Sacramento, CA 95814
Dear Senator Torlakson:
On behalf of the Dublin City Council, I am writing to urge you to keep a promise---one
the legislature made to the people of California and its cities and counties five years ago.
It was made in 1998 when the Vehicle License Fee (VLF) reduction was enacted during
better economic times. The promise was simple: if the state could no longer afford to
fund the VLF reduction, the VLF would be restored so vital city and county public health
and safety services would not be threatened.
Since 1935 cities and counties have received the VLF in lieu of locally collected property
taxes on vehicles. VLF revenues constitute nearly $2 million a year in the City of Dublin.
The VLF, therefore, is a critical component of funding these vital City services.
In 1986 the voters by an 81.8% margin passed Proposition 47, pledging the proceeds of
the VLF to funding local government services. The 1998 law that created the VLF tax
holiday did not change this policy; it simply committed the state general fund to
financing an offset against the VLF payment obligation of a vehicle owner. The same law
provides for the restoration of the VLF if insufficient funds are available in the state
general fund to afford the VLF "offset". By all indications, that time has come.
In the near future, you will have the chance to keep the promise made by the 1998
legislature and found in state law. On behalf of the Dublin City Council, I strongly urge
you to reject the Governor's proposed raid of more than $4 billion in Vehicle License Fee
(VLF) backfill payments to cities and counties and to support legislation to restore the
VLF if the state general fund can no longer afford the VLF tax holiday.
We recognize that during these difficult times, sacrifices are necessary. But raiding more
than $4 billion in VLF backfill funds would disproportionately shift the state's fiscal
problems onto our local governments and would jeopardize essential locally delivered
public health and safety programs and services. Clearly, a state grab of VLF funds will
leave many localities with no option but to take police officers and fire fighters off the
street or reduce public health and safety programs, services and equipment.
Attachment 2 B
In the five years of state budget surpluses, local governments did not receive a
proportionate benefit or any significant funding increases. Instead, local governments and
our local services continued providing more than $4 billion each year to fund state
obligations. Raiding an additional $4 billion in VLF backfill payments over the next 18
months is neither equitable nor fair. No state program or department has been asked to
shoulder such a disproportionate share of the budget pain.
In light of the state's current economic climate, I urge you to support legislation such as
Assembly Bill X1 4 that would guarantee VLF revenues to the cities and counties.. It's
the right thing to do, and it keeps the promise made in 1998.
Sincerely,
Janet Lockhart
Mayor
G:\Chris\Legislation 2002WLF letter 2003.doc
ABX1 4 Assembly BILL, 1st Extraordinary Session - AMENDED
BILL NUMBER: ABX1 4 AMENDED BILL TEXT
~/~ENDED IN ASSEMBLY JANUARY 27, 2003
INTRODUCED BY Assembly Member Wesson
(Principal coauthor: Senator Soto)
JANUARY 21, 2003
An act to amend Sections 10754 and 11000 of the Revenue and
Taxation Code, relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 4, as amended, Wesson. Vehicle license fees.
The Vehicle License Fee (VLF) Law establishes, in lieu of any ad
valorem property tax upon vehicles, an annual license fee for any
vehicle subject to registration in this state in the amount of 2% of
the market value of that vehicle, as specified. The VLF Law offsets
this amount by 67.5% for vehicle license fees with a final due date
on or after July 1, 2001, and requires the Controller, upon receipt
of monthly notification from the Department of Motor Vehicles of the
amount of offsets applied, to transfer General Fund moneys to
reimburse local governments for losses resulting from the vehicle
license fee offset.
The VLF Law also requires, in the event there are insufficient
moneys in the General Fund for the Controller to fully reimburse
local governments for losses resulting from the vehicle license fee
offset, that the offset amount be reduced in proportion to the
shortfall in funding to reimburse local governments for those losses.
Existing law does not designate the person or agency responsible
for making the determination of whether there are sufficient moneys
in the General Fund to make these reimbursements.
This bill would provide that the Director of Finance is required
to make the same determination of whether there are insufficient
moneys in the General Fund for the Controller to fully reimburse
local governments for losses resulting from the vehicle license fee
offsets.
This bill would clarify that the term "General FUnd,'' as used with
reference to the vehicle license fee offset, has the same meaning as
set forth in a specified statute, and would specify that the term
"General Fund" does not include any moneys in that fund that the
state is obligated to repay to the source from which those moneys
were received, or any moneys in that fund that are derived from loans
or other forms of indebtedness.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 10754 of the Revenue and Taxation Code is
amended to read:
10754. (a) Notwithstanding any other provision of law, the total
amount of the vehicle license fee otherwise required with respect to
a vehicle shall be offset in accordance with those provisions set
forth below that are operative pursuant to subdivision (b):
(1) (A) For any initial or original registration of any vehicle,
never before registered in this state, for which the final due date A~achment3
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ABX1 4 Assembly BILL, 1st Extraordinary Session - AMENDED
for the license fee is on or after January 1 of any calendar year for
which this paragraph is operative, and for any renewal of
registration with an expiration date on or after January 1 of any
calendar year for which this paragraph is operative, the department
shall offset the total amount of fees otherwise due at the time of
registration of that vehicle by an amount equal to 25 percent of the
amount computed pursuant to Section 10752 or 10752.1, or Section
18115 of the Health and Safety Code.
(B) Upon proper payment of license fees to the Department of Motor
Vehicles, the amount of the offset for each vehicle shall be
transferred into the Motor Vehicle License Fee Account in the
Transportation Tax Fund, and into the Local Revenue Fund, pursuant to
Section 11000 or Section 11000.1, as applicable.
(C) During any period for which the Director of Finance makes a
finding that insufficient moneys'are available to be transferred from
the General Fund to fully fund the offsets required by subparagraph
(A) the department shall, as soon as possible, but no later than 90
days after the Director of Finance makes that finding, reduce the
amount of each offset computed pursuant to subparagraph (A) by
multiplying that amount by the ratio of the amount of moneys actually
available to be transferred from the General Fund to pay for those
offsets to the amount of moneys that is necessary to fully fund those
offsets.
(D) The Controller shall provide the Director of Finance with any
information available to the Controller that is requested by the
Director of Finance for purposes of making the determination required
by subparagraph (C).
(2) (A) For any initial or original registration of any vehicle,
never before registered in this state, for which the final due date
for the license fee is on or after January 1 of any calendar year for
which this paragraph is operative, and for any renewal of
registration with an expiration date on or after January 1 of any
calendar year for which this paragraph is operative, the department
shall offset the total amount of fees otherwise due at the time of
registration of that vehicle by an amount equal to 35 percent of the
amount computed pursuant to Section 10752 or 10752.1, or Section
18115 of the Health and Safety Code.
(B) Upon proper payment of license fees to the Department of Motor
Vehicles, the amount of the offset for each vehicle shall be
transferred into the Motor Vehicle License Fee Account in the
Transportation Tax Fund, and into the Local Revenue Fund, pursuant to
Section 11000 or Section 11000.1, as applicable.
(C) During any period for which the Director of Finance makes a
finding that insufficient moneys are available to be transferred from
the General Fund to fully fund the offsets required by subparagraph
(A) the department shall, as soon as possible, but no later than 90
days after the Director of Finance makes that finding, reduce the
amount of each offset computed pursuant to subparagraph (A) by
multiplying that amount by the ratio of the amount of moneys actually
available to be transferred from the General Fund to pay for those
offsets to the amount of moneys that is necessary to fully fund those
offsets.
(D) The Controller shall provide to the Director of
Finance -~:itk any information available to the
Controller that is requested by the Director of Finance for purposes
of making the determination required by subparagraph (C).
(3) (A) For any initial or original registration of any vehicle,
never before registered in this state, for which the final due date
for the license fee is on or after January 1 of any calendar year for
which this paragraph is operative, and for any renewal of
registration with an expiration date on or after January 1 of any
calendar year for which this paragraph is operative, the department
shall offset the total amount of fees otherwise due at the time of
registration of that vehicle by an amount equal to 671/2 percent of
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ABX1 4 Assembly BILL, 1st Extraordinary Session - AMENDED
the amount computed pursuant to Section 10752 or 10752.1, or Section
18115 of the Health and Safety Code.
(B) Upon proper payment of license fees to the Department of Motor
Vehicles, the amount of the offset for each vehicle shall be
transferred into the Motor Vehicle License Fee Account in the
Transportation Tax Fund, and into the Local Revenue Fund, pursuant to
Section 11000 or Section 11000.1, as applicable.
(C) During any period for which the Director of Finance makes a
finding that insufficient moneys are available to be transferred from
the General Fund to fully fund the offsets required by subparagraph
(A) the department shall, as soon as possible, but no later then 90
days after the Director of Finance makes that finding, reduce the
amount of each offset computed pursuant to subparagraph (A) by
multiplying that amount by the ratio of the amount of moneys actually
available to be transferred from the General Fund to pay for those
offsets to the amount of moneys that is necessary to fully fund those
offsets.
(D) The Controller shall provide the Director of Finance with any
information available to the Controller that is requested by the
Director of Finance for purposes of making the determination required
by subparagraph (C).
(b) The offset provisions set forth in subdivision (a) shall be
operative as provided by the following:
(1) Paragraph (1) of subdivision (a) shall be operative for
vehicle license fees with a final due date in the calendar year
beginning on January 1, 1999.
(2) Paragraph (2) of subdivision (a) shall be operative for
vehicle license fees with a final due date on or after January 1,
2000, and before July 1, 2001.
(3) Paragraph (3) of subdivision (a) shall be operative for
vehicle license fees with a final due date on or after July 1, 2001.
(c) (1) For purposes of this section:
(1) "Department" means the Department of Motor Vehicles with
respect to a vehicle license fee offset for a vehicle subject to
registration under the Vehicle Code, and the Department of Housing
and Community Development with respect to a vehicle license fee
offset for a manufactured home, mobilehome, or commercial coach
described in Section 18115 of the Health and Safety Code.
(2) The "final due date" for a license fee is the last date upon
which that fee may be paid without being delinquent.
(3) "General Fund" has the same meaning as that term is defined in
Section 16300 of the Government Code, but does not include either of
the following:
(A) Any moneys deposited in the General Fund that the state is
obligated to either repay or return to the source, fund, account, or
any successor thereof, from which the money was received.
(B) Any moneys deposited in the General Fund that are derived from
short-term obligations, loans, sales of bonds or debentures, or
other forms of indebtedness.
SEC. 2. Section 11000 of the Revenue and Taxation Code is amended
to read:
11000. (a) Beginning on the operative date of Section 9551.2 of
the Vehicle Code, the Controller shall do both of the following:
(1) Transfer from the General Fund to the Motor Vehicle License
Fee Account in the Transportation Tax Fund an amount equal to 75.67
percent of the amount of offsets that are applied by the department
pursuant to Sections 9551.2 and 9554.1 of the Vehicle Code.
(2) Transfer from the General Fund to the Local Revenue Fund,
established pursuant to Section 17600 of the Welfare and Institutions
Code, in the Transportation Tax Fund an amount equal to 24.33
percent of the amount of offsets that are applied by the department
pursuant to Sections 9551.2 and 9554.1 of the Vehicle Code.
(b) The department shall notify the Controller and the Director of
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ABEX1 4 Assembly BILL, 1st Extraordinary Session - AMENDED
Finance of the total amount of the offsets applied by the department
pursuant to Sections 9551.2 and 9554.1 of the vehicle Code
concurrently with the department's transfer for deposit of vehicle
license fee revenues as required by law.
(c) For purposes of Section 15 of Article XI of the California
Constitution, the General Fund revenues that are transferred as
required by paragraph (1) of subdivision (a) shall constitute
successor tax revenues to the vehicle license fees offset in this
part and shall be allocated in the same manner as revenue derived
from taxes imposed pursuant to this part.
(d) For purposes of Article 1 (commencing with Section 25350) of
Chapter 5 of Part 2 of Division 2 of Title 3 of the Government Code,
Section 11003, and Chapter 6 (commencing with Section 17600) of Part
5 of Division 9 of the Welfare and Institutions Code, the General
Fund transfer amounts specified in paragraphs (1) and (2) of
subdivision (a) are hereby deemed to be vehicle license fee proceeds
and vehicle license fee revenues. These General Fund transfer
amounts are subject to the same pledges, liens and encumbrances, and
priorities set forth in Section 25350 and following of, Section 53584
and following of, and Section 5450 and following of, the Government
Code.
(e) Nothing in this section amends or intends to amend or impair
Section 25350 and following of, Section 53584 and following of, the
Government Code, or any other statute dealing with the interception
of funds.
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