LEGISLATIVE ANALYSIS
ASSEMBLY THIRD READING
AB 1690 (Leno)
As Amended June 2, 2003
Majority vote
LOCAL GOVERNMENT 6-2 APPROPRIATIONS 17-7
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|Ayes:|Salinas, Lieber, Leno, |Ayes:|Steinberg, Berg, Kehoe, |
| |Mullin, | |Corbett, Diaz, |
| |Steinberg, Wiggins | | Firebaugh, Goldberg, |
| | | |Leno, Nation, |
| | | |Chan, Nunez, Pavley, |
| | | |Ridley-Thomas, |
| | | |Simitian, Wiggins, Yee, |
| | | |Laird |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Daucher, La Suer |Nays:|Bates, Daucher, Haynes, |
| | | |Maldonado, Pacheco, |
| | | |Runner, Samuelian |
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SUMMARY: Authorizes any city, county, or city and county that
forms a public safety finance agency to levy a local general
income tax and shift a specified portion of annual property tax
allocation income to the public safety finance agency.
Specifically, this bill :
1)Authorizes any city, county, or city and county to form a
public safety finance agency to supplement fire protection or
police or sheriff services, and finance capital improvements
for its fire, police, or sheriff's department or for any other
public agency that provides those services within its
boundaries.
2)Authorizes any city, county, or city and county that forms a
public safety finance agency to levy a local income tax,
subject to approval of the majority of voters.
3)Specifies that the amount of this local personal income tax
shall not exceed 8% of the state tax liability for a
city-levied tax, 2% of the state tax liability for a
county-levied tax, or 10% of the state tax liability for a tax
levied by a city and county.
4)Requires the county auditor, once the tax is approved, to
transfer a portion of the annual property tax revenue
allocation to the public safety finance agency in an amount
equal to 50% of the estimated local income tax revenues to be
collected within the first 12 months.
5)Requires the governing board of a public safety finance agency
to allocate the property tax revenues it receives as follows:
40% of the funds shall be dedicated to fire protection
services; 40% shall be dedicated to police and sheriff
services; 20% shall be allocated as specified in a written
agreement between the chief fire official and sheriff or
police chief.
6)Provides that if any provision of this bill, or local measure
enacted pursuant to this bill,
is invalidated by an appellate court, the remaining provisions
will become inoperative.
7)Imposes a state-mandated local program by imposing new duties
upon local officials.
EXISTING LAW prohibits any city, county, city and county, or any
other local entity from imposing or collecting a local income
tax, with the exception of a business license tax. Also
requires two-thirds voter approval for special taxes levied for
specified purposes, and approval
of a simple majority of voters for general taxes levied for
general governmental purposes.
FISCAL EFFECT: According to the Assembly Appropriations
Committee analysis, this bill authorizes cities and counties to
generate up to $3.4 billion in local income tax revenue
annually, and would require them to transfer $1.7 billion in
property taxes to public safety finance agencies, beginning in
2003-04, if each city and county in the state were to impose the
local income tax authorized by this bill. Most likely, the
amount generated and property taxes transferred would be much
less, as not all cities and counties would impose the tax, and
not all that would impose the tax would do so at the maximum
rate authorized.
The Franchise Tax Board (FTB) is still in the process of
estimating the costs to implement and administer the local
income taxes authorize by this bill, but indicates these costs
would be in the millions of dollars. Although the bill
authorizes FTB to deduct its administrative expenses from
revenue collections, FTB believes that it would need a
significant up-front appropriation to cover its start-up costs.
Start-up costs would include, but not be limited to, system
programming, creation of a billing system, and the creation of a
schedule, form, or billing notices for the local income tax.
Ongoing costs would depend upon the number of local taxes
authorized, the number of residents subject to the tax, the
level of self-assessment and compliance achieved, and the extent
of the enforcement activities needed. Ongoing costs would
include additional storage space, data entry, system programming
and maintenance, reports, collections activities, and customer
service personnel.
COMMENTS: This bill authorizes a locally-enacted income tax for
cities and counties, approved by a majority of the voters, that
would be a discretionary source of funding. The only
requirement placed on local governments is that they agree to
set up a public safety finance agency and transfer an amount of
property tax revenue equal to 50% of the estimated first year
local income tax collections to that agency to support local
fire service and law enforcement.
Local government revenue options have been severely limited
since the passage of Proposition 13 in 1978. Since then, local
governments have looked to benefit assessments, which now
require two-thirds voter approval, as a means to augment public
safety budgets. All too often, fiscally strapped local agencies
are forced to cut public services in order to alleviate local
budget woes. According to the author's office, this bill will
help local governments that have already implemented cuts in the
wake of local budget crises to restore funds, as well as allow
other local governments to avoid making them in the future.
Proponents contend that California's existing tax structures are
inequitable, and unlike Proposition 13, this bill empowers local
voters to decide where and how their local tax dollars are
raised and spent.
Opponents note that new taxes levied at the local level are
unprecedented and add another confusing layer of policy that
further exacerbate the problems inherent in California's tax
system. Currently, local governments have the authority to
place a fire protection benefits assessment before the voters
for approval. However, approval of such special assessments
require a two-thirds majority approval of the voters, which is a
higher threshold than the simple majority required under this
bill as a general assessment.
While this bill appears to follow the letter of the law, there
is a long history of litigation since the passage of Proposition
13 in 1978 over the imposition of taxes for specified purposes
by local governments and agencies, and this bill seems poised to
continue this legacy. The California Constitution clearly
states that local special taxes raised for a specified purpose
require approval of a two-thirds majority of voters. It is also
clear, however, that taxes levied for general governmental
purposes only require approval of the majority of voters. This
bill states that the local income tax will be for general
purposes, requiring approval of only a majority of the voters,
but includes ties that bind the authority to assess the local
tax with the establishment of a public safety finance agency
that will receive a specified portion of property tax revenue.
The end result will be that an agency will be established, a tax
will be levied, and the agency will receive funds for specific
purposes. The caveat is that the source of the funds, while
tied to the new tax revenue, is existing property tax revenues.
Proponents contend that since the estimate and shift occur only
one time, there is no direct connection between the income tax
and the revenues transferred from property taxes beyond the
first year of implementation, which removes the necessity of the
two-thirds vote requirement for special taxes. Whatever the
proper interpretation of the law on this matter may be will
likely ultimately be a matter for the courts to decide.
VOTES - ROLL CALL
MEASURE: AB 1690
AUTHOR: Leno
TOPIC: Public safety finance agencies.
DATE: 06/05/2003
LOCATION: ASM. FLOOR
MOTION: AB 1690 Leno Assembly Third Reading
(AYES 41. NOES 35.) (PASS)
AYES
****
Berg Bermudez Calderon Chan
Chavez Chu Cohn Corbett
Diaz Dutra Dymally Firebaugh
Frommer Goldberg Hancock Jackson
Kehoe Koretz Laird Leno
Levine Lieber Longville Lowenthal
Montanez Mullin Nation Nunez
Oropeza Parra Pavley Reyes
Ridley-Thomas Salinas Simitian Steinberg
Vargas Wiggins Wolk Yee
Wesson
NOES
****
Aghazarian Bates Benoit Bogh
Campbell Canciamilla Cogdill Correa
Cox Daucher Dutton Garcia
Harman Haynes Shirley Horton Houston
Keene La Malfa La Suer Leslie
Maddox Maldonado Matthews Maze
McCarthy Mountjoy Nakanishi Pacheco
Plescia Richman Runner Samuelian
Spitzer Strickland Wyland
ABSENT, ABSTAINING, OR NOT VOTING
*********************************
Jerome Horton Liu Nakano Negrete McLeod
BILL NUMBER: AB 1690 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 2, 2003
AMENDED IN ASSEMBLY APRIL 23, 2003
AMENDED IN ASSEMBLY APRIL 1, 2003
INTRODUCED BY Assembly Member Leno
(Principal coauthor: Assembly Member Lieber)
(Coauthors: Assembly Members Bermudez, Calderon, Chavez,
Goldberg, Koretz, Laird, Montanez, Nation, Pavley, Steinberg,
Vargas, and Wiggins) Vargas, Wiggins,
and Yee)
(Coauthor: Senator Burton)
FEBRUARY 21, 2003
An act to add Article 4 (commencing with Section 55650) to Chapter
4 of Part 2 of Division 2 of Title 5 of the Government Code, and to
amend Section 17041.5 of, and to add Section 99.3 to, the
Revenue and amend Sections 17041.5 and 19533 of, to
add Section 99.3 to, and to add Part 10.1 (commencing with Section
18201) to, the Revenue and Taxation Code, relating to local
government.
LEGISLATIVE COUNSEL'S DIGEST
AB 1690, as amended, Leno. Public safety finance agencies.
Under existing law, local fire protection services may be provided
by, among other entities, a fire protection district, which may
comprise territory including cities or counties, by a fire department
or company organized in an unincorporated town, or by a fire
department established by a city or county.
This bill would authorize any city, county, or city and county to
form a public safety finance agency for the purposes of supplementing
fire protection or police or sheriff services, and financing needed
capital improvements for its fire or police or sheriff's department
or for any other public agency that provides fire protection or
police or sheriff services within its boundaries.
Existing law provides that, with the exception of a business
license tax, a city, county, city and county, or any other local
entity may not impose or collect a local income tax.
This bill would authorize any city, county, or city and county
that forms a public safety finance agency to levy a local general
income tax, if that tax is approved by a majority of the voters
voting on that tax. This bill would also require that any
action to claim a refund of such a tax be brought within 90 days
after the tax is first paid by the taxpayer bringing the refund
action. This bill would require the Franchise Tax
Board (FTB) to administer and collect these local income taxes and
require the board to transmit the revenues derived from these taxes
within 60 days of collection. This bill would also authorize the FTB
to deduct its costs in collecting the tax prior to transmitting the
revenues to the imposing local entity.
This bill would also require, in the case of a local government
that has both formed a public safety finance agency and adopted a
local income tax, that property tax revenue be annually assigned to
the public safety finance agency, from the forming local government,
in an amount that is equal to 50% of the amount of revenues estimated
to be collected from the local income tax in the first 12 months of
imposition. This bill would also require the governing board of a
public safety finance agency to annually allocate these revenues
according to a specified formula. By imposing new revenue allocation
duties upon local officials, this bill would impose a state-mandated
local program. This bill would also provide that if any provision
of the bill, or any properly proposed ordinance enacted pursuant to
the act, is invalidated by an appellate court, then the remaining
provisions of the bill shall become inoperative.
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: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Article 4 (commencing with Section 55650) is added to
Chapter 4 of Part 2 of Division 2 of Title 5 of the Government Code,
to read:
Article 4. Public Safety Finance Agency
55650. (a) Any city, county, or city and county may form, by
ordinance, a public safety finance agency for the following purposes:
(1) To supplement fire protection services and finance needed
capital improvements for its fire department or other outside agency
that provides structural fire protection services within the
boundaries of that city, county, or city and county.
(2) To supplement police or sheriff services and finance needed
capital improvements for its police or sheriff's department or other
outside agency that provides police or sheriff services within the
boundaries of that city, county, or city and county.
(b) In the case of a city, county, or city and county that does
not directly provide either its own fire protection services or its
own police or sheriff services, or both, that portion of the funds of
the public safety protection agency that are available for the
category of services not directly provided may be made available only
to the outside agency that directly provides that same category of
services within the boundaries of the city, county, or city and
county.
(c) When a decision, determination, or other action by the public
safety finance agency formed pursuant to this section is required by
this article, the governing body of that agency may not delegate the
obligation to decide, determine, or act to another entity, unless
this article specifically provides for that delegation.
(d) A public safety finance agency formed pursuant to this section
may, in addition to any funds provided by the city, county, or city
and county that formed that agency, accept financial assistance from
the state or federal government or any public or private source for
any purpose set forth in subdivision (a).
(e) All funds of a public safety finance agency formed pursuant to
this section shall be held in trust for the purposes set forth in
subdivision (a) and may not be utilized to supplant other funds
applied to fire protection or police or sheriff services.
SEC. 2. Section 99.3 is added to the Revenue and Taxation Code, to
read:
99.3. For the purposes of the computations required by this
chapter:
(a) If a public safety finance agency is formed by a city, county,
or city and county ordinance pursuant to Section 55650 of the
Government Code and is located within a city, county, or city and
county for which an income tax authorized by subdivision (b)
of Section 17041.5 Part 10.1 (commencing with Section
18201) has been approved by the voters, the auditor shall
assign to that public safety finance agency that portion of the
annual property tax revenue allocation determined pursuant to Section
96 or subdivision (a) of Section 96.1 for that city, county, or city
and county in an amount equal to 50 percent of the amount estimated
by the Franchise Tax Board pursuant to subdivision (c) to be
collected on behalf of the city, county, or city and county during
the first 12 months in which the income tax is imposed. In each
fiscal year that follows a fiscal year in which an assignment of ad
valorem property tax revenues is made pursuant to this subdivision,
ad valorem property tax revenue allocations made pursuant to Sections
96.1 and 96.5 shall fully reflect the allocation adjustments
required by that assignment. In each fiscal year, the governing
board of a public safety finance agency shall allocate the property
tax revenues it receives under this subdivision according to the
following:
(1) Forty percent for the purposes described in paragraph (1) of
subdivision (a) of Section 55650 of the Government Code.
(2) Forty percent for the purposes described in paragraph (2) of
subdivision (a) of Section 55650 of the Government Code.
(3) Twenty percent for the purposes specified in subdivision (a)
of Section 55650 of the Government Code as specified in a written
agreement between the following parties:
(A) The chief fire official that directly provides public safety
services in the city, county, or city and county that formed the
public safety finance agency.
(B) As applicable, the sheriff or police chief that directly
provides public safety services in the city, county, or city and
county that formed the public safety finance agency.
(b) Upon the approval of an income tax authorized by
subdivision (b) of Section 17041.5 Part 10.1
(commencing with Section 18201) , the imposing city, county, or
city and county shall give notice of that approval to the Franchise
Tax Board, and to the assessor and auditor of the county within which
the territory subject to the public safety finance agency is
located. This notice shall specify the city, county, or city and
county that has approved the imposition of the income tax.
(c) The Franchise Tax Board shall, within 60 days of notice of the
approval of the tax authorized by subdivision (b) of
Section 17041.5 Part 10.1 (commencing with Section
18201) , estimate, based upon historical data on state income
tax collections for residents of that city, county, or city and
county, the amount of tax to be collected on behalf of the city,
county, or city and county in the first 12 months in which that tax
is imposed. The Franchise Tax Board shall notify the county auditor
of its estimate.
(d) (1) The county assessor shall provide to the county auditor,
within 30 days of the notice of approval of an income tax authorized
by subdivision (b) of Section 17041.5 Part
10.1 (commencing with Section 18201) , a report that identifies
the assessed valuations for the tax rate areas within the
jurisdiction of the public safety finance agency.
(2) The auditor shall estimate the amount of property tax revenue
derived from the tax rate areas that are within the jurisdiction of
the public safety finance agency.
(3) The auditor shall estimate that portion of the property tax
revenue determined pursuant to paragraph (2) that is to be assigned
to the public safety finance agency pursuant to subdivision (a).
(4) The auditor shall, within 45 days of receipt of the notice
under subdivision (c), notify the governing body of the city, county,
or city and county that formed the public safety finance agency of
the assignment to be made pursuant to subdivision (a).
SEC. 3. Section 17041.5 of the Revenue and Taxation Code is
amended to read:
17041.5. (a) Except as provided in
subdivision (b) Part 10.1 (commencing with Section
18201) , notwithstanding any statute, ordinance, regulation,
rule or decision to the contrary, no city, county, city and county,
governmental subdivision, district, public and quasi-public
corporation, municipal corporation, whether incorporated or not or
whether chartered or not, shall levy or collect or cause to be levied
or collected any tax upon the income, or any part thereof, of any
person, resident or nonresident.
(b)
SEC. 4. Part 10.1 (commencing with Section 18201) is added to the
Revenue and Taxation Code, to read:
PART 10.1. LOCAL INCOME TAX
18201. (a) (1) Any city, county, or city and county that
has formed a public safety finance agency by ordinance pursuant to
Section 55650 of the Government Code may levy a general tax upon the
taxable income of any person residing therein
individual who is a resident of the city, county, or city and county
for each taxable year beginning on or after January 1, 2004.
The tax may not exceed an amount equal to the net tax
imposed under defined in Section 17039
multiplied by:
(A) Eight percent with respect to a tax levied by a city.
(B) Two percent with respect to a tax levied by a county.
(C) Ten percent with respect to a tax levied by a city and county.
(2) Any ordinance adopted by a city, county, or city and county
for the purpose of levying a tax on income shall be subject to
approval by a majority of the voters voting on that issue at an
election.
(3) A tax imposed under this subdivision shall be administered and
collected by the board, in the same manner as taxes are administered
and collected pursuant to Part 10.5 (commencing with Section 18401).
(4) The board shall remit the taxes collected, less the board's
costs of administration, within 60 days after those revenues are
reported and collected.
(c)
(b) This section may not be construed so as to prohibit the
levy or collection of any otherwise authorized license tax upon a
business measured by or according to gross receipts.
(d) Any action to claim a refund of any tax paid pursuant to an
ordinance that is enacted pursuant to this section shall be brought
on or before 90 days after the day that the tax is first paid by the
taxpayer that brings the action.
SEC. 4.
18202. A local tax imposed under this part shall be administered
in the same manner as a tax imposed under Part 10 (commencing with
Section 17001). Part 10.2 (commencing with Section 18401) shall
apply to any tax imposed under this part in the same manner and with
the same force and effect and to the full extent as if the language
of that part has been incorporated in full into this part, except to
the extent that any provision is inconsistent with this part or is
not relevant to this part.
18203. For purposes of this part, the term "resident" has the
same meaning as under Section 17014, modified by substituting "the
city," "the county," or "the city and county," as applicable, in lieu
of "this state."
18204. (a) The Franchise Tax Board shall revise the personal
income tax returns required to be filed pursuant to Part 10.2
(commencing with Section 18401) to allow an individual to report and
pay a local income tax in accordance with this part. The returns
shall require the taxpayer to include the individual's city and
county of residence.
(b) Subdivision (a) does not apply with respect to returns for any
taxable year beginning on or after January 1 of a calendar year
unless the Franchise Tax Board receives notice of approval of a local
income tax, as required by Section 99.3, by June 1 of that calendar
year.
18205. The board shall transmit local income tax revenues
collected pursuant to this part, net of refunds and net of an amount
equal to the costs incurred by the Franchise Tax Board in
implementing and administering the tax authorized in this part and
related statutes as added or amended by the act adding this part, to
the city, the county, or the city and county to which the amount due
is owing on or before 60 days after collecting the tax.
SEC. 5. Section 19533 of the Revenue and Taxation Code is amended
to read:
19533. In the event the debtor has more than one debt being
collected by the Franchise Tax Board and the amount collected by the
Franchise Tax Board is insufficient to satisfy the total amount
owing, the amount collected shall be applied in the following
priority:
(a) Payment of any delinquencies transferred for collection under
Article 5 (commencing with Section 19270) of Chapter 5.
(b) Payment of any taxes, additions to tax, penalties, interest,
fees, or other amounts due and payable under Part 7.5 (commencing
with Section 13201), Part 10 (commencing with Section 17001), Part 11
(commencing with Section 23001), or this part.
(c) Payment of any taxes, additions to tax, penalties,
interest, fees, or other amounts due and payable under Part 10.1
(commencing with Section 18201).
(d) Payment of delinquent wages collected pursuant to the
Labor Code.
(d)
(e) Payment of delinquencies collected under Section 10878.
(e)
(f) Payment of any amounts due that are referred for
collection under Article 5.5 (commencing with Section 19280) of
Chapter 5.
(f)
(g) Payment of any amounts that are referred for collection
pursuant to Section 62.9 of the Labor Code.
(g)
(h) Payment of delinquent penalties collected for the
Department of Industrial Relations pursuant to the Labor Code.
(h)
(i) Payment of delinquent fees collected for the Department
of Industrial Relations pursuant to the Labor Code.
(i) Payment of delinquencies referred by the Student Aid
Commission pursuant to Section 16583.5 of the Government Code.
(j) Notwithstanding the payment priority established by this
section, voluntary payments made by a taxpayer designated by the
taxpayer as payment for a personal income tax liability, shall not be
applied pursuant to this priority, but shall instead be applied
solely to the personal income tax liability for which the voluntary
payment was made.
SEC. 6. If any provision of this act, or any ordinance that
is properly proposed by a local governing body pursuant to this act,
is held invalid in a final decision of an appellate court, the
remaining provisions of this act shall become inoperative.
SEC. 5.
SEC. 7. Notwithstanding Section 17610 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
reimbursement does not exceed one million dollars ($1,000,000),
reimbursement shall be made from the State Mandates Claims Fund.
