Council's State Legislation Committee (O'Donnell, Johnson, Garcia) Votes 3-0 To Recommend Full Council Endorse SB 1243 (Would Let Shippers Continue To Avoid Paying Full Amount of CA's Sales/Use Tax On Marine Fuel)

No Committee member asks about State Bd of Equalization estimate that continuing exemption will cost state approx. $90-137.5 million annually (incl. local revenue losses), so LBReport.com asks about this; hear Committee members' responses

Supporters of the bill include multiple maritime and cargo-related interests (listed below) who say the measure will protect local jobs and keep Port-related businesses competitive. Ordinary consumers who purchase gasoline for their motor vehicles pay the full amount of CA's sales/use tax on each gallon of gasoline they buy.

The bill, whose primary author is state Senator Alan Lowenthal (D, LB-Paramount), passed the state Senate on May 30 with no "no" votes either on the Senate floor or in any Senate Committee. Sen. Lowenthal is running for Congress in a newly drawn LB-west OC Congressional seat...and his November runoff opponent, LB Councilman Gary DeLong, has previously indicated that he supports the sales tax exemption policy reflected in SB 1243. The measure is now in the state Assembly, where it is co-authored (being carried by) Assemblywoman Bonnie Lowenthal.

Committee chair O'Donnell agendized the item for June 11 with a "support" recommendation" (city staff said it had no recommendation and was awaiting Council guidance). The item appeared on line shortly before the June 5 election that brought O'Donnell a third Council term after he initially sought the Assembly seat now held by Bonnie Lowenthal (who initially sought a state Senate seat, then switched back to the Assembly).

When no members of the Committee asked about the continuing state and local revenue losses, LBReport.com quickly went to the speaker's podium, cited the Board of Equalization's figures and asked the Committee members about this. To hear our our question and the Committee members' responses, click here. [In a later exchange, City staffer Tom Modica explicitly acknowledged that a lower figure by the state Legislative Analyst's Office reflects estimates made roughly 10-15 years ago.]

Following the exchange, three speakers came to the podium to speak in support of the bill: a retired member and a current member from Boatman's Union/ILWU and a representative of Foss Maritime.

To view the state Senate's floor analysis of the bill, click here.

In its written legislative analysis of the measure, the State Board of Equalization stated in pertinent part [bracketed material by us for clarity]:

REVENUE SUMMARY

The revenue loss [annually] from exempting from the sales and use tax maritime fuels sold to a water common carrier, for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the first out of state destination would be as follows:

[Based on total maritime fuel sales $ 1.047.6 billion and $ 1.571.5 billion]

General Fund loss (3.94%) between $ 41.3 million and 61.9 million

Fiscal Recovery loss (0.25%) between 2.6 million and 3.9 million

Local Revenue Fund 2011 loss (1.06%) between 11.1 million and 16.7 million

Local Tax loss (2.00%) between 21.0 million and 31.4 million

Special District loss (1.5%)* between 15.7 million and 23.6 million

Total between $ 91.7 million and $ 137.5 million

* Nearly all of the maritime fuels are sold in jurisdictions with a tax rate of 8.75%.

[The BOE routinely provides legislative analyses to address administrative, cost, revenue and policy issues of pending legislation and doesn't indicate a formal BOE position on the bill.]

To read the State Board of Equalization analysis in full, click here. To view the bill in full, click here

The state Senate's legislative analysis listed the bills supporters/opponents as follows as of May 25:

Support: Alaska Tanker Company, LLC, American President Lines, American Waterways Operators, California Association of Port Authorities, California Taxpayers Association, California Trade Coalition, City of Carson Mayor, Jim Dear, CMA CGM America, LLC, Cruise Lines International Association, General Steamship Agencies, General Steamship Corporation, Harbor Association of Industry & Commerce, Horizon Lines, ILWU - Northern CA District Council, ILWU - Southern CA District Council, Inlandboatman's Union of the Pacific International, International Longshore and Warehouse Union, Maersk, Inc., Masters, Mates and Pilots Union, Matson Navigation Company, Inc., Mitchell and Mitchell Insurance Agency, MOL (America) Inc., OOCL Inc., Pacific Merchant Shipping Association, Port of Long Beach, Sailor's Union of the Pacific, Seafarers International Union, The Jankovich Company, Western Ocean Services, Yang Ming Corporation and 15 members of the Inlandboatmen's Union -Southern CA Region

The Senate floor analysis listed no opposition.

The state legislature faces a looming state budget deficit (spending exceeding revenue) approaching $16 billion. Governor Brown and multiple Dem lawmakers favor a November ballot measure that would increase the state sales tax by a quarter percent and increase the state income tax on high income earners.

Shortly after voting to approve the industry-sought exemption from paying part of the state sales tax, Committee member Garcia said he'd like to see the Committee and the Council support the ballot measure in the coming weeks. Committee chair O'Donnell and vice chair Johnson both nodded their heads in agreement.

Governor Brown's Dept. of Finance indicated in a Senate Appropriations Committee hearing that it had "no position" on the bill.