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State Leg. Committee Chair O'Donnell Agendizes Item Recommending Approval of SB 1243 (Would Let Shippers Continue Avoiding Full Amount of CA's Sales/Use Tax On Marine Fuel They Buy); Measure Recently Passed Senate, Is Now In Assembly Co-Authored By Bonnie Lowenthal


(June 7, 2012) -- In his capacity as chair of the City Council's State Legislation Committee, Councilman Patrick O'Donnell on Monday June 4 quietly agendized for a June 11 meeting of his Committee a recommendation to support SB 1243 that the state Board of Equalization says would cost the state from $92 million to $137.5 million each year [including a revenue portion for local entities] by letting shippers continue to avoid paying CA's sales/use tax on a portion of the fuel they buy.

The measure is now in the state Assembly, where it is co-authored (being carried by) Assemblywoman Bonnie Lowenthal. The bill, whose primary author is state Senator Alan Lowenthal, 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 SB 1243.)

Supporters of the bill include multiple maritime and Port-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 state legislature currently faces a looming state budget deficit (spending exceeding revenue) approaching $16 billion. Governor Brown and multiple Dem lawmakers have advocated 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, saying current revenue projections fall short of anounts needed to maintain current school funding.

The State Legislation Committee item to support SB 1243's marine fuel tax break wasn't referred to the Committee by the City Council. It is agendized as "To Support Senate Bill 1243 (Lowenthal) regarding bunker fuel [sic: more accurately termed marine fuel] and to forward recommendation to City Council for approval."

No city staff report or staff recommendation accompanies the Committee item. Our understanding is that Committee chairs set their Committee agendas...inviting the conclusion that the Committee item and the recommendation to support the bill come from Committee chair O'Donnell.

Efforts to reach Councilman O'Donnell on the matter Monday night (June 4) (via email through an intermediary) and on Tuesday June 5 (through his office) were unsuccessful.

In 2011, Councilman O'Donnell announced that he was a candidate for the Assembly seat then-being vacated by Assemblywoman Lowenthal, but when she changed her mind and announced that she'd seek another two year Assembly term, Councilman O'Donnell dropped his Assembly run and announced that he'd seek a third City Council term.

As separately reported by today, at a June 6 (day after election) regularly scheduled monthly "Chat with Pat" public meeting, Councilman O'Donnell told the audience, "I look forward to a good strong four more years and working with everyone."

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

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


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

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

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