Reform of tax clear hurdle
April 30, 2003
Inland Valley Daily Bulletin
But cities oppose property levy plan
By DAVID M. DRUCKER
Monday, April 28, 2003 -
SACRAMENTO -- An effort to provide perhaps the most comprehensive reform of local government finance since Proposition 13 advanced on Monday, when a bill opposed by most cities won narrow support in a key legislative committee.
Ever since Proposition 13 barred municipalities from hiking property taxes at will, they have relied on sales tax revenue to fund public safety, trash hauling, road maintenance and other essential services. But Assembly Bill 1221 would end that practice by substituting 50 percent of all tax earned via retail sales with property-tax funds and force cities to look to residential development for revenue growth.
"This is an awful bill, just awful," Rancho Cucamonga Councilwoman Diane Williams said, following her testimony to the Assembly Committee on Revenue and Taxation in the Capitol.
Charles Bader, who testified against the bill on behalf of San Bernardino, said AB 1221 could cost the city more than $4 million over the next five years.
"Losing city control over the sales tax is a horrible thing," Bader said. "Mayor (Judith) Valles has been very much in the forefront of opposing theses raids on city revenues."
The bipartisan brainchild of Assemblymen John Campbell, R- Irvine, and Darrell Steinberg, D-Sacramento, the bill failed to garner the necessary votes on its first roll call, but later passed with four yes votes and three abstentions.
Three Democrats and one Republican switched their votes from abstentions after what one Steinberg aide called "some arm twisting."
The intense lobbying efforts of Campbell and Steinberg means changes to the bill are likely as it navigates the committee process on its journey toward a possible floor vote. Groups such as the California Chamber of Commerce and the California State Association of Counties testified in favor of the bill.
"You don't want to stop common-sense reform just because you can't fix everything at one time," Steinberg told the committee.
Should the bill pass, the revenue growth of cities and counties would no longer depend on increasing sales tax money via retail store developments, especially the big box retailer. Revenue growth would instead be tied to increasing property tax revenues, which are tied to residential, industrial and office building construction.
This would be accomplished by replacing half of every penny municipalities earn from the sales tax with property tax funds. Theoretically, cities and counties would forever earn about the same amount of money in sales tax revenue as is coming in when the bill passes.
Revenue growth would be available mainly through increasing residential, industrial and office park development.
"I think that what we have here is a fear of change rather than a realistic look at the problem," Campbell said to the committee, in response to opposition testimony offered by the League of California Cities and a parade of city officials who traveled to Sacramento to oppose the bill.
Among those voting in favor were Assemblyman Tom Harman, R-Huntington Beach, and Democratic Assemblymen Marco Antonio Firebaugh of Sough Gate, John Laird of Santa Cruz and Mark Leno of San Francisco. Revenue and Taxation Committee Chairman Ed Chavez, D-City of Industry, abstained.
Some of the members who supported AB 1221 still expressed concern about how it is written. Consequently, changes are likely in an effort to build a consensus and increase the bill's chances of surviving to the floor and passing.
"My position is simple: If my local governments don't like it, I'm going to vote no," Assemblyman Russ Bogh, R-Yucaipa, said.
The bill contains language designed to protect local governments from Sacramento's habit of raiding municipal coffers to shore up budget deficits such as the $30 billion gap that currently exists.
If such a raid occurred, the changes created by the legislation would be suspended. Campbell and Steinberg said they are open to amending AB 1221 to include constitutional protections for local government revenues collected and dispersed by the state.
"The state has an unmistakable pattern of action of first taking control over a source of revenue and then taking all or part of that revenue," Bader said. "That's the base of the issue; it's a lack of trust of the Legislature."
David M. Drucker can be reached by e-mail email@example.com or by phone at (916) 442-5096.