BEVRLYRLY STAFF REPORT. Meeting Date: April 10, 2018 To: From: Subject:
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1 BEVRLYRLY STAFF REPORT Meeting Date: April 10, 2018 To: From: Subject: Honorable Mayor & City Council Cynthia Owens, Senior Management Analyst Request for the City Council to Take a Positon on (a) Proposition 68 California Drought, Water, Parks, Climate, Coastal - Protection, and Outdoor Access for All Act of 2018, (b) Proposition 69 - Motor Vehicle Fees and Taxes: Restriction on Expenditures: Appropriations Limit, (c) the Tax Fairness, Transparency and Accountability Act of 2018 (# , Amdt #1), and (d) the Proposed Ballot Initiative (# ) to Repeal Senate Bill 1 - the Road Repair and Accountability Act of 2017 Attachments: 1 Local Streets and Roads Projected Revenues INTRODUCTION - The City Council has historically taken positions on proposed state legislation of interest to Beverly Hills because of the City s location, economy, programs, and policies This item requests the City Council provide direction to staff on drafting letters of support/opposition, adopting resolutions in support/opposition, or remaining neutral on: a) Proposition 68 - California Drought, Water, Parks, Climate, Coastal Protection and Outdoor Access for All Act of 2018; b) Proposition 69 - Motor Vehicle Fees and Taxes: Restriction on Expenditures: Appropriations Limit; c) The Tax Fairness, Transparency and Accountability Act of 2018 (# , Amdt #1); and d) The proposed ballot initiative (# ) to repeal Senate Bill 1 the Road Repair and Accountability Act of 2017 The City Council Legislative/Lobby Committee (Liaisons Mayor Gold and Vice Mayor Mirisch) reviewed these items on March 15, 2018 and their recommendations are included in the following section of the report DISCUSSION On March 15, 2018, the City Council Legislative/Lobby Committee recommended that City Council consider: Opposing Proposition 68, Supporting Proposition 69,
2 Meeting Date: April 10, 2018 Opposing the Tax Fairness, Transparency and Accountability Act of 2018 (# , Amdt #1), and Supporting the proposed ballot initiative (# ) to repeal Senate Bill 1 Proposition 68 - California Drought, Water; Parks, Climate, Coastal Protection, and Outdoor Access for all Act of 2018 Proposition 68 would authorize the sale of $4 billion in general obligation bonds for state and local parks; water infrastructure and flood protection projects; and other environmental protection projects This ballot measure was initiated by the 2017 state legislature passage of Senate Bill 5 With the assumption of a 35 percent interest rate, this bond is expected to accrue $253 billion in interest with the state ultimately spending $653 billion to pay off the bonds issued Portions of the Proposition 68 bond funds would be allocated as follows: $725 million for the construction of parks in park-poor neighborhoods $200 million in per capita grants to local governments for park rehabilitation grants o $200,000 minimum for cities o $40 million in grants to local jurisdictions where voters have passed local or regional park infrastructure improvement measures $142 million for the California River Parkways Act o $375 million to the Santa Monica Conservancy for projects to enhance the Los Angeles River Watershed On March 15, 2018, the City Council Legislative/Lobby Committee recommended the City oppose this legislation The Liaisons expressed concerns about the $4 billion bond becoming a $653 billion bond once $253 billion in interest accrues The Liaisons also expressed concerns with how the repayment of the bond would affect the state s other general fund obligations and programs Proposition 69 - Motor Vehicle Fees and Taxes: Restrictions on Expenditures: Appropriations Limit Proposition 69 would require the revenue from the diesel sales tax and Transportation Improvement Fee (TIF) created by the passage of Senate Bill 1 (SB 1) be dedicated for transportation-related purposes SB I is expected to generate $52 billion over the next decade with annual proceeds estimated at $54 billion The legislation requires approximately 50% of the proceeds to be set aside for city and county governments with the remaining amount allocated to the state As defined by SB 1, the new motor vehicle fees and taxes will provide annual funding in the following amounts to local and state governments: Local Funding State Funding $15 billion to local street and road maintenance $1 5 billion for state highway maintenance and rehabilitation $750 million for transit operations and capital $400 million for highway bridge and culvert maintenance and rehabilitation $200 million to the local partnership program $300 million for high priority freight corridors $100 million for the Active Transportation $250 million for solutions for congested corridors Program bikes and pedestrian projects Page2of6
3 Meeting Date: April 10, 2018 Local Funding State Funding $825 million dollars for the regional share of the $80 million for parks programs, off-highway State Transportation Improvement Program vehicle programs, boating programs, and agricultural programs $25 million for local planning grants $275 million for the interregional share of the State Transportation Improvement Program $25 million for freeway service patrols $7 million for transportation research at the University of California and the California State University $5 million for workforce training programs Total Local Annual Revenue = $2,657,500,000 Total State Revenue = $2,594,500,000 As of 2018, the state constitution prohibits the legislature from using gasoline excise tax revenue and diesel excise tax revenue for general non-transportation purposes This proposition would require the diesel sales tax revenue generated by SB 1 to be deposited into the Public Transportation Account This account is designed to distribute funds for mass transportation and rail systems Proposition 69 would require the TIF revenue be spent on public streets, highways and transportation systems This is the primary funding source for the $15 billion annual funding for local street and road maintenance Additionally, Proposition 69 exempts the revenue from SB l s fee schedules and tax increases from the state appropriation limit, sometimes referred to as the Gann Limit This limit, approved by voters in 1979, prohibits both state and local governments from spending revenue in excess of the per-person government spending in the fiscal year after several adjustments for cost-of-living and population changes Proposition 69 only applies to the revenue generated by SB 1 and does not restrict any other money the state generates that is related to fuel taxes, vehicle fees, etcetera unless that funding is already restricted by the state s constitution Nothing in this proposition or in SB 1 guarantees local funding will continue at its current levels The funding levels could change with an act of the state legislature Should SB 1 be repealed through a voter initiative, than the passage of this proposition will have no effect The City Council Legislative/Lobby Committee recommended the City support this legislation as long as it did not include provisions to affirm the taxes and fees enacted by the passage of SB 1 Tax Fairness, Transparency and Accountability Act of 2018 (# , Amdt #1) The Tax Fairness, Transparency and Accountability Act of 2018 ( Act ), which is sponsored by the California Business Roundtable, seeks to expand the requirement of a supermajority approval in order to enact new revenue measures The California League of Cities ( League ) is opposed to this Act The League has identified this Act as being detrimental to the ability of local governments to charge fees for services The League is requesting the assistance of local jurisdictions in defeating this Act While the Act applies universally to the state legislature and local government, the information provided below focuses on the impacts to local jurisdictions Page3of6
4 Meeting Date: April 10, 2018 This Act broadens the definition of what taxes and fees would require approval by a twothirds supermajority vote of the local authority for new revenue measures For local governments, it would also require two-thirds approval of the electorate to raise new taxes or of the governing body to raise new fees For our City, this would require approval by four of the five City Council members for any fee increases Some key elements of the Act regarding taxes include: Requiring two-thirds approval of all members of the local legislative body before a tax can be placed on the ballot; Eliminating local authority to impose a tax for general purposes by majority vote; Expanding the definition of a tax to include payments voluntarily made in exchange for a benefit received, which may include local franchise fees; Prohibiting any tax from being placed on the ballot unless it either specifically identifies by binding and enforceable limitation how it can be spent, with any change requiring re-approval by the electorate, or states in a separate stand alone segment of the ballot that the tax revenue is intended for unrestricted revenue purposes ; and Requiring tax measures to be consolidated with the regularly scheduled general election for members of the governing body, unless an emergency is declared by a unanimous vote of the governing body Additionally, this initiative will restrict the ability of local governments to impose fees or charges, other than those subject to Proposition 218, by: Prohibiting a fee or charge from being imposed, increased or extended unless approved by two-thirds vote of the legislative body; Authorizing a referendum on decisions of a legislative body to impose, increase or extend a fee by petitions signed by 5% of affected voters; Requiring a fee or charge proposed by initiative to be subject to a two-thirds vote of the electorate; Narrows the legal threshold from reasonable to actual costs for fees applied to local services, permits, licenses, etc Further, the measure authorizes new avenues to challenge actual costs by enabling a payor to request a court decide whether they are reasonable Opens up further debate by replacing the existing standard that fees and charges bear a fair and reasonable relationship to the payors burdens and benefits with a more rigorous proportional to the costs created by the payor standard; and Increases the legal burden of proof for local agencies from preponderance of evidence (more likely than not) to clear and convincing evidence (high probability) to establish that a levy, charge or other exaction is: o not a tax, o the amount is no more than necessary to cover the actual costs, and o the revenue is not being used for other than its stated purpose The City Council Legislative/Lobby Committee recommended the City oppose this ballot initiative Proposed ballot initiative (# ) to repeal Senate Bill I - the Road Repair and Accountability Act of 2017 This ballot initiative would repeal SB 1, which enacted the following vehicle fuel taxes and fees to pay for repairs and improvements to local roads, state highways, and public transportation Gasoline excise tax: $012 per gallon Page 4 of 6
5 Meeting Date: April 10, 2018 Diesel excise tax: $020 per gallon Diesel sales tax: 4% per gallon Road Improvement Fee of $10000 per year for zero-emission vehicles Transportation Improvement Fee (TIF) The fee will be based on the market value of the vehicle with the fee range described below: o $2500 per year for vehicles with a market value $0 - $4,999 o $5000 per year for vehicles with a market value $5,000 - $24,999 o $10000 per year for vehicles with a market value $25,000 - $34,999 o $15000 per year for vehicles with a market value $35,000 - $59,999 o $17500 per year for vehicles with a market value $60,000 and higher SB 1 also specifies that the tax rates and fees specified in this bill are adjusted annually based on the Consumer Price Index (CPI) Furthermore, this initiative will require the state legislature to submit any future measure enacting specified taxes or fees on gas or diesel fuel, or on the privilege to operate a vehicle on public highways, to the electorate for approval It is currently estimated that SB 1 will raise approximately $54 billion annually in dedicated transportation funding to rehabilitate and maintain local streets, roads, and highways; safety improvements; repair and replace aging bridges and culverts; congestion reduction; and bicycle and pedestrian facilities According to wwwcaliforniacityfinancecom, the City is projected to receive $950,272 in funding for local streets, toad maintenance and rehabilitation during Fiscal Year (Attachment 1) Of that funding, $236,979 is new funding from SB 1 For Fiscal Year , the City is projected to receive $1,453,694 for local streets, road maintenance and rehabilitation with $614,720 generated from SB 1 This legislation also contains language that the tax rates and fees are adjusted annually for CPI; therefore, the annual amount generated by SB 1 could increase each fiscal year The City Council Legislative/Lobby Committee expressed concerns that the increase in the gas tax passed by the state legislature is a regressive tax that will create an undue burden on taxpayers, especially those in lower income brackets Additionally, they deemed the tax to be overreaching by the Governor and state legislature As such, the Liaisons recommended taking a position of support to repeal the increase of the Legislature approved gas and car tax FISCAL IMPACT The anticipated financial impacts to the City for each initiative is estimated as follows: a) Proposition 68 guarantees each City will minimally receive a one-time amount of $200,000 It is unclear how much of the bond money would be available through grants to the City and whether or not the City would receive any of the grant funding b) Proposition 69 guarantees the funding generated by the passage of SB I is dedicated for transportation-related purposes Should this funding not be dedicated, there is potential for the state legislature at a later date to appropriate funds generated by the SB 1 for other purposes It is unknown what the revenue loss to the City would be should the revenue be redirected but it could be up to the annual, dedicated allotment c) Tax Fairness, Transparency and Accountability Act of 2018 (# , Amdt #1) would require higher thresholds for the approval of taxes and fees Additionally, it narrows the threshold of what is considered a reasonable cost to recover through Page 5 of 6
6 Meeting Date: April 10, 2018 a fee to what is the actual cost Pet the Secretary of State s website, there is a potential for substantial decreases in annual local revenues depending upon future actions of the state legislature, local governing bodies, voters and the courts d) Proposed ballot initiative (# ) to repeal Senate Bill I - the Road Repair and Accountability Act of 2017 would decrease City revenue The City is projected to receive $950,272 in funding for local streets, road maintenance and rehabilitation during Fiscal Year Of that funding, $236,979 is new funding from SB 1 For Fiscal Year , the City is projected to receive $1,453,694 for local streets, road maintenance and rehabilitation with $614,720 generated from SB 1 Should this item be repealed, the City would lose this new revenue stream for maintaining City streets at an approximate cost of $614,720 per year RECOMMENDATION Staff recommends that the City Council provide direction on drafting letters of support/opposition, adopting resolutions in support/opposition, or remain neutral on: a) Proposition 68 - California Drought, Water, Parks, Climate, Coastal Protection and Outdoor Access for all Act of 2018; b) Proposition 69 - Motor Vehicle Fees and Taxes: Restrictions on Expenditures: Appropriations Limit; c) The Tax Fairness, Transparency and Accountability Act of 2018; and d) The proposed ballot initiative (# ) to repeal Senate Bill 1 - the Road Repair and Accountability Act of 2017 Page 6 of 6
7 Attachment 1
8 44, ,569 Local Streets and Roads - Projected Revenues : Estimated 11 January 2018 Hwy Users Tax Loan Road ntnc Hwy Users Tax Loan Road Mntnc Account Repayment RehabAcct Account Repayment RehabAcct LOSANGELESCOUNTY AGOURA HILLS 435,967 23, , , , , ,132 ALHAMBRA 1, , , , , ,443,431 3,632,320 ARCADIA 1,175, ,215 1,568,072 1,383, ,755 2,401,742 ARTESIA 349,766 19, , , , ,132 AvALöN -:- 81,390 4,238 21, ,890 94,914 4,238 61, ,059 AZUSA BALDWIN PARK ,019 41, , , , ,593 BELLFLOWER BELL GARDENS 879,112 48, ,233 1, ,034,460 48, ,137 1,794,281 BEVERLY HILLS , , , ,974 39, ,333 1,453,694 BRADBURY 28,246 1,258 6,313 35,818 32,262 1,258 18,383 51,903 BURBANK 2,144, , ,023 2,862,908 2,525, ,404 1,744,183 4,389,085 CALABASAS 500,527 27, , , , ,900 1,017,735 CARSON 1,911, , ,241 2,552,394 2,251, ,491 1,555,555 3,913,519 CERRITOS 1,026,906 56, ,382 1,369,173 1,208,427 56, ,950 2,096,262 CLAREMONT COMMERCE ,852 74, , ,080 14, , ,873 COMPTON 2,040, , ,725,287 2,403, ,740 1,661,435 4,179,059 COVINA 1,004,562 55, ,519 1,339,798 1,182,354 55, ,879 2,051,950 CUDAHY 504,765 27, , , ,318 27, ,370 1,026,439 CULVER CITY 823,940 45, ,715 1,098, ,418 45, , ,960 DIAMOND BAR 1,169,387 64, ,458 1,559, ,399 64, ,641 2,388,914 DOWNEY 2,322, , ,206 3,101,505 2,735, ,407 1,890,300 4,755,535 bjaite ,548 25, , , ,474 25, , ,403 EL MONTE 2,331, , ,692 3,113,327 2,746, ,903 1,897,540 4,773,693 EL SEGUNDO 347,759 19,004 95, , ,401 19, , ,009 GARDENA GLENDALE GLENDORA HAWAIIAN GARDENS 311,436 16,772 84, , ,954 16, , ,715 HAWTHORNE 1,789,761 99, ,953 2,389,371 2,107,763 99,657 1,455,719 3,663,139 HERMOSA BEACH 406,540 22, , , ,699 22, , ,743 H IDDEN HILLS 2,143 10,751 56,914 50,859 2,143 31,302 84,304 HUNTINGTON PARK 1,216,367 67, ,673 1,622,548 1,431,785 67, ,117 2,485,410 INDUSTRY 14, ,572 18,029 16, ,489 24,583 INGLEWOOD IRWINDALE 34,653 1,618 8,116 44,387 39, ,630 65,063 LA CANADA FLINTRIDGE 425,403 23, , , ,758 23, , ,434 L-IABRA HEIGHTS 6,210 31, , ,387 6,210 90, ,316 LAKEWOOD 1,635,377 91, ,529 2,182,907 1,925,759 91,001 1,329,281 3,346,040 January 2018 Ca tiforiacitjfirtaricecow r;;;; tnew
9 - 842,534 1,409, , , ,277 Local Streets and Roads - Projected Revenues Estimated 11 January 2018 Hwy Users Tax Loan RoadMinc Account Repayment Rehab Acct LA MIRADA 1,013,139 56, ,932 1,351,268 LANCASTER 3,214, , ,078 4,294, ,723 1,107, , , ,536 23, , , ,874 2,738,518 13,035,323 81,975,656 4,594,724 23,050, ,621,006 LA PUENTE 831,078 45,990 LA VERNE LAWNDALE LOMITA LONG BEACH LOS ANGELES LYNWOOD MALIBU MANHAHAN BEACH MAYWOOD MONROVIA MONTEBELLO 683, , ,497 9,750,931 1,472, , , , ,308,300 81,848 14,485 40,344 31, ,663 41, , , , ,192 I I ,613 1,964,593 72, , , , , , ,653 1,055, , ,494 MONTEREY PARK 1,261,442 70, ,351 1,682,828 NORWALK 2,154, , ,966 2,876,900 PALMDALE PALOS VERDES ESTATES PARAMOUNT 1,146,211 63, ,940 1,528,726 PASADENA 2,921, , ,455 3,901,463 PICO RIVERA 1,310,916 72, ,267 1,748,992 - POMONA 3,163, ,740 4,226,127 RANCHO PALOS VERDES 880,329 48, ,576 1,173,656 REDONDO BEACH 78, ,990 1,880, , , ,483 23, , , ,523 2,686,864 2,370, ,129 1,637,904 4,120, , , ,536 4,003,637 11, , ,639 3,531,086 10,796 29,548 41, , ,624 2,442,766 3,471 1,093,283 1,526,284 6,141,081 14,504 Ce 1iFotv iacitj FirLcrLce cow Hwy Users Tax Loan Road Mntnc Account Repayment RehabAcct 1,192,465 56, ,903 2,069, , ,414 2,620,767 6,587, ,832 45, ,798 1,695, ,788 37, ,889 1,392, ,353 37, ,061 1,400, ,511 23, , , , ,874 7,973,776 20,012,452 96,637,317 4,594,724 67,116, ,348,823 1,733,308 81,848 1,195,586 3,010, ,383 14, , , ,101 40, ,315 1,488, J , ,565 1,614,784 1,540,165 72,663 1,061,409 2,674,236 1,484,923 70,035 1,023,032 2,577,991 2,537, ,991 1,752,752 4,410,574 3,806, ,307 2,633,802 6,620, ,349,077 63, ,660 2,341,312 3,441, ,945 2,380,195 5,984,156 1,543,248 72,809 1,063,551 2,679,609 3, ,556 2,579,019 6,482,793 1,035,894 48, ,134 1,796, ,335 1,144,273 2,882,054 ROLLING HILLS ESTATES 170,369 9,171 46, , ,633 9, ROSEMEAD 1,127,172 62, ,584 1,503,264 1,326,631 62, , ,764 2,302,206 SAN DIMAS 704,878 38, , , ,054 38, ,442 1,436,410 SAN FERNANDO 27, , , ,111 27, ,616 1,029,563 SAN GABRIEL 46, ,945 1,123, ,338 46, ,180 1,719,150 SAN MARINO 280,861 15,310 76, , ,714 15, , ,657 SANTA CLARITA 4,401, ,953 1,233,885 5,881,415 5,186, , ,025,078 SANTA FE SPRINGS 379,674 20, , ,026 20, , ,561 SANTA MONICA 1,914, , ,153 2,556,732 2,255, ,673 1,558,212 3,920,183 SIERRA MADRE 231,042 12,516 62, , ,982 12, , ,331 SIGNAL HILL 243,188 13,197 66, , ,300 13, , ,277 SOUTH EL MONTE 432,804 23,716 SOUTH GATE SOUTH PASADENA TEMPLE CITY 748,634 TORRANCE 2,997,464 VERNON 10,038 January ,012, , ,822 29,548
10 ,200,849 1,253, ,636-10,784 5, ,019 Local Streets and Roads - Projected Revenues \ I Estimated 11 January 2018 Hwy Users Tax Loan Road ntnc Account Repayment Rehab Acct WALNUT 621,806 34, , ,923 WEST COVINA - 122, ,878 2,938,291 WEST HOLLYWOOD 738,354 40, , ,788 WESTLAKE VILLAGE 176,513 9, , ,764 WHITTIER 1,790,694 99, ,215 2,390,618 County of Los AneIes 148,520,749 7,020,753 35,221, ,762,934 Total Cities &County: Los Angeles 335,771,823 17,464,962 87,617, ,854,308 Ii1!c 1 IhII -----, Hwy Users Tax Li Roadntnc Account Repayment RehabAcct 731,120 34, ,407 2,591, ,565 1,790, ,519 40, , ,876 9, ,993 2,108,862 99,709 1,456, ,479,841 7,020, ,554, ,058,154 17,464, ,116,989 1,265,784 4,504, , ,383 3,665, ,055, ,640, CHOWCHILLA 362,558 21, , , ,080 21, , ,356 MA ERA 75, ,878 1,705,121 1,493,463 75,124 1,097,361 2,665,948 County of Madera 4,694, ,432 1,672,747 6,700,411 5,753, ,432 4,870,557 10,957,119 Total Cities & Madera 6,309, ,974 2,157,073 8,896,955 7,677, ,974 6,280,776 14,388,423 MARIN COUNTY BELVEDERE 50,869 2,469 12,387 65,726 58,742 2,469 36,068 97,279 CORTE MADERA - 54, ,520 10, , ,328 FAIRFAX 163,899 8,607 43, , ,341 8, , ,673 LARKSPUR 268,671 14,292 71, , ,239 14, , ,303 MILL VALLEY NOVATO 1,143,640 61, ,949 1,516,572 1,341,261 61, ,395 2,308,638 ROSS 58,568 2,891 14,503 75,962 67,785 2,891 42, ,905 SAN ANSELMO 276,245 14,707 73, , ,136 14, , ,676 SAN RAFAEL 1,274,781 69, ,994 1,690,942 1,495,309 69,167 1,010,345 2,574,821 SAUSALITO 158,836 8,330 41, , ,394 8, , ,396 TIBURON 204,093 10,809 54, , ,555 10, , ,254 County of Mann 5,085, ,943 1,314, ,968 5,908, ,943 3,826,301,996,782 Total Cities & Coun Mann 9,206, ,931 2,422,750 12,112,023 10,733, ,931 7,054,351 18,270,829 MARIPOSA COUNTY County of MariDosa 1,574, , ,826 2,198,814 2,693, ,817 1,480,000 4,277,471 MEN DOCINO COUNTY FORT BRAGG 167,002 8,835 44, , ,179 8, , ,077 POINT ARENA 15, ,578 18,209 16, ,506 24,775 UKIAH ,546 93, , , , ,679 WILLITS 107,379-28, , ,602 81, ,683 County of Mendocino 3,652, ,335 1,210,719 5,104,899 4,417, ,335 3,525,266 8,184,507 Total Cities & County: Mendocino 4,287, ,833 1,378,769 5,941,021 5,159, ,833 4,014,580 9,448,720 January 2018 Ca Iifory iacityfiarc co
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