STAFF REPORT. Attachments: 1. Local Streets and Roads Projected. Revenues
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1 STAFF REPORT To: From: Subject: Honorable Mayor & City Council Cynthia Owens, Senior Management Analyst Request for the City Council to Take a Position 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 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 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 3.5 percent interest rate, this bond is expected to accrue $2.53 billion in interest with the state ultimately spending $6.53 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 $37.5 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 $6.53 billion bond once $2.53 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 1 is expected to generate $52 billion over the next decade with annual proceeds estimated at $5.4 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 $1.5 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 Local Funding State Funding $82.5 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 $27.5 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 = 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 TIE revenue be spent on public streets, highways and transportation systems. This is the primary funding source for the $1.5 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 Eairness, Transparency and Accountability Act of 2018 ( Act ) seeks to expand the requirement of a supermajority approval in order to enact new revenue measures. This Act is sponsored by the California Business Roundtable and the American Beverage Institute ( ABA ). The ABA has contributed more than $4 million to the signature gathering efforts and is now considered the principal sponsor of this Act. Due to the influx of money, it is extremely likely they will be able to gather the required number of signatures to place it on the November ballot. Page3of6
4 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 believes this is an attempt by the California Business Roundtable and the ABA, which is led by large corporations such as Pepsi-Cola, Coca- Cola, and the Dr Pepper Snapple Group, to avoid paying their fair share of the costs to provide local essential services (i.e. police, fire, libraries, and public works) that serve our community. 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. 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 Page4of6
5 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: $0.12 per gallon Diesel excise tax: $0.20 per gallon Diesel sales tax: 4% per gallon Road Improvement Fee of $ 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 $25.00 per year for vehicles with a market value $0 - $4,999 o $50.00 per year for vehicles with a market value $5,000 - $24,999 o $ per year for vehicles with a market value $25,000 - $34,999 o $ per year for vehicles with a market value $35,000 - $59,999 o $ 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 $5.4 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 the City is projected to receive $950,272 in funding for local streets, road 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. Page 5 of 6
6 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 1 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 a fee to what is the actual cost. Per 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 1 - 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 MAIri Approved Sy Page 6 of 6
7 Attachment I
8 1,004,562 Local Streets and Roads - Projected Revenues Estimated 11 January 2018 Hwy Users Tax Loan Road Minc Hwy Users Tax Loan RoaWMntnc Account Repayment RehabAcct Account Repayment RehabAcct LOS A.NG!LE contv AGOURA HILLS 435,967 23,894 ALHAMBRA 1,774,756 98,815 ARCADIA 1, ,224 ARTESIA 349,766 19,117 AVALON 81,390 4,238 AZUSA 1,019,789 56,571 BACbWIN PARk 1,543,911 85,873 BELL 749,019 41,390 BELLFLOWER 1,566,620 87,146 BELL GARDENS 879,112 48,684 BEVERLY HILLS 713,293 39,387 BRADBURY 28,246 1,258 BURBANK 2,144, ,404 calabasas 500,527 27,513 CARSON 1, ,491 CERRITOS 1,026,906 56,886 CLAREMONT 745,309 41,182 COMMERCE 272,690 14,852 COMPTON 2,040, ,740 - COVINA 55,717 CUDAHY 504,765 27,751 CULVER CITY 823,940 45,590 DIAMOND BAR 1,169,387 64,874 DOWNEY DUARTE EL MONTE EL SEGUNDO GARDENA GLENDALE GLENDORA HAWAIIAN GARDENS HAWTHORNE HERMOSA BEACH HIDDEN HILLS HUNTINGTON PARK INDUSTRY INGLEWOOD IRWINDALE LA CANADA FUNTRIDGE LA HABRA HEIGHTS LAKEWOOD January ,322, ,548 2,331, ,759 1,243,497 4,105,503 1,078, ,436 1,789, ,540 44,021 1,216,367 14,945 2,344,547 34, , ,569 1,635, ,407 25, ,903 19,004 69, ,353 59,806 16,772 99,657 22,300 2,143 67, ,621 1,618 23,302 6,210 91,001 I 119, , ,215 95,905 21, , , , , , ,593 6, , , , , ,598 74, , , , , , , , ,692 95, , , ,033 84, , ,874 10, ,673 2, ,297 8, ,898 31, , ,731 2,369,304 1,568, , ,890 1,360,162 2,060, ,051 2,090,955 1,172, ,272 35,818 2,862, ,069 2,552,394 1,369, , ,048 2,725,287 1,339, ,736 1,098,246 1,559,720 3,101, ,254 3,113, ,103 1,658,830 5,485,463 1,438, ,347 2,389, ,714 56,914 1,622,548 18,029 3,130,465 44, , ,936 2,182,907 Ct tiforiacit9fiw.t.cow. 512,212 2,090,074 1,383, ,768 94,914 1,200,305 1,817, ,093 1,844,700 1,034, ,974 32,262 2,525, ,322 2,251,473 1,208, , ,080 2,403,884 1,182, , ,418 1,376,399 2,735, ,474 2,746, ,401 1,463,768 4,837,362 1,269, ,954 2,107, ,699 50,859 1,431,785 16,581 2,761,357 39, , ,387 1,925,759 23,894 98,815 65,224 19,117 4,238 56,571 85,873 41,390 87,146 48,684 39,387 1, A04 27, ,491 56,886 41,182 14, ,740 55,717 27,751 45,590 64, ,407 25, ,903 19,004 69, ,353 59,806 16,772 99,657 22,300 2,143 67, ,621 1,618 23,302 6,210 91, ,026 1,443, , ,247 61, ,350 1,254, ,593 1,272, , ,333 18,383 1,744, ,900 1,555, , , ,941 1,661, , , , ,641 1,890, ,881 1,897, ,603 1,008,336 3,350, , ,989 1,455, ,744 31, ,117 7,489 1,908,035 23, ,374 90,719 1,329, ,132 3,632,320 2,401, , ,059 2,083,226 3,158,172 1,527,075 3,204,816 1,794,281 1,453,694 51,903 4,389,085 1,017,735 3,913,519 2,096,262 1,519, ,873 4,179,059 2,051 1,026,439 1,680,960 2,388,914 4,755, ,403 4,773, ,009 2,541,133 8,416, , ,715 3,663, ,743 84,304 2,485,41 O 24,583 4,800,013 65, , ,316 3,346,040
9 I Local Streets and Roads - Projected Revenues I I I - Estimated 11 January B1 Hwy Users Tax Loan Road ntnc Hwy Users Tax Loan Roa Mntnc Account Repayment RehabAcct Account Repayment Rehab Acct I LA MIRADA 1,013,139 56, , , , ,903 2, LANCASTER 3,214, ,297 3,787, ,620,767 6,587,493 LA PUENTE 831,078 45, ,723 1,107, ,832 45, ,798 1,695,620 LA VERNE 683,446 37, , , ,788 37, ,889 1,392,390 LAWNDALE 687,319 37, , , ,353 37, ,061 1,400,344 LOMITA 423,497 23, , , ,511 23, , ,519 LONG BEACH 9, ,874 2,738,518 13,035,323 11,492, ,874 7,973,776 20,012,452 LOS ANGELES 81,975,656 4,594,724 23,050, ,621,006 96,637,317 4, ,116, ,348,823 LYNWOOD 1,472,133 81, ,613 1,964,593 1,733, ,586 3,010,742 MALIBU 266,161 14,485 72, , ,383 14, , ,463 MANHATTAN BEACH 730,365 40, , , ,101 40, ,315 1,488,760 MAYWOOD 578,861 31, , , ,491 31, ,235 1,177,576 MONROVIA 791,721 43, ,653 1,055, ,434 43, ,565 1,614,784 MONTEBELLO MONTEREY PARK 1,261,442 70, ,351 1,682,828 1,484,923 70,035 1,023,032 2,577,991 NORWALK 2,154, , ,966 2,876,900 2,537, ,991 1,752,752 4,410,574 PALMDALE 3,230, , ,555 4,315,583 3,806, ,307 2,633,802 6,620,185 PALOS VERDES ESTATES 284,835 15,532 77, , ,399 15, , ,820 PARAMOUNT 1,146,211 63, ,528,726 1,349,077 63, ,660 2,341,312 PASADENA 2,921, , ,455 3,901,463 3,441, ,945 2,380,195 5,984,156 PICO RIVERA 1,310,916 72, ,267 1,748,992 1,543,248 72,809 1,063,551 2,679,609 POMONA RANCHO PALOS VERDES 880,329 48, ,576 1,173,656 1,035,894 48, ,134 1,796,780 REDONDO BEACH 1,409,479 78, ,990 1,880,804 1,659,445 78,335 1,144,273 2,882,054.. ROLLING HILLS ESTATES 170,369 9,171..._..._ 46, , ,633 9, , ,764 ROSEMEAD 1,127,172 62, ,584 1,503,264 1,326,631 62, ,067 2,302,206 SAN DIMAS 704, , , ,054 38, ,442 1,436,410 SAN FERNANDO 506,285 27, , , ,111 27, ,616 1,029,563 SAN GABRIEL 842,534 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, ,953 3,592,719 9,025,078 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, , , ,483 23, , ,635 SOUTH GATE 2,012, , ,523 2,686,864 2,370, ,129 1,637,904 4,120,045 SOUTH PASADENA 537,822 29, , , ,110 29, ,624 1,093,283 TEMPLE CITY 748,634 41, , , ,639 41, ,526,284 TORRANCE 2,997, , ,945 4,003,637 3,531, ,228 2,442,766 6,141,081 VERNON 10, ,192 11,467 10, ,471 14,504 CatiForvJaCitj F(vi.twtc&co January2018
10 Local Streets and Roads - Projected Revenues Estimated 11 January 2018 Hwy Users Tax Loan RoadMic Account Repayment RehabAcct WALNUT WEST COVINA WEST HOLLYWOOD WESTLAKE VILLAGE WHIHIER County of Los Angeles Total Cities & County: Los Angeles 621,806 2,200, , ,513 1,790, ,520, ,771,823 34, ,565 40,792 9,515 99,709 7,020,753 17,464, , , ,642 47, ,215 35,221,432 87,617,523 c sBjJ 55J Hwy Users Tax Loan Road Mntnc Account Repayment [ RehabAcct J 827, ,120 34, ,407 1,265,784 2,938,291 2,591, ,565 1,790,348 4,504, , ,519 40, ,858 1,505, , , , ,383 2,390,618 2,108,862 99,709 1,456,483 3,665, ,762, ,479,841 7,020, ,554, ,055, ,854, ,058,154 17,464, ,116, ,640,105 CHOWCHILLA 362,558 21, , , ,080 21, , ,356 MADERA 1,253,119 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 & County: Madera 6,309, ,974 2,157,073 8,896,955 7,677, ,974 6,280,776 14,388,423 MARIN COUNTY BELVEDERE CORTE MADERA FAI RFAX LARKSPUR MILL VALLEY NOVATO ROSS SAN ANSELMO SAN RAFAEL SAUSAUTO TIBURON County of Ma tin 50, , , , ,185 1,143,640 58, ,245 1,274, , ,093 5,085,918 9,206,342 2,469 10,784 8,607 14,292 16,950 61,982 2,891 14,707 69,167 8,330 10, , ,931 12,387 54,100 43,179 71,701 85, ,949 14,503 73, ,994 41,787 54,226 1,314, , , , , ,170 1,516,572 75, ,734 1,690, , ,127 6,661, , , , , ,228 1,341,261 67, ,136 1,495, , ,555 5,908, ,469 10,784 8,607 14,292 16,950 61,982 2,891 14,707 69,167 8,330 10, , , , , , , ,395 42, ,832 1,010, , ,890 3,826, , , , , ,774 2,308, , ,676 2,574, , ,254 9,996, Total Cities & Coun Mann MARX POSA COUNTY Count Dsa 1,574, , ,826 2,198,814 2,693, ,817 1,480,000 4,277,471 MENDOCINO COUNTY FORT BRAGG 167,002 8,835 44, , ,179 8, , ,077 POINT ARENA 15, ,578 18,209 16, ,506 24,775 UKIAH 345,076 18,546 93, , ,221 18, , ,679 WILLITS 107,379 5,602 28, , ,246 5,602 81, ,683 County of Mendocino 3,652, ,335 1,210,719 5,104,699 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 tiforv.iaci4j Fiavc&.co
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