BEVERLY HILLS Meeting Date: May 8, 2018 Item Number: D 4 To: From: AGENDA REPORT Honorable Mayor & City Council Cynthia Owens, Senior Management Analyst Subject: A. RESOLUTION OF THE COUNCIL OF THE CITY OF BEVERLY HILLS TO SUPPORT PROPOSITION 69 MOTOR VEHICLE FEES AND TAXES: RESTRICTIONS ON EXPENDITURES: APPROPRIATIONS LIMITS B. RESOLUTION OF THE COUNCIL OF THE CITY OF BEVERLY HILLS TO SUPPORT THE PROPOSED BALLOT INITIATIVE (#17-0033) TO REPEAL SENATE BILL 1 THE ROAD REPAIR AND ACCOUNTABILITY ACT C. RESOLUTION OF THE COUNCIL OF THE CITY OF BEVERLY HILLS TO OPPOSE THE PROPOSED BALLOT INITIATIVE (#17-0050, AMDT. #1), THE TAX FAIRNESS, TRANSPARENCY AND ACCOUNTABILITY ACT OF 2018 Attachments: 1. Resolution - Proposition 69 2. Resolution - Repeal of Senate Bill 1 3. Resolution - Tax Fairness, Transparency and Accountability Act of 2018 4. Summary of Proposition and Ballot Initiatives RECOMMENDATION Staff recommends the City Council adopt: A. A resolution in support of Proposition 69 - Motor Vehicle Fees and Taxes: Restriction on Expenditures: Appropriations Limit (Proposition 69 ); B. A resolution in support of the proposed ballot initiative (#17-0033) to repeal Senate Bill 1 - the Road Repair and Accountability Act of 2017 ( repeal of SB 1 ); and C. A resolution in opposition to the proposed ballot initiative (#17-0050, Amdt. #1), the Tax Fairness, Transparency and Accountability Act of 2018 ( Tax Fairness Act ). Page 1 of 3
Meeting Date: May 8, 2018 INTRODUCTION The City Council has historically taken positions on proposed local, state, and federal legislation of interest to Beverly Hills because of the City s location, economy, programs, and policies. On March 15, 2018, the City Council Legislative/Lobby Committee (Liaisons Mayor Gold and Vice Mayor Mirisch) reviewed various measures for the June and November elections. At that meeting, the Liaisons recommended the City: a) Oppose Proposition 68; b) Support Proposition 69; c) Support the repeal of SB 1 and d) Oppose the Tax Fairness Act. At the April 24, 2018 City Council Study Session, the Council supported the recommendations of the Liaisons on three initiatives (b-d) and remained neutral on (a). This item requests the City Council adopt resolutions supporting Proposition 69 as well as the repeal of SB I and adopt a resolution opposing the Tax Fairness Act (Attachments 1-3). DISCUSSION Proposition 69 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. The Legislative/Lobby Committee Liaisons ( Liaisons ) agreed with the purpose of Proposition 69, as they desired to keep Sacramento from potentially redirecting the money generated by SB 1 to non-transportation related purposes. The Liaisons recommended the City Council consider adopting a resolution in support of Proposition 69. The City Council agreed 4-0 (Mayor Gold absent) with the recommendation and reasoning of the Liaisons to support Proposition 69. Proposed Ballot Initiative to Repeal SB I This ballot initiative would repeal SB 1, which enacted vehicle fuel taxes and fees to pay for repairs and improvements to local roads, state highways, and public transportation. The Liaisons expressed concerns that the increase in the state s fuel tax 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 Legislature. The Liaisons recommended the City Council consider adopting a resolution in support of the repeal of SB 1. The City Council voted 3-1 (CouncilmemberWunderlich opposed, Mayor Gold absent) to support the recommendation of the Liaisons. The City Council recognized SB 1 was a regressive sales tax that disproportionately affects those who are less able to pay. In general, the Council stated they could support a future transporting funding mechanism Page2of3
Meeting Date: May 8, 2018 if it was equitable; however, as SB 1 is not equitable they recommended a resolution in support of the ballot initiative to repeal SB 1. Proposed Ballot Initiative Tax Fairness Act The Tax Fairness Act seeks to expand the requirement of a supermajority approval in order to enact new revenue measures. The Liaisons opposed this ballot initiative as it benefits businesses and allows them to avoid paying for the full cost of services they receive from local jurisdictions. Additionally, the Tax Fairness Act would shift the burden of these uncovered costs from businesses to local general funds, which are generated by taxpayers. Ultimately, this initiative would reduce the amount of general fund money available to support police, fire, park, planning, and other community services. The City Council agreed 4-0 (Mayor Gold absent) with the recommendation and reasoning of the Liaisons to oppose this ballot initiative. FISCAL IMPACT The anticipated financial impacts to the City for each initiative is estimated as follows: A. 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. B. The proposed ballot initiative (#17-0033) 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 2017-18. Of that funding, $236,979 is new funding from SB 1. For Fiscal Year 2018-19, 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. C. The Tax Fairness, Transparency and Accountability Act of 2018 (#17-0050, 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. orge Chavez Approved By Page3of3
Attachment I
will RESOLUTION NO. 1 $-R RESOLUTION Of THE COIThJCIL Of THE CITY Of BEVERLY HILLS TO SUPPORT PROPOSITION 69 - MOTOR VEHICLE FEES AND TAXES: RESTRICTIONS ON EXPENDITURES: APPROPRIATIONS LIMITS WHEREAS, the City of Beverly has historically taken positions on proposed state legislation of interest to Beverly Hills; and WHEREAS, the 2016 California Statewide Local Streets and Roads Needs Assessment, which provides critical analysis and information on the local transportation network s condition and funding needs, indicates that the condition of the local transportation network is deteriorating at an increasing rate; and WHEREAS, cities and counties are facing a funding shortfall of $73 billion over the next ten years to repair and maintain in a good condition the local streets and roads system and the State Highway System has $57 million worth of deferred maintenance; and WHEREAS, state Senate Bill 1 the Road Repair and Accountability Act of 2017 raise approximately $5.4 billion annually in long term, dedicated transportation funding to rehabilitate and maintain local streets, roads, and highways, make critical, lifesaving safety improvements, repair and replace aging bridges and culverts, reduce congestion, and increase mobility options including bicycle and pedestrian facilities with the revenues split equally between state and local projects; and WHEREAS, these transportation revenues should be constitutionally protected to ensure funds are used only for transportation purposes; and WHEREAS, Proposition 69 on the June 2018 ballot would add another layer of accountability by preventing the State Legislature from diverting any new transportation B0785-0001\2181561v1doc
revenues for non-transportation improvement purposes. follows: NOW, THEREFORE, the Council of the City of Beverly Hills resolves as Section 1. The City of Beverly Hills supports Proposition 69, Motor Vehicle fees and Taxes: Restriction on Expenditures: Appropriations Limit. Section 2. The City Clerk shall certify to the adoption of this resolution and shall cause this resolution and his certification to be entered in the Book of Resolution of the Council of this City. Adopted: ATTEST: JULIAN A. GOLD, MD Mayor of the City of Beverly Hills, California BYRON POPE City Clerk (SEAL) APPROVED AS TO FORM: APPROVED AS CONTENT: LJRENCE S. WIENER City Attorney MAHDI ALUZRI City Manager 80785-0001\21$1561v1.doc 2
Attachment 2
THE the RESOLUTION NO. 18-R- RESOLUTION Of THE COUNCIL Of THE CITY Of BEVERLY HILLS TO SUPPORT THE PROPOSED BALLOT INITIATIVE (#17-0033) TO REPEAL SENATE BILL 1 - ROAD REPAIR AND ACCOUNTABILITY ACT WHEREAS, the City of Beverly has historically taken positions on proposed state legislation of interest to Beverly Hills; and WHEREAS, state Senate Bill 1 ( SB 1 ) Road Repair and Accountability Act of 2017 enacted a variety of vehicle fuel taxes and fees to pay for the repairs and improvements to local roads, state highways, and public transportation as follows: Increased the gasoline excise tax by $0.12 per gallon; Increased the diesel excise tax by $0.20 per gallon; Increased diesel sales tax by 4% per gallon; Created a road improvement feel of $100.00 per year for zero-emission vehicles; Created a transportation improvement fee based on the market value of the vehicle as follows: 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 $100.00 per year for vehicles with a market value $25,000 - $34,999 o $150.00 per year for vehicles with a market value $35,000 - $59,999 B0785-000I\21$l557vLdoc 1
o $175.00 per year for vehicles with a market value $60,000 and higher Specifies that the tax rates and fees established by SB 1 are to be adjusted annually based on the Consumer Price Index; and WHEREAS, SB 1 is a regressive tax that disproportionately affects individuals in lower income brackets; and WHEREAS, SB 1 does not offer a fair and unbiased solution for charging fees and taxes to repair and improve local roads, state highways, and public transportation; and WHEREAS, SB 1 does not offer a variety of broader and more equitable solutions for obtaining funding to repair and improve local roads, state highways, and public transportation; and WHEREAS, the proposed ballot initiative will repeal SB 1 and the associated vehicle fuel taxes and fees to pay for the repairs and improvements to local roads, state highways, and public transportation; and WHEREAS, the proposed ballot initiative will require the state legislature to submit any future measure enacting specified taxes or fees on gas or diesel fuel, or on the privilege to operate a vehicle on public highways, to the electorate for approval. NOW, THEREFORE, the Council of the City of Beverly Hills resolves as follows: Section 1. The City of Beverly Hills supports the proposed ballot initiative (#17-0033) to repeal Senate Bill 1 - the Road Repair and Accountability Act of 2017. B0785-000I\2181557v1.doc 2
Section 2. The City Clerk shall certify to the adoption of this resolution and shall cause this resolution and his certification to be entered in the Book of Resolution of the Council of this City. Adopted: ATTEST: JULIAN A. GOLD, MD Mayor of the City of Beverly Hills, California BYRON POPE City Clerk (SEAL) APPROVED AS TO FORM: ii& L$ UREN CE S. WIENER City Attorney APPROVED AS CONTENT: MAHDI ALUZRI City Manager B07$5-000I\2181557v1,doc 3
Attachment 3
RESOLUTION NO. 1 8-R- RESOLUTION Of THE COUNCIL Of THE CITY Of BEVERLY HILLS TO OPPOSE THE PROPOSED BALLOT INITIATIVE (#17-0050, AMDT. #1), THE TAX fairness, TRANSPARENCY AND ACCOUNTABILITY ACT Of 201$ WHEREAS, the City of Beverly has historically taken positions on proposed state legislation of interest to Beverly Hills; and WHEREAS, California s cities, counties and special districts follow strict guidelines and existing state law regarding the establishment of reasonable fees and the required voter approval of all local taxes; and WHEREAS, there is a signature-gathering campaign for a state ballot measure currently sponsored by the American Beverage Association and the California Business Roundtable that would severely harm the ability of local governments to continue to provide quality services by imposing onerous roadblocks to raising local revenue to address community needs, services and infrastructure improvements; and WHEREAS, the proposed ballot measure would allow businesses to escape from their existing obligations to pay the full cost of services that they request and receive from local agencies and benefit from; and WHEREAS, the proposed ballot measure would shift the burden of these uncovered costs from business interests to local general funds supported by taxpayers, and thereby reduce general funds available to support police, fire, park, planning, and other community services. B0785-0001\2181551v1doc
NOW, THEREFORE, the Council of the City of Beverly Hills resolves as follows: Section 1. The City of Beverly Hills hereby opposes the Tax Fairness, Transparency and Accountability Act of 201$ on the grounds that this measure would harm the ability of local communities to adequately fund services. Section 2. The City Manager or his designee is hereby directed to email a copy of the adopted resolution to the League of California Cities at cityletterscacities.org. Section 3. The City Clerk shall certify to the adoption of this resolution and shall cause this resolution and his certification to be entered in the Book of Resolution of the Council of this City. Adopted: ATTEST: JULIAN A. GOLD, MD Mayor of the City of Beverly Hills, California BYRON POPE City Clerk (SEAL) APPROVED AS TO FORM: APPROVED AS CONTENT: LAURENC. WIENER City Attorney MARDI ALUZRI City Manager B0785-000l\2181551v1.doc 2
Attachment 4
) ATTACHMENT 4 SUMMARY OF PROPOSITION AND BALLOT INITIATIVES Proposition 69 - Motor Vehicle Fees and Taxes: Restrictions on Expenditures: Appropriations Limit Proposition 69 would requite 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 $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 Total Local Annual Revenue = $ $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 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 $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 1978-1979 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 I 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. Proposed ballot initiative (#17-0033) 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 $100.00 per year for zero-emission vehicles Transportation Improvement Fee (TIE). 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 $100.00 per year for vehicles with a market value $25,000 - $34,999 o $150.00 per year for vehicles with a market value $35,000 - $59,999 o $175.00 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 www.californiacityfinance.com, the City is projected to receive $950,272 in funding for local streets, road maintenance and rehabilitation during Fiscal Year 2017-18. Of that funding, $236,979 is new funding from SB 1. For Fiscal Year 2018-19, 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 Page 2 of 4
Tax Fairness, Transparency and Accountability Act of 2012 (#17-0050, Amdt. #1) The Tax Fairness, 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. 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 Page 3 of 4
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 covet the actual costs, and o the revenue is not being used for other than its stated purpose. Page 4 of4