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Marin IJ: Marin voters appear willing to extend the half-cent Transportation Sales Tax in the county, but bumping that up by a quarter cent is less certain, according to a new poll.

Poll results of about 1,850 voters showed that for a 2018 ballot measure there is 61.5% support for renewing the half-cent tax and adding a quarter cent to that.

In 2020, (during the presidential election when more people turn out), approval grew to 65.2%.

A two-thirds approval — 66.67% — is needed to pass a sales tax.

Are Marin Voters like lemmings happy to jump with an additional $12 million onto the existing $25 million /yr we give the Transportation Authority of Marin ?

Agenda Item No: 6.b    Meeting Date: January 17, 2017 

TOPIC: Support of Exemption to Existing Sales Tax Cap

SUBJECT: RESOLUTION SUPPORTING LEGISLATION TO EXEMPT THE EXISTING SALES TAX CAP TO ACCOMMODATE UP TO 0.5% FOR THE TRANSPORTATION AUTHORITY OF MARIN

RECOMMENDATION: Adopt resolution.

BACKGROUND: Existing law authorizes various local governmental entities, subject to certain limitations and approval requirements, to levy a transaction and use tax for general purposes, in accordance with the procedures and requirements set forth in the Transactions and Use Tax Law, including a requirement that the combined rate of all taxes that may be imposed in accordance with that law in the county not exceed 2%.

In recent history, this cap can be quickly reached when both cities and counties enact their own district taxes. It is particularly problematic for counties because if one city within a county has reached the cap, then the county is precluded from seeking voter approval to self-impose additional district taxes. Similarly, cities that have already reached the cap are constrained when seeking additional funding for programs and services above the cap.

At the present time, the Counties of Alameda, Contra Costa, Los Angeles, and San Mateo have reached the 2% limit. The Counties of Marin, Monterey, San Diego, and Sonoma are near the limit. The Legislature has previously granted exemptions to the 2% cap for transactions and use taxes to support countywide transportation programs, at both the county and local city level.

For example, the legislature authorized the Los Angeles County Metropolitan Transportation Authority an exemption (AB 23 (Feuer) Chapter 302) in 2008. In 2011, Alameda County was provided with an exemption (AB 1086 (Wieckowski) Chapter 327). Contra Costa County received an exemption in 2012 (AB 210 (Wieckowski), Chapter 194). In 2015, the legislature enacted SB 705 (Hill), Chapter 579, to provide San Mateo and Monterey Counties with an exemption. All of these exemptions were specifically related to transportation related sales tax measures.

Proposed legislation for TAM to increase the sales tax limit up to 0.5% would need to be approved by the Legislature and signed by the Governor. Senator Mike McGuire has been requested to consider sponsoring the legislation.

ANALYSIS: The following table is a list of sales tax levels in Marin County, effective January 1st, 2017. After the passage of Statewide Proposition 55 at the November 8th Election (see below on its impact), the current maximum sales tax limit for Marin County is 9.25%, which includes the state sales tax limit of 7.25%, and the local sales tax allowance of 2%. The 2% local cap applies regardless of the state’s sales tax rate. Without an exemption, no tax can be enacted county-wide that puts any jurisdiction in the county over the 2% cap.

Effective January 1st, 2017, the current available increase allowed for a countywide increase is 0.25% before reaching the 2.0% limit, since the County’s Measure A 0.25% sales tax for child care and health services failed on November 8th. Attachment C is a table that summarizes the ballot measure results for Marin County from the November 8th Election.

If TAM were to pursue an increase of sales tax for transportation in the future of 0.5% and no other countywide or city specific sales taxes are enacted, it would need to pass legislation similar to past legislative exemptions identified above. Legislative approval for an exemption to the sales tax limit for Marin County does not automatically increase the sales tax for Marin County.

Proposition 55 Tax Extension to Fund Education and Healthcare

In 2012, California successfully passed Proposition 30 to temporarily raise income tax on couples making over $500,000 per year through 2019 and temporarily increasing the statewide sales tax by 0.25% through 2016. Proposition 30 yielded over $6 billion annually to help the Legislature pass a balanced budget.

In the November 8th Election, Proposition 55 was passed to allow the increased income tax on single filers making over $250,000 or joint filers making over $500,000 to continue until 2030, while allowing the 0.25% sales tax increase from Proposition 30 to expire. It is estimated that anywhere from $4 billion to $9 billion could be realized between 2019 and 2030, depending on the health of the economy and stock market.

The expiration of the sales tax increase from Proposition 55 reduced the State sales tax from 7.5% to 7.25%, as reflected in the table above, but does not affect the 2% local sales tax cap.

Legislative Authorization TO ALLOW FLEXIBILITY

TAM’s Transportation Sales Tax (Measure A) was approved by Marin voters on November 2, 2004 and started collecting revenues on a ½ cent sales tax on April 1, 2005.

 Authorized the collection of sales tax revenues over a 20-year period.

Currently raises over $25 million dollars each year ($500 million over 20 years) dedicated to local transportation projects and programs, and it is approaching its 12th year of collection with a sunset date of March 31, 2025. If TAM chooses to renew its sales tax, there is no effect on the cap, and no legislation is required.

However, the TAM Board would like to further consider both a renewal and a potential increase.

An increase may not be feasible due to the cap that exists now.

This legislation would remove existing legislative constraints to considering placement of a new transportation-related sales tax on the ballot.

Rather than waiting until the last few years of the existing Measure A Transportation Sales Tax, the TAM Board is considering the placement of a renewal and/or increase in the sales tax dedicated to transportation in an upcoming Marin general election. The earliest this could occur is 2018.

The TAM Board agrees the time is optimal to legislatively seek an exemption to the sales tax cap limit for Marin County in anticipation of reauthorizing or increasing the transportation sales tax as early as 2018. It is imperative that a sales tax cap increase occur before any sales tax needing the exemption is placed on the ballot. Legislation approved by the legislature and Governor in 2017 would become effective on January 1, 2018. This allowance would give TAM and its member agencies the maximum flexibility in considering the placement of a county-wide sales tax on the ballot in June or November of 2018.

There is evidence that the public may support an extend-and-expand option for Marin’s transportation related sales tax, allowing for more transportation needs to be met. Unless the cap is raised, TAM will be precluded from considering all options in response to public interest. The Legislature and Governor Brown have consistently approved local sales tax cap legislation for transportation purposes.

Process and Schedule for Legislation Introduction

Senator Mike McGuire has been responsive to TAM’s request for sponsoring a bill seeking an exemption to the cap. Senator McGuire would need to introduce legislation by the third week of February at the latest.

Once a bill is introduced, TAM will await its assignment to a policy committee. The 2017 Legislative Session is the first year of a two-year session. Bills will most likely be heard in early April. Since TAM’s legislation is only requesting permission for an exemption of up to 0.5%, the bill would be a majority vote item if it were to clear policy committee and head to the Floor. The bill would not be designated as fiscal, meaning that it would not be heard by the Appropriations Committee.

After heading to policy committee and a Floor vote, the process repeats in the other house. If TAM’s legislation passes with a majority vote bill and it is signed into law by the Governor, the bill would take effect on January 1, 2018.

NEXT STEPS

TAM is currently soliciting statements of support from each jurisdiction in Marin for TAM to seek legislation pursue State legislation in 2017 to provide an exemption to the 2% cap on the local transaction and use taxes (also known as the district tax). The bill would provide an exemption of no more than 0.5% for the Transportation Authority of Marin (TAM), affording flexibility to place items before voters to reauthorize or supplement the existing Transportation Sales Tax (Measure A) program dedicated to transportation purposes in Marin County.

TAM will continue to work with Senator Mike McGuire to introduce legislation by the third week of February at the latest.

FISCAL IMPACT: There is no direct cost to the City of San Rafael associated with support of this legislation.

OPTIONS: The City Council has the following options to consider on this matter:

1. Adopt the Resolution supporting the proposed legislation

2. Reject or request changes to the Resolution

RECOMMENDED ACTION: Adopt a Resolution in support of legislation to exempt the existing sales tax cap to accommodate up to 0.5% for the Transportation Authority of Marin

ATTACHMENTS:

A: Draft Sales Tax Exemption Language

B: Marin November 2016 Ballot Measures and Results C: List of Local Sales Tax Exemption Bills

RESOLUTION NO.

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL SUPPORTING LEGISLATION TO EXEMPT THE EXISTING SALES TAX CAP TO ACCOMMODATE UP TO 0.5% FOR THE TRANSPORTATION AUTHORITY OF MARIN

WHEREAS, Existing law authorizes various local governmental entities, subject to certain limitations and approval requirements, to levy a transaction and use tax for general purposes, in accordance with the procedures and requirements set forth in the Transactions and Use Tax Law, including a requirement that the combined rate of all taxes that may be imposed in accordance with that law in the county not exceed 2%; and

WHEREAS, this cap can be quickly reached when both cities and counties enact their own district taxes; and

WHEREAS, if one city within a county has reached the cap, then the county is precluded from seeking voter approval to self-impose additional district taxes; and

WHEREAS, Marin County is near the limit; and

WHEREAS, The Legislature has previously granted exemptions to the 2% cap for transactions and use taxes to support countywide transportation programs, at both the county and local city level; and

WHEREAS, the Transportation Authority of Marin (TAM) is currently soliciting statements of support from each Jurisdiction in Marin for TAM to pursue State legislation in 2017 to provide an exemption to the 2% cap on the local transaction and use taxes (also known as the district tax); and

WHEREAS, the exemption, if enacted in legislation, would provide additional funding for transportation projects throughout Marin County;

NOW, THEREFORE, BE IT RESOLVED that the City Council supports the TAM request to seek an exemption to the existing sales tax cap to accommodate up to 0.5% for the Transportation Authority of Marin.

I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the Council of said City on Monday, the 17th of January, 2017 by the following vote, to wit:

AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS:

ESTHER C. BEIRNE, City Clerk

ATTACHMENT A

Please draft the following bill to amend Sections 7299 and 7300 of the Revenue and Taxation Code to read as follows:

SB XXXX (Legislator). Transactions and use taxes: Transportation Authority of Marin

Existing law authorizes various local governmental entities, subject to certain limitations and approval requirements, to levy a transactions and use tax for general purposes, in accordance with the procedures and requirements set forth in the Transactions and Use Tax Law, including a requirement that the combined rate of all taxes that may be imposed in accordance with that law in the county not exceed 2%.

This bill would authorize the Transportation Authority of Marin to impose a transaction and use tax for the support of countywide transportation programs at a rate of up to 0.5% that, in combination with other specified taxes, would exceed the combined rate limit.

These provisions would be repealed by their own terms on January 1, 2028, if an ordinance is not approved, as specified.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Marin.

7299. Notwithstanding any other law, the Transportation Authority of Marin may impose a transactions and use tax for the support of countywide transportation programs at a rate of up to 0.5% percent that would, in combination with all taxes imposed in accordance with Part 1.6 (commencing with Section 7251), exceed the limit established in Section 7251.1, if all of the following requirements are met:

•         The Transportation Authority of Marin adopts an ordinance proposing the transactions and use tax by any applicable voting approval requirement.

• 
  

•         The ordinance proposing the transactions and use tax is submitted to the electorate and is approved by the voters voting on the ordinance in accordance with        

•         Article XIII C of the California Constitution.

• 
  

•         The transactions and use tax conforms to the Transactions and Use Tax Law, Part

•         1.6 (commencing with Section 7251), other than Section 7251.1.

• 
  

•         7300. If the ordinance proposing the transactions and use tax is not approved as required by

•                 subdivision (b) of Section 7299, this chapter shall be repealed as of  January 1, 2028.

• 
  

• SEC. 3. (a) The Legislature finds and declares that the special law contained in Section 1 of this measure is necessary and that a general law.

ATTACHMENT B

Highlighted texts indicate that streets and roads are eligible components of the measure and underlined texts indicate a sales tax measure.

Information from: http://www.marincounty.org/depts/rv/election-info/election-schedule/page-data/tabs-collection/2016/nov-8/measure/list

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Information from: http://www.marincounty.org/depts/rv/election-info/election-schedule/page-data/tabs-collection/2016/nov-8/measure/list

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LIST OF LOCAL SALES TAX EXEMPTION BILLS

In 1987, the Legislature imposed a maximum combined rate of 1% on all transactions and use taxes (TUT) within any county. That rate was incrementally increased - first to 1.5% in 1990 and then to 2% in 2003. The TUT law authorizes the adoption of local add- on rates to the combined state and local sales tax rate. Under existing law, cities and counties may impose a TUT for general or special purposes, subject to voter approval, provided that the combined countywide rate of tax does not exceed 2%.

Therefore, when a city or district imposes a transactions and use tax, the increased tax rate counts toward the county's cap, which means that the county is restricted in its ability to raise revenues on a countywide basis.

Currently the Counties of Alameda, Contra Costa, Los Angeles, Monterey, and San Mateo have reached the 2% limit and have sought exemptions. The Counties of Marin, San Diego, and Sonoma are near the 2% limit.

These taxes may be imposed either directly by the city or county, or through a special purpose entity established by the city or county. Counties may also create a transportation authority to impose district taxes under the Public Utilities Code or designate a transportation planning agency to impose a district tax, subject to the applicable voter approval requirements.

According to the Board of Equalization, there are 202 local jurisdictions, including cities, counties, and special purpose entities, that impose a district tax for general or specific purposes. Of the 202 jurisdictions, 48 are county-imposed taxes and 154 are city-imposed taxes. Of the 48 county-imposed taxes, 44 are imposed for special purposes. Of the 154 city-imposed taxes, 124 are general-purpose taxes and 30 are special purpose taxes.

The Legislature has previously granted exemptions to the 2% statutory cap for transactions and use taxes to primarily support countywide transportation programs. Governor Brown has preferred to sign these bills into law rather than exemptions for general purposes.

Below is a list of bills that have been considered by the legislature:

1. AB 1665 (Bonilla), Chapter 45, Statutes of 2016, removes the existing authority granted to Alameda County and Contra Costa County to impose an additional transaction and use tax (TUT), subject to voter approval, and instead grants Contra Costa County's existing authority to the Contra Costa Transportation Authority (CCTA).

   The bill was chaptered in July allowing CCTA time to place Measure X on the November 2016 ballot. It failed by receiving only 62% of the vote.

   
   

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2. SB 705 (Hill), Chapter 579, Statutes of 2015, authorizes Monterey and San Mateo Counties to impose a countywide sales tax for transportation purposes (1/8% and 1/2% respectively) that would, in combination with all other locally imposed sales tax, exceed the 2% tax rate cap if certain requirements are met.

   Monterey used its exemption to place a ballot on the November 2016 ballot. San Mateo intends to do so in November of 2018.

3. AB 464 (Mullin) would have increased the maximum combined rate of all transactions and use taxes (district taxes) that may be levied by authorized entities within a county from 2% to 3%. This bill was vetoed by the Governor.

   In his veto message, Governor Brown stated: “Although I have approved raising the limit for individual counties, I am reluctant to approve this measure in view of all the taxes being discussed and proposed for the 2016 ballot.”

4. AB 1324 (Skinner), Chapter 795, Statutes of 2014, allows the City of El Cerrito to adopt an ordinance to impose a transactions and use tax not to exceed 0.5% for general purposes that would, in combination with other taxes, exceed the statutory limit of 2%. According to the author, "The City of El Cerrito was hit particularly hard by the recession and the local economy is still struggling to recover. As a result, local property values have declined. The sluggish economy, diminished revenues from reduced property assessments, the loss of redevelopment, store relocations, and other factors are forcing the city to reduce services."

   
   

   The Governor, sympathetic to the City’s fiscal emergency, signed the bill. This bill has been the exception to the types of bills that have been signed.

   The City subsequently placed Measure R on the November 2014 ballot to “protect/maintain City services, including fire prevention/ emergency services; emergency response times; neighborhood police patrols; firefighter/ police staffing; crime prevention/investigation resources; after-school programs; library hours/ programs; senior services; open space, parks, paths/ playfields; other general City services.”

5. AB 210 (Weickowski), Chapter 194, Statutes of 2013, extends the current authority for Alameda County to adopt an ordinance imposing a transaction and use tax from January 1, 2014, to December 31, 2020, and allows Contra Costa County to adopt an ordinance imposing a transactions and use tax in the same manner as Alameda County. The bill, which was sponsored by the Alameda County Transportation Commission and supported by the Contra Costa County Transportation Authority, was authored for purposes of placing a transportation sales tax measure on each county’s respective ballot. Alameda placed Measure BB on the November 2014 ballot, which acquired was approved with over 70% of the vote.

   
   

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6. SB 33 (Wolk) of 2013 would have allowed the County of Sonoma or any city within the County to impose a transactions and use tax for general purposes, and allow Sonoma County, any city within Sonoma County, or the Sonoma County Transportation Authority to impose a transactions and use tax for a specific purpose including, but not limited to the support of transportation and road maintenance programs and library services by up to 0.5% that would, in combination with all other transaction and use taxes, exceed the 2% statutory limit. The bill failed passage.

7. AB 1086 (Weickowski), Chapter 327, Statutes of 2011, allows Alameda County to adopt an ordinance, until January 1, 2014, to impose a transactions and use tax not to exceed 0.5% for the support of countywide transportation programs that would, in combination with other taxes, exceed the statutory limit of 2%.

8. AB 2321 (Feuer), Chapter 302, Statutes of 2008, amends the Los Angeles County Metropolitan Transportation Authority (Metro) existing authority to adopt a .5% transactions and use tax (sales tax) in Los Angeles County by eliminating outdated deadlines for specific projects and programs and extending the period in which the tax can be collected from six and one-half years to 30 years, subject to a two-thirds approval of local voters.

   This bill allowed Metro to place Measure R on the November 2008 ballot. The measure passed with 67% of the vote.

9. SB 314 (Murray), Chapter 785, Statutes of 2003, enacts provisions originally authorizing the .5% sales tax, for no more than six and one-half years, for specific transportation projects and programs. That sales tax was never imposed. Metro now believes that the November 2008 ballot may be a viable time to place this sales tax proposal, amended to reflect the changes contemplated in this bill, before Los Angeles voters. This bill was superseded by AB 2321.

TAM's PLAN to spend the $500 MILLION

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