GOVERNMENT RELATIONS
Stakeholders
taking
advocacy
responsibility
seriously
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Shoot for the Stars
2014 CMRTA ANNUAL CONFERENCE
October 16, 2014 – 10 am
Pleasanton, California
Presented by
Fran Mancia, Vice President of Government Relations
with special guest
Steve Shea, Senior Policy Consultant
Office of the President Pro Tempore, Senator Darrel Steinberg, and
former 4th District BOE Member (2009)
Shoot for
the Stars
I.
Welcome & What’s Happened Since Meeting Last October
II.
Introduction of Special Guest - Steve Shea (Office of President
Pro Tempore) and former BOE Member
III.
2014 California Legislative Review
IV.
Congressional Review: Internet Tax Freedom Act;
Marketplace Fairness Act; Preserving Proposition 218
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V.
Implementing AB 1717: UUT From Prepaid Wireless
VI.
State Board of Equalization
VII.
Tax Reform/ SB 983 (2014)
VIII.
Revenue and Facts
IX.
“Balloting” Local Revenues and the EASE Principle
X.
30th Year for the FTB CBT/ 2019 Sunset
XI.
Takeaways
2014 Legislative
Review
Local Governance
Prohibits imposing a business license for certain care facilities. SB 1382 prohibits
locals from imposing a business license, fee, or tax for the privilege of operating a
facility licensed under the bill that serves six or fewer persons. (chaptered)
Single-use carry out bags. SB 270 prohibits stores from providing single-use
carryout bags beginning July 2015 (larger stores) and July 2016 (for convenience
stores). Requires that stores make available recycled bags at a minimum of $0.10,
with all funds used by the stores for compliance. (chaptered)
California film and TV tax credit. AB 1893 extends the California Film Commission
incentive program by five years, lifts the per-film budget tax credit limitation so that
larger films may qualify, and offers new incentives to specific film and television
production activities. (chaptered)
Recycling: used mattresses. SB 1274 is a clean up bill to ensure that local
governments recover cost associated with illegally disposed mattresses. (chaptered)
Solar energy: permits. AB 2188 requires cities and counties to adopt an ordinance
to create a permitting and inspection process for residential solar installations of
less than 10 kilowatts. (chaptered)
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2014 Legislative
Review
Local Governance
License plate recognition systems. SB 893 stood to have unintended consequences
for local governments and public parking authorities by placing restrictions and
criteria on the use of Automated License Plate Recognition (ALPR) technologies.
The bill would have effected revenues collected through parking tickets and using
the data for law enforcement purposes. A new bill, likely more palatable, focusing
on what the usage of and a privacy policy will contain is expected in 2015.
MuniServices lead opposition and clarification to workable bill. (died)
Regulating medical marijuana. SB 1262 was an effort by the League and police
chiefs to make regulating medical marijuana subject to local jurisdictions with a
specific focus on public safety. (died)
Public outsourcing. HR 29 is non-binding yet included a likely end result limiting
options for government agencies to determine the best solution for providing
services to the public. MuniServices joined local governments, the California
Chamber of Commerce, and others to oppose. (adopted)
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2014 Legislative
Review
Property Tax and
Parcel Taxes
Parcel tax reports (transparency). AB 2109 requires the Controller to
publish detail on local parcel taxes. (chaptered)
Database on property tax revenues (transparency). AB 2211 would have
required counties to make public the allocation of general ad valorem
property tax revenues. (vetoed)
Property tax/ VLF for territory annexed to cities. AB 1521 and SB 69 would
have changed formulas for VLF adjustments to account for territory annexed
into cities after 2004. MuniServices supported. (vetoed)
Prohibiting future PILOT’s (Payment In Lieu of Taxes). AB 1760 prohibits
staring January, 2015 locals from entering into a PILOT agreement (payment
of property taxes in exchange for developers’ low income housing
exemption) with a property owner of a related project. (chaptered)
Property tax postponement. AB 2231 reinstates the Senior Citizens and
Disabled Citizens Property Tax Postponement program (chaptered)
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2014 Legislative
Review
Sales and Use Taxes
Extending the 2% transactions and use tax/ district tax. AB 1324 allows the City of
El Cerrito to adopt an ordinance proposing a district tax that exceeds the 2%
limitation. This legislation has spurred discussion of extending the current 2%
limitation statewide. MuniServices supported. (chaptered)
Local taxes: transactions and use taxes. AB 2119 authorizes a county board of
supervisors to levy, increase, or extend a transactions and use tax (TUT) with voter
approval for use in the county unincorporated area. MuniServices supported.
(chaptered)
Transportation sales tax revenues from toll facilities. AB 2250 requires that
revenue generated from a managed lane administered by a local agency on a state
highway be used in the corridor where it was generated. (chaptered)
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2014 Legislative
Review
Transitioning
Redevelopment to
Successor Agencies
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Redevelopment successor agency plans. AB 1963 extends the date for the
Department of Finance to January 1, 2016 to approve the successor agency’s
long-range property management plan. MuniServices supported. (chaptered)
Redevelopment bond proceeds issued prior to 2011. AB 2493 would have
allowed successor agencies to use the bonds for affordable housing; SB 1129
would have allowed the proceeds to be used for projects with high paying jobs
and expedite approval process. MuniServices supported. (vetoed)
2014 Legislative
Review
Military base reuse. AB 229 allows a military base reuse authority to form an
IRFD for projects and facilities to clean up and develop former military bases.
(chaptered)
Raising revenues for JPA purposes. AB 2170 clarifies that JPA’s can raise
revenues with voter approval for projects consistent with the purposes of the
JPA. MuniServices supported. (chaptered)
Post RDA/ Economic
Development
(JPA) Joint Powers Agency
BID clarification. AB 2618 clarifies the law with respect to the Constitution and
provides clarity to local governments using BID’s for economic development.
(chaptered)
(IFD) Infrastructure Financing
Districts
Financing broadband. AB 2292 allows an IFD to finance public capital facilities
or projects that include broadband. (chaptered)
(EIFD) Enhanced Infrastructure
Financing District
Financing public capital facilities. SB 628 allows locals to create an EIFD to
finance public facilities/ projects of community-wide significance. (chaptered)
(IFRD) Infrastructure &
Refinancing Financing Districts
(BID) Business Improvement
District
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Vehicle surcharge for bicycle infrastructure. SB 1183 allows a local agency to
impose a voter approved surcharge up to $5 on vehicles to improve trails and
bikeways. (chaptered)
2014 Legislative
Review
Environmental
Initiatives
AB 69 was a major
piece of legislation at
the end of the 2014
session that would have
delayed cap-and-trade
on fuels until 2018.
Several oil and gas
companies supported
this legislation.
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The State’s cap and trade regulations (AB 32) in January, 2015 will begin to apply to
transportation fuels. Transportation fuels account for roughly 40 percent of
California’s GHG emissions.
Zero and near-zero emission vehicles and car sharing in low income neighborhoods.
SB 1275 sets a goal of placing at least 1 million of these vehicles the road by 2023.
Includes requirements for charging stations in the apartment buildings in lower income
neighborhoods. (chaptered)
Green stickers and use of carpool lanes. AB 2013 raises the cap on the Green Sticker
program to allow electric vehicles in carpool lanes regardless of occupancy from
55,000 to 70,000 cars. (chaptered)
Funding technology. SB 1204 establishes a program to fund technology for zero- and
near-zero-emission trucks, buses and off-road vehicles. (chaptered)
Permitting process for cities. AB 2188 requires cities and counties to establish an
expedited permitting process for small residential rooftop solar panels. (chaptered)
Regional plans for rises in sea level. AB 2516 create a state database of city, county
and regional plans to deal with rises in sea level. (chaptered)
What is the Internet Tax Freedom Act?
Congressional
Review
First passed in 1998 to ensure that access to the internet is not inhibited by
taxation during the infancy of the internet. Has been reauthorized three times
since 1998, most recently in 2007 and expires on 11/1/14.
What is the Marketplace Fairness Act?
ITFA (Internet Tax
Freedom Act)
MFA (Marketplace
Fairness Act)
MITFA (Marketplace
Internet Tax Freedom
Act)
Proposed legislation that would allow state and local governments to compel
retailers to collect and remit sales taxes on online sales.
MFA is needed because consumers’ failure to pay online sales and use taxes
results in the loss of approximately $23 billion in taxes to state and local
governments every year. 1992 Supreme Court Case Quill Corp. v. North
Dakota called on Congress to resolve this issue.
What is the Marketplace Internet Tax Freedom Act?
Proposed legislation that includes the MFA and a 10 year extension of the
ITFA.
Source: Dustin McDonald, Vice President, Government Relations, GFOA
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ITFA, MFA and ITFA: 2013 to 2014
Congressional
Review
Local governments’
should advocate for
exceptions for ‘voter
approved local taxes’
in legislation approved
by Congress.
05/06/13
Senate Passed S 743, MFA
09/18/13
House Judiciary Committee Chairman Released Principles for
House Legislation
02/05/14
Developing a new House MFA bill begins
03/12/14
House Judiciary Committee Hearing on MFA Issues
07/15/14
House passes (HR 3086), ITFA
07/15/14
Senate introduces MITFA (S 2609) MuniServices supported.
09/18/14
ITFA moratorium is added to ‘short-term’ spending bill
11/2014
Anticipate post-election Congressional activity
12/11/14
Expiration of Congressional ‘short-term’ spending bill (with ITFA)
Source: Dustin McDonald, Vice President, Government Relations, GFOA
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Mechanism for collecting UUT revenue for prepaid wireless
Utility Users Tax
Implementing AB 1717
Over 50% of new wireless
services are prepaid.
Consumers across all
income levels are
purchasing prepaid
phones. In some cases the
loss to cities is as high as
25% in the last three years.
AB 1717 is stakeholder crafted to ensure state and local surcharges & fees on
prepaid wireless are properly captured and remitted appropriately while
guaranteeing public safety. MuniServices was the lead local government stakeholder
and supported. (chaptered)
Potential revenue: The BOE estimates nearly $73 million of local revenue will be
collected as a result of the bill. The actual collection and remittance on prepaid
wireless begins January 1, 2016.
Evaluation: The 2020 sunset provision, together with a reporting requirement of the
BOE, will allow stakeholders to assess the cost effectiveness of the program and
recommend any needed adjustments. Locals must enter into an agreement with
the BOE by September 15, 2015.
Reduced costs: The responsibilities of the BOE have been significantly reduced by
requiring the wireless carriers to directly remit the state and local taxes to those
taxing jurisdictions.
Implementation webinars are being scheduled. Contact Fran Mancia for detail.
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State Board of
Equalization
Why cities should look at the BOE as a partner
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The BOE is more than a local sales tax administrator
BOE decisions on rules and regulations, allocation cases, and more affect
a city’s finances and revenues
Policy decisions include and go beyond enforcement, the underground
economy, and collection tools
BOE determines costs for programs and revenue forecasts
Opportunities and resources
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Access to Board-prepared forecasting tools
Attend local and regional meetings
Local government and consumer friendly website (www.boe.ca.gov)
Who’s on deck for the BOE and State Controller’s race
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Current
The November 2014 Election
Tax Reform
SB 983 led to a broader
discussion on revenue
sharing & the current tax
structure .
“Any changes to the current
system should be carefully
weighed both for potential
benefits as well as negative
impacts on those agencies
that have made decisions
and rely on revenue based
upon existing rules.”
- League of Cities Revenue
and Tax Committee
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Proposed SB 983 (2014) shifts the point of sale for a card local system from
the place where the sale was negotiated to the ‘point of delivery of fuel to the
vehicle.’ If SB 983 becomes law this may open the door to other bills being
introduced in the future that redistribute Bradley- Burns sales tax, further
destabilizing a jurisdiction’s revenue base. MuniServices led educational effort
for cities’ on the bill’s implication.
League’s Internal Sales Tax Working Group
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Sales tax agreements, SB 27 from 2009 (proposed amendments to
prohibit future agreements that shift money away from local agencies
(Doesn’t affect existing agreements going forward)
Leakage from internet sales. (Federal Marketplace Fairness Act)
Allocate more $ from county pools based on destination. ($500 thousand
to $10,000?)
Sales tax distribution from changing market--remote sales in California
(CA based internet sales) (possibly split 75/25)
Symptom of a bigger problem
Tax Reform
California has an outdated local tax system. Cities are faced with a shrinking
Economic base to fund basic services. SB 983 is the pursuit of a legislative
remedy over what amounts to the revenue generated by a gas station
(without a convenience store).
Bradley-Burns and the current tax structure
“We have an outdated
tax system. ” “I am
interested in trying to
bring more fairness
into the system and
more stability.”
-Betty Yee
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Bradley-Burns was put in place in 1955 that worked when shopping took place
mostly in storefronts. The current sales tax structure only taxes 30% of the true
tax base, which creates a challenge for true economic development and the
maintenance of local control.
Proposition 1A and State Constitution
Proposition 1A (March 2004) restricts the ability of the state to reduce local
sales tax rates or alter the method of allocation; and restricts the state’s ability
to shift local property taxes between schools and non-school local governments.
Any significant changes to the allocation methods for Bradley-Burns sales taxes
or shifts in local sales and property taxes would require changes to the
Constitution.
November 2014 vs. November 2013
Local “Balloting”
In November of 2014
there are over 200 local
ballot measures. In
November 2013 there
was about 35.
Is this a trend or case
for tax reform?
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Bonds ( 5) / School Bonds (113) (10 in November 2013)
Business License (6) (2 in November 2013)
Hotel Tax (12) (2 in November 2013)
Marijuana Tax (9)
Mining Tax (1)
Sales Taxes (52) (6 in November 2013)
Soda Taxes (2)
Utility Users Taxes (15) (2 in November 2013)
Card Room Tax (1)
Parcel Tax (40) (9 in November 2013)
Pension/ Property Tax from former RDA (1)
Property Transfer Tax (2)
Vehicle Tax (1)
Miscellaneous (22) (1 in November 2013)
Oil (1 in November 2013)
Revenue
Facts and
Trends
Challenges and Conditions
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In about a decade, a
cohort born between
the early 1980s and
just past the
millennium will make
up 75 percent of the
workforce.
- Brookings Institution
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Retail will change more in the next five years than it has in the last 50
(Chris Donnelly, Accenture)
E-commerce is doubling in size every five years. Expect that rate to
increase
California’s recovery continues at a slow pace
Financial and economic impact from drought conditions
Statewide Annualized Sales Tax Growth by Sector
Department Stores
0.1%
New Auto Sales
9.7%
Apparel Stores
4.0%
Leasing
9.9%
Restaurants
6.1%
Business to Business
3.3%
Food Markets
1.7%
Construction
5.2%
Service Stations
-1.2%
Total
3.7%
EASE: Evaluating
the local revenue
source
The EASE principles
Equity: The tax burden falls equally across all businesses and / or individuals.
Administrative: Minimizing the cost of compliance on taxpayers, minimizing
the cost to the City to enforce the tax policy and maximize taxpayer
compliance.
Stability: Focuses on how the tax in question would affect the volatility of the
revenue.
Economic Benefits: The tax promotes the City’s economic objectives with
minimum disruption to the taxpayer
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Shoot for the
CBT Stars
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CBT 30th Anniversary in
2014!
Currently about 107
cities are participating
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“The program has
helped the City
Increase business
license fee compliance”
-Letter of Support
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1984 (state mandate) FTB sponsored legislation mandating cities to annually report
information obtained from businesses they licensed
1999 (mandate repealed) FTB contacted cities directly in 2000-01 to purchase
business tax data. About 350 cities sold data to the FTB while others could not
because there was no longer a state law; confidentiality restrictions in their own
municipal code prohibited providing the State the data
2000 (AB 63 and SB 1146 legislation re-establishes CBT) Authorized the FTB to
disclose to city tax officials who execute an agreement with the FTB certain
information regarding local business taxpayers. CMRTA sponsored AB 63 to create the
first opportunity for cities to obtain data from the FTB. AB 63 obligated cities to pay
the FTB’s costs in providing their data; many cities desirous of the FTB’s data could not
afford to pay the FTB fees
2008 (SB 1146 extended sunset) Extended CBT sunset to January 1, 2014
2010 (proposed SB 1036 would have expanded CBT to more city participation) SB
1036 would have allowed cities to contract with third parties
2012 (SB 211 extends CBT sunset to 2019) Despite support of the Legislature and
several cities, the bill was stripped of language allowing local governments the option
to contract with third parties
2014 CBT 30 year Anniversary with approximately 109 participating cities
2014 to 2018 Threats of eliminating funding exist; work on expanding CBT to allow
increased city participation
2019 CBT sunset unless extended
Takeaways
Stakeholders
taking
advocacy
responsibility
seriously
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
CBT – Beyond 2019
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Consider the EASE principles when evaluating options for revenues
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Don’t need to reinvent – look at what other cities are doing (for example
www.transformgov.org)
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Leverage outside help – other ways to generate revenue; public-private
partnerships work
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Consider the future State BOE and Controller
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Consider the opportunity through AB 1717
Government
Relations Team
Fran Mancia, VP of Government Relations
P: 800.800.8181 (5013)
E: Fran.Mancia@MuniServices.com
Brenda Narayan, Director of Government Relations/ In-House Lobbyist
P: 800.800.8181 (5014)
E: Brenda.Narayan@MuniServices.com
League of California
Cities Building
1400 K Street,
Suite 301
Sacramento, CA 95814
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Glen Everroad, Special Projects
P: 949.874.4786
E: gleneverroad@gmail.com