BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     AB 338


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          Date of Hearing:  April 22, 2015


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                              Brian Maienschein, Chair


          AB 338  
          Roger Hernández - As Amended April 13, 2015


          SUBJECT:  Los Angeles County Metropolitan Transportation  
          Authority:  transactions and use tax.


          SUMMARY:  Authorizes the Los Angeles County Metropolitan  
          Transportation Authority (MTA), subject to voter approval, to  
          impose an additional transactions and use tax at a rate of 0.5%  
          for a period not to exceed 30 years.  Specifically, this bill:  


          1)Authorizes MTA to impose a transactions and use tax at a rate  
            of 0.5% that is applicable to the incorporated and  
            unincorporated areas of Los Angeles County (County) for a  
            period not to exceed 30 years.  


          2)Requires MTA to adopt the ordinance and submit the proposed  
            transactions and use tax to the voters.  Specifies that the  
            ordinance only becomes operative, if approved by two-thirds 


          of the voters voting on the measure, pursuant to Article XIII C  
            of the California Constitution.  
          3)Requires the ordinance imposing the tax to contain all of the  
            following:









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             a)   An expenditure plan that lists the transportation  
               projects and programs to be funded by the tax;  


             b)   An expenditure plan that includes measures that ensure  
               net revenues are shared equitably between regions of the  
               County;


             c)   A provision conforming the ordinance to the existing  
               Transaction and Use Tax Law, except to the 2% combined  
               transactions and use tax cap;


             d)   A provision that limits MTA's administrative costs to  
               1.5% of total net revenues; and,


             e)   A requirement that MTA allocate 20% of net revenues from  
               the tax to bus operations and 5% of net revenues from the  
               tax to rail operations, during the period that the  
               ordinance is operative.  


          4)Requires MTA to notify the Legislature prior to the adoption  
            of amendments to the adopted expenditure plan.  


          5)Allows MTA to incur bonded indebtedness payable from the net  
            revenues of the tax.  


          6)Requires the 20% of tax revenues to bus operations to be  
            allocated to all eligible and included municipal transit  
            operators in the County and to MTA in accordance with current  
            law.  Requires the allocation to MTA and eligible and included  
            municipal operators to be made solely from the revenues  
            derived from the tax and not from local discretionary sources.  








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          7)Makes findings and declarations relating to Los Angeles County  
            voter approved sales tax measures to fund transportation.  


          FISCAL EFFECT:  This bill is keyed fiscal.  


          COMMENTS:   


          1)Transaction and Use Taxes.  Transactions and use taxes are  
            taxes imposed on the total retail price of any tangible  
            personal property and the use or storage of such property when  
            sales tax is not paid.  These types of taxes may be levied as  
            general taxes, which are unrestricted, or special taxes, which  
            are restricted for a specified use.  The Transactions and Use  
            Tax law authorizes the adoption of local add-on rates to the  
            combined state and local sales tax rate.  The law has been  
            amended multiple times to authorize specific cities, counties,  
            special districts and county transportation authorities to  
            impose a transactions and use tax, if voters approve the tax.   



            Existing state law authorizes cities and counties to impose  
            transactions and use taxes in 0.125% increments in addition to  
            the state's 7.5% sales tax provided that the combined rate in  
            the county does not exceed 2%.  The Legislature has granted  
            several exemptions to the 2% cap, including to several  
            counties to allow an additional countywide transaction and use  
            tax for transportation purposes.  


          2)Prior Legislation.  SB 314 (Murray), Chapter 785, Statutes of  
            2003, originally enacted provisions that authorized MTA to  
            impose a 0.5% transactions and use tax, not subject to the 2%  








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            cap for no more than six and one-half years, for specific  
            transportation projects and programs.  The authority to put a  
            tax measure on the ballot was never used.  AB 2321 (Feuer),  
            Chapter 302, Statutes of 2008, modified those provisions to  
            allow MTA to impose a transactions and use tax for 30 years.   
            AB 2321 additionally required MTA to adopt an expenditure plan  
            prior to submitting a transactions and use tax to the voters  
            and to include specified projects and programs in its Long  
            -Range Transportation Plan.  In November 2008, more than 67%  
            of Los Angeles County voters approved this tax in a ballot  
            measure known as Measure R.  Measure R, in addition to Measure  
            C (1990) and Proposition A (1980), are the three 0.5%  
            countywide transactions and use taxes that provide the  
            majority of MTA's funding.  


            AB 1446 (Feuer), Chapter 806, Statutes of 2012, authorized  
            MTA, subject to voter approval, to extend the existing  
            transactions and use tax (Measure R) for an unlimited amount  
            of time, allowing MTA to determine a sunset date, if any.  AB  
            1446 also required MTA to update its expenditure plan prior to  
            submitting the tax measure to the voters.  However, the  
            measure put before Los Angeles County voters in November 2012  
            failed to achieve the two-thirds threshold necessary for  
            passage.  SB 1037 (Hernández), Chapter 196, Statutes of 2014,  
            requires MTA to update its expenditure plan and Long-Range  
            Transportation Plan before placing another transactions and  
            use tax measure before the voters.  


            According to the Board of Equalization, Los Angeles County has  
            14 transaction and use taxes, three county-wide taxes for  
            transportation purposes and 11 city-wide taxes.  Despite the  
            statutory exemption for MTA's transactions and use tax, Los  
            Angeles County has reached the 2% cap.  


          3)Bill Summary.  This bill authorizes MTA to impose by ordinance  
            an additional 0.5% transactions and use tax, for a period not  








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            to exceed 30 years, subject to two-thirds voter approval  
            pursuant to the California Constitution.  The transaction and  
            use tax authorized by this bill is not subject to the 2% cap  
            in existing law.  


            Similar to prior legislation, this bill requires the ordinance  
            imposing the tax to contain specified information, including  
            an expenditure plan to list the transportation projects and  
            programs to be funded from the tax.  However, this bill also  
            requires the expenditure plan to include measures that ensure  
            revenues are shared equitably between regions of the County.   
            Similar to AB 2321, this bill specifies that 20% of all  
            revenue derived from that tax is for bus transit operations  
            and 5% is for rail transit operations.  


            This bill is author-sponsored.  


          4)Author's Statement.  According to the author, "The purpose of  
            this bill is to provide MTA with an opportunity to seek a  
            county-wide voter approval for a half cent increase to the  
            countywide sales tax for transportation purposes.  As MTA  
            continues to work with the subregional Council of Governments  
            to develop priorities for a potential expenditure plan, this  
            bill furthers that commitment by providing constructive  
            parameters to ensure a fair and equitable distribution of  
            resources and investments in the county.  Moreover, this bill  
            recognizes best practices by investing in transit and rail as  
            an important part of addressing the traffic issues in Los  
            Angeles.  In fact, all three existing voter approved sales tax  
            measures in LA County include funding for transit and rail.  


            "While Los Angeles continues to experience some of the most  
            challenging traffic congestion in the state and nation, Los  
            Angeles voters have also recognized the importance of  
            investing in a transportation network that is responsible to  








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            the needs to commuters, transit users, and that facilitates  
            the movement of goods in the region.  Most importantly, Los  
            Angeles voters have responded to an expenditure plan that can  
            demonstrate fairness in the distribution of investments  
            throughout the region.  


            "This bill provides an approach and potential pathway to bring  
            additional resources to Los Angeles County by creating a  
            platform which will lead to investments predicated on fairness  
            and transparency."  


          5)Pending Legislation.  This bill is substantially similar to SB  
            767 (De León), which passed out of the Senate Transportation  
            and Housing Committee and is currently pending in the Senate  
            Governance and Finance Committee.  SB 767 would also authorize  
            MTA to impose an additional countywide 0.5% transactions and  
            use tax, but contains several differences to this bill.  SB  
            767 allows MTA to determine the length of the transactions and  
            use tax and this bill establishes a 30-year limit.   
            Additionally, SB 767 does not contain several of the  
            provisions in this bill, including the requirement that the  
            expenditure plan must contain a measure to ensure equity  
            between regions, the dedicated percentage of revenue to bus  
            and rail operations, or the requirement that MTA must notify  
            the Legislature prior to adopting amendments to the adopted  
            expenditure plan.  


            AB 464 (Mullin), currently pending in this Committee, would  
            not impact the authority granted by this bill to MTA, but  
            seeks to raise the overall statewide transactions and use tax  
            rate cap from 2% to 3%. 


          6)Arguments in Support.  Supporters argue given current  
            transportation needs, this bill is a reasonable approach to  
            getting additional funding that will help reduce gridlock, put  








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            people to work, and promote economic growth in the region.  


          7)Arguments in Opposition.  Opposition argues that any increase  
            in the transactions and use tax only adds to what is already  
            one of the most regressive taxes in the state which  
            disproportionately impacts California's most vulnerable  
            residents.  


          8)Double-Referral.  This bill is double-referred to the  
            Transportation Committee.  


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Amalgamated Transit Union


          California Teamsters Public Affairs Council




          Opposition


          California Taxpayers Association


          Howard Jarvis Taxpayers Association










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          Analysis Prepared by:Misa Lennox / L. GOV. / (916) 319-3958