BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                       AB 338


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          ASSEMBLY THIRD READING


          AB  
          338 (Roger Hernández)


          As Amended  April 13, 2015


          Majority vote


           ----------------------------------------------------------------- 
          |Committee       |Votes |Ayes                |Noes                |
          |                |      |                    |                    |
          |                |      |                    |                    |
          |----------------+------+--------------------+--------------------|
          |Local           |6-3   |Gonzalez, Alejo,    |Maienschein,        |
          |Government      |      |Chiu, Cooley,       |Linder, Waldron     |
          |                |      |Gordon, Holden      |                    |
          |                |      |                    |                    |
          |----------------+------+--------------------+--------------------|
          |Transportation  |11-5  |Frazier, Bloom,     |Achadjian, Baker,   |
          |                |      |Chu, Daly, Dodd,    |Kim, Linder,        |
          |                |      |Eduardo Garcia,     |Melendez            |
          |                |      |Gomez, Medina,      |                    |
          |                |      |Nazarian,           |                    |
          |                |      |O'Donnell, Santiago |                    |
          |                |      |                    |                    |
          |----------------+------+--------------------+--------------------|
          |Appropriations  |12-5  |Gomez, Bloom,       |Bigelow, Chang,     |
          |                |      |Bonta, Calderon,    |Gallagher, Jones,   |
          |                |      |Daly, Eggman,       |Wagner              |
          |                |      |Eduardo Garcia,     |                    |
          |                |      |Holden, Quirk,      |                    |
          |                |      |Rendon, Weber, Wood |                    |
          |                |      |                    |                    |
          |                |      |                    |                    |








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          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 California  
            Constitution Article XIII C.  


          3)Requires the ordinance imposing the tax to contain all of the  
            following:


             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;










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             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.  


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


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, negligible state fiscal impact.  According to the State  
          Board of Equalization (BOE) a new 0.5% district tax in Los Angeles  
          County would raise approximately $8 million in the first full year  
          of implementation  


          COMMENTS:   









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          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%  
            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  








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            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  
            (Hernandez), 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 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  








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            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 [Los  
            Angeles] 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 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.  SB 767 (De León) of the current  








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            legislative session, pending in the Senate, is substantially  
            similar to this bill.  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) of the current legislative session, pending in  
            the Assembly, 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  
            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.  




          Analysis Prepared by:                                               
                          Misa Lennox / L. GOV. / (916) 319-3958  FN:  
          0000341










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