HomeMy WebLinkAboutB-5 AB 1221 Staff Report The California Communities Act
CONSENT ITEM
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: ROBERT K. PERSON, ASSISTANT CITY MANAGER
VIA: RICK COLE, CITY MANAGER
DATE: MAY 19, 2003
SUBJECT: AB 1221 – THE CALIFORNIA BALANCED COMMUNITIES ACT
RECOMMENDATION
It is recommended that the City Council approve a letter of support for Assembly 1221 – The California
Balanced Communities Act of 2003.
BACKGROUND
Under the current law, Bradley-Burns Uniform Local Sales and Use Tax Law, cities and counties are
allocated 1% of every retail purchase that takes place within their jurisdictional boundary. At the same
time, they receive very little property tax revenue. Given the fractured history of the state/local fiscal
relationship, local jurisdictions have grown increasingly reliant upon their ability to maximize their
sales tax revenue. Consequently, land use decisions are often “fiscalized.” New growth is
encouraged based on the necessity of each city and county to qualify for more and more sales tax
revenues. As a result, cities and counties within a given region are constantly looking for ways to
bring more retail sales tax generators into their jurisdictional boundary. This can have the impact of
skewing land use decisions toward retail use and away from housing, manufacturing and other uses
that do not generate a significant amount of sales taxes or revenue. It also leads to endless
competition among cities and counties for a finite amount of retail sales tax dollars.
The result of this broken system of local government finance is the development of local
governments with imbalances in community land uses, housing shortages in certain areas, long
commutes for workers living in housing rich/job poor fringe-area suburbs, and fractured families in
which working parents lose quality time with their children because of long commutes.
The Problem
The current fiscal incentives in local land use decisions often prevent local governments from making
their preferable land use planning decisions. All too often the allure of generating sales tax puts local
officials in a situation of needing to saturate their cities with retail while housing and other forms of
development fall behind. Absent fiscal pressure, most communities would gladly choose a mixture of
land uses including housing, retail and commercial, unfortunately this is not their reality. The reality is,
California is a state full of unbalanced communities.
The Solution: AB 1221 (Steinberg & Campbell)
The State of California has a golden opportunity to fix a broken system before our quality of life further
deteriorates. AB 1221 would create a more balanced system of local government financing that would
enable cities and counties to grow the way they want to. AB 1221 does not take away the incentive of local
governments to serve their citizens by fostering retail services, but rather it allows for a more balanced
approach by taking away the disincentives currently associated with the building of homes. Specifically, AB
1221 would:
Swap a portion of the locally levied sales tax for an equivalent amount of property tax from the
State.
Reduce the locally levied 1% sales tax rate to .5% and raise the State sales tax by .5%.
Increase the amount of property tax (ERAF) equal to .5% of the locally levied sales tax from the
State to each respective city or county in the base year.
Each year after the base year, the city and the county will receive the same amount of property
tax they received in the prior year, plus a share of the property tax that is attributable to the
growth in assessed value within their jurisdiction. The pro rata shares of the property tax of each
jurisdiction would determine the share of the growth. This is consistent with existing law.
Provide a reversal mechanism so that if a future legislature reduces the property tax allocated to
local governments in this bill, then the sales tax rate would also be reinstated.
FISCAL IMPACT
There is no fiscal impact as a result of this specific item.