Saratoga News

Proposed vehicle license fee repeal would have dire effect

City stands to lose about $1.2 million if bill passes

Wolfe: How low can you go?

By Sarah Lombardo

Proposed state legislation that could save individual Californians an average of $200 a year in vehicle license fees could cost the city of Saratoga a lot more.

Gov. Pete Wilson proposed May 13 to cut in half the vehicle license fees that Californians pay, saving taxpayers billions of dollars but threatening a prime source of revenue for local communities.

Wilson's plan comes about three months after legislation was introduced in the California Assembly that would repeal the vehicle license fee paid by car owners when they register their cars. If passed, Assembly Bill 1776 could mean the loss of $1.2 million in funds to Saratoga's coffers, according to City Manager Larry Perlin.

"Vehicle license fees are the largest single revenue source in the city's budget," he said. "It's more than our property tax revenues, more than our tax-equity allocation revenue would have been and more than the utility tax."

AB 1776, proposed by Republican Assemblyman Tom McClintock of Simi Valley, would repeal the state's vehicle license fees, created in 1935 to replace the personal property tax on vehicles Californians used to pay. In 1986, California residents approved a proposition to reserve the majority of fees collected for local agencies. The tax equals 2 percent of the value of a vehicle and amounts to about $185 a year per vehicle. The fee is collected each year by the Department of Motor Vehicles, and then 90 percent of the fees are funneled back to local cities and county agencies. In Saratoga, that means the city receives about $42 per resident, or $1.2 million.

In a statement released May 13, McClintock called the fee "this hated tax that strikes at a necessity of life for all Californians." McClintock, who introduced the bill to repeal the fee about three months ago, also introduced Assembly Constitutional Amendment 45 last month, which would likewise repeal the tax.

But city officials call the tax a necessity of life in Saratoga.

"If we lose that fee, we might as well lock the doors to City Hall and go home," one city staffer said.

"I think if the vehicle license fees are repealed, there's going to need to be some serious soul-searching on the part of the City Council about how the city is going to function and provide services," Perlin said. "The city would basically be in a position where it would barely deal with basic services.

"That could be the death knell for recreation," he added.

The loss of vehicle license fees would follow 1996's loss of $1.4 million in utility users' tax and TEA fees.

Perlin also said he fears the move to repeal the fees will only gain popularity in this election year, despite the effect it could have on Saratoga and other low-tax cities, because a call to lower taxes when the state's coffers are flush is always popular with voters.

"Everyone knows the state will be awash in cash," Perlin said. "Legislators are not only going to want to get their hands on that money for projects in their areas, but they are going to seek some sort of tax cut."

Some state legislators are already picking up the mantle of AB 1776, including Wilson and local Assemblyman Jim Cunneen.

Supporters of the legislation point out that it will include provisions to continue funds to local agencies, primarily through sales tax.

"But the problem with that is, sale taxes are only as good as the economy," Perlin said. And if the economy goes bad, the state will not only be unable to replenish city coffers, but might have to raid them through other legislative means.

The repeal is being opposed by the League of California Cities, which in a bulletin to local agencies dated May 8 urged cities, counties and their constituent associations "to make every effort to contact members of the Senate, the Assembly and the governor to oppose any repeal or reduction in the vehicle license fee."

A League editorial dated May 1 stated: "Local government officials find the governor's and legislators' consideration of a huge tax cut using local government revenue outrageous in light of still unrepaid tax take-aways and lack of sound fiscal conditions of local agencies."

Said Perlin: "For a lot of cities, this will hurt. But they have other ample sources of revenue, such as commercial business. Saratoga is in a different position."

Saratoga Mayor Don Wolfe is hopeful that state politicians will think about the impact a repeal would have on the city and take proper measures to ensure negative impacts are avoided.

"I think in the state Legislature, prudent minds will prevail, and a measure that does damage to local cities will not become law," he said. "I'm a low-tax person myself, but in Saratoga, how low can you go?"

Others, primarily Democrats, who oppose any repeal or reduction in the tax say the surplus should be saved and used for leaner years in the future or spent on education.

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