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Archived News Release from 2003

For Immediate Release

Redwood City Urges Legislature to Reject Governor's Vehicle License Fee "Take Away"

Redwood City, CA - January 28, 2003 - At its meeting last night, the Council of the City of Redwood City joined many other cities in passing a resolution urging the California legislature to reject the Governor’s proposed “take away” of Vehicle License Fee (VLF) reimbursements to local governments. The Governor’s proposed budget includes this and other massive cuts in local revenues, which will have a long-term impact on many cities’ ability to provide necessary services to their citizens.

If the Governor’s VLF proposal is enacted, Redwood City would suffer a loss of an estimated $1.5 million this fiscal year, and an estimated $3.3 million next year, followed by commensurate annual losses on a permanent basis. Other cities will suffer similar losses, despite a promise made by the legislature that the VLF would be fully restored, with those funds going to local governments, in the event that the economy prevents the State from making those reimbursements to local governments. Throughout the State, if the proposal is enacted, the loss of VLF ‘backfill’ will amount to over $4 billion annually, threatening funding for basic city and county services like public safety, health and human services, and parks and recreation.

This $4 billion is on top of the over-$5 billion the State already takes away from local governments from the property tax shift of the early 1990s. The fact is, cities and counties are subsidizing the State at the expense of the services our communities need.

In 1986 the voters passed Proposition 47, pledging the proceeds of the VLF to funding of local government services. In Redwood City, these revenues amount to approximately $4.4 million for fiscal year 2002/2003. In 1998, with the State experiencing a budget surplus, then-Governor Pete Wilson signed a bill to reduce the VLF by 25%, as a ‘tax cut’ to the public. Currently, the fee has been reduced by 67.5% of its original amount. The total amount of VLF legally due from the taxpayers has not changed. Instead, the State reimburses to local governments the ‘tax cut’ portion of the amount due. The same law provides for the restoration of the VLF if insufficient funds are available in the State general fund to afford the VLF offset. Obviously, with the State budget deficit, that time has come. The Governor’s proposed budget does not restore the VLF to its original level, but instead removes these ‘backfill’ funds from local governments.

Other aspects of the Governor’s proposal also hit local governments very hard, including losses of redevelopment agency funds, loss of reimbursement of booking fees, and loss of road repair funds. These proposals will force local governments to shoulder a disproportionate share of the budget ‘pain.’

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Contact: Ed Everett
City Manager

Text of


WHEREAS, prior to 1935, cities and counties collected property taxes on motor vehicles to fund essential local public health and safety services; and

WHEREAS, in 1935, the Legislature first enacted the Vehicle License Fee (VLF) Act, replacing the property tax on vehicles with a 1.75 percent fee charged against the value of the motor vehicle; and

WHEREAS, in 1948, the rate of the VLF was increased to 2 percent of the value of the vehicle; and

WHEREAS, in 1986, the voters voted overwhelmingly to constitutionally dedicate the proceeds of the VLF to fund city and county services; and

WHEREAS, in 1998, a period of strong economic growth, the Legislature approved the use of a portion of the rapidly growing state General Fund to reduce the VLF payments of vehicle owners. This amount, known as the “offset”, grew in future years to a 67.5 percent offset against the amount owed. The amount paid to local governments in lieu of the reduced VLF payment is known as the “VLF backfill”; and

WHEREAS, the 1998 legislation and subsequent enactments contain clear provisions that when insufficient funds are available to be transferred from the General Fund to fully fund the offsets and backfill amount that the VLF offset shall be reduced and VLF payments increased; and

WHEREAS, VLF and backfill revenues constitute 15 to 25 percent of typical city and county general purpose revenues. On average, more than 60 percent of city general fund spending and more than half of county general funds go to front line law enforcement, fire, emergency medical services, and health care programs.

WHEREAS, revenues derived from the VLF and backfill are of critical importance in funding vital local public health and safety services; and

WHEREAS, any failure by the Legislature to maintain the VLF backfill or restore the VLF will cause widespread disruption in local government services essential to the well-being of California citizens and their cities and counties; and

WHEREAS, Governor Davis’ proposal to divert $4 billion in local VLF backfill payments over the next 17 months fails to honor the 1998 commitment and is a direct assault on local services that will be felt by every California resident; and

WHEREAS, shifting $4.2 billion in locally controlled revenues for local services is neither equitable nor fair. No state program or department has been asked to shoulder such a disproportionate share of the budget pain. These cuts come on top of the nearly $5 billion each year that is transferred from local services to fund state obligations.

that if the state General Fund can no longer afford the expense of part or all of the VLF “backfill” that the Legislature and Governor of California are hereby respectfully urged to implement the provisions of current law providing for the reduction of the VLF offset in bad economic times and to restore the VLF in an amount necessary to reduce the VLF backfill; and

RESOLVED FURTHER, that the Council of the City of Redwood City hereby expresses its profound appreciation to the legislators who support such VLF restoration legislation.

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