Los Gatos Weekly-Times

Vehicle tax cuts in Sacramento could leave cities holding the bag

Los Gatos stands to lose $1 million per year

An election-year gimmick?

By Jeff Kearns

Los Gatos and other local governments statewide stand to lose a major source of state funding if a new bill that seeks to abolish vehicle license fees becomes law.

The town would lose an even million per year, says Town Manager Dave Knapp, but Los Gatos may be able to hang on to the money, which was pledged to pay back the costs of building parking lot No. 4.

But if the town loses the money, it would mean deep cuts in services. More than half the car tax money Los Gatos receives goes to the police department.

The tax, which has been on the books since 1935, raises about $4 billion each year from car owners, who pay an average of about $200 per year on a sliding scale based on the price and age of their vehicles.

Republican leaders in Sacramento are lining up behind various proposals to eliminate the car tax, but Democrats say the money should be put back into schools or social programs.

Assemblyman Tom McClintock (R-Simi Valley) introduced a bill (AB 1776) three months ago that would repeal the car tax. Three similar bills (SB 1723, SB 1998 and SB 2003) sponsored by Southern California Republicans have been introduced in the state Senate and are scheduled for debate in the Senate Revenue and Taxation Committee on June 3.

McClintock's bill, originally set for debate in the Assembly Revenue and Taxation Committee May 11, has been rescheduled for the same week as the Senate bills.

Unveiling his state budget for the upcoming fiscal year, Gov. Pete Wilson last week proposed cutting the tax in half beginning Jan. 1, citing a budget surplus of about $4 billion.

McClintock hailed the announcement as "one small step for a governor, one giant leap for taxpayers."

Attorney General Dan Lungren also weighed in on the issue last week, promising to abolish the tax and return the money to families if he is elected governor. Lungren has also endorsed McClintock's proposal.

The proposals would cover the losses by amending the state constitution to lock in current funding levels and replace the car tax with sales tax money, but local government officials say the move would still leave cities high and dry if the economy weakens, because sales tax is keyed in much more closely to the health of the economy.

"The first time the state runs into financial troubles, they'll come back for that money," Knapp says.

He adds that cars should be taxed because they tend to generate high levels of spending for cities, and says that state politicians are playing with local money for political reasons. "You shouldn't give away someone else's resources as a way to make points for yourself," he says.

Mayor Linda Lubeck dismisses the proposal as "an election-year gimmick." She says that she simply doesn't believe lawmakers will make good on their pledges to replace the tax money with other sources.

"We've been led down that primrose path before. They promise to give it back, but they never do," she said.

Lubeck adds that she doesn't have a clue how the town would cover the cuts.

Monte Sereno City Manager Gay Strand says that the cuts would shrink her budget by at least $130,000--15 percent of the city's total operating budget.

"It's an important stable revenue source for all cities," she said of the tax. "It provides a lot of vital services."

Monte Sereno's City Council sent off letters opposing the cuts to Assemblyman Jim Cunneen, state Sen. Byron Scheer and Wilson. Cunneen is supporting AB 1776.

Local government organizations, such as the League of California Cities and the Santa Clara County Cities Association, have spoken out against the proposals.

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