Vehicle License Fee Cut Bad for Cities

* California is currently experiencing an economic resurgence. Estimates are that state funds will increase $4.2 billion over the current and next fiscal year.

Sources of this revenue growth are personal income taxes ($3.6 billion) and increased receipts from capital gains taxes.

Gov. Pete Wilson and Assemblyman Tom McClintock (R-Northridge) have, therefore, proposed a tax reduction--a good idea. However, the tax cut proposed is in vehicle license fees, an important revenue source for cities and counties, not the state!

Vehicle license fees have existed as a local revenue source in California since 1935. These fees were imposed in lieu of a property tax on vehicles and were constitutionally protected as a local revenue source to cities by voters in 1986.

The state can circumvent that constitutional protection by simply reducing or eliminating the fee. Vehicle license fees are used by cities and counties to pay for police, fire and public works. In Cypress, vehicle license fees total $1.8 million annually--9% of our city’s general fund.

Proposals to “make up” the lost local license fee money with state monies are not reliable. The state has raided the coffers of cities to balance its budgets 16 times in the last 18 years.

Most citizens don’t realize that the state began reallocating 30% of property tax from cities and counties in 1992-93 to meet the state’s obligations to fund schools. This practice continues each year; Cypress will be forced to lose more than $1 million in revenues to the state this coming year because of this previous tax shift.

Faced with a budget surplus, our state legislators want to give the appearance of being generous. But instead of giving back their own money, they are offering to give back dollars that would go to cities and counties.

Promises to “backfill” a percentage of lost vehicle license fee funds from state revenues can simply be changed in any future year. The state can even attach spending restrictions on money it allocates to cities. The proposed reduction makes cities beholden to the state for annual funds and increases the state’s ability to impose its will on local government. Most citizens want financial decisions to be made at the local level, not mandated by the state or conditioned by withholding funds.

We all want a tax cut, but this is a bait-and-switch approach.

MARY ANN JONES

Mayor

Cypress