County Officials Fear Loss of Car-Tax Funds

Despite promises that the money will be replaced, leaders across Orange County are concerned about losing more than $226 million a year under a state proposal to repeal the annual fee motorists pay to register their vehicles.

The delicate bankruptcy bailout that Orange County crafted relied heavily on pledging away several streams of income, including the money collected by the state and returned to the county by the so-called car tax. The money was used to repay nearly $1 billion worth of securities it issued in 1996 to escape from its financial woes.

If the state does eliminate the fee, said Dennis Carpenter, the county’s legislative lobbyist, the state would be required to replace the funds.

“If they wipe out the whole tax, it has to be back-filled by some other device or asset,” he said.

But, said Carpenter, who worked intently on the marathon end-of-the-session legislative deal to get the county out of December bankruptcy, county and local officials are right to be suspicious--and concerned about the future.

“Local governments across the state are very upset because it’s one of the few sources of revenue they have been able to rely on,” Carpenter added. “The talk is we can replace it this year because we’ve got the money, but what do we do next year?”

The amount of money at stake is substantial.

Currently, Orange County’s share of vehicle license fees is $130 million a year, and cities within the county receive $96 million. Los Angeles County receives $445 million and the cities there receive $320 million.

About $17 million of Orange County’s share is intercepted by the state and used to repay the bankruptcy notes. In 2001, the share rises to $26 million.

Like others, Assemblyman Dick Ackerman, (R-Fullerton) a former Fullerton councilman, said he is worried about the future.

“City officials are very concerned,” Ackerman said. “The state has [stripped] them out of a lot of money in the past.”

In the early 1990s, for example, during much leaner times for the state budget, the Legislature shifted millions of dollars from local government to schools.

When the car tax repeal surfaced, Ackerman said he received a letter from County Executive Officer Jan Mittermeier, who brought up the bankruptcy securities repayment issue.

Gary Burton, the county’s chief financial officer, said the county wrote to Gov. Pete Wilson and county legislators expressing concern about its bankruptcy debts.

“We like to have happy bondholders,” Burton said, adding that the deal to repay the debt involved is “a constitutionally protected pledge” of revenue that might now be in doubt.

Assemblyman Tom McClintock (R-Granada Hills)--watching the state’s budget surplus continue to swell--first proposed repealing the so-called car tax in February. Kirk Hudson, McClintock’s consultant on the bill, has assured local officials that the county’s repayment plan would not be affected, Ackerman said.

“It will be back-filled [by other revenue] just the same as anything else,” Hudson said Tuesday.