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01-21-2003 - Resolution Urging California Legislature to Reject Governor's Proposed Shift of Local Vehicle License Fee Revenuesn L� i it TO: Andrew G. Pasmant, City Manager and City Council FROM: Artie A. Fields, Assistant City Manager City of West Covina Memorandum AGENDA ITEM NO. G - 2 DATE January 21, 2003 SUBJECT: RESOLUTION URGING THE CALIFORNIA LEGISLATURE TO REJECT THE GOVERNOR'S PROPOSED SHIFT OF LOCAL VEHICLE LICENSE FEE REVENUES RECOMMENDATION: It is recommended that the City Council adopt the following resolution: RESOLUTION NO `"-'I A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST COVINA URGING THE CALIFORNIA LEGISLATURE TO REJECT THE GOVERNOR'S PROPOSED SHIFT OF LOCAL VEHICLE LICENSE FEE REVENUES DISCUSSION: Councilrnember Ben Wong requested that this item be agendized for the City Council's review. Motor Vehicle in Lieu Tax (VLF) is a license fee equivalent to 2% of the market value of motor vehicles. VLF is imposed annually as a license fee by the State in lieu of property taxes. The City of. West Covina receives a monthly apportionment from the State based on population. The City of West Covina's revenue estimate for VLF for 2002-03 is $5.9 million. VLF represents 15% of the City of West Covina's 2002 — 2003 General Fund Budget. In 1998, the State reduced the vehicle license fee that vehicle owner's pay by about 1/3 of the original amount. Instead of reducing the revenues to local agencies, the State provided a "backfill" amount to local agencies to prevent a reduction in local government revenues and services. Of the $5.9 million that the City of West Covina receives in VLF, approximately $3.9 million comes from the State backfill. VLF is a General Fund Revenue for the City of West Covina and is 15% of the City's General Fund budget. On January 10, 2003 Governor Gray Davis recommended the shift of over $4 billion in Vehicle License Fee (VLF) backfill funds away from cities and counties over the next 18 months to fund other priorities in the Governor's budget proposal. The Governor's budget proposal includes the following reduction of VLF funding to the City of West Covina: Fiscal Year Reduction -of VLF Revenues to the City of West Covina in Governor's Proposed Budget 2002-2003 $2,033,804 2003 - 2004 4,653,115 2004 - 2005 4,885,770 Total Reduction 2002 - 2005 $11,572,689 On January 14, 2003 California State Assembly Speaker Herb Wesson announced that he plans to move swiftly to introduce legislation to allow for restoration of the VLF funding for cities and counties. "During the years of surpluses, we rolled back fees that had been in place for years, including the vehicle license fee - which our state Constitution sets aside for cities and counties," Speaker Wesson said. "From day one, the rollback was conditional - it was only to take place when the state had the money to protect, local services. We're prepared to clarify the law to operate as intended - and to restore the fee to its normal level." The Speaker has specifically asked that cities take action to support this effortand immediately adopt a resolution urging the legislature to reject the Governor's budget proposal to eliminate the VLF backfill. The League of California Cities supports Speaker Wesson's intent to protect VLF funding for local government -and is encouraging all cities to contact their State representatives to ask for their vote in favor of the partial VLF restoration. FISCAL IMPACT: Y None. Prepared by: Chris Freeland Administrative Analyst 11 Approved by: Artie Fields Assistant City Manager Attachment