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Published on 06/08/1998 All articles from this issue

Cities fret loss of vehicle fee revenues

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By Clyde Noel

Special to the Town Crier

Gov. Pete Wilson's plan to cut vehicle registration fees in half could mean a loss of $1.1 million to the City of Los Altos, said Finance Director Sherry Lambach.

"People seem to think this is a state tax because it's collected by the state, but it's really a local tax," Lambach said. "The state has a big surplus this year so they should give relief to taxpayers on a state tax, not a local tax. The state said the cities would be reimbursed, but I remember when they took away local property taxes, and we were never reimbursed."

Vehicle license fees are personal property taxes motorists pay when they register their cars each year. It is currently 2 percent of the value of the car. The average vehicle owner would save $200 to $300 a year on registration if the reduction of fees is passed in the legislature.

Wilson's budget calls for reducing the car tax to 1 percent on Jan. 1, and to .5 percent in 2002.

He also proposes making up the lost revenue to local governments which now get most of the $3.9 billion revenue collected from the tax.

Wilson announced the idea to slash vehicle registration fees as part of his plan to cut taxes in light of the state's $4 billion budget surplus. Four bills are currently pending in the state Legislature to repeal vehicle license fees.

"This is a hot topic - it would really affect Los Altos Hills," said Los Altos Hills City Manager Jeff Peterson. "The vehicle license fee represents $335,000, or 10 percent, of our 1998-99 operating budget, and we would lose $165,000 the first year."

The Mountain View City Council decided at its May 12 meeting to oppose several bills that seek to repeal the vehicle license fee.

The council is concerned that if these bills pass, Mountain View will have a loss of $3 million, more than 5 percent of the city's general fund.

Cities have a limited way to use revenues because they are earmarked for specific uses, and vehicle license revenues are used to supplement city generated funds. Like most cities, the loss could disrupt or reduce services such as police, libraries, parks, economic development, planning and road repair.

According to Cupertino City Manager Don Brown, cutting the vehicle registration fees in half would mean a $2 million loss for the City of Cupertino. Brown chalked the fee repeal attempts as political grandstanding, and that such a repeal would have serious consequences for cities.

The Santa Clara County Library System would be affected with a loss of $960,544 in revenues it receives from the fees. County Librarian Susan Fuller said the vehicle fee revenues are about 5 percent of its $19 million budget. The library system operates 10 city libraries, including two in Los Altos.

Santa Clara County also receives vehicle fee revenues from the state and could lose as much as $116 million.

The League of California Cities, a nonprofit organization that is supported by California cities, said the vehicle license fee is the wrong tax to cut. If the state is determined to seek a tax cut, League officials suggest cutting a state tax instead.

The vehicle license fee has been a local tax since 1935 and is one of the few stable sources for local government, city officials said.