Mayors, council members and city managers throughout California are being alerted to potentially budget-busting losses in local sales tax revenue if a three-bill “consumer protection” package is passed after the legislature reconvenes on Aug. 6.
The Coalition to Protect Our Freedom to Drive is calling, visiting and emailing city officials throughout the state to urge municipal opposition to Senate Bill 956, authored by Sen. Ted Lieu (D-Laguna Beach); Assembly Bill 1447 by Assemblyman Mike Feuer (D-West Hollywood), and AB 1534 by Assemblyman Bob Weickowski (D-Fremont.)
Larry Grooms, a coalition spokesman, said, “Unintended consequences from the harsh and expensive regulatory provisions in the bills will cut off the source of used car financing for customers with little or no credit, and no sale means no sales tax revenue for cities, counties and the state itself.”
Grooms added, “The legislature didn’t explore the fiscal and economic consequences from these bills, and neither did the League of California Cities, so local officials were in the dark until the coalition began spreading the word within the past three months.”
Coalition research into the self-financing used car business model, commonly called Buy Here – Pay Here, found the business sector is already heavily regulated by the state, with consumer complaints to the Department of Motor Vehicles average under 1 percent a year.
According to the State Board of Equalization used car dealers generated just under $468 million in state and local sales taxes in calendar year 2011. Industry projections if the three-bill package becomes law are for sales tax revenue losses ranging from $234 million to $337 million a year.
Former State Senator George Runner, now elected as a member of the Board of Equalization, wrote in a Capitol Weekly guest column in early July, “A Board of Equalization staff analysis confirms this; there would be fewer car sales due to more individuals deemed ineligible for loans. Fewer sales mean less money for state and local government from reduced sales tax revenues.”
Runner added, “For many in our state, no car means no job. No job means they’re unable to rebuild their credit. Alternatively, some could resort to illegal, often dangerous, loan sharks to borrow enough at an even higher rate to buy a car outright. That doesn’t serve anyone and could only increase crime and unemployment.” He concluded, “In the case of SB 956, AB 1447 and AB 1534 the sum of the parts is indeed greater than the whole. Rather than help consumers, these bills will hurt them. They will destroy jobs and diminish tax revenue.”
Last week the 2,000-member Sacramento Metro Chamber of Commerce, oldest and largest voice for business in the greater Sacramento area, declared its opposition to each of the three bills, the Chamber believes will do more harm than good for businesses and consumers.
With its resolution in opposition the Sacramento Metro Chamber became the largest business advocacy organization to align with the Coalition to Protect Our Freedom to Drive, joining such other organizations as the Antelope Valley Board of Trade, California Taxpayer Protection Committee, Antelope Valley Chambers of Commerce, AV Hispanic Chamber of Commerce and others.
Because the bills have already been passed through their respective house of origin, local officials will have little time to weigh-in on what happens with the bills when the legislature reconvenes on Aug. 6.
Some cities, including Lancaster, Palmdale and Agoura Hills, lacking time to hold the two meetings needed to pass a formal resolution in opposition, all agreed to have council members write opposition letters as individuals.
The statewide coalition was formed in May to warn state lawmakers and city officials about unintended consequences from the bills, including inability of credit-challenged Californians to buy cars from Buy Here – Pay Here dealerships, and subsequent multi-million dollars losses in state, county and city sales tax revenue, along with loss in vehicle license fees. The coalition has a website at www.protectfreedomtodrive.com