SR 05:169 - Laserfiche WebLink

Honorable Mayor and Members of the City Council: BACKGROUND Vehicle license fees ("VLF") were historically assessed in the amount of 2% of a vehicle's' depreciated market value as a cost for operating a vehicle on California's public highways. Beginning in 1999, the VLF was offset (or reduced) to a rate of .65%. In connection with the offset of the VLF, the Legislature authorized appropriations from the State General Fund to "backfill" the offset so that local governments, which receive all of the VLF revenues, would not experience a loss of revenues. The legislation that established the VLF offset program also provided that if there were insufficient State General Fund moneys to fully backfill the VLF offset, the fee payable by drivers would be increased to assure that local governments would not be disadvantaged. In June 2003, the State Director of Finance ordered the suspension of VLF offsets, due to insufficient funds, and beginning in October 2003, the VLF paid by vehicle owners was restored to the original 2%. However, the offset suspension was rescinded by Governor Schwarzenegger on November 17, 2003 and State offset payments to local governments resumed. Approximately $1.2 billion was not received by local governments during the time period between the suspension of the VLF offsets and the implementation of higher fees and is still owed them by the State. The City of Pleasanton's share of the unpaid VLF is $1,136,257 (the "Pleasanton VLF Receivable"). During the 2004-05 budget process, the State and local governments reached agreement that the VLF receivable would be repaid by August 2006, although there is unclear language in Proposition lA that could possibly allow the State to delay payment until 2008. VLF Pro~ram The CSCDA and the League of Califomia Cities have offered a bond financing program to all cities with VLF receivables. At an initial bond sale in February 2005, 133 cities participated resulting in the sale of approximately 56% of the total State VLF receivable. A second bond sale is now being offered through the CSCDA in July. Under the program, CSCDA will sell bonds to pay the participating cities their share of the State VLF receivable in late July 2005, less a percentage to cover the cost of issuing the bonds. The cities estimated cost is approximately 7.5%, and includes our share of capitalized interest, credit enhancement costs, and bond counsel expense. This cost will be partially offset by securing and investing the funds 12 months earlier than the State's deadline for payment. More importantly, staff is anxious to receive the funds, knowing that the State is projecting continued budget shortfalls. Once the City receives its money from the bond sale, the City is removed from any risk associated with non-payment by the State in August 2006. SR:05:169