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CC SR 20210907 05 - Cal Cities 2021 Annual Confrence Resolutions RANCHO PALOS VERDES CITY COUNCIL MEETING DATE: 09/07/2021 AGENDA REPORT AGENDA HEADING: Regular Business AGENDA TITLE: Consideration and possible action to advise the City’s voting delegate on the City Council’s positions regarding the Cal Cities 2021 Annual Conference Resolutions. RECOMMENDED COUNCIL ACTION: (1) Authorize the City Council’s voting delegate to support the adoption of Cal Cities General Assembly Resolution No. 1 (Equitable Distribution of the Bradley Burns 1% Local Sales Tax) (2) Authorize the City Council’s voting delegate to support the adoption of Cal Cities General Assembly Resolution No. 2 (Funding and Regulatory Authority for Railroad Cleanup Activities) FISCAL IMPACT: None Amount Budgeted: N/A Additional Appropriation: N/A Account Number(s): N/A ORIGINATED BY: Megan Barnes, Senior Administrative Analyst REVIEWED BY: Karina Bañales, Deputy City Manager APPROVED BY: Ara Mihranian, AICP, City Manager ATTACHED SUPPORTING DOCUMENTS: A. 2021 Cal Cities Annual Conference Resolution packet (page A-1) BACKGROUND AND DISCUSSION: The Cal Cities (formerly League of California Cities) 2021 Annual Conference will be held September 22-24 at the SAFE Credit Union Convention Center in Sacramento. At the annual conference, the Cal Cities General Assembly will consider two resolutions at the annual business meeting on September 24. The City Council is encouraged to review the resolutions and determine a City position on them so that the City of Rancho Palos Verdes’ voting delegate (i.e., Mayor Alegria) and/or alternates (Councilmember Dyda and City Manager Mihranian were identified as alternates by the City Council at its August 3, 1 CITYOF RANCHO PALOS VERDES 2021 meeting) may most effectively represent and convey the City’s position on the resolutions. Policy development is a vital and ongoing process within Cal Cities. The principal means for deciding policy on the important issues facing cities and Cal Cities is through the organization’s seven standing policy committees1 and the Board of Directors. The process allows for timely consideration of issues in a changing environment and assures city officials the opportunity to both initiate and influence policy decisions. Annual conference resolutions constitute an additional way to develop Cal Cities policy. This year’s resolutions have been reviewed by Staff to identify any potential impact to the City. A brief description of each resolution and Staff’s recommendation is provided below. The full text of the resolutions is attached to this report, along with related background information provided by its sponsors and Cal Cities staff (Attachment A). 1. Equitable Distribution of the Bradley Burns 1% Local Sales Tax The City of Rancho Cucamonga proposes a resolution calling on the state Legislature to pass legislation that provides for a fair and equitable distribution of the Bradley Burns 1% local sales tax from in-state online purchases, based on data where products are shipped to, and that rightfully takes into consideration the impacts that fulfillment centers have on host cities but also provides a fair share to California cities that do not and/or cannot have a fulfillment center within their jurisdiction. The City of Rancho Cucamonga is sponsoring this resolution to “address the issues in how sales and use taxes are distributed in the 21st century.” All California cities and counties impose Bradley Burns sales taxes to receive 1 cent on every dollar of a sale of tangible goods within a jurisdiction’s boundaries. In 2018, the U.S. Supreme Court clarified in Wayfair v. South Dakota that states could charge and collect tax on purchases even if the seller does not have a physical presence in the state. Current policies by the California Department of Tax and Fees (CDTFA) require that the 1% Bradley Burns local tax revenue from in -state online retailers be allocated to the jurisdiction from which the package was shipped from, as opposed to going into a countywide pool, as is the practice with out-of-state online retailers. Earlier this year, one of the largest online retailers shifted its ownership structure and now operates as an in-state online retailer as well as out-of-state online retailer. Previously, all sales tax revenue generated by this retailer’s sales went into a countywide pool and was distributed among the jurisdictions in the pool; now the revenue from in -state sales goes entirely to the city where the fulfillment center is located, and the packages are shipped from. Cities that do not have a fulfillment center now receive no revenue from this retailer’s online in-state sales transactions, even when the packages are delivered to locations within the cities’ borders and paid for by residents in those locations. 1 Resolution No. 1 will be reviewed by the Revenue and Taxation Policy Committee. Resolution No. 2 will be reviewed by the Housing, Community and Economic Development Committee, and the Transportation, Communications and Public Works Committee. 2 Additionally, the sponsoring city argues that jurisdictions without fulfillment centers experience impacts from ecommerce and increased deliveries, such as traffic, air quality and compromised safety, as well as the negative impact on brick-and-mortar businesses struggling to compete with the sharp increase in online shopping. The City of Rancho Cucamonga has therefore proposed a resolution to advocate for an equitable distribution of the local sales tax from in-state online purchases and to take into account where a product is shipped to, not solely where it is shipped from or the location of a fulfillment center. In Rancho Palos Verdes, sales tax revenue is projected to make up 7.3% of the General Fund this fiscal year. Under pre-pandemic conditions, almost half of the City’s sales tax revenue came from hotels and restaurants. Rancho Palos Verdes does not have a fulfillment center, and is not as dependent on sales tax as other jurisdictions in Los Angeles County. As seen in the table below, the City’s allocation of sales tax revenue from the county pool has fluctuated in recent years. It is difficult to determine whether these changes can be attributed to shifts in spending habits due to on-again, off-again pandemic restrictions on businesses or the change in the business model of the aforementioned online retailer. However, given the growing popularity of online shopping, and to address potential revenue loss and the inequitable distribution of sales tax revenue from in-state online purchases, Staff believes it is in the City’s interest to support the adoption of 2021 Cal Cities General Assembly Resolution No. 1. Recommendation: Staff recommends supporting 2021 Cal Cities General Assembly Resolution No. 1. 3 FY:zm&.19 Q3 Q4 Ql Q2 Total Co unty Poo l A ll ocati o n 90,147 72,803 85,331 90,964 339,245 Qu art erly Di stri buti o n 27% 21% 25% 27 % FY2019-20 Q3 Q4 Ql Q2 Total Co unty Poo l A ll ocati o n 98,561 102,271 74,295 85,988 361,115 Qu art erly Di stri buti on 27% 28% 21% 24% Ye ar Ov e r Ye ar Ch ang e 9% 40% -13% -5% 6~ FY2020-21 Q3 Q4 Q1 Q2 Total Co unty Po o l A ll oca t i on 101,895 95,049 73,886 ·-270,830 Ye arOverYe arCh ang e 3% -7% -1% ·- 2. Funding and Regulatory Authority for Railroad Cleanup Activities The City of South Gate proposes a resolution calling on Cal Cities to urge the Governor and the Legislature to provide adequate regulatory authority and necessary funding to assist cities with railroad right-of-way areas to address illegal dumping, graffiti, and homeless encampments that proliferate along the rail lines and result in public safety issues. The City of South Gate is sponsoring this resolution “to address a critical issue within communities, especially disadvantaged communities of color that are home to the State’s freight rail lines.” Railroad operators own nearly 6,000 miles of rail right-of-way throughout California, which is regulated primarily by the Federal Railroad Administration. The California Public Utilities Commission (CPUC) oversees enforcement of operational safety through its Railroad Operations and Safety Branch (ROSB). Within the ROSB, the CPUC employs 41 inspectors who perform regular inspections, focused inspections, accident investigations, security inspections, and complaint investigations. In addition, the inspectors address safety risks that, while not violations of regulatory requirements, pose potential risks to public or railroad employee safety. Homeless encampments along railroad rights-of-way are a growing problem in California and increase incidents of illegal dumping and unauthorized access and trespassing activities. Other impacts include train service reliability with debris strikes, near-misses, and trespasser injuries/fatalities. A city must receive authorization from a railroad operator before addressing the impacts made by homeless encampments because of their location on private property. Absent a memorandum of understanding (MOU) with a railroad operator detailing shared maintenance, enforcement, and expenses, cities do not have the authority to unilaterally abate graffiti or clean up trash on a railroad’s right-of-way. The City of South Gate has therefore proposed a resolution aiming to increase funding for the CPUC to scale up its inspection of rail lines statewide, as well as allocate funds and provide regulatory authority to cities to immediately address concerns regarding illegal dumping, homeless encampments, and graffiti along r ailroad segments that intersect their jurisdiction. No rail lines traverse the City of Rancho Palos Verdes. However, a rail spur along North Gaffey Street in San Pedro is located within a mile of RPV’s Eastview neighborhood. Residents who utilize services offered by L.A. County’s S.A.F.E. (solvents, automotive, flammables and electronics) recycling center, for example, must cross the railroad to access the facility. Although this resolution does not directly impact the City of Rancho Palos Verdes, given the proximity of the rail spur to the Eastview neighborhood, and given the City’s past advocacy calling on the CPUC to increase funding to enhance utility equipment-related public safety (i.e. Rule 20A allocations for power line undergrounding), Staff believes it is in the City’s interest to support the adoption of 2021 Cal Cities General Assembly Resolution No. 2. 4 Recommendation: Staff recommends supporting 2021 Cal Cities General Assembly Resolution No. 2. ALTERNATIVES: In addition to the Staff recommendations, the following alternative action s are available for the City Council’s consideration: 1. Direct the voting delegate and/or alternate(s) to oppose or take no position on the adoption of 2021 Cal Cities Resolution No. 1. 2. Direct the voting delegate and/or alternate(s) to oppose or take no position on the adoption of 2021 Cal Cities Resolution No. 2. 3. Direct Staff to further research issues related to the resolutions before providing direction to the voting delegate and/or alternate(s), and continue this matter to the September 21, 2021 City Council meeting. 5 Annual Conference Resolutions Packet 2021 Annual Conference Resolutions September 22 - 24, 2021 A-1 LEAGUE OF CALIFORNIA CITIES INFORMATION AND PROCEDURES RESOLUTIONS CONTAINED IN THIS PACKET: The League of California Cities (Cal Cities) bylaws provide that resolutions shall be referred by the president to an appropriate policy committee for review and recommendation. Resolutions with committee recommendations shall then be considered by the General Resolutions Committee at the Annual Conference. This year, two resolutions have been introduced for consideration at the Annual Conference and referred to Cal Cities policy committees. POLICY COMMITTEES: Three policy committees will meet virtually one week prior to the Annual Conference to consider and take action on the resolutions. The sponsors of the resolutions have been notified of the time and location of the meetings. GENERAL RESOLUTIONS COMMITTEE: This committee will meet at 1:00 p.m. on Thursday, September 23, to consider the reports of the policy committees regarding the resolutions. This committee includes one representative from each of Cal Cities regional divisions, functional departments, and standing policy committees, as well as other individuals appointed by the Cal Cities president. Please check in at the registration desk for room location. CLOSING LUNCHEON AND GENERAL ASSEMBLY: This meeting will be held at 12:30 p.m. on Friday, September 24, at the SAFE Credit Union Convention Center. PETITIONED RESOLUTIONS: For those issues that develop after the normal 60-day deadline, a petition resolution may be introduced at the Annual Conference with a petition signed by designated voting delegates of 10 percent of all member cities (48 valid signatures required) and presented to the Voting Delegates Desk at least 24 hours prior to the time set for convening the Closing Luncheon & General Assembly. This year, that deadline is 12:30 p.m., Thursday, September 23. Resolutions can be viewed on Cal Cities Web site: www.cacities.org/resolutions. Any questions concerning the resolutions procedures may be directed to Meg Desmond mdesmond@calcities.org. 1 A-2 GUIDELINES FOR ANNUAL CONFERENCE RESOLUTIONS Policy development is a vital and ongoing process within Cal Cities. The principal means for deciding policy on the important issues facing cities is through Cal Cities seven standing policy committees and the board of directors. The process allows for timely consideration of issues in a changing environment and assures city officials the opportunity to both initiate and influence policy decisions. Annual conference resolutions constitute an additional way to develop Cal Cities policy. Resolutions should adhere to the following criteria. Guidelines for Annual Conference Resolutions 1.Only issues that have a direct bearing on municipal affairs should be considered or adopted at the Annual Conference. 2.The issue is not of a purely local or regional concern. 3.The recommended policy should not simply restate existing Cal Cities policy. 4.The resolution should be directed at achieving one of the following objectives: (a)Focus public or media attention on an issue of major importance to cities. (b)Establish a new direction for Cal Cities policy by establishing general principals around which more detailed policies may be developed by policy committees and the board of directors. (c)Consider important issues not adequately addressed by the policy committees and board of directors. 2 A-3 KEY TO ACTIONS TAKEN ON RESOLUTIONS Resolutions have been grouped by policy committees to which they have been assigned. Number Key Word Index Reviewing Body Action 1 2 3 1 - Policy Committee Recommendation to General Resolutions Committee 2 - General Resolutions Committee 3 - General Assembly HOUSING, COMMUNITY & ECONOMIC DEVELOPMENT POLICY COMMITTEE 1 2 3 2 Securing Railroad Property Maintenance REVENUE & TAXATION POLICY COMMITTEE 1 2 3 1 Online Sales Tax Equity TRANSPORTATION, COMMUNICATION & PUBLIC WORKS POLICY COMMITTEE 1 2 3 2 Securing Railroad Property Maintenance 3 A-4 KEY TO ACTIONS TAKEN ON RESOLUTIONS (Continued) Resolutions have been grouped by policy committees to which they have been assigned. KEY TO REVIEWING BODIES KEY TO ACTIONS TAKEN 1. Policy Committee A Approve 2. General Resolutions Committee D Disapprove 3. General Assembly N No Action R Refer to appropriate policy committee for study ACTION FOOTNOTES a Amend+ * Subject matter covered in another resolution Aa Approve as amended+ ** Existing League policy Aaa Approve with additional amendment(s)+ *** Local authority presently exists Ra Refer as amended to appropriate policy committee for study+ Raa Additional amendments and refer+ Da Amend (for clarity or brevity) and Disapprove+ Na Amend (for clarity or brevity) and take No Action+ W Withdrawn by Sponsor Procedural Note: The League of California Cities resolution process at the Annual Conference is guided by the Cal Cities Bylaws. 4 A-5 1.RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES (“CAL CITIES”) CALLING ON THE STATE LEGISLATURE TO PASS LEGISLATION THAT PROVIDES FOR A FAIR AND EQUITABLE DISTRIBUTION OF THE BRADLEY BURNS 1% LOCAL SALES TAX FROM IN-STATE ONLINE PURCHASES, BASED ON DATA WHERE PRODUCTS ARE SHIPPED TO, AND THAT RIGHTFULLY TAKES INTO CONSIDERATION THE IMPACTS THAT FULFILLMENT CENTERS HAVE ON HOST CITIES BUT ALSO PROVIDES A FAIR SHARE TO CALIFORNIA CITIES THAT DO NOT AND/OR CANNOT HAVE A FULFILLMENT CENTER WITHIN THEIR JURISDICTION Source: City of Rancho Cucamonga Concurrence of five or more cities/city officials: Cities: Town of Apple Valley; City of El Cerrito; City of La Canada Flintridge; City of La Verne; City of Lakewood; City of Moorpark; City of Placentia; City of Sacramento Referred to: Revenue and Taxation Policy Committee WHEREAS, the 2018 U.S. Supreme Court decision in Wayfair v. South Dakota clarified that states could charge and collect tax on purchases even if the seller does not have a physical presence in the state; and WHEREAS, California cities and counties collect 1% in Bradley Burns sales and use tax from the purchase of tangible personal property and rely on this revenue to provide critical public services such as police and fire protection; and WHEREAS, in terms of “siting” the place of sale and determining which jurisdiction receives the 1% Bradley Burns local taxes for online sales, the California Department of Tax and Fee Administration (CDTFA) determines “out-of-state” online retailers as those with no presence in California that ship property from outside the state and are therefore subject to use tax, not sales tax, which is collected in a countywide pool of the jurisdiction where the property is shipped from; and WHEREAS, for online retailers that have a presence in California and have a stock of goods in the state from which it fulfills orders, CDTFA considers the place of sale (“situs”) as the location from which the goods were shipped such as a fulfillment center; and WHEREAS, in early 2021, one of the state’s largest online retailers shifted its ownership structure so that it is now considered both an in-state and out-of-state retailer, resulting in the sales tax this retailer generates from in-state sales now being entirely allocated to the specific city where the warehouse fulfillment center is located as opposed to going into a countywide pool that is shared with all jurisdictions in that County, as was done previously; and WHEREAS, this all-or-nothing change for the allocation of in-state sales tax has created winners and losers amongst cities as the online sales tax revenue from the retailer that was once spread amongst all cities in countywide pools is now concentrated in select cities that host a fulfillment center; and WHEREAS, this has created a tremendous inequity amongst cities, in particular for cities that are built out, do not have space for siting a 1 million square foot fulfillment center, are not located along a major travel corridor, or otherwise not ideally suited to host a fulfillment center; and 5 A-6 WHEREAS, this inequity affects cities statewide, but in particular those with specific circumstances such as no/low property tax cities that are extremely reliant on sales tax revenue as well as cities struggling to meet their RHNA obligations that are being compelled by the State to rezone precious commercial parcels to residential; and WHEREAS, the inequity produced by allocating in-state online sales tax revenue exclusively to cities with fulfillment centers is exasperated even more by, in addition to already reducing the amount of revenue going into the countywide pools, the cities with fulfillment centers are also receiving a larger share of the dwindling countywide pool as it is allocated based on cities’ proportional share of sales tax collected; and WHEREAS, while it is important to acknowledge that those cities that have fulfillment centers experience impacts from these activities and deserve equitable supplementary compensation, it should also be recognized that the neighboring cities whose residents are ordering product from that center now receive no revenue from the center’s sales activity despite also experiencing the impacts created by the center, such as increased traffic and air pollution; and WHEREAS, the COVID-19 pandemic greatly accelerated the public’s shift towards online purchases, a trend that is unlikely to be reversed to pre-pandemic levels; and NOW, THEREFORE, BE IT RESOLVED that Cal Cities calls on the State Legislature to pass legislation that provides for a fair and equitable distribution of the Bradley Burns 1% local sales tax from in-state online purchases, based on data where products are shipped to, and that rightfully takes into consideration the impacts that fulfillment centers have on host cities but also provides a fair share to California cities that do not and/or cannot have a fulfillment center within their jurisdiction. 6 A-7 Background Information to Resolution Source: City of Rancho Cucamonga Background: Sales tax is a major revenue source for most California cities. Commonly known as the local 1% Bradley-Burns tax, since the 1950’s, cities have traditionally received 1 cent on every dollar of a sale made at the store, restaurant, car dealer, or other location within a jurisdiction’s boundaries. Over the years, however, this simple tax structure has evolved into a much more complex set of laws and allocation rules. Many of these rules relate to whether or not a given transaction is subject to sales tax, or to use tax – both have the same 1% value, but each applies in separate circumstances. The California Department of Tax and Fee Administration (CDTFA) is responsible for administering this system and issuing rules regarding how it is applied in our state. The following chart created by HdL Companies, the leading provider of California sales tax consulting, illustrates the complex structure of how sales and use tax allocation is done in California, depending on where the transaction starts, where the goods are located, and how the customer receives the goods: With the exponential growth of online sales and the corresponding lack of growth, and even decline, of shopping at brick and mortar locations, cities are seeing much of their sales tax 7 A-8 PLACE OF SALE LOCATION OF GOODS AT THE TIME OF SALE HOW CUSTOMER RECEIVES GOODS ALLOCATION OF LOCAL TAX Taxable Transaction Not In -Store IOn inc or Out of State) ------- Local tax Is allocated to the countywide pool based on point of delivery I-~ the jurisdiction 1n which the fulfillment center is located Local tax is allocated to the jurisdiction in which the store is located • In this sr:.eoorio the retniler does not own a stock at :ioods in Cafrtomia and sales orders ore neyotiatec//pmcessed out at state. An out ot state c.ompany is not required to hold a seller's pem,jt fur an in-stnte third party warehouse it they do not mm o sloe~ of :iood.s ot the time of sale. growth coming from the countywide sales tax pools, since much of the sales tax is now funneled to the pools. Recently, one of the world’s largest online retailers changed the legal ownership of its fulfillment centers. Instead of having its fulfillment centers owned and operated by a third-party vendor, they are now directly owned by the company. This subtle change has major impacts to how the 1% local tax is allocated. Following the chart above, previously much of the sales tax would have followed the green boxes on the chart and been allocated to the countywide pool based on point of delivery. Now, much of the tax is following the blue path through the chart and is allocated to the jurisdiction in which the fulfillment center is located. (It should be noted that some of the tax is still flowing to the pools, in those situations where the fulfillment center is shipping goods for another seller that is out of state.) This change has created a situation where most cities in California – more than 90%, in fact – are experiencing a sales tax revenue loss that began in the fourth quarter of calendar year 2021. Many cities may not be aware of this impact, as the fluctuations in sales tax following the pandemic shutdowns have masked the issue. But this change will have long-term impacts on revenues for all California cities as all these revenues benefiting all cities have shifted to just a handful of cities and counties that are home to this retailer’s fulfillment centers. This has brought to light again the need to address the issues in how sales and use taxes are distributed in the 21st century. Many, if not most cities will never have the opportunity have a warehouse fulfillment center due to lack of space or not being situated along a major travel corridor. These policies especially favor retailers who may leverage current policy in order to negotiate favorable sales tax sharing agreements, providing more money back to the retailer at the expense of funding critical public services. With that stated, it is important to note the many impacts to the jurisdictions home to the fulfillment centers. These centers do support the ecommerce most of us as individuals have come to rely on, including heavy wear and tear on streets – one truck is equal to about 8,000 cars when it comes to impact on pavement – and increased air pollution due to the truck traffic and idling diesel engines dropping off large loads. However, it is equally important that State policies acknowledge that entities without fulfillment centers also experience impacts from ecommerce and increased deliveries. Cities whose residents are ordering products that are delivered to their doorstep also experience impacts from traffic, air quality and compromised safety, as well as the negative impact on brick-and-mortar businesses struggling to compete with the sharp increase in online shopping. These cities are rightfully entitled to compensation in an equitable share of sales and use tax. We do not believe that online sales tax distribution between fulfillment center cities and other cities should be an all or nothing endeavor, and not necessarily a fifty-fifty split, either. But we need to find an equitable split that balances the impacts to each jurisdiction involved in the distribution of products purchased online. Over the years, Cal Cities has had numerous discussions about the issues surrounding sales tax in the modern era, and how state law and policy should be revisited to address these issues. It is a heavy lift, as all of our cities are impacted a bit differently, making consensus difficult. We believe that by once again starting the conversation and moving toward the development of laws and policies that can result in seeing all cities benefit from the growth taxes generated through online sales, our state will be stronger. It is for these reasons, that we should all aspire to develop an equitable sales tax distribution for online sales. 8 A-9 LETTERS OF CONCURRENCE Resolution No. 1 9 A-10 July 19, 2021 Cheryl Viegas Walker, President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Dear President Walker: The Town of Apple Valley strongly supports the City of Rancho Cucamonga’s effort to submit a resolution for consideration by the General Assembly at Cal Cities 2021 Annual Conference in Sacramento. Current policies by the California Department of Tax and Fees (CDTFA) require that the one percent Bradley Burns local tax revenue from in-state online retailers be allocated to the jurisdiction from which the package was shipped from, as opposed to going into a countywide pool as is the practice with out-of-state online retailers. Earlier this year, one of the largest online retailers shifted its ownership structure and now operates as an in-state online retailer as well as out-of-state online retailer. Whereas, all sales tax revenue generated by this retailer’s sales previously went into a countywide pool and was distributed amongst the jurisdictions in the pool. Now the revenue from in-state sales goes entirely to the city where the fulfillment center is located, and the packages shipped from. Cities that do not have a fulfillment center now receive no revenue from this retailer’s online in-state sales transactions, even when the packages are delivered to locations within the cities’ borders and paid for by residents in those locations. Cities that border jurisdictions with fulfillment centers also experience its impacts such as increased truck traffic, air pollution and declining road conditions. This all-or-nothing practice has created clear winners and losers amongst cities as the online sales tax revenue from large online retailers that was once spread amongst all cities in countywide pools is now concentrated in select cities fortunate enough to host a fulfillment center. This has created a growing inequity amongst California cities, which only benefits some and is particularly unfair to cities who have no chance of ever obtaining a fulfillment center, such as those that are built out or are not situated along major travel corridors. No/low property tax cities that rely on sales tax revenue are especially impacted as well as cities struggling to meet their RHNA allocations that are being pressured by Sacramento to rezone precious commercial parcels to residential. The current online sales tax distribution policies are inherently unfair and exasperate the divide between the winners and losers. Ultimately, the real winners may be the retailers, who leverage these policies to negotiate favorable sales tax sharing agreements from a small group of select cities understandably wanting to host fulfillment centers. The current online sales tax distribution policies unfairly divide local agencies, exacerbate already difficult municipal finances, and in the end result in a net loss of local government sales tax proceeds that simply serve to make private sector businesses even more profitable at the expense of everyone’s residents. 10 A-11 We can do better than this. And we should all aspire to develop an equitable sales tax distribution of online sales that addresses the concerns noted above. For these reasons, the Town of Apple Valley concurs that the resolution should go before the General Assembly. If you have any questions regarding the Town’s position in this matter, please do not hesitate to contact the Town Manager at 760-240-7000 x 7051. Sincerely, Curt Emick Mayor 11 A-12 July 21, 2021 Cheryl Viegas Walker, President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: Letter of Support for the City of Rancho Cucamonga’s Resolution for Fair and Equitable Distribution of the Bradley Burns 1% Local Sales Tax Dear President Walker: The City of El Cerrito supports the City of Rancho Cucamonga’s effort to submit a resolution for consideration by the General Assembly at the Cal Cities 2021 Annual Conference in Sacramento. Current policies by the California Department of Tax and Fees (CDTFA) require that the 1 percent Bradley Burns local tax revenue from in-state online retailers be allocated to the jurisdiction from which the package was shipped from, as opposed to going into a countywide pool as is the practice with out-of-state online retailers. Earlier this year, one of the largest online retailers shifted its ownership structure and now operates as an in- state online retailer as well as out-of-state online retailer. Previously, all sales tax revenue generated by this retailer’s sales went into a countywide pool and was distributed amongst the jurisdictions in the pool; now the revenue from in-state sales goes entirely to the city where the fulfillment center is located and the packages are shipped from. Cities that do not have a fulfillment center now receive no revenue from this retailer’s online in- state sales transactions, even when the packages are delivered to locations within the cities’ borders and paid for by residents in those locations. Cities that border jurisdictions with fulfillment centers also experience its impacts such as increased truck traffic, air pollution, and declining road conditions. This all-or-nothing practice has created clear winners and losers amongst cities as the online sales tax revenue from large online retailers that was once spread amongst all cities in countywide pools is now concentrated in select cities fortunate enough to host a fulfillment center. This has created a growing inequity amongst California cities, which only benefits some and is particularly unfair to cities such as El Cerrito who have no chance of ever obtaining a fulfillment center as we are a built out, four square mile, small city. Additionally, cities not situated along major travel corridors and no/low property tax cities that rely on sales tax revenue are especially impacted, as well as cities struggling to build much needed affordable housing that may require rezoning commercial parcels in order to meet their RHNA allocations. 12 A-13 The current online sales tax distribution policies are inherently unfair and exasperate the divide between the winners and losers. Ultimately, the real winners may be the retailers, who leverage these policies to negotiate favorable sales tax sharing agreements from a small group of select cities understandably wanting to host fulfillment centers. The current online sales tax distribution policies serve to divide local agencies, exacerbate already difficult municipal finances, and in the end results in a net loss of local government sales tax proceeds that simply serve to make private sector businesses even more profitable at the expense of everyone’s residents. We can do better, and we should all aspire to develop an equitable sales tax distribution of online sales that addresses the concerns noted above. For these reasons, the City of El Cerrito concurs that the resolution should go before the General Assembly. Sincerely, Paul Fadelli, Mayor City of El Cerrito cc: El Cerrito City Council City of Rancho Cucamonga 13 A-14 14A-15i &,1YIL\(l\NI\DJ\ ! FJJNTRIDGF, July 14, 2021 J:: Ms. Cheryl Viegas Walker, President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Dear President Walker: City Council Terry Walker, Mayor Keith Eich, Mayor Pro Tern Jonathan C. Curtis Michael T. Davitt Richard B. Gunter Ill The City of La Canada Flintridge strongly supports the City of Rancho Cucamonga's effort to introduce a resolution for consideration by the General Assembly at CalCITIES' 2021 Annual Conference in Sacramento. Current policies by the California Department of Tax and Fees (CDTFA) require that the 1% Bradley Burns local tax revenue (sales tax) from in-state on line retailers be allocated to the jurisdiction from which the package was shipped, as opposed to going into a countywide pool, as is the practice with out-of-state online retailers. Earlier this year, one of the largest online retailers shifted its ownership structure and now operates as an in-state online retailer as well as an out-of-state online retailer. Whereas all sales tax revenue generated by this retailer's sales previously went into a countywide pool and was distributed amongst the jurisdictions in the pool, now the revenue from in-state sales goes entirely to the jurisdiction where the fulfillment center is located and the packages shipped from. Cities that do not have a fulfillment center now receive no revenue from this retailer's online in-state transactions even though their packages are delivered to locations within those cities' borders and paid for by residents in those locations. Cities that abut jurisdictions with fulfillment centers experience fulfillment centers' impacts just as much, such as increased truck traffic, air pollution and declining road conditions. This all-or-nothing practice has created clear winners and losers amongst cities as the online sales tax revenue from large online retailers, that was once spread amongst all cities in countywide pools, is now concentrated in select cities fortunate enough to host a fulfillment center. This benefits only those few hosting jurisdictions and is particularly unfair to cities who have no chance of ever hosting a fulfillment center, such as those that are built out or are not situated along major travel corridors. No/low property tax cities that rely heavily on sales tax revenue are especially impacted as well as cities struggling to meet their RHNA allocations that are being pressured by Sacramento to rezone precious commercial parcels to residential. The current online sales tax distribution policies are inherently unfair and exasperate the divide between the winners and losers. Ultimately, the real winners may be the retailers who leverage these policies to negotiate favorable sales tax sharing agreements from a small group of select cities understandably eager to host fulfillment centers. The current online sales tax distribution policies unfairly divide local agencies, exacerbate already difficult municipal finances and, in the end, result in a net loss of local government sales tax proceeds that simply serve to make private One Civic Center Drive, La Canada Flintridge, CA 91011 • (818) 790-8880 • Fax (818) 790-7536 www.lcf.ca.oov 15A-16Ms. Cheryl Viegas Walker, President July 14, 2021 Page 2 sector businesses even more profitable at the expense of cities' residents. We should all aspire to develop an equitable sales tax distribution of online sales that addresses the concerns noted above. For these reasons, the City of La Canada Flintridge concurs that the proposed resolution should go before the General Assembly. Sincerely, ~'t/Z:~f~ Terry Walker Mayor 16 A-17 CITY OF LA VERNE CITY HALL July 19 , 2021 3660 "D" Str eet, La Verne, Ca li forn ia 917 50-3599 www.cityoflaverne.o rg Cheryl V iegas Walker, President League of California Cities 1400 K Street, Suite 400 Sacramento , CA 95814 Dear President Walker: The City of La Verne strongly supports the City of Rancho Cucamonga's effort to subm it a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. Current policies by the Californ ia Department of Tax and Fees (CDTFA) require that the 1 percent Bradley Burns local tax revenue from in-state online retailers be allocated to the jurisdiction from which the package was shipped from , as opposed to going into a countywide pool as is the practice with out-of-state online retailers . Earlier this yea r , one of the largest online retailers shifted its ownership structure and now operates as an in- state online reta iler as well as out-of-state onl ine retai ler. W hereas all sales ta x revenue generated by this reta iler's sales previously went into a countywide pool and was distributed amongst the jurisd ictions in the pool , now the revenue from in-state sales goes entirely to the city where the fu lfillment center is located , and the packages shipped from . Cities that do not have a fulfillment center now receive no revenue from this retailer's online in-state sales transactions , even when the packages are delivered to locations within the cities' borders and pa id for by residents in those locations . Cities that border jurisdictions with fulfillment centers also experience its impacts such as increased truck traffic , air pollution , and declining road conditions . This all-or-nothing practice has created clear winners and losers amongst cities as the online sales tax revenue from large online ret a il ers that was once spread amongst all cities in countywide pools is now concentrat ed in select cities fortunate enough to host a fulfillment center. This has created a growing inequ ity amongst California cities , which only benefits some and is particularly unfair t o cities which have no chance of ever obtai ning a fulfillment center, such as those that are bui lt out or are not situated a long maj or travel corridors. No/low property tax cities that re ly on sales tax revenue are Gener al Administrat ion 909/596-8726 • Water Customer Service 909/596 -87 44 • Community Services 909/596-8700 Pub lic Works 909/59 6-87 41 • Finance 909/596 -871 6 • Community Developm ent 909/596-8706 • Bui lding 909/596 -87 13 Po lice Departmen t 909/596-1913 • Fire Department 90 9/59 6-5991 • General Fax 909/596 -8737 17 A-18 July 19 , 2021 Re: Online Sale s Tax Equity Support Page2 especially impacted as well as cities struggling to meet their RHNA allocations that are being pressured by Sacramento to rezone precious commercial parcels to residential. The current online sales tax distribution policies are inherently unfair and exacerbate the divide between the winners and losers. Ultimately, the real winners may be the retailers, who leverage these policies to negotiate favorable sales tax sharing agreements from a small group of select cities understandably wanting to host fu lfillment centers. The current online sales tax distribution policies unfairly divide local agencies, exacerbate already difficult municipal finances, and in the end , result in a net loss of local government sales tax proceeds that simply serve to make private sector businesses even more profitable at the expense of everyone's residents . We can do better than this. And we should all aspire to develop an equitable sales tax distribution of online sales that addresses the concerns noted above . For these reasons, the City of La Verne concurs that the resolution should go before the General Assembly . Sincerely , Bob Russi City Manager City of La Verne 18 A-19 Stne Croft Yicc \ta~o r Ariel Pe Council \frmb~r July 15 , 2021 Chery l V iegas Wa lke r , Presiden t Leagu e of Cal ifo rn ia Cities 1400 K Street, Suite 400 Sacramento, CA 958 14 Dear Pres ident Wa lker: Jeff Wood \Ja ~or \.irki L. Stu<:k<'y Council \!ember Todd Roi:er, Council .\!ember T he City of Lakewood strongly sup po1ts the C ity of Rancho Cucamonga's effort to s u bm it a resolu tion fo r con s ideratio n by t he General Assem b ly at t he League's 2021 A nnua l Confere nce in Sacramento. Current po lic ies by t he California Department of Tax a nd Fees (CDTF A) requ ire that the I percent Bradley B u rns local tax revenue from in-state o nl in e reta il e rs be a ll ocated to the j uri sd ictio n fro m w hi c h t he package was s hi pped from, as opposed to go ing into a countywide pool as is the practice w it h out-of-state onli ne re ta il ers. Earli e r th is year, one of t he la rgest o nline retail e rs s h ifted its ownershi p struct ure a nd now operates as an in-state onl ine retailer a s well as o ut-of-state on line re ta il e r. W hereas, a ll sales tax revenue generated by t hi s retail e r 's sales p revio us ly went in to a countyw ide poo l a nd was d istributed a m ongst the jur isd ictions in the pool, now the revenu e fro m in-st ate sa les goes e nti re ly to t he city where the fulfi ll ment center is located, a nd t he packages s hi pped fro m . Citie s t hat do not h ave a ful fi ll me nt center now receive n o revenue fro m this retail er's o nline in -st at e sales transactions, even when the packages a re del iver ed to locations w ithi n t he c it ies' borders and paid for by res idents in those locatio ns. C ities that border j uris d ictions with fu lfi ll ment centers a lso experience its impacts s uch as inc reased truck traffic, a ir po ll utio n and d ec linin g road cond it io ns . This a ll-or -noth ing practice has created c lear winners and losers a m ongst c it ies as the on l ine sales tax reven ue fro m la rge o nline retail ers t hat was o nce spread a mo ngst a ll c it ies in countywide pools is now concentrated in select c ities fo 1t un ate enough to host a fu lfi llment center . Th is has c reated a growin g inequ ity amongst Cal iforn ia c ities, w hich o n ly benefits some and is particu la rl y unfair to cities th at have no c ha nce of ever obtainin g a fu lfil lm e nt center, such as t hose t hat a re built o ut o r a re not s it uated a lo n g major trave l corridors. No/low propetty tax cities that re ly on sa les tax reven ue are es peciall y impacted a s we ll as c it ies s trugglin g to meet t heir RHNA a ll ocati o ns t hat are being pressure d by Sacramento to rezone preci o us commerc ia l parc e ls to res ident ia l. T he current onl ine sales tax d istri bution pol icies are inherently u nfair and exasperate the divide between t he winners a nd losers. U lt i mate ly, t he rea l winners may be the retail ers, w ho leverage these pol icies to negotiate favorable sales tax s haring agree me nts fro m a s m a ll grou p of se lect c ities u nderstandably wanting to host fulfill me nt centers . T he current o nl ine sales tax dis tribu t ion policies u n fa ir ly divide local agencies, exacerbate a lready difficul t m unicipal finances, and in the end resu lt in a net loss of local government sa les tax p roceeds t hat s im p ly serve to make private sector b usinesses even mo re profitab le at the expense of eve ryone's residents. We can do better than thi s . A nd we s hould a ll aspire to deve lo p an equi table sales tax d ist ri bution of o n li ne sales that addresses the concerns noted abo ve. For these reasons, the C ity of Lakewood concurs that the resolutio n s ho u ld go befo re t he General Assembly. s;ncerely, ~ ~0: Mayor Lakewood 5050 Clark \H~nuc, Lakc,,ood, C A 90712 • (562 ) 866-9771 • Fax (562) 866-0505 • www.l akcwoodcity.org • Ema il: sen iccl@ lakc" oodcit},<irg CITY OF MOORPARK JANICE S. PARVIN Mayor DR. ANTONIO CASTRO Councilmember CHRIS ENEGREN Councilmember DANIEL GROFF Councilmember DAVID POLLOCK Councilmember 799 Moorpark Avenue, Moorpark, California 93021 Main City Phone Number (805) 517-6200 | Fax (805) 532-2205 | moorpark@moorparkca.gov July 14, 2021 TRANSMITTED ELECTRONICALLY Cheryl Viegas-Walker, President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Dear President Walker: The City of Moorpark strongly supports the City of Rancho Cucamonga’s effort to submit a resolution for consideration by the General Assembly at the League’s 2021 Annual Conference in Sacramento. Current policies of the California Department of Tax and Fees (CDTFA) require that the one percent Bradley Burns local tax revenue from in-state online retailers be allocated to the jurisdiction from which the package was shipped, as opposed to going into a countywide pool as is the practice with out-of-state online retailers. Earlier this year, one of the largest online retailers shifted its ownership structure and now operates both as an in-state online retailer and as an out-of-state online retailer. Whereas all sales tax revenues generated by this retailer’s sales previously went into countywide pools and were distributed amongst the jurisdictions in the pool, sales tax revenues from in-state sales now go entirely to the city where the fulfillment center is located and the package is shipped from. Cities that do not have a fulfillment center now receive no sales tax revenue from this retailer’s online in-state sales transactions, even when the packages are delivered to locations within the cities’ borders and paid for by residents in those locations. Cities that border jurisdictions with fulfillment centers also experience its impacts such as increased truck traffic, air pollution, and deteriorating road conditions. This all-or-nothing practice has created clear winners and losers amongst cities as the online sales tax revenues from large online retailers that were once spread amongst all cities in countywide pools are now concentrated in select cities fortunate enough to host a fulfillment center. This has created a growing inequity amongst California cities, which only benefits some and is particularly unfair to cities who have no chance of ever obtaining a fulfillment center, such as those that are built out or are not situated along major travel corridors. No/low property tax cities that rely on sales tax revenue are especially impacted, as well as 19 A-20 Letter of Support Page 2 cities struggling to meet their RHNA allocations that are being pressured by Sacramento to rezone limited commercial properties for residential land uses. The current online sales tax distribution policies are inherently unfair and exasperate the divide between the winners and losers. Ultimately, the real winners may be the retailers, who leverage these policies to negotiate favorable sales tax sharing agreements from a small group of select cities understandably wanting to host fulfillment centers. The current online sales tax distribution policies unfairly divide local agencies, exacerbate already difficult municipal finances, and ultimately result in a net loss of local government sales tax proceeds that simply serve to make private sector businesses more profitable at the expense of everyone’s residents. We can do better than this, and we should all aspire to develop an equitable sales tax distribution of online sales that addresses the concerns noted above. For these reasons, the City of Moorpark concurs that the resolution should go before the General Assembly at the 2021 Annual Conference in Sacramento. Sincerely, Janice S. Parvin Mayor cc: City Council City Manager 20 A-21 21 A-22 The People are the City Mayor City Clerk: CRAIG S. GREEN ROBERTS. MCKINNELL Mayor Pro Tem CHAD P. WANKE Councllmembers: RHONDA SHADER WARD L. SMITH JEREMY 8. YAMAGUCHI 401 East Chapman Avenue -Placentia, California 92870 Cheryl Viegas Walker, President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Dear President Walker: July 14, 2021 City Treasurer KEVIN A. LARSON City Administrator DAMIEN R. ARRULA The City of Placentia strongly supports the City of Rancho Cucamonga's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. Current policies by the California Department of Tax and Fees (CDTFA) require that the 1 percent (1 %) Bradley Burns local tax revenue from in-state online retailers be allocated to the jurisdiction from which the package was shipped from, as opposed to going into a countywide pool as is the practice with out-of-state online retailers. Earlier this year, one of the largest online retailers shifted its ownership structure and now operates as an in- state online retailer as well as out-of-state online retailer. Whereas, all sales tax revenue generated by this retailer's sales previously went into a countywide pool and was distributed amongst the jurisdictions in the pool, now the revenue from in-state sales goes entirely to the city where the fulfillment center is located, and the packages shipped from. Cities that do not have a fulfillment center now receive no revenue from this retailer's online in-state sales transactions, even when the packages are delivered to locations within the cities' borders and paid for by residents in those locations. Cities that border jurisdictions with fulfillment centers also experience its impacts such as increased truck traffic, air pollution and declining road conditions. This all-or-nothing practice has created clear winners and losers amongst cities as the online sales tax revenue from large online retailers that was once spread amongst all cities in countywide pools is now concentrated in select cities fortunate enough to host a fulfillment center. This has created a growing inequity amongst California cities, which only benefits some and is particularly unfair to cities who have no chance of ever obtaining a fulfillment center, such as those that are built out or are not situated along major travel corridors. No/low property tax cities that rely on sales tax revenue are especially impacted as well as cities struggling to meet their RHNA allocations that are being pressured by Sacramento to rezone precious commercial parcels to residential. The current online sales tax distribution policies are inherently unfair and exasperate the divide between the winners and losers. Ultimately, the real winners may be the retailers, who leverage these policies to negotiate favorable sales tax sharing agreements from a small group of select cities understandably wanting to host fulfillment centers. The 22 A-23 Letter of Support: City of Rancho Cucamonga July 14 , 2021 Page 2 of 2 current online sales tax distribution policies unfairly divide local agencies, exacerbate already difficult municipal finances, and in the end result in a net loss of local government sales tax proceeds that simply serve to make private sector businesses even more profitable at the expense of everyone's residents. We can do better than this. And we should all aspire to develop an equitable sales tax distribution of online sales that addresses the concerns noted above. For these reasons, the City of Placentia concurs that the resolution should go before the General Assembly. Should you have any questions regarding this letter, please contact me at (714) 993-8117 or via email at admin istration@placentia .org . Damien R. Arrula City Administrator 23 A-24 Leyne Milstein Assistant Ciry Manager Cheryl Viegas Walker, President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Dear President Walker: ( SACRAMENTO Office of the City Manager July 19, 2021 Ciry Hali 915 I Street, Fifth Floor Sacramento, CA 95814-2604 916-808-5704 The City of Sacramento strongly supports the City of Rancho Cucamonga's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. Current policies by the California Department of Tax and Fees (CDTFA) require that the one percent Bradley Burns local tax revenue from in-state online retailers be allocated to the jurisdiction from which the package was shipped from, as opposed to going into a countywide pool as is the practice with out-of-state on line retailers. Earlier this year, one of the largest online retailers shifted its ownership structure and now operates as an in-state online retailer as well as out-of-state online retailer. Whereas all sales tax revenue generated by this retailer's sales previously went into a countywide pool and was distributed amongst the jurisdictions in the pool, now the revenue from in-state sales goes entirely to the city where the fulfillment center is located, and the packages shipped from. Cities that do not have a fulfillment center now receive no revenue from this retailer's online in-state sales transactions, even when the packages are delivered to locations within the cities' borders and paid for by residents in those locations. Cities that border jurisdictions with fulfillment centers also experience its impacts such as increased truck traffic, air pollution and declining road conditions. This all-or-nothing practice has created clear winners and losers amongst cities as the on line sales tax revenue from large online retailers that was once spread amongst all cities in countywide pools is now concentrated in select cities fortunate enough to host a fulfillment center. This has created a growing inequity amongst California cities, which only benefits some and is particularly unfair to cities who have no chance of ever obtaining a fulfillment 24 A-25 Leyne Milstein Assistant City Manager ( ;i' i SACRAMENTO Office of the C ity Manager City Hall 915 I Street, Fifth Floor Sacramento, CA 95814-2604 916-808-5704 center, such as those that are built out or are not situated along major travel corridors. No/low property tax cities that rely on sales tax revenue are especially impacted as well as cities struggling to meet their Regional Housing Needs Allocation (RHNA) that are being pressured by Sacramento to rezone precious commercia l parcels to residential. The current on line sales tax distribution policies are inherently unfair and exasperate the divide between the winners and losers . Ultimately, the real winners may be the retailers, who leverage these policies to negotiate favorable sales tax sharing agreements from a small group of select cities understandably wanting to host fulfillment centers. The current online sales tax distribution policies unfairly divide local agencies, exacerbate already difficult municipa l finances, and in the end, result in a net loss of local government sales tax proceeds that simply serve to make private sector businesses even more profitable at the expense of everyone's residents. We can do better than this. And we should all aspire to develop an equitable sales tax distribution of online sales that addresses the concerns noted above. For these reasons, the City of Sacramento concurs that the resolution should go before the General Assembly. Sincerely, ~ leyne 1,1ilstein (Ju! 19, 202114:48 PDT) Leyne Milstein Assistant City Manager League of California Cities Staff Analysis on Resolution No. 1 Staff: Nicholas Romo, Legislative Affairs, Lobbyist Committee: Revenue and Taxation Summary: This Resolution calls on the League of California Cities (Cal Cities) to request the Legislature to pass legislation that provides for a fair and equitable distribution of the Bradley Burns 1% local sales tax from in-state online purchases, based on data where products are shipped to, and that rightfully takes into consideration the impacts that fulfillment centers have on host cities but also provides a fair share to California cities that do not and/or cannot have a fulfillment center within their jurisdiction. Background: The City of Rancho Cucamonga is sponsoring this resolution to “address the issues in how sales and use taxes are distributed in the 21st century.” The City notes that “sales tax is a major revenue source for most California cities. Commonly known as the local 1% Bradley-Burns tax, since the 1950’s, cities have traditionally received 1 cent on every dollar of a sale made at the store, restaurant, car dealer, or other location within a jurisdiction’s boundaries. Over the years, however, this simple tax structure has evolved into a much more complex set of laws and allocation rules. Many of these rules relate to whether or not a given transaction is subject to sales tax, or to use tax – both have the same 1% value, but each applies in separate circumstances. Recently, one of the world’s largest online retailers changed the legal ownership of its fulfillment centers. Instead of having its fulfillment centers owned and operated by a third-party vendor, they are now directly owned by the company. This subtle change has major impacts to how the 1% local tax is allocated. This change has created a situation where most cities in California – more than 90%, in fact – are experiencing a sales tax revenue loss that began in the fourth quarter of calendar year 2021. Many cities may not be aware of this impact, as the fluctuations in sales tax following the pandemic shutdowns have masked the issue. But this change will have long-term impacts on revenues for all California cities as all these revenues benefiting all cities have shifted to just a handful of cities and counties that are home to this retailer’s fulfillment centers.” The City’s resolution calls for action on an unspecified solution that “rightfully takes into consideration the impacts that fulfillment centers have on host cities but also provides a fair share to California cities that do not and/or cannot have a fulfillment center within their jurisdiction,” which aims to acknowledge the actions taken by cities to alleviate poverty, catalyze economic development, and improve financial stability within their communities through existing tax sharing and zoning powers. 25 A-26 Ultimately, sponsoring cities believe “that by once again starting the conversation and moving toward the development of laws and policies that can result in seeing all cities benefit from the growth taxes generated through online sales, our state will be stronger.” Sales and Use Tax in California The Bradley-Burns Uniform Sales Tax Act allows all local agencies to apply its own sales and use tax on the same base of tangible personal property (taxable goods). This tax rate currently is fixed at 1.25% of the sales price of taxable goods sold at retail locations in a local jurisdiction, or purchased outside the jurisdiction for use within the jurisdiction. Cities and counties use this 1% of the tax to support general operations, while the remaining 0.25% is used for county transportation purposes. In California, all cities and counties impose Bradley-Burns sales taxes. California imposes the sales tax on every retailer engaged in business in this state that sells taxable goods. The law requires businesses to collect the appropriate tax from the purchaser and remit the amount to the California Department of Tax and Fee Administration (CDTFA). Sales tax applies whenever a retail sale is made, which is basically any sale other than one for resale in the regular course of business. Unless the person pays the sales tax to the retailer, they are liable for the use tax, which is imposed on any person consuming taxable goods in the state. The use tax rate is the same rate as the sales tax rate. Generally, CDTFA distributes Bradley‑Burns tax revenue based on where a sale took place, known as a situs‑based system. A retailer’s physical place of business—such as a retail store or restaurant—is generally the place of sale. “Sourcing” is the term used by tax practitioners to describe the rules used to determine the place of sale, and therefore, which tax rates are applied to a given purchase and which jurisdictions are entitled to the local and district taxes generated from a particular transaction. California is primarily an origin-based sourcing state – meaning tax revenues go to the jurisdiction in which a transaction physically occurs if that can be determined. However, California also uses a form of destination sourcing for the local use tax and for district taxes (also known as “transactions and use taxes” or “add-on sale and use taxes”). That is, for cities with local add-on taxes, they receive their add-on rate amount from remote and online transactions. Generally, allocations are based on the following rules: •The sale is sourced to the place of business of the seller - whether the product is received by the purchaser at the seller’s business location or not. •If the retailer maintains inventory in California and has no other in state location, the source is the jurisdiction where the warehouse is situated. This resolution is concerned with the growing amount of online retail activity being sourced to cities with warehouse/fulfillment center locations. •If the business’ sales office is located in California but the merchandise is shipped from out of state, the tax from transactions under $500,000 is allocated 26 A-27 via the county pools. The tax from transactions over $500,000 is allocated to the jurisdiction where the merchandise is delivered. •When a sale cannot be identified with a permanent place of business in the state, the sale is sourced to the allocation pool of the county where the merchandise was delivered and then distributed among all jurisdictions in that county in proportion to ratio of sales. For many large online retailers, this has been the traditional path. Online Sales and Countywide Pools While the growth of e-commerce has been occurring for more than two decades, led by some of the largest and most popular retailers in the world, the dramatic increase in online shopping during the COVID-19 pandemic has provided significant revenue to California cities as well as a clearer picture on which governments enjoy even greater benefits. In the backdrop of booming internet sales has been the steady decline of brick-and- mortar retail and shopping malls. For cities with heavy reliance on in-person retail shopping, the value of the current allocation system has been diminished as their residents prefer to shop online or are incentivized to do so by retailers (during the COVID-19 pandemic, consumers have had no other option but to shop online for certain goods). All the while, the demands and costs of city services continue to grow for cities across the state. As noted above, the allocation of sales tax revenue to local governments depends on the location of the transaction (or where the location is ultimately determined). For in- person retail, the sales tax goes to the city in which the product and store are located - a customer purchasing at a register. For online sales, the Bradley Burns sales tax generally goes to a location other than the one where the customer lives – either to the city or county where an in-state warehouse or fulfillment center is located, the location of in-state sales office (ex. headquarters) or shared as use tax proceeds amongst all local governments within a county based on their proportionate share of taxable sales. Under current CDTFA regulations, a substantial portion of local use tax collections are allocated through a countywide pool to the local jurisdictions in the county where the property is put to its first functional use. The state and county pools constitute over 15% of local sales and use tax revenues. Under the pool system, the tax is reported by the taxpayer to the countywide pool of use and then distributed to each jurisdiction in that county on a pro-rata share of taxable sales. If the county of use cannot be identified, the revenues are distributed to the state pool for pro-rata distribution on a statewide basis. Concentration of Online Sales Tax Revenue and Modernization Sales tax modernization has been a policy goal of federal, state, and local government leaders for decades to meet the rapidly changing landscape of commercial activity and ensure that all communities can sustainably provide critical services. 27 A-28 For as long as remote and internet shopping has existed, policy makers have been concerned about their potential to disrupt sales and use tax allocation procedures that underpin the funding of local government services. The system was designed in the early twentieth century to ensure that customers were paying sales taxes to support local government services within the community where the transactions occurred whether they resided there or not. This structure provides benefit to and recoupment for the public resources necessary to ensure the health and safety of the community broadly. City leaders have for as long been concerned about the loosening of the nexus between what their residents purchase and the revenues they receive. Growing online shopping, under existing sourcing rules, has led to a growing concentration of sales tax revenue being distributed to a smaller number of cities and counties. As more medium and large online retailers take title to fulfillment centers or determine specific sales locations in California as a result of tax sharing agreements in specific cities, online sales tax revenue will be ever more concentrated in a few cities at the control of these companies. Furthermore, local governments are already experiencing the declining power of the sales tax to support services as more money is being spent on non-taxable goods and services. For more on sales and use tax sourcing please see Attachment A. State Auditor Recommendations In 2017, the California State Auditor issued a report titled, “The Bradley-Burns Tax and Local Transportation Funds, noting that: “Retailers generally allocate Bradley Burns tax revenue based on the place of sale, which they identify according to their business structure. However, retailers that make sales over the Internet may allocate sales to various locations, including their warehouses, distribution center, or sales offices. This approach tends to concentrate Bradley Burns tax revenue into the warehouses’ or sales offices’ respective jurisdictions. Consequently, counties with a relatively large amount of industrial space may receive disproportionately larger amounts of Bradley Burns tax, and therefore Local Transportation Fund, revenue. The State could make its distribution of Bradley Burns tax revenue derived from online sales more equitable if it based allocations of the tax on the destinations to which goods are shipped rather than on place of sale.” The Auditor’s report makes the following recommendation: “To ensure that Bradley‑Burns tax revenue is more evenly distributed, the Legislature should amend the Bradley‑Burns tax law to allocate revenues from Internet sales based on the destination of sold goods rather than their place of sale.” 28 A-29 In acknowledgement of the growing attention from outside groups on this issue, Cal Cities has been engaged in its own study and convening of city officials to ensure pursued solutions account for the circumstances of all cities and local control is best protected. These efforts are explored in subsequent sections. Cal Cities Revenue and Taxation Committee and City Manager Working Group In 2015 and 2016, Cal Cities’ Revenue and Taxation Policy Committee held extensive discussions on potential modernization of tax policy affecting cities, with a special emphasis on the sales tax. The issues had been identified by Cal Cities leadership as a strategic priority given concerns in the membership about the eroding sales tax base and the desire for Cal Cities to take a leadership role in addressing the associated issues. The policy committee ultimately adopted a series of policies that were approved by the Cal Cities board of directors. Among its changes were a recommended change to existing sales tax sourcing (determining where a sale occurs) rules, so that the point of sale (situs) is where the customer receives the product. The policy also clarifies that specific proposals in this area should be carefully reviewed so that the impacts of any changes are fully understood. See “Existing Cal Cities Policy” section below. Cal Cities City Manager Sales Tax Working Group Recommendations In the Fall of 2017, the Cal Cities City Managers Department convened a working group (Group) of city managers representing a diverse array of cities to review and consider options for addressing issues affecting the local sales tax. The working group of city managers helped Cal Cities identify internal common ground on rapidly evolving e-commerce trends and their effects on the allocation of local sales and use tax revenue. After meeting extensively throughout 2018, the Group made several recommendations that were endorsed unanimously by Cal Cities’ Revenue and Taxation Committee at its January, 2019 meeting and by the board of directors at its subsequent meeting. The Group recommended the following actions in response to the evolving issues associated with e-commerce and sales and use tax: Further Limiting Rebate Agreements: The consensus of the Group was that: •Sales tax rebate agreements involving online retailers should be prohibited going forward. They are inappropriate because they have the effect of encouraging revenue to be shifted away from numerous communities and concentrated to the benefit of one. •Any type of agreement that seeks to lure a retailer from one community to another within a market area should also be prohibited going forward. Existing law already prohibits such agreements for auto dealers and big box stores. Shift Use Tax from Online Sales, including from the South Dakota v. Wayfair Decision Out of County Pools: The Group’s recommendation is based first on the principle of “situs” and that revenue should be allocated to the jurisdiction where the use occurs. Each city and county in California imposed a Bradley Burns sales and use tax rate 29 A-30 under state law in the 1950s. The use tax on a transaction is the rate imposed where the purchaser resides (the destination). These use tax dollars, including new revenue from the South Dakota v. Wayfair decision, should be allocated to the destination jurisdiction whose Bradley Burns tax applies and not throughout the entire county. •Shift of these revenues, from purchases from out of state retailers including transactions captured by the South Dakota v. Wayfair decision, out of county pools to full destination allocation on and after January 1, 2020. •Allow more direct reporting of use taxes related to construction projects to jurisdiction where the construction activity is located by reducing existing regulatory threshold from $5 million to $100,000. Request/Require CDTFA Analysis on Impacts of Sales Tax Destination Shifts: After discussion of numerous phase-in options for destination sourcing and allocation for sales taxes, the Group ultimately decided that a more complete analysis was needed to sufficiently determine impacts. Since the two companies most cities rely on for sales tax analysis, HdL and MuniServices, were constrained to modeling with transaction and use tax (district tax) data, concerns centered on the problem of making decisions without adequate information. Since the CDTFA administers the allocation of local sales and use taxes, it is in the best position to produce an analysis that examines: •The impacts on individual agencies of a change in sourcing rules. This would likely be accomplished by developing a model to examine 100% destination sourcing with a report to the Legislature in early 2020. •The model should also attempt to distinguish between business-to-consumer transactions versus business-to-business transactions. •The model should analyze the current number and financial effects of city and county sales tax rebate agreements with online retailers and how destination sourcing might affect revenues under these agreements. Conditions for considering a Constitutional Amendment that moves toward destination allocation: Absent better data on the impacts on individual agencies associated with a shift to destination allocation of sales taxes from CDTFA, the Group declined to prescribe if/how a transition to destination would be accomplished; the sentiment was that the issue was better revisited once better data was available. In anticipation that the data would reveal significant negative impacts on some agencies, the Group desired that any such shift should be accompanied by legislation broadening of the base of sales taxes, including as supported by existing Cal Cities policy including: •Broadening the tax base on goods, which includes reviewing existing exemptions on certain goods and expanding to digital forms of goods that are otherwise taxed; and •Expanding the sales tax base to services, such as those commonly taxed in other states. This Resolution builds upon previous work that accounts for the impacts that distribution networks have on host cities and further calls on the organization to advocate for changes to sales tax distribution rules. 30 A-31 The Resolution places further demands on data collected by CDTFA to establish a “fair and equitable distribution of the Bradley Burns 1% local sales tax from in-state online purchases.” Such data is proposed to be collected by SB 792 (Glazer, 2021). More discussion on this topic can be found in the “Staff Comments” section. Staff Comments: Proposed Resolution Affixes Equity Based, Data Driven Approach to Existing Cal Cities Policy on Sales Tax Sourcing The actions resulting from this resolution, if approved, would align with existing policy and efforts to-date to modernize sales tax rules. While not formalized in existing Cal Cities policy or recommendations, city managers and tax practitioners generally have favored proposals that establish a sharing of online sales tax revenues rather than a full destination shift. City leaders and practitioners across the state have acknowledged during Cal Cities Revenue and Taxation and City Manager’s working group meetings that the hosting of fulfillment centers and ancillary infrastructure pose major burdens on local communities including detrimental health and safety impacts. This acknowledgement has moved mainstream proposals such as this one away from full revenue shifts towards an equity-based, data driven approach that favors revenue sharing. This Resolution would concretely affix this approach as Cal Cities policy. More Data is Needed to Achieve Equity Based Approach A major challenge is the lack of adequate data to model the results of shifting in-state online sale tax revenues. Local government tax consultants and state departments have limited data to model the effects of changes to sales tax distribution because their information is derived only from cities that have a local transactions and use tax (TUT). Tax experts are able to model proposed tax shifts using TUTs since they are allocated on a destination basis (where a purchaser receives the product; usually a home or business). However, more than half of all cities, including some larger cities, do not have a local TUT therefore modeling is constrained and incomplete. Efforts to collect relevant sales tax information on the destination of products purchased online are ongoing. The most recent effort is encapsulated in SB 792 (Glazer, 2021), which would require retailers with online sales exceeding $50 million a year to report to CDTFA the gross receipts from online sales that resulted in a product being shipped or delivered in each city. The availability of this data would allow for a much more complete understanding of online consumer behavior and the impacts of future proposed changes to distribution. SB 792 (Glazer) is supported by Cal Cities following approval by the Revenue and Taxation Committee and board of directors. Impact of Goods Movement Must Be Considered As noted above, city leaders and practitioners across the state acknowledge that the hosting of fulfillment centers and goods movement infrastructure pose major burdens on local communities including detrimental health, safety, and infrastructure impacts. Not least of which is the issue of air pollution from diesel exhaust. According to California Environmental Protection Agency (Cal EPA): 31 A-32 “Children and those with existing respiratory disease, particularly asthma, appear to be especially susceptible to the harmful effects of exposure to airborne PM from diesel exhaust, resulting in increased asthma symptoms and attacks along with decreases in lung function (McCreanor et al., 2007; Wargo, 2002). People that live or work near heavily-traveled roadways, ports, railyards, bus yards, or trucking distribution centers may experience a high level of exposure (US EPA, 2002; Krivoshto et al., 2008). People that spend a significant amount of time near heavily-traveled roadways may also experience a high level of exposure. Studies of both men and women demonstrate cardiovascular effects of diesel PM exposure, including coronary vasoconstriction and premature death from cardiovascular disease (Krivoshto et al., 2008). A recent study of diesel exhaust inhalation by healthy non-smoking adults found an increase in blood pressure and other potential triggers of heart attack and stroke (Krishnan et al., 2013) Exposure to diesel PM, especially following periods of severe air pollution, can lead to increased hospital visits and admissions due to worsening asthma and emphysema- related symptoms (Krivoshto et al., 2008). Diesel exposure may also lead to reduced lung function in children living in close proximity to roadways (Brunekreef et al., 1997).” The founded health impacts of the ubiquitous presence of medium and heavy-duty diesel trucks used to transport goods to and from fulfillment centers and warehouses require host cities to meet increased needs of their residents including the building and maintenance of buffer zones, parks, and open space. While pollution impacts may decline with the introduction of zero-emission vehicles, wide scale adoption by large distribution fleets is still in its infancy. Furthermore, the impacts of heavy road use necessitate increased spending on local streets and roads upgrades and maintenance. In addition, many cities have utilized the siting of warehouses, fulfillment centers, and other heavy industrial uses for goods movements as key components of local revenue generation and economic development strategies. These communities have also foregone other land uses in favor of siting sales offices and fulfillment networks. All said, however, it is important to acknowledge that disadvantaged communities (DACs) whether measured along poverty, health, environmental or education indices exist in cities across the state. For one example, see: California Office of Environmental Health Hazard Assessment (OEHHA) CalEnviroScreen. City officials may consider how cities without fulfillment and warehouse center revenues are to fund efforts to combat social and economic issues, particularly in areas with low property tax and tourism- based revenues. The Resolution aims to acknowledge these impacts broadly (this analysis does not provide an exhaustive review of related impacts) and requests Cal Cities to account for them in a revised distribution formula of the Bradley Burns 1% local sales tax from in- state online purchases. The Resolution does not prescribe the proportions. Clarifying Amendments Upon review of the Resolution, Cal Cities staff recommends technical amendments to provide greater clarity. To review the proposed changes, please see Attachment B. 32 A-33 Fiscal Impact: Significant but unknown. The Resolution on its own does not shift sales tax revenues. In anticipation and mitigation of impacts, the Resolution requests Cal Cities to utilize online sales tax data to identify a fair and equitable distribution formula that accounts for the broad impacts fulfillment centers involved in online retail have on the cities that host them. The Resolution does not prescribe the revenue distribution split nor does it prescribe the impacts, positive and negative, of distribution networks. Existing Cal Cities Policy: •Tax proceeds collected from internet sales should be allocated to the location where the product is received by the purchaser. •Support as Cal Cities policy that point of sale (situs) is where the customer receives the product. Specific proposals in this area should be carefully reviewed so that the impacts of any changes are fully understood. •Revenue from new regional or state taxes or from increased sales tax rates should be distributed in a way that reduces competition for situs-based revenue. (Revenue from the existing sales tax rate and base, including future growth from increased sales or the opening of new retail centers, should continue to be returned to the point of sale.) •The existing situs-based sales tax under the Bradley Burns 1% baseline should be preserved and protected. •Restrictions should be implemented and enforced to prohibit the enactment of agreements designed to circumvent the principle of situs-based sales and redirect or divert sales tax revenues from other communities, when the physical location of the affected businesses does not change. Sales tax rebate agreements involving online retailers are inappropriate because they have the effect of encouraging revenue to be shifted away from numerous communities and concentrated to the benefit of one. Any type of agreement that seeks to lure a retailer from one community to another within a market area should also be prohibited going forward. •Support Cal Cities working with the state California Department of Tax and Fee Administration (CDTFA) to update the county pool allocation process to ensure that more revenues are allocated to the jurisdiction where the purchase or first use of a product occurs (usually where the product is delivered). Use Tax collections from online sales, including from the South Dakota v Wayfair Decision, should be shifted out of county pools and allocated to the destination jurisdiction whose Bradley Burns tax applies and not throughout the entire county. Support: The following letters of concurrence were received: Town of Apple Valley City of El Cerrito City of La Canada Flintridge City of La Verne City of Lakewood 33 A-34 City of Moorpark City of Placentia City of Sacramento 34 A-35 Sales Tax Sourcing –6 –February 12, 2018 CaliforniaCityFinance.com 35 A-36 Figl: Ty pical "Ove r the Count er" Tran saction Seller's Place of Business Buyer Receives at ... Retail Store Fig2 : Dealership Automobile Sa le Seller (dealer) Fig3: Pr ivat e Pa rty Automobile Sa le Seller (not a dealer) Buyer registers (uses) vehicle at Sales Tax Sourcing – 7 – February 12, 2018 CaliforniaCityFinance.com 36 A-37 Fig4: Remote (Online) Sa le-In -Stat e Business Office Seller's Pla ce of Bu siness Fa ctory l 13\&-l·il.WJIUiiN Prod uct De livered Buyer Receives at ... *1f the seller is in the same Transactio ns and Use Tax "di strict" as the buyer, then the seller is responsible for collecting and remittin g the tax. If the buyer is in a diff ere nt district, the buyer is responsib le . Figs: Remote (Online) Sale-In-State Warehouse. Out-of-State Sales Office Seller's Place of Business Product Delivered Buyer Receives at ... * If the se lier is in the same Transactions and Use Tax "district" as the buyer, then the se lier is responsible for co lie cting and remitting the tax. If the bu)"e r is in a different district, th~ buyer is responsible. Sales Tax Sourcing –8 –February 12, 2018 CaliforniaCityFinance.com Courtesy of HdL Companies 37 A-38 Fig6 : Remote (Online) Sale-Out of State Business Seller's Place of Busi ness Sa l es O ffice Warehou se @l i•Mfili ·◄ Factory ~ i•Mfili ;M Seller's Place of Business Sa l es Office Product Deliver e d Prod uct Dro p -shippe d B uyer Receives at ... B uyer Receives at ... GUIDELINES FOR ALLOCATION o i=j LOCAL TAX -ONLIN E ANO I N-S,T ORE Plaoe o f Sal e Locatio n o f Good.s at the T ,ime· of Sale How Customer Recei ves G oods A llocat ion of Tax Onlin e -O rder is placed o r cali forni a F ulfillment Sh ipped t o Cal i fornia Local tax i.s allocated to the j u r isdi ction i n downloaded outsi de Cent er Customer wh ich the ful f i llm<>nt cen ter i.s l ocated Cal iforn ia Onl i ne -Order is placed o r californi a Fulfillment Shipped to Cal iforni a P,.r COTFA Regu l a t i on :18 0 2 , l ocal tax is a l lo cat e d to the jur i.s d iction where tt>e downl oaded i n, California, Centie,-Custom e r o r der is placed Onli ne Out o f Stane Fulfil ment Sh ipped t o Cal i forni a Local tax is allocated to tfle co1.mtywide Cente,-Custom e r p ool based on poi nt of del i very Out o f Sta,te Fulfil ment P icked U p l n aSt ore Local tax is allocated to tfle countywi de Onli ne Center (Click & Collect! p o o l based o n p o i n t o f d e l i very Ca l if omi a Fulfillmem Onli n -e Center Own ed and D r op-Sh i ppedl to Local tax is an ocated to tt>e count ywi d e Operated by Third Party Californi a Custom er pool l>a.sed o n poi nt ot d e l i very Ven dor Onli ne In -Stor e (Goods w ith d rawn Sh ipped to Cal iforni a L oca l Tax i s allocated to the j u risdiction f r,om stor-e i nven tory) Customer where t h e store is locat e-di Onli ne i n -Stor e (Goods w ith dr.a,wn P icked U p l n ~Store L oca I Tax i s allocated to the j u risdiction fr,om stor e i nven t ory! (Click & Collect! wh.ere t h e stor e i s lbcat edl in -Stor e i n -Stor e (Goods w i tihdrawn Over ·t h e Counter Loca I Tax i s allocated to the Jurisdi ction from stor e i nv<>ntoryl where t h e stor e is l'ocatedl Sales Tax Sourcing – 9 – February 12, 2018 CaliforniaCityFinance.com Tax Incentive Programs, Sales Tax Sharing Agreements In recent years, especially since Proposition 13 in 1978, local discretionary (general purpose revenues) have become more scarce. At the same time, options and procedures for increasing revenues have become more limited. One outcome of this in many areas has been a greater competition for sales and use tax revenues. This has brought a rise in arrangements to encourage certain land use development with rebates and incentives which exploit California’s odd origin sales tax sourcing rules. The typical arrangement is a sales tax sharing agreement in which a city provides tax rebates to a company that agrees to expand their operations in the jurisdiction of the city. Under such an arrangement, the company generally agrees to make a specified amount of capital investment and create a specific number of jobs over a period of years in exchange for specified tax breaks, often property tax abatement or some sort of tax credit. In some cases, this has simply taken the form of a sales office, while customers and warehouses and the related economic activity are disbursed elsewhere in the state. In some cases the development takes the form of warehouses, in which the sales inventory, owned by the company, is housed.6 Current sales tax incentive agreements in California rebate amounts ranging from 50% to 85% of sales tax revenues back to the corporations. Today, experts familiar with the industry believe that between 20% to 30% of local Bradley-Burns sales taxes paid by California consumers is diverted from local general funds back to corporations; over $1 billion per year. Moving to Destination Sourcing: The Concept7 A change from origin sourcing rules to destination sourcing rules for the local tax component of California’s sales tax would improve overall revenue collections and distribute these revenues more equitably among all of the areas involved in these transactions. A change from origin based sourcing to destination based sourcing would have no effect on state tax collections. However, it would alter the allocations of local sales and use tax revenues among local agencies. Most retail transactions including dining, motor fuel purchases, and in-store purchases would not be affected. But in cases where the property is received by the purchaser in a different jurisdiction than where the sales agreement was negotiated, there would be a different allocation than under the current rules. 6 See Jennifer Carr, “Origin Sourcing and Tax Incentive Programs: An Unholy Alliance” Sales Tax Notes; May 27, 2013. 7 The same issues that are of concern regarding the local sales tax do not apply to California’s Transactions and Use Taxes (“Add-on sales taxes”) as these transactions, when not over the counter, are generally allocated to the location of use or, as in the case of vehicles, product registration. There is no need to alter the sourcing rules for transactions and use taxes. The Source of Origin Based Sourcing Problems Where other than over-the-counter sales are concerned origin sourcing often causes a concentration of large amounts of tax revenue in one location, despite the fact that the economic activity and service impacts are also occurring in other locations. The large amounts of revenue concentrated in a few locations by California’s “warehouse rule” origin sourcing causes a concentration of revenue far in excess of the service costs associated with the development. In order to lure jobs and tax revenues to their communities, some cities have entered into rebate agreements with corporations. This has grown to such a problem, that 20% to 30% of total local taxes paid statewide are being rebated back to corporations rather than funding public services. 38 A-39 Sales Tax Sourcing –12 –February 12, 2018 CaliforniaCityFinance.com Destination Sourcing Scenario 1: Full-On 39 A-40 "Over the Counter" Seller's Place of Business Buyer Receives at ... Retail Store Automobile ... just like over the counter and Transa ctions Tax exception r em ains) Seller (dealer) Sales Office Buyer registers (uses) vehicle at Re mote Sale t------------------ Seller's Place of Business Sales Office I 13i@l·il·Mdliiiti Warehouse l ILM·il•filddi\l Factory l M-l·il·lidlii\N Buyer Receives at ... Sales Tax Sourcing – 13 – February 12, 2018 CaliforniaCityFinance.com Destination Sourcing Scenario 2: Split Source mjgc 40 A-41 • Same as now for "over the counter" and automobile. • Leave 0.25% on current se lle r if instate (origin) • Co uld be pha sed in . Remote Sale -Seller with In -State Lo ca tion Seller's Place of Business Sales Office l Gii+l·'*·hldtiffiti Buyer Receives at ... Remote Sale-Out of State Seller-------- D Seller's Place of Business Warehouse l i3ifi.ji.lt(fiti€ti Factory I 13iti=Hl·Jldti€1 Buyer Receives at ... RESOLUTION OF THE LEAGUE OF CALIFORNIA CITIES (“CAL CITIES”) CALLING ON THE STATE LEGISLATURE TO PASS LEGISLATION THAT PROVIDES FOR A FAIR AND EQUITABLE DISTRIBUTION OF THE BRADLEY BURNS 1% LOCAL SALES TAX FROM IN-STATE ONLINE PURCHASES, BASED ON DATA WHERE PRODUCTS ARE SHIPPED TO, AND THAT RIGHTFULLY TAKES INTO CONSIDERATION THE IMPACTS THAT FULFILLMENT CENTERS HAVE ON HOST CITIES BUT ALSO PROVIDES A FAIR SHARE TO CALIFORNIA CITIES THAT DO NOT AND/OR CANNOT HAVE A FULFILLMENT CENTER WITHIN THEIR JURISDICTION WHEREAS, the 2018 U.S. Supreme Court decision in Wayfair v. South Dakota clarified that states could charge and collect tax on purchases even if the seller does not have a physical presence in the state; and WHEREAS, California cities and counties collect 1% in Bradley Burns sales and use tax from the purchase of tangible personal property and rely on this revenue to provide critical public services such as police and fire protection; and WHEREAS, in terms of “siting” the place of sale and determining which jurisdiction receives the 1% Bradley Burns local taxes for online sales, the California Department of Tax and Fee Administration (CDTFA) determines “out-of-state” online retailers as those with no presence in California that ship property from outside the state and are therefore subject to use tax, not sales tax, which is collected in a countywide pool of the jurisdiction where the property is shipped from; and WHEREAS, for online retailers that have a presence in California and have a stock of goods in the state from which it fulfills orders, CDTFA considers the place of sale (“situs”) as the location from which the goods were shipped such as a fulfillment center; and WHEREAS, in early 2021, one of the state’s largest online retailers shifted its ownership structure so that it is now considered both an in-state and out-of-state retailer, resulting in the sales tax this retailer generates from in-state sales now being entirely allocated to the specific city cities where the warehouse fulfillment centers is are located as opposed to going into a countywide pools that is are shared with all jurisdictions in those counties that County, as was done previously; and WHEREAS, this all-or-nothing change for the allocation of in-state sales tax has created winners and losers amongst cities as the online sales tax revenue from the retailer that was once spread amongst all cities in countywide pools is now concentrated in select cities that host a fulfillment centers; and WHEREAS, this has created a tremendous inequity amongst cities, in particular for cities that are built out, do not have space for siting a 1 million square foot fulfillment centers, are not located along a major travel corridor, or otherwise not ideally suited to host a fulfillment center; and WHEREAS, this inequity affects cities statewide, but in particular those with specific circumstances such as no/low property tax cities that are extremely reliant on sales tax revenue as well as cities struggling to meet their Regional Housing Needs Allocation (RHNA) obligations that are being compelled by the State to rezone precious commercial parcels to residential; and 41 A-42 WHEREAS, the inequity produced by allocating in-state online sales tax revenue exclusively to cities with fulfillment centers is exasperated even more by, in addition to already reducing the amount of revenue going into the countywide pools, the cities with fulfillment centers are also receiving a larger share of the dwindling countywide pool as it is allocated based on cities’ proportional share of sales tax collected; and WHEREAS, while it is important to acknowledge that those cities that have fulfillment centers experience impacts from these activities and deserve equitable supplementary compensation, it should also be recognized that the neighboring cities whose residents are ordering products from those that centers now receive no Bradley Burns revenue from the center’s sales activity despite also experiencing the impacts created by them center, such as increased traffic and air pollution; and WHEREAS, the COVID-19 pandemic greatly accelerated the public’s shift towards online purchases, a trend that is unlikely to be reversed to pre-pandemic levels; and NOW, THEREFORE, BE IT RESOLVED that Cal Cities calls on the State Legislature to pass legislation that provides for a fair and equitable distribution of the Bradley Burns 1% local sales tax from in-state online purchases, based on data where products are shipped to, and that rightfully takes into consideration the impacts that fulfillment centers have on host cities but also provides a fair share to California cities that do not and/or cannot have a fulfillment center within their jurisdiction. 42 A-43 2.A RESOLUTION CALLING UPON THE GOVERNOR AND THE LEGISLATURE TO PROVIDE NECCESARY FUNDING FOR CUPC TO FUFILL ITS OBLIGATION TO INSPECT RAILROAD LINES TO ENSURE THAT OPERATORS ARE REMOVING ILLEGAL DUMPING, GRAFFITI AND HOMELESS ENCAMPMENTS THAT DEGRADE THE QAULITY OF LIFE AND RESULTS IN INCREASED PUBLIC SAFETLY CONCERNS FOR COMMUNITIES AND NEIGHBORHOODS THAT ABUTT THE RAILROAD RIGHT- OF-WAY. Source: City of South Gate Concurrence of five or more cities/city officials: Cities: City of Bell Gardens; City of Bell; City of Commerce; City of Cudahy; City of El Segundo; City of Glendora; City of Huntington Park; City of La Mirada; City of Long Beach; City of Lynwood; City of Montebello; City of Paramount; City of Pico Rivera Referred to: Housing, Community and Economic Development; and Transportation, Communications and Public Works WHEREAS, ensuring the quality of life for communities falls upon every local government including that blight and other health impacting activities are addressed in a timely manner by private property owners within its jurisdictional boundaries for their citizens, businesses and institutions; and WHEREAS, Railroad Operators own nearly 6,000 miles of rail right-of-way throughout the State of California which is regulated by the Federal Railroad Administration and/or the California Public Utilities Commission for operational safety and maintenance; and WHEREAS, the California Public Utilities Commission (CPUC) is the enforcing agency for railroad safety in the State of California and has 41 inspectors assigned throughout the entire State to inspect and enforce regulatory compliance over thousands of miles of rail line; and WHEREAS, areas with rail line right-of-way within cities and unincorporated areas are generally located in economically disadvantaged zones and/or disadvantaged communities of color where the impact of blight further lowers property values and increases the likelihood of unsound sanitary conditions and environmental impacts upon them; and WHEREAS, many communities are seeing an increase in illegal dumping, graffiti upon infrastructure and homeless encampments due to the lax and inadequate oversight by regulatory agencies; and WHEREAS, local governments have no oversight or regulatory authority to require operators to better maintain and clean their properties as it would with any other private property owner within its jurisdictional boundaries. Thus such local communities often resort to spending their local tax dollars on cleanup activities or are forced to accept the delayed and untimely response by operators to cleaning up specific sites, and; WHEREAS, that railroad operators should be able to provide local communities with a fixed schedule in which their property will be inspected and cleaned up on a reasonable and regular schedule or provide for a mechanism where they partner with and reimburse local governments for an agreed upon work program where the local government is enabled to remove items like illegal dumping, graffiti and encampments; and 43 A-44 WHEREAS, the State has made it a priority to deal with homeless individuals and the impacts illegal encampments have upon those communities and has a budgetary surplus that can help fund the CPUC in better dealing with this situation in both a humane manner as well a betterment to rail safety. RESOLVED, at the League of California Cities, General Assembly, assembled at the League Annual Conference on September 24, 2021, in Sacramento, that the League calls for the Governor and the Legislature to work with the League and other stakeholders to provide adequate regulatory authority and necessary funding to assist cities with these railroad right-of- way areas so as to adequately deal with illegal dumping, graffiti and homeless encampments that proliferate along the rail lines and result in public safety issues. The League will work with its member cities to educate federal and state officials to the quality of life and health impacts this challenge has upon local communities, especially those of color and/or environmental and economic hardships. 44 A-45 Background Information to Resolution Source: City of South Gate Background: The State of California has over 6,000 miles of rail lines, with significant amount running through communities that are either economically disadvantaged and/or disadvantaged communities of color. While the Federal Railroad Administration (FRA) has primary oversight of rail operations, they delegate that obligation to the State of California for lines within our State. The administration of that oversight falls under the California Public Utilities Commission (CPUC). The CPUC has only 41 inspectors covering those 6,000 miles of railroad lines in the State of California. Their primary task is ensuring equipment, bridges and rail lines are operationally safe. The right-of-way areas along the rail lines are becoming increasingly used for illegal dumping, graffiti and homeless encampments. Rail operators have admitted that they have insufficient funds set aside to clean up or sufficiently police these right-of-way areas, despite reporting a net income of over $13 billion in 2020. CPUC budget does not provide the resources to oversee whether rail operators are properly managing the right-of-way itself. The City of South Gate has three rail lines traversing through its city limits covering about 4 miles. These lines are open and inviting to individuals to conduct illegal dumping, graffiti buildings and structures along with inviting dozens of homeless encampments. As private property, Cities like ourselves cannot just go upon them to remove bulky items, trash, clean graffiti or remove encampments. We must call and arrange for either our staff to access the site or have the rail operator schedule a cleanup. This can take weeks to accomplish, in the meantime residents or businesses that are within a few hundred feet of the line must endure the blight and smell. Trash is often blown from the right-of-way into residential homes or into the streets. Encampments can be seen from the front doors of homes and businesses. South Gate is a proud city of hard working-class residents, yet with a median household income of just $50,246 or 65% of AMI for Los Angeles County, it does not have the financial resources to direct towards property maintenance of any commercial private property. The quality of life of communities like ours should not be degraded by the inactions or lack of funding by others. Cities such as South Gate receive no direct revenue from the rail operators, yet we deal with environmental impacts on a daily basis, whether by emissions, illegal dumping, graffiti or homeless encampments. The State of California has record revenues to provide CPUC with funding nor only for safety oversight but ensuring right-of-way maintenance by operators is being managed properly. Rail Operators should be required to set aside sufficient annual funds to provide a regular cleanup of their right-of-way through the cities of California. 45 A-46 46 A-47 LETTERS OF CONCURRENCE Resolution No. 2 47 A-48 48 A-49 7100 Garfield Avenue · Bell Gardens, CA 90201 • 562·806·7700 ·www.bellgardens.org CITY OF SOUTH GATE ANNUAL CONFERENCE RESOLUTION July 21, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: City of South Gate Annual Conference Resolution President Walker: The City of Bell Gardens supports the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. The City's resolution seeks to address a critical issue within communities, especially those of economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines. While supportive of the economic base the industry serves to the State, their rail lines have often become places where illegal dumping is a constant problem and our growing homeless population call home. These impact of these activities further erode the quality of life for our communities, increase blight, increase unhealthy sanitation issues and negatively impact our ability to meet State water quality standards under the MS4 permits. As members of the League our city values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel free to contact Marco Barcena at 562- 7761 if you have any questions. Sincerely, Marco Barcena Mayor CC: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org 49 A-50 7100 Garfield Avenue · Bell Gardens, CA 90201 • 562-806-7700 • www.bellgardens.org CITY OF SOUTH GATE ANNUAL CONFERENCE RESOLUTION July 20, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: City of South Gate Annual Conference Resolution President Walker: As a Councilwoman with the City of Bell Gardens, I support the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. The City of South Gate's resolution seeks to address a critical issue within communities, especially those of economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines. While supportive of the economic base the industry serves to the State, their rail lines have often become places where illegal dumping is a constant problem and our growing homeless population call home. These impact of these activities further erode the quality of life for our communities, increase blight, increase unhealthy sanitation issues and negatively impact our ability to meet State water quality standards under the MS4 permits. As members of the League our city values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel free to contact Lisseth Flores at (562) 806-7763 if you have any questions. Sincerely, Lisseth Flores Councilwoman CC: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org 50 A-51 CITY OF SOUTH GATE ANNUAL CONFERNCE RESOLUTION July 15, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: City of South Gate Annual Conference Resolution President Walker: The city of Bell supports the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. The City's resolution seeks to address a critical issu e within communities, especially those of economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines. While supportive of the economic base the industry serves to the State, their rail lines have often become places where illegal dumping is a constant problem and our growing ho meless population call home. These impact of these activities further erode the quality of life for our communities, increase blight, increase unhealthy sanitation issues and negatively impact our ability to meet State water quality standards under the MS4 permits. As members of the Leag ue our city values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel fre e to contact Paul Philips, City Manager at 323 -588-6211, if you have any questions. Alicia Romero Mayor CC: Blanca Pacheco, President, Los Angeles County Division c/o Jen nife r Quan, Executive Director, Los Angeles County Di v ision, 6330 Pinc Aven ue. Be ll. Ca li fornia 9020 I • Pho ne (323) 588-62 11 Fa x (323) 77 1-9473 July 20, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: Railroad Oversight Annual Conference Resolution President Walker: The City of Commerce supports the City of South Gate’s effort to submit a resolution for consideration by the General Assembly at the League of California Cities’ (“League”) 2021 Annual Conference in Sacramento. The City’s resolution seeks to address a critical issue within communities, especially disadvantaged communities of color that are home to the State’s freight rail lines. While I am supportive of the economic base the railroad industry serves to the State, their rail lines have often become places where illegal dumping is a constant problem and our growing homeless population call home. The impact of these activities further erode the quality of life for our communities, increase blight, increase unhealthy sanitation issues and negatively impact our ability to meet State water quality standards under the MS4 permits. As members of the League, our City values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel free to contact Edgar Cisneros, City Manager, via email at ecisneros@ci.commerce.ca.us or at 323-722-4805, should you have any questions. Sincerely, Mayor Leonard Mendoza CC: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org CITY OF COMMERCE 2535 Commerce Way • Commerce, California 90040 • (323) 722-4805 • FAX (323) 726-6231 51 A-52 52 A-53 CITY OF CUDAHY CALIFORNIA July 21, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Incorporated November 10, 1960 RE: City of South Gate Annual Conference Resolution Dear President Walker: 5220 Santa Ana Street Cudahy, California 90201 (323)773-5143 The City of Cudahy supports the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. The City of South Gate's resolution seeks to address a critical Issue within communities, especially those of economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines. While supportive of the economic base the industry serves to the State; their rail lines have often become places where illegal dumping is a constant problem and our growing homeless population call home. These impacts of these activities further erode the quality of life for our communities, increase blight, increase unhealthy sanitation issues and negatively impact our ability to meet State water quality standards under the MS4 permits. As members of the League our city values the policy development process provided to the General Assembly. We appreciate your time on this issue. If you have any questions, please do not hesitate to call my office at 323-773-5143. CC: Chris Jeffers, City Manager, City of South Gate 53 A-54 Elected Officials: Drew Boyles, Mayor Chris Pimentel Mayor Pro Tam Carol Pirsztuk, Counc/1 Member Scot Nicol, Counc/1 Member Lance Giroux, Counc/1 Member Tracy Weaver, City Clerk Matthew Robinson, City Treasurer Appointed Offlclals: Scott Mitnick, City Manager Mark D. Hensley, City Attorney Department Directors: Barbara Voss D1,puty City Manager Joseph LIiiia, Flnam;e Chris Donovan, Fire Chief Charles Mallory, lnfonnat/on Technology Services Mallssii McCollum, Community Services Rebecca Redyk, Human Resources Denis Cook, Interim Development Services Jamie Bermudez, Interim Po/fee Chief El/as Sassoon, Public Works www.elsegundo.org www.e/s(lgundobuslness.com www.elsegundo 100.org ~iljtof 111 July 16, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Office of the Mayor RE: City of South Gate Annual Conference Resolution President Walker: The City of El Segundo supports the Los Angeles County Division's City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. The City's resolution seeks to address a critical issue within communities, especially those of economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines. While supportive of the economic base the industry serves to the State, their rail lines have often become places where illegal dumping is a constant problem and our growing homeless population call home. The impact of these activities further erodes the quality of life for our communities, increases blight, increases unhealthy sanitation issues, and negatively impacts our ability to meet Slate water quality standards under the MS4 permits. As members of the League, our City values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel free to contact El Segundo Public Works Director Elias Sassoon at 310-524-2356, if you have any questions. Sincerely, ,...-:::;:::,:;:, -~ . . /""~-- Drew~; Mayor of El Segundo CC: City Council, City of El Segundo Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jguan@cacities.org Jeff Kiernan, League Regional Public Affairs Manager (via email) 350 Main Street, El Segundo, California 90245-3813 Phone (310) 524-2302 Fax (310) 322-7137 54 A-55 __ ., - CITY OF GLENDORA CITY HALL (626) 9-i.l-8200 1 ~-=.i ~ July 14, 2021 116 East Foothill Blvd., Glendora, California 917.\1 \V\-\' w .d.glendor (.,,i.:a. us Cheryl Viegas Walker, President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 SUBJECT: SUPPORT FOR THE CITY OF SOUTH GATE'S ANNUAL CONFERENCE RESOLUTION Dear President Walker: The City of Glendora is pleased to support the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League of California Cities' 2021 Annual Conference in Sacramento. The City of South Gate's resolution seeks to address a critical issue that many communities, small and large, are experiencing along active transportation corridors, particularly rail lines. Given the importance and growth of the ports and logistics sector, and the economic support they provide, we need to do more to ensure that conflicts are appropriately addressed and mitigated to ensure they do not become attractive nuisances. Our cities are experiencing increasing amounts of illegal dumping (trash and debris) and the establishment of encampments by individuals experiencing homelessness along roadways, highways and rail lines. Such situations create unsafe conditions •• safety, health and sanitation -that impact quality of life even as we collectively work to address this challenge in a coordinated and responsible manner. As members of the League of California Cities, Glendora values the policy development process provided to the General Assembly and strongly support consideration of this issue. Your attention to this matter is greatly appreciated. Should you have any questions, please feel free to contact Adam Raymond, City Manager, at aravrnoncl@cit v{)fglfndor,t,org or (626) 914-820 I. C: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org PRIDE OF THE FOOTHILLS 55 A-56 July 21, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 Office of the Mayor Re: Resolution No. 2021-18 Supporting City of South Gate Annual Conference Resolution President Walker: The City of Huntington Park (City) supports the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. Enclosed is Resolution No. 2021-18 adopted by the City Council of the City of Huntington Park. The City's resolution seeks to address a critical issue within communities, especially those of economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines. While supportive of the economic base the industry serves to the State, their rail lines have often become places where illegal dumping is a constant problem and our growing homeless population call home. These impacts of these activities further erode the quality of life for our \ communities, increase blight, increase unhealthy sanitation issues and negatively affect our ability to meet State water quality standards under the MS4 permits. As members of the League, our City values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel free to contact our City Manager, Ricardo Reyes, at 323-582-6161, if you have any questions. Sincerely, Graciela Ortiz Mayor, City of Huntington Park CC: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org Enclosure( s) 56 A-57 13700 La Mirada Boulevard of \..A l\.t14' La Mirada, California 90638 I "<?, CITY OF LA MIRADA LaMirada,Californi:~6~~~0:~~ oo ~ 0 f O / ( A T E D T O S E R V / ( E Phon°' (562) 943-0lll Faxc (562) 943-1464 I'\ "1 www.cityoflamirada.org ~~~ =~~-..., o'J --------------------------------- il' Qi\,~ July 19, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, California 95814 SUBJECT: LETTER OF SUPPORT FOR CITY OF SOUTH GATE'S PROPOSED RESOLUTION AT CALCITIES ANNUAL CONFERENCE President Walker: The City of La Mirada supports the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. The City of South Gate's resolution seeks to address a critical issue within communities that are home to the State's freight rail lines. While the City of La Mirada is supportive of the economic base the railroad industry serves to the State, the rail lines have become places where illegal dumping and a growing homeless population are significant problems. The negative impact of these illegal activities decreases the quality of life for the La Mirada community, increases blight and unhealthy sanitation issues, and negatively impacts the City's ability to meet State water quality standards under the MS4 permits. As members of the League, the City of La Mirada values the policy development process provided to the General Assembly. We appreciate your consideration on this issue. Please feel free to contact Assistant City Manager Anne Haraksin at (562) 943-0131 if you have any questions. Sincerely, CITYO~DA ~.,__ . w..o:J' Mayor cc: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org Ed Eng, EdD Mayor Anthony A. Otero, DPPD Mayor Pro Tem Steve De Ruse, D. Min. l'ouncilmemher John Lewis, Esq. Councilmernber Andrew Sarega Councilme111bc~ Jeff Boynton City Manager July 22, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: Support for City of South Gate Resolution—Cleanup Activities on Rail Operator Properties Dear President Walker, On behalf of the City of Long Beach, I write to support the City of South Gate’s proposed resolution for the League of California Cities’ (League) 2021 Annual Conference. This resolution seeks to direct the League to adopt a policy urging State and federal governments to increase oversight of rail operators’ land maintenance. The City is a proponent of increased maintenance along railways and believes a League advocacy strategy would help expedite regional responses. The COVID-19 pandemic has exacerbated the public health and safety concerns on rail rights-of-way, as trash, debris, and encampments have increased exponentially. These challenges erode the quality of life for our communities, increase blight, and contribute to public health and sanitation issues. To address these concerns, the City has engaged directly with regional partners to prioritize ongoing maintenance and cleanups, and has invested $4 million in the Clean Long Beach Initiative as part of the City’s Long Beach Recovery Act to advance economic recovery and public health in response to the COVID-19 pandemic. The City of South Gate’s proposed resolution would further advance these efforts for interjurisdictional coordination. The increased oversight proposed by the resolution will help support better coordination and additional resources to address illegal dumping and encampments along private rail operator property. This is a critical measure to advance public health and uplift our most vulnerable communities. For these reasons, the City supports the proposed League resolution. Sincerely, THOMAS B. MODICA City Manager cc: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org 57 A-58 58 A-59 OFF ICE OF T HE MAYOR MARISELA SANT ANA City of LYNWOOD In corporated 1921 11330 Bullis Road, Lynwood, CA 90262 (310) 603-0220 X 200 CITY OF SOUTH GATE ANNUAL CONFERNCE RESOLUTION July 20, 2021 Cheryl Viegas Walker President League of Ca lifornia Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: City of South Gate Annual Conference Resolution President W a lker: Lynwood ~ mr The City of Lynwood supports the City of South Gate's effo r t to s ubmit a r esolution for c onsideration by the General Assembly at the League's 2 0 21 Annual Conference in Sacrame nto. The City's resolution seeks to address a critical issue within communities, especially those of econom ic disadva ntage and disadvantage comm unities of color that a r e home to the State's freight rail lines. Whil e s upportive of the economic base the industry serves to the State, their ra il lin es have often b ecome places whe r e illegal dumping is a constant p robl e m and our growing home less population call hom e. These impact of these activities furt her erode the qua lity of life for our communities, increase blight, i ncrease unhealthy sanitation issues and negative ly impact our a bility t o m eet State w ate r quality s t a ndards und er the MS4 p e rmits. As members of the League our city values the policy d evelopme nt process provided to the General Assembly. W e a ppreciate your time on this issu e. Pl e ase feel free to contact Ernie Hernandez at (310) 6 0 3-0220 ext. 200, if you have any questions. CC: Bl a n ca Pacheco, Pr eside nt, Los Ange les Co unty Divi s ion c/o Jennifer Quan, Executive Director, Lo s An geles Cou n ty Divi s io n, jquan @ca cities.org 59 A-60 July 19, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: Resolution in Support of City of South Gate Annual Conference Resolution President Walker: The City of Montebello (City) supports the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. Attached is the Resolution to be considered for adoption by the City Council of the City of Montebello at our July 28, 2021, City Council meeting. The City's resolution seeks to address a critical issue within communities, especially those of economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines . While supportive of the economic base the industry serves to the State, their rail lines have often become places where illegal dumping is a constant problem and our growing homeless population call home. The impact of these activities further erodes the quality of life for our communities, increase blight, increase unhealthy sanitation issues and negatively impact our ability to meet State water quality standards under the MS4 permits. As members of the League, our City values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel free to contact our City Manager, Rene Bobadilla, at 323-887-1200, if you have any questions. Sincerely, ~::7::f!:~£~~ Mayor, City of Montebello CC: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org 1600 West Beverly Boulevard• Montebello, California 90640-3932 • {323}-887-1200 60 A-61 BRENDA OLMOS Mayor VILMA CUELLAR STALLINGS Vice Mayor Safe, Healthy, and Attractive July 19, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 ISABEL AGUAYO Councllmember LAURIE GUILLEN Councilmember PEGGY LEMONS Councllmember RE: SUPPORT FOR ANNUAL LEAGUE OF CITIES CONFERENCE GENERAL ASSEMBLY RESOLUTION President Walker: The City of Paramount supports the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. The proposed resolution is attached South Gate's resolution seeks to address a critical issue within communities, especially those of economic disadvantage and disadvantage communities of color that are home to the State's freight rail lines. While supportive of the economic boon the freight industry serves to the State, their rail line rights of way have often become places where illegal dumping is a constant problem and where our growing homeless populations reside. The impact of these activities further erode the quality of life for our communities, increase blight, increase unhealthy sanitation issues and negatively impact our ability to meet State water quality standards under the MS4 permits. As a member of the California League of Cities, the City of Paramount values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel free to contact City Manager John Moreno at (562) 220-2222 if you have any questions. Dedicated to providing fiscally responsible setvices that maintain a vibrant community. 16400 Colorado Avenue• Paramount, CA 90723-5012 • Ph: 562-220-2000 • paramountclty.com II facebook.com/CltyofParamounl I m instagram.com/paramount_posts I C!] youtube.com/CityofParamount 61 A-62 Steve Carmona City Manager City of Pico Rivera OFFICE OF THE CITY MANAGER 6615 Passons Boulevard , Pico Rivera, California 90660 (562) 801-4371 Web: www.pico-rivera.org e-mail: scastro@pico-rivera.org CITY OF SOUTH GATE ANNUAL CONFERENCE RESOLUTION July 14, 2021 Cheryl Viegas Walker President League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: City of South Gate Annual Conference Resolution President Walker: City Cou nci I Raul Elias Mayor Dr. Monica Sanchez Mayor Pro Tem Gustavo V. Camacho Councilmember Andrew C. Lara Councllmember Erik Lutz Councilmember The City of Pico Rivera supports the City of South Gate's effort to submit a resolution for consideration by the General Assembly at the League's 2021 Annual Conference in Sacramento. The City's resolution seeks to address a critical issue within communities, especially those of economic disadvantage and disadvantaged communities of color that are home to the State's freight rail lines. While supportive of the economic base the industry serves to the State; their rail lines have often become places where illegal dumping is a constant problem and our growing homeless population call home. The impact of these activities further erodes the quality of life for our communities, increases blight, increases unhealthy sanitation issues, and negatively impacts our ability to meet State water quality standards under the MS4 permits. As members of the League, our City values the policy development process provided to the General Assembly. We appreciate your time on this issue. Please feel free to contact Steve Carmona at (562) 801-4405 if you have any questions. Sincerely, ~ / y-:)f:;c_ (;~-- City Manager City of Pico Rivera CC: Blanca Pacheco, President, Los Angeles County Division c/o Jennifer Quan, Executive Director, Los Angeles County Division, jquan@cacities.org League of California Cities Staff Analysis on Resolution No. 2 Staff: Damon Conklin, Legislative Affairs, Lobbyist Jason Rhine, Assistant Director, Legislative Affairs Caroline Cirrincione, Policy Analyst Committees: Transportation, Communications, and Public Works Housing, Community, and Economic Development Summary: The City of South Gate submits this resolution, which states the League of California Cities should urge the Governor and the Legislature to provide adequate regulatory authority and necessary funding to assist cities with railroad right-of-way areas to address illegal dumping, graffiti, and homeless encampments that proliferate along the rail lines and result in public safety issues. Background: California Public Utilities Commission (CPUC) Railroad Oversight The CPUC’s statewide railroad safety responsibilities are carried out through its Rail Safety Division (RSD). The Railroad Operations and Safety Branch (ROSB), a unit of RSD, enforces state and federal railroad safety laws and regulations governing freight and passenger rail in California. The ROSB protects California communities and railroad employees from unsafe practices on freight and passenger railroads by enforcing rail safety laws, rules, and regulations. The ROSB also performs inspections to identify and mitigate risks and potential safety hazards before they create dangerous conditions. ROSB rail safety inspectors investigate rail accidents and safety- related complaints and recommend safety improvements to the CPUC, railroads, and the federal government as appropriate. Within the ROSB, the CPUC employs 41 inspectors who are federally certified in the five Federal Railroad Administration (FRA) railroad disciplines, including hazardous materials, motive power and equipment, operations, signal and train control, and track. These inspectors perform regular inspections, focused inspections, accident investigations, security inspections, and complaint investigations. In addition, the inspectors address safety risks that, while not violations of regulatory requirements, pose potential risks to public or railroad employee safety. CPUC’s Ability to Address Homelessness on Railroads Homeless individuals and encampments have occupied many locations in California near railroad tracks. This poses an increased safety risk to these homeless individuals of being struck by trains. Also, homeless encampments often create unsafe work environments for railroad and agency personnel. While CPUC cannot compel homeless individuals to vacate railroad rights-of-way or create shelter for homeless individuals, it has the regulatory authority to enforce measures that can reduce some safety issues created by homeless encampments. The disposal of waste materials or other disturbances of walkways by homeless individuals can create tripping hazards in the vicinity of railroad rights-of-way. This would cause violations of Commission GO 118-A, which sets standards for walkway surfaces alongside railroad tracks. Similarly, tents, wooden structures, and miscellaneous debris in homeless encampments can create violations of 62 A-63 Commission GO 26-D, which sets clearance standards between railroad tracks, and structures and obstructions adjacent to tracks. Homelessness in California According to the 2020 Annual Homeless Assessment Report (AHAR) to Congress, there has been an increase in unsheltered individuals since 2019. More than half (51 percent or 113,660 people) of all unsheltered homeless people in the United States are found in California, about four times as high as their share of the overall United States population. Many metro areas in California lack an adequate supply of affordable housing. This housing shortage has contributed to an increase in homelessness that has spread to railroad rights-of- way. Homeless encampments along railroad right-of-way increase the incidents of illegal dumping and unauthorized access and trespassing activities. Other impacts include train service reliability with debris strikes, near-misses, and trespasser injuries/fatalities. As of April 2021, there have been 136 deaths and 117 injuries reported by the Federal Railroad Administration over the past year. These casualties are directly associated with individuals who trespassed on the railroad. Cities across the state are expending resources reacting to service disruptions located on the railroad’s private property. It can be argued that an increase in investments and services to manage and maintain the railroad’s right-of-way will reduce incidents, thus enhancing public safety, environmental quality, and impacts on the local community. State Budget Allocations – Homelessness The approved State Budget includes a homelessness package of $12 billion. This consists of a commitment of $1 billion per year for direct and flexible funding to cities and counties to address homelessness. While some details related to funding allocations and reporting requirements remain unclear, Governor Newsom signed AB 140 in July, which details key budget allocations, such as: • $2 billion in aid to counties, large cities, and Continuums of Care through the Homeless Housing, Assistance and Prevention grant program (HHAP); • $50 million for Encampment Resolution Grants, which will help local governments resolve critical encampments and transitioning individuals into permanent housing; and • $2.7 million in onetime funding for Caltrans Encampment Coordinators to mitigate safety risks at encampments on state property and to coordinate with local partners to connect these individuals to services and housing. The Legislature additionally provided $2.2 billion specifically for Homekey with $1 billion available immediately. This funding will help local governments transition individuals from Project Roomkey sites into permanent housing to minimize the number of occupants who exit into unsheltered homelessness. With regards to this resolution, the State Budget also included $1.1 billion to clean trash and graffiti from highways, roads, and other public spaces by partnering with local governments to pick up trash and beautify downtowns, freeways, and neighborhoods across California. The program is expected to generate up to 11,000 jobs over three years. Cities Railroad Authority A city must receive authorization from the railroad operator before addressing the impacts made by homeless encampments because of the location on the private property. Additionally, the city 63 A-64 must coordinate with the railroad company to get a flagman to oversee the safety of the work crews, social workers, and police while on the railroad tracks. A city may elect to declare the encampment as a public nuisance area, which would allow the city to clean up the areas at the railroad company’s expense for failing to maintain the tracks and right-of-way. Some cities are looking to increase pressure on railroad operators for not addressing the various homeless encampments, which are presenting public safety and health concerns. Courts have looked to compel railroad companies to increase their efforts to address homeless encampments on their railroads or grant a local authority’s application for an Inspection and Abatement Warrant, which would allow city staff to legally enter private property and abate a public nuisance or dangerous conditions. In limited circumstances, some cities have negotiated Memoranda of Understandings (MOU) with railroad companies to provide graffiti abatement, trash, and debris removal located in the right-of-way, and clean-ups of homeless encampments. These MOUs also include local law enforcement agencies to enforce illegally parked vehicles and trespassing in the railroad’s right- of-way. MOUs also detailed shared responsibility and costs of providing security and trash clean-up. In cases where trespassing or encampments are observed, the local public works agency and law enforcement agency are notified and take the appropriate measures to remove the trespassers or provide clean-up with the railroad covering expenses outlined in the MOU. Absent an MOU detailing shared maintenance, enforcement, and expenses, cities do not have the authority to unilaterally abate graffiti or clean-up trash on a railroad’s right-of-way. Fiscal Impact: If the League of California Cities were to secure funding from the state for railroad clean-up activities, cities could potentially save money in addressing these issues themselves or through an MOU, as detailed above. This funding could also save railroad operators money in addressing concerns raised by municipalities about illegal dumping, graffiti, and homeless encampments along railroads. Conversely, if the League of California Cities is unable to secure this funding through the Legislature or the Governor, cities may need to consider alternative methods, as detailed above, which may include significant costs. Existing League Policy: Public Safety: Graffiti The League supports increased authority and resources devoted to cities for abatement of graffiti and other acts of public vandalism. Transportation, Communications, and Public Works Transportation The League supports efforts to improve the California Public Utilities Commission’s ability to respond to and investigate significant transportation accidents in a public and timely manner to improve rail shipment, railroad, aviation, marine, highway, and pipeline safety 64 A-65 Housing, Community, and Economic Development Housing for Homeless Homelessness is a statewide problem that disproportionately impacts specific communities. The state should make funding and other resources, including enriched services, and outreach and case managers, available to help assure that local governments have the capacity to address the needs of the homeless in their communities, including resources for regional collaborations. Homeless housing is an issue that eludes a statewide, one-size-fits-all solution, and collaboration between local jurisdictions should be encouraged. Staff Comments: Clarifying Amendments Upon review of the Resolution, Cal Cities staff recommends technical amendments to provide greater clarity. To review the proposed changes, please see Attachment A. The committee may also wish to consider clarifying language around regulatory authority and funding to assist cities with these efforts. The resolution asks that new investments from the state be sent to the CPUC to increase their role in managing and maintaining railroad rights-of- ways and potentially to cities to expand their new responsibility. The committee may wish to specify MOUs as an existing mechanism for cities to collaborate and agree with railroad operators and the CPUC on shared responsibilities and costs. Support: The following letters of concurrence were received: City of Bell Gardens City of Bell City of Commerce City of Cudahy City of El Segundo City of Glendora City of La Mirada City of Paramount City of Pico Rivera City of Huntington Park City of Long Beach City of Lynwood City of Montebello 65 A-66 2.A RESOLUTION CALLING UPON THE GOVERNOR AND THE LEGISLATURE TO PROVIDE NECCESARY NECESSARY FUNDING FOR CUPC THE CALIFORNIA PUBLIC UTILITIES COMMISSION (CPUC) TO FUFILL ITS OBLIGATION TO INSPECT RAILROAD LINES TO ENSURE THAT OPERATORS ARE REMOVING ILLEGAL DUMPING, GRAFFITI AND HOMELESS ENCAMPMENTS THAT DEGRADE THE QAULITY QUALITY OF LIFE AND RESULTS IN INCREASED PUBLIC SAFETLY SAFETY CONCERNS FOR COMMUNITIES AND NEIGHBORHOODS THAT ABUTT THE RAILROAD RIGHT-OF-WAY. Source: City of South Gate Concurrence of five or more cities/city officials Cities: City of Bell Gardens; City of Bell; City of Commerce; City of Cudahy; City of El Segundo; City of Glendora; City of Huntington Park; City of La Mirada; City of Long Beach; City of Lynwood; City of Montebello; City of Paramount; City of Pico Rivera Referred to: Housing, Community and Economic Development; and Transportation, Communications and Public Works WHEREAS, ensuring the quality of life for communities falls upon every local government including that blight and other health impacting activities are addressed in a timely manner by private property owners within its jurisdictional boundaries for their citizens, businesses and institutions; and WHEREAS, Railroad Operators own nearly 6,000 miles of rail right-of-way throughout the State of California which is regulated by the Federal Railroad Administration and/or the California Public Utilities Commission CPUC for operational safety and maintenance; and WHEREAS, the California Public Utilities Commission (CPUC) is the enforcing agency for railroad safety in the State of California and has 41 inspectors assigned throughout the entire State to inspect and enforce regulatory compliance over thousands of miles of rail line; and WHEREAS, areas with rail line right-of-way within cities and unincorporated areas are generally located in economically disadvantaged zones and/or disadvantaged communities of color where the impact of blight further lowers property values and increases the likelihood of unsound sanitary conditions and environmental impacts upon them; and WHEREAS, many communities are seeing an increase in illegal dumping, graffiti upon infrastructure and homeless encampments due to the lax and inadequate oversight by regulatory agencies; and WHEREAS, local governments have no oversight or regulatory authority to require operators to better maintain and clean their properties as it would with any other private property owner within its jurisdictional boundaries. Thus such local communities often resort to spending their local tax dollars on cleanup activities or are forced to accept the delayed and untimely response by operators to cleaning up specific sites, and; WHEREAS, that railroad operators should be able to provide local communities with a fixed schedule in which their property will be inspected and cleaned up on a reasonable and regular schedule or provide for a mechanism where they partner with and reimburse local governments for an agreed upon work program where the local government is enabled to remove items like illegal dumping, graffiti and encampments; and ATTACHMENT A 66 A-67 WHEREAS, the State has made it a priority to deal with homeless individuals and the impacts illegal encampments have upon those communities and has a budgetary surplus that can help fund the CPUC in better dealing with this situation in both a humane manner as well as a betterment to rail safety. RESOLVED, at the League of California Cities, General Assembly, assembled at the League Cal Cities Annual Conference on September 24, 2021, in Sacramento, that the Cal Cities League calls for the Governor and the Legislature to work with the Cal Cities League and other stakeholders to provide adequate regulatory authority and necessary funding to assist cities with these railroad right-of-way areas so as to adequately deal with illegal dumping, graffiti and homeless encampments that proliferate along the rail lines and result in public safety issues. The Cal Cities League will work with its member cities to educate federal and state officials to the quality of life and health impacts this challenge has upon local communities, especially those of color and/or environmental and economic hardships. 66 A-68