State Assemblyman Darrell Steinberg of Sacramento, California has filed legislation that has companies like Wal-Mart and Home Depot lobbying for their life. The proposal, A.B. 680, would end what critics have called “sales tax zoning”, in which local officials make land use decisions based predominately on how much sales tax revenue it will generate, rather than whether it’s good or consistent land use policy. This chase for revenues has led to the oversaturation of malls and big box stores, inefficient use of public services, the resulting closure of excess retail space, and the “unhealthy competition” for retail facilities. Over the past 25 years, California has seen a profound change in the way local governments finance themselves. As property tax revenues became a smaller percentage of the local fiscal mix, communities turned to the sales tax as the way to financ local government. Local governments are allowed to keep 1% of every retail purchase that takes place within their borders. This is called “situs-based” sales tax allocation, which has led to competition among local governments for developer’s retail projects. The state has already passed a law, submitted by Assemblyman Peter Torlakson, that requires any town which lures away a retail project to share sales revenues with the originating town. But the Steinberg bill goes further. It seeks to end the “fiscalization” of land use decisions, and the bidding war for big box projects, by requiring the sharing of sales tax revenues in a multi-county region. A.B. 680 would allow the state Board of Equalization to distribute sales tax revenue derived from a 1% tax to communities in the greater Sacramento region, which encompasses a 6 county region. Communities would have their sales tax revenues from a base year held harmless, but any “growth” revenues would be reallocated on the basis of one third to the site where the tax was generated, one third based on housing eligibility, and one third on a population basis. ‘Housing eligibility’ measures the amount of low income housing, homeless shelters, infill development or open space acquisition plans. The legislation creates the Sacramento Regional Smart Growth Fund Allocation Program, or CAPSMART to use funds in support of smart growth initiatives in the region. such as transportation services, public housing, etc. The bill also creates the Sacramento Regional Open Space and Recreation Conservancy. The overall intent of the bill is to encourage cities and counties in the region to participate in responsible regional growth by rewarding communities which meet specified ‘smart growth’ criteria. Suburban communities complain that the revenue sharing bill will take away their golden goose — having no idea how much these big boxes have already unfairly destroyed smaller business activities and jobs.
Many cities and towns have expressed frustration at being forced to enter into a tax war with their surrounding neighbors, and cities and towns have watched developers leap frog from community to community building a ‘bigger and better’ project to steal revenue from another town, sometimes placing projects just over one town border line. Regional revenue sharing is one strategy for taking away the incentive to over-produce retail projects, and focus instead on valid land use issues. A property tax sharing plan has been in effect in the Minneapolis-St. Paul region for roughly thirty years. For more details on tax sharing, see the book “Slam Dunking Wal-Mart” , or search this database by “tax sharing” and “Torlakson”. For a copy of A.B. 680, contact [email protected]