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11 -M- MCCLINTOCK FILES MEASURES TO END VEHICLE LICENSE FEES LAWSUIT CHALLENGING PULLING OF VLF TRIGGER FILED Senator Tom McClintock has filed a pair of initiatives in response to California Finance Direc- tor Steve Peace's June 19 announcement of the vehicle license fee (VLF) trigger activation. "Pull- ing the trigger" restores the fees to their 1998 levels, relieving the state of its obligation to backfill cities and counties approximately $4 billion. McClintock filed the initiatives in hopes of reversing the effect of the VLF trigger. The first initiative is a statue that sets the VLF at $1. The second would enact a set of constitutional amendments to abolish the VLF. It would also narrowly define "tax ", and provide for a monthly transfer from Sales Tax Funds to local governments in an amount equal to the 2002 -03 VLF allocation to cities and counties, adjusted for population and other economic factors. The McClintock initiative not only gets rid of the "car tax," it includes a "son of Prop 37" provision, causing many locally imposed fees or fines to be labeled as taxes, and thereby subject to a super - majority vote to remain in place. This proposal would further weaken cities' and counties' munick pal authority and fiscal independence, as these type of civil fines and penalties that a city can impose allow cities to enforce its Municipal Code - including nuisance abatement - through a civil, rather than criminal, process. The League and the LOCAL coalition support restoration of the VLF, believing it to be legal and a necessary alternative to the catastrophic local service cuts that would result from the cash - strapped state's inability to pay $4 billion in VLF backfill to cities and counties. On luly 1, the Howard Jarvis Taxpayers Association filed a lawsuit challenging the restora- tion of the Vehicle License Fee (VLF) to 1998 levels. A number of Republican legislators and two Los Angeles area talk radio hosts are also parties to the action. The named defendants are the Department of Motor Vehicles and the Director of the State Department of Finance. The lawsuit asks the court to declare that the restoration increase of the VLF to its 1998 levels is unlawful for the following reasons: • Any VLF increase requires a 2/3 vote of the Legislature • The Legislature could not delegate the power to increase the VLF to the executive branch • The statute does not meet the standards for a lawful delegation of legislative authority to change tax rates • The statute violates the guarantee of uniform tax rates Note that the suit is not seeking injunctive relief (hence filing of the suit does not stop pay- ment of the backfill) and that the backfill provisions remain part of the Revenue and Taxation Code. Of course, the premise for the pulling of the trigger is that the state can no longer afford the backfill, so it is not clear what would happen in the event the suit were successful. The League has convened an advisory group of city attorneys for the litigation and has been in close contact with the state about its plans for defending the suit. We will continue to monitor the lawsuit and keep cities informed. Our Mission Restore and protect local control for cities through education and advocacy to enhance the quality of life for all Calrfornians. I I I PAGE 2 /PRIORITY FOCUS Visit the League's Official Web Site-- www.cacities.org