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LEAGUE OF WOMEN VOTERS OF CALIFORNIA EDUCATION FUND	Nonpartisan Pros & Cons of Proposition 11 LOCAL SALES AND USE TAXES. REVENUE SHARING.
	Legislative Constitutional Amendment

THE QUESTION

Should local governments be authorized to contract to share sales tax or use tax revenues without a vote of the people?

THE SITUATION

The state Constitution allows cities and counties to impose a 1.25 percent tax on retail sales. However, there are often imbalances between communities that collect the sales tax revenue and neighboring communities that shoulder the burdens of infrastructure, traffic, and public services. Communities compete to attract large retailers by offering sales tax refunds, diverting tax revenues that would be used for public services.

The Constitution allows cities and counties to contract to share sales tax revenue, but these contracts must be approved by a majority of the voters in each jurisdiction. No California community has proposed such a contract.

PROVISIONS

This measure adds an alternate process for sharing sales tax revenues that requires a 2/3 vote of each city council and/or county board of supervisors instead of approval by a majority of the voters in each jurisdiction. In effect, it shifts the power to share tax revenues from the voters to their elected representatives.

FISCAL EFFECT

The State Board of Equalization may incur additional costs to administer an increased number of jurisdictions that have elected to enter into the contracts authorized by this proposition.

SUPPORTERS SAY

• Proposition 11 makes it easier for local officials to divide scarce revenues and stop the all-or-nothing duels between cities and counties.
• Revenue sharing reduces the pressure to give away public funds.

• Decisions on tax revenues, such as revenue sharing agreements, should not be made without voter approval.
• Agreements to share tax revenues could be linked to other obligations, such as annexation.

(Nonpartisan analysis prepared by the League of Women Voters of California Education Fund.)
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Last updated: September 7, 1998
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