Assembly Member Sharon Quirk-Silva recently introduced legislation that would address the current issue of Orange County’s lost vehicle license fees, or revenue it received from annual car registrations. The County hoped to receive an arrangement with the State similar to the one every other county has: receiving property tax revenue in lieu of vehicle license fees on a dollar-for-dollar basis, known as the Vehicle License Fee Adjustment Amount (VLFAA).
Although the County did not receive that exact dollar-for-dollar swap, as the other 57 counties did beginning nearly a decade ago, this effort, in concert with the entire Orange County legislative delegation, represents the best possible outcome in the current situation. Of course, Orange County will remain 58th of 58 counties in California for the percentage share of property tax revenue returned to it. However, it is hoped and expected that legislators from Orange County will continue to advocate for a more equitable property tax revenue distribution among all California counties.
Core to the legislation, Orange County’s proposed $53 million in VLFAA would increase due to higher property values resulting in higher property tax revenue over time and would facilitate an end to the State’s current lawsuit against the County. Also part of the legislation, the County would, over the next five fiscal years, repay to the State the full $150 million in property taxes that it withheld as the property tax revenue it would have received over the last two years, beginning in FY 2014-15.
As you may know, this past May the Orange County Superior Court ruled that Orange County pay approximately $75 million annually to the State in perpetuity, in addition to retroactively repaying the $150 million that it withheld during the last two budget years. Unfortunately, under this scenario, Orange County would have continued to receive neither VLF revenue nor property tax revenue.
As background, after Orange County declared bankruptcy in 1994, it issued bonds in order to replace money it lost in its investments. The following year, the State Legislature approved an exemption for Orange County to direct a portion of its VLF as a secure payment stream to the bondholders. In 2004, the State swapped with all the other 57 California counties, on a dollar-for-dollar match, their VLF money in exchange for property tax revenue, with the exception of Orange County, due to its special arrangement to repay its creditors.
When the County refinanced its bonds in 2005 to take advantage of lower interest rates, the special VLF payment exemption was, unfortunately, not maintained through legislation. However, the County continued to receive VLF instead of the additional property tax until it was lost in 2011.
Please click here to view the County of Orange press release.