DATE: May 19, 1998
TO: Board of Supervisors
SUBJECT: FAIR DISTRIBUTION OF JET FUEL SALES TAX REVENUE

SUMMARY:
Issue/Reference:
Approval of this Board letter will express the Board of Supervisors' support for State legislation which has been introduced to provide for an equitable method of distributing jet fuel sales tax revenue in California.

Recommendation:
SUPERVISOR JACOB
1. Adopt the attached resolution expressing the Board of Supervisors' support for State legislation to amend the current formula used to allocate tax revenues collected from the sale of jet fuel in California.

2. Direct the Chief Administrative Officer to draft letters for the Chairman's signature to be sent to the members of the State Legislature representing San Diego, the County's Sacramento representative, and to the members of the State Board of Equalization expressing the Board of Supervisors' support for changing the current formula.

Fiscal Impact:
If approved, this request will result in no additional costs or staff years.

BACKGROUND
Under the Bradley-Burns Uniform Local Sales and Use Tax Law, the local share of sales and use taxes are allocated to the local taxing jurisdiction in which sales occur. The Board of Equalization, the entity responsible for distributing these taxes to local jurisdictions, interprets the point of sale as the place of business where the principal negotiations are carried out. Unfortunately, this interpretation results in the allocation of tax revenues to municipalities in which sales contracts are signed instead of to the municipalities in which the exchange of goods actually occurred.

Since jet fuel taxes are distributed in this manner, local jurisdictions in which jet fuel sales occur, such as the County of San Diego, the City of San Diego, the City of El Cajon, and the City of Carlsbad, lose tax revenue to places like Los Angeles, San Francisco, and Laguna Hills, where the oil companies' corporate offices are located. This current antiquated system only serves to shift precious resources to governments such as San Francisco County who may not even have an airport located within their boundaries. Meanwhile, local governments that provide vital airport services and the infrastructure needed as a direct result of airport operations are cheated from the revenue generated within their jurisdictions.

Recent attempts to change Board of Equalization Regulation 1802 (a) (2) concerning the sales and use tax allocation method have failed. However, the California State Legislature is considering three bills to change the formula and allow the local share of the sales tax to be distributed to the city or county in which the jet fuel is pumped. If we are to provide equity to those governments throughout California shouldering the financial burden necessary to ensure successful airport operations, the current allocation method must be changed. Therefore, I urge you to adopt the attached resolution supporting legislation to change the current method used to distribute the local share of sales and use taxes.

Respectfully Submitted,

DIANNE JACOB
Supervisor, Second District