From the Public Agency Law Department: Part One of a Four Part Series:
2018 Newly Introduced California Legislation Impacting Public Agencies
The following is an overview of newly introduced and pending legislation that will impact California cities, counties, special districts, and water districts, if passed and/or approved by the electorate. To read more about a particular bills or propositions, follow the links below and contact SBEMP for further information or assistance.
2018 Proposed Legislation (Part One) Proposed Initiative 1700-50 Amdt. #1 – Tax Fairness, Transparency, and Accountability Act of 2018
This measure, which is currently under circulation for signatures and proposed for the November 2018 ballot, although it has not yet qualified, would amend the state Constitution to change the rules for how the state and local governments can impose taxes, fees, and other changes.
Specifically, this measure would drastically limit local revenue authority, while making comparatively minor modifications to state authority.
For cities and other local agencies, it applies retroactively and voids any local measure approved by local voters on or after January 1, 2018, but prior to the effective date of this act, that does not comply with the provisions of the Act.
Below, please find additional implications of this measure.
Restricting Local Tax Authority:
a) Eliminates local authority to impose a tax for general purposes by majority vote and instead requires all local proposed tax increases to be subject to a two-thirds vote.
This proposal also requires two-thirds approval of all members of the local legislative body before a tax can be placed on the ballot.
b) Requires a two-thirds vote to “extend” a tax to new territory, a new class of payor, or expanded base. For cities, this would limit all future annexations by requiring a separate two-thirds vote of the affected residents prior to applying any existing city tax. Other limitations may apply to a local interpretation that an existing local tax applies to a business or product.
c) Expands the definition of a tax to include payments voluntarily made in exchange for a benefit received, which may cover local franchise fees.
d) Prohibits any tax to be placed on the ballot unless it either specifically identifies by binding and enforceable limitation how it can be spent, with any change requiring reapproval by the electorate, or states in a separate stand-alone segment of the ballot that the tax revenue is intended for “unrestricted revenue purposes.”
e) Requires tax measures to be consolidated with the regularly scheduled general election for members of the governing body, unless an emergency is declared by a unanimous vote of the governing body.
f) Expands the application of this act to include actions and “legal authority” that may be “enforced” or ‘”implemented” by a local government.
g) Requires a tax imposed by initiative to also be subject to a two-thirds vote, to address concerns over the Cannabis Coalition v. City of Upland decision.
h) Clarifies that a levy, charge, or exaction retained by and payable to a non-governmental entity is a tax, if the local agency limits the use of the proceeds in any way, to address concerns over the Schmeer v. County of Los Angeles decision.
i) Exempts existing school bond (55% vote) construction authority from the application of the bill. Restricting Local Fee Authority: Restricts the ability of a local government to impose fees or charges, other than those subject to Prop. 218, by:
a) Prohibiting a fee or charge from being imposed, increased or extended unless approved by two-thirds vote of the legislative body.
b) Authorizing a referendum on decisions of a legislative body to impose, increase or extend a fee or charge triggered by petitions signed by 5% of affected voters.
c) Requiring a fee or charge proposed by initiative to be subject to a two-thirds vote of the electorate.
d) Narrowing the legal threshold from “reasonable” to “actual” costs for fees applied to local services, permits, licenses, etc. Further, the measure authorizes new avenues to challenge “actual” costs by enabling a payor to also second-guess in court whether the fees are “reasonable.” This legislation, if passed, would also open up further litigation and debate by replacing the existing standard that fees and charges bear a “fair and reasonable relationship to the payors burdens and benefits” with a more rigorous “proportional to the costs created by the payor” standard.
e) Increasing the legal burden of proof for local agencies from “preponderance of evidence” (more likely than not) to “clear and convincing evidence” (high probability) to establish that a levy, charge or other exaction is:
(1) not a tax,
(2) the amount is no more than necessary to cover the actual costs, and
(3) the revenue is not being used for other anything than its stated purpose.
- Current Version of Proposed Initiative 1700-50 Amdt. #1: https://oag.ca.gov/system/files/initiatives/pdfs/17-0050%20%28Two-Thirds%20Vote%20Requirement%20V1%29.pdf
- Title and Summary: https://oag.ca.gov/system/files/initiatives/pdfs/Title%20and%20Summary%20%2817-0050%29_0.pdf
- LAO Fiscal Impact Estimate: https://oag.ca.gov/system/files/initiatives/pdfs/fiscal-impact-estimate-report%2817-0050%29_0.pdf