Business Item 5b
STAFF REPORT
City Council Business Item
DATE: March 18, 2024
TO: Honorable Mayor and Council Members
FROM: Merritt Perry, City Manager
SUBJECT: Initiative No. 21-0042A1, The Taxpayer Protection and Government Accountability Act
STAFF RECOMMENDATION:
Staff recommends Council adopt Resolution 2024-06 opposing Initiative No. 21-0042A1, the Taxpayer Protection and Government Accountability Act.
EXECUTIVE SUMMARY:
The Taxpayer Protection and Government Accountability Act would revise the California Constitution with provisions that limit voters’ authority and input, adopt new and stricter rules for raising taxes and fees, and may make it more difficult to impose fines and penalties for violation of state and local laws. The measure puts billions of local government tax and fee revenues at risk statewide with related core public service impacts. The measure could have significant negative impacts on City of Fortuna operations and core service delivery. The California Business Roundtable sponsors the proposed constitutional initiative.
MAJOR PROVISIONS
Fees and Charges
Except for licensing and other regulatory fees, fees and charges may not exceed the “actual cost” of providing the product or service for which the fee is charged. “Actual cost” is the “minimum amount necessary.” The burden to prove the fee or charge does not exceed “actual cost” is changed to “clear and convincing” evidence. Requires fees and charges paid for the use of local and state government property and the amount paid to purchase or rent government property to be “reasonable.” These fees and charges are currently allowed to be market-based. Whether the amount is “reasonable” (introducing a new legal standard aiming to force below market fee and charge amounts) must be proved by “clear and convincing evidence.” The standard may significantly reduce the amount large companies (e.g., oil, utilities, gas, railroads, garbage/refuse, cable, and other corporations) will pay for the use of local public property.
Prohibits fees on new development based on vehicle miles traveled.
Taxes
Taxes and fees adopted after Jan. 1, 2022, that do not comply with the new rules, are void unless reenacted.
Business Item 5b
Invalidates Upland decision that allows a majority of local voters to pass special taxes.
The measure specifies that taxes proposed by the initiative are subject to the same rules as taxes placed on the ballot by a city council.
Expressly prohibits local advisory measures which allow local voters to express a preference for how local general tax dollars should be spent. Requires voter approval to expand existing taxes (e.g., Utility, Transient Occupancy) to new territory (e.g., annexations) or to expand the tax base (e.g., new utility service) New taxes can only be imposed for a specific time period. City charters may not be amended to include a tax or fee. All state taxes require majority voter approval.
Fines and Penalties
May require voter approval of fines, penalties, and levies for corporations and property owners that violate state and local laws unless a new, undefined adjudicatory process is used to impose the fines and penalties.
DISCUSSION/ADDITIONAL BACKGROUND
On Jan. 4, 2022, the California Business Roundtable filed the “Taxpayer Protection and Government Accountability Act” or AG# 21-0042A1. On Feb. 1, 2023, the measure qualified for the November 2024 ballot.
The League of California Cities, along with a broad coalition of local governments, labor and public safety leaders, infrastructure advocates, and businesses, strongly opposes this initiative.
Local government revenue-raising authority is currently substantially restricted by state statute and constitutional provisions, including the voter approved provisions of Proposition 13 of 1978, Proposition 218 of 1996, and Proposition 26 of 2010. The Taxpayer Protection and Government Accountability Act adds and expands restrictions on voters and local government tax and fee authority.
Fees and Taxes
Local governments levy a variety of fees and other charges to provide core public services.
Major examples of affected fees and charges are:
Nuisance abatement charges, such as for weeds, rubbish, and general nuisance abatement to fund community safety, code enforcement, and neighborhood cleanup programs.
Commercial franchise fees.
Emergency response fees, such as in connection with DUI. Advanced Life Support (ALS) transport charges.
Document processing and duplication fees.
Transit fees, tolls, parking fees, and public airport and harbor use fees. Facility use charges, fees for parks and recreation services, garbage disposal tipping fees.
Virtually every city, county, and special district must regularly (e.g., annually) adopt increases to fee rates and charges and revise rate schedules to accommodate new users and activities. Most of these would be subject to new standards and limitations under threat of legal challenge. Based on the current volume of fees and charges imposed by local agencies, including council-adopted increases to simply accommodate inflation, Cal Cities estimates the amount of local government Business Item 5b
fee and charge revenue at risk is approximately $2 billion per year including those adopted since Jan. 1, 2022. Over ten years, $20 billion of local government fee and charge revenues will be at heightened legal peril.
Hundreds of local tax measures were approved in 2022 that likely do not comply with the provisions of the initiative. Nearly $2 billion of annual revenues from these voter-approved measures will cease a year after the effective date of the measure, reducing the local public services funded by these measures, unless the tax is re-submitted for voter approval.
Reductions on local government tax revenues have impacts on core services and infrastructure including fire and emergency response, law enforcement, streets and roads, drinking water, sewer sanitation, parks, libraries, affordable housing, homelessness prevention, and mental health services.
The City of Fortuna currently does not have any revenue measures affected by the proposed ballot measure, however if the City puts a tax measure on the 2024 ballot, it would be subject to the provisions of the measure. This could limit the City’s ability to specify what general tax funds could be spent on such as public safety, fire services, etc.
Fines and Penalties
Under existing law, cities are required to provide due process before imposing a penalty or fine for violation of its municipal code:
1. A local agency must adopt administrative procedures that govern imposing fines and penalties, including providing a reasonable period of time for a person responsible for a continuing violation to correct or remedy the violation [Gov't Code 53069.4].
2. Notice must be given to the violating party before imposing the penalty; and give the party an opportunity to be heard and present any facts or arguments [Merco Construction Engineers v. Los Angeles Unified School District (1969) 274 CA 2d 154, 166].
3. The fine may not be "excessive" [U.S. Constitution amendments VIII and XIV].
The initiative converts administratively-imposed fines and penalties into taxes unless a new, undefined, and ambiguous “adjudicatory due process” is followed. This provision may put at risk authority to impose fines and penalties for violations of state and local law.
FISCAL IMPACT:
The Taxpayer Protection and Government Accountability Act will take billions of dollars away from local government services statewide.
RECOMMENDED COUNCIL ACTION:
1. Receive staff report and review questions with staff
2. Open Public Comment
3. Close Public Comment
4. Motion to Adopt Resolution 2024-06 and read by title only. Roll Call vote.
Business Item 5b
ATTACHMENTS:
Resolution 2024-06 Opposition to Initiative 21-0042A1 League of California Cities Summary