DATE: March 4, 2024
TO: Mayor and Members of the City Council
VIA: Stefan Chatwin, City Manager
FROM: Marlene Subhashini, Assistant City Manager
DEPARTMENT: City Manager
SUBJECT: THE CALIFORNIA BUSINESS ROUNDTABLE “TAXPAYER
PROTECTION AND GOVERNMENT ACCOUNTABILITY ACT”
RECOMMENDATION
It is recommended that the City Council receive and accept a report on the California Business Roundtable’s (CBRT) Taxpayer Protection and Government Accountability Act and by Minute Order, direct staff to draft a letter in opposition of the measure and authorize the Mayor to sign the letter and find the action exempt under CEQA pursuant to CEQA Guidelines section 15061(b)(3).
EXECUTIVE SUMMARY
The Taxpayer Protection and Government Accountability Act (“CBRT measure”), is an initiative (Initiative #1935) proposed for the November 2024 State Ballot. Sponsored by CBRT, the measure proposes significant new tax and fee limitations on both state and local governments, reversing numerous court decisions, and retroactively voiding any state or local laws, decisions, or administrative actions in conflict with its provisions enacted after January 1, 2022. If passed, the measure would greatly limit the ability of voters and state and local governments to raise revenues to provide government services and fund critical infrastructure projects. The measure would amend 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. Based on the current volume of fees and charges imposed by local agencies, including council-adopted increases to simply accommodate inflation, the League of California Cities (Cal Cities) estimates the amount
of local government fee and charge revenue at risk is approximately $2 billion per year, including those adopted since January 1, 2022. Cal Cities, along with a broad coalition of local agencies and other partners, strongly oppose 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 (1978), Proposition 218 (1996), and Proposition 26 (2010). The CBRT measure is the most consequential proposal that would further limit the ability of the state and local governments to enact, modify, or expand taxes, assessments, fees, and property-related charges. If passed by voters in 2024, the CBRT measure would put billions of local government tax and fee revenues at risk statewide with impacts to related core public services. The measure could have significant negative impacts on the City operations and core service delivery.
BACKGROUND/ANALYSIS
In 2018, a proposed constitutional initiative, the “Tax Fairness, Transparency and Accountability Act” was circulated to qualify for the November 2018 Ballot. This initiative was supported by the CBRT and would have significantly impacted local revenue authority. The initiative was withdrawn due to strong opposition from Cal Cities, and other coalition partners. On January 4, 2022, the CBRT filed the "Taxpayer Protection and Government Accountability Act" (Initiative No. 21-0042A1). On February 1, 2023, the Secretary of State certified that initiative #1935 – a measure that would amend the California Constitution to change the rules for how the state and local governments can impose taxes, fees, and other charges is eligible to appear on the ballot at the November 5, 2024, Statewide General Election.
The proposed constitutional initiative is sponsored by CBRT. The CBRT is a non-partisan organization comprised of the senior executive leadership of the major employers throughout the state (and considered to be the lobbying arm of the largest and wealthiest corporations in California).
If passed by the voters, key impacts of the initiative would include the following major provisions, among others:
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.
▪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.
In September 2023, Governor Gavin Newsom joined the State Legislature and former President pro Tempore of the California State Senate John Burton to file an emergency petition for writ of mandate with the California Supreme Court, asking the court to conduct preelection review of the Taxpayer Protection and Government Accountability Act (Initiative #1935) and prevent the measure from being placed on the November 2024 Ballot. The California Supreme Court did grant a hearing to rule on the petition filed by Newsom, and Burton to withhold the CBRT measure from the ballot. The petition makes two legal arguments as to why the measure should not appear on the November 2024 Ballot. First, it argues that the measure is an invalid revision of the State Constitution — which cannot be accomplished by initiative — rather than an amendment, which can. This is because the measure strips the Legislature and the Executive branch of important powers — requiring voter approval of all taxes, and requiring legislative action on all fees, even such things as a fee for a replacement driver’s license. The second claim is that the measure would impair essential governmental powers; here, the power to impose taxes, delegate fee-making procedures to the Executive branch, and for that branch to fully administer financial aspects of government programs. The matter will likely be set for argument in March or April and a decision is likely by the June ballot-printing deadline. While it is uncertain whether the Court will agree with the claims made by the plaintiffs, it is a positive development that the case will be deliberated.
As part of the broader CBRT discussion, it is important to note that ACA 13 (Ward) is also appearing on the ballot in November. While two standalone propositions, should ACA 13 pass with a simple 50%+1 majority vote, it would make it incredibly difficult for CBRT to take effect. This is because, the CBRT measure (which only requires a simple 50%+1 majority to pass) would require a two-thirds vote threshold to modify. ACA 13 states that in cases such as this, a ballot measure must secure the vote threshold that the proposition is seeking to raise. In other words, if ACA 13 were to pass, CBRT would not take effect unless it garnered a two-thirds vote. Additionally, ACA 13 permits a local governing body, at any election, to hold an advisory vote concerning any issue of governance for the purpose of allowing voters within the jurisdiction to voice their opinions on the issue.
It also provides that an advisory question is approved only if a majority of the votes cast on the question are in favor, and that the results of the advisory vote are not controlling on the local governing body.
ACA 13 is backed by local government associations, including Cal Cities, and labor organizations and is in response to the CBRT ballot measure. If ACA 13 is approved by voters, it would mark the first time that any state ballot measure would require more than a simple majority vote to be approved. Specifically, state ballot measures that: (1) are initiative measures (the term “initiative” refers exclusively to a proposed law that qualifies for the ballot through the collection of voters’ signatures on an initiative petition); (2) propose to amend the State Constitution; and (3) propose to increase the vote required for voters to approve a state or local ballot measure, would be subject to a voter approval threshold that is greater than a simple majority vote.
The City of Foster City relies on the use of fees, taxes, and other charges to provide vital core services to the community, including infrastructure and public safety services. The proposed CBRT measure would create detrimental fiscal implications for the City, potentially impacting core services to the community, which would negatively impact the quality of life of Foster City residents and businesses.
Link to the full text of the ballot initiative: Initiative 21-0042
CALIFORNIA ENVIRONMENTAL QUALITY ACT
This proposed action is not subject to review under the California Environmental Quality Act (California Public Resources Code §§ 21000, et seq., "CEQA") and CEQA Guidelines (Title 14 California Code of Regulations §§ 15000, et seq.), because it does not involve any commitment to a specific project which could result in a potentially significant physical impact on the environment; and, constitutes an organizational or administrative activity that will not result in direct or indirect physical changes in the environment.
FISCAL IMPACT
There is no fiscal impact associated with receiving this report. However, passage of the CBRT measure would put City revenues and future budgets at risk.
CITY COUNCIL VISION, MISSION, AND VALUE/PRIORITY AREA
Smart Planning, Development, and the Local Economy
ATTACHMENTS:
Attachment 1 - The Taxpayer Protection & Government Accountability Act Economic Development Analysis prepared by CALED
Attachment 2 - ACA 13 Memo prepared by RPPG
California Association for Local Economic Development Pg. 1, 04.26.22 The Taxpayer Protection and Government Accountability Act1 The Taxpayer Protection and Government Accountability Act (Act),2 is an initiative proposed for the state ballot sponsored by the California Business Roundtable.3 The measure, which is currently “on the street” collecting signatures, proposes significant new tax and fee limitations on both state and local governments, reversing numerous court decisions, and retroactively voiding any state or local laws, decisions, or administrative actions in conflict with its provisions enacted after January 1, 2022. • Text of measure: https://oag.ca.gov/system/files/initiatives/pdfs/21-0042A1 (Taxes).pdf • Legislative Analyst Fiscal Analysis: https://lao.ca.gov/BallotAnalysis/Initiative/2021-042 • Attorney General’s Title and Summary: https://oag.ca.gov/system/files/initiatives/pdfs/Title and Summary (21-0042A1).pdf Effects on State laws and regulatory activities: 1) Requires that every levy, charge, or exaction of any kind “imposed” by “state law” which results in any taxpayer paying a new or higher tax or a new or higher “exempt charge,4”must be subject to new and more rigorous approval requirements. 2) Defines “imposed” as to “adopt, enact, reenact, create, establish, collect, increase, or extend.” 3) Defines “extend” to “include, but is not limited to, any of the following related to a tax or an exempt charge: lengthening its duration, delaying or eliminating its expiration, expanding its application to a new territory or class of payor, or expanding the base to which its rate is applied.” 4) Defines “state law” as including, but not limited to, “any state statute, state regulation, state executive order, state resolution, state ruling, state opinion letter, or other legal authority or interpretation5 adopted, enacted, enforced, issued, or implemented by the legislative or executive branches of state government.6 State Taxes: 1) Increases the limitations on the Legislature to enact a new or higher tax. Existing law requires a two-thirds vote in each legislative house and the Governor’s signature. The Act requires state voters to approve all new or higher state taxes by majority vote. 2) Requires any tax (or any future changes to the use of the tax) to be submitted to the voters (either by the Legislature or by voter initiative) to include, both within the text of the measure and in the title and summary and ballot label, the following information: a. Duration of the tax b. Estimate of annual expected revenue c. Legal, binding and enforceable limitation on how the revenue can be spent d. If the revenue can be spent for general purposes, the phrase “unrestricted general revenue purposes” must be included in a separate stand-alone section 1 Analysis prepared 4/20/2022 for the California Association for Local Economic Development (CALED) by Dan Carrigg, Daniel Carrigg Consulting, [email protected] 2 This proposed initiative is referred to as 21-0042A1 by the Attorney General and Legislative Analyst’s Office. The Secretary of State reports that it surpassed 25% of required signatures as of March 16, 2022. 3 The proponents of this measure filed a similar measure in 2018, which included a provision requiring all local taxes to be subject to a two-thirds vote. While the measure secured sufficient signatures to be placed on the ballot, it was ultimately pulled from the ballot by the sponsors as part of a legislative agreement to adopt legislation which imposed a 12-year ban on local taxes on soda. 4 The term “exempt charge” is likely unfamiliar to many. The bottom line with this measure is that it deems everything a tax, unless it falls into one of the categories of “exempt charges,” as defined in this Act. 5 The full breadth of the implications of these terms is difficult to contemplate. 6 Does not include actions taken by UC, CSU or community colleges.
CALIFORNIA ASSOCIATION FOR LOCAL ECONOMIC DEVELOPMENT The Taxpayer Protection & Government Accountability Act Economic Development Analysis
California Association for Local Economic Development Pg. 2, 04.26.22 State “Exempt Charges:” 3) Shifts all authority for “imposing” enacting and approving new or higher state “exempt charges” (covers fees, levies, exactions and all other charges not deemed “taxes”) from state agencies to the Legislature. Requires these exempt charges to be approved by majority vote approval of both legislative houses and Governor’s signature. 4) Defines “exempt charges” by making various changes to existing definitions in the Constitution that describe various charges that are not considered taxes, as follows: a. Deletes entirely a definition that provides that a tax does not include “a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of conferring the benefit or granting the privilege to the payor.7” b. Substantively narrows a second definition in the Constitution that describes a permitted charge imposed for “a specific government service or product provided” directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of conferring the benefit or granting the privilege to the payor.” By requiring costs not exceed “actual” rather than “reasonable” costs this measure will reduce revenue and increase costs for documentation.8 c. Requires that a charge for the entrance to or use of state property, or the purchase, rental, or lease of state property both be “reasonable” and not exceed “actual” costs.9” d. Deletes reference to “other monetary charge” from the exception in the Constitution for fines and penalties imposed by a Court or the State, as a result of a violation of law. Instead, the Act requires that interest for nonpayment of fines and penalties may be collected, and that fines and penalties levied by the state must be via “a state administrative enforcement agency10 pursuant to adjudicatory due process.11” e. Adds two new categories of “exempt charge” to include i. a levy, charge or exaction collected from local units of government, health care providers or health care service plans related to reimbursement rates or payments under the State Medi-Cal Program. ii. a levy, charge or exaction collected for the promotion of California Tourism, under the California Tourism Marketing Act.12 f. Defines “actual cost” as: i. “(i) the minimum amount necessary to reimburse the government for the cost of providing the service or product to the payor, and (ii) where the amount charged by the government is not used for any other purpose other than reimbursing that cost.” ii. “(ii) the maximum amount that may be imposed is the actual cost less all other sources of revenue, including but not limited to taxes, other exempt charges, grants, and state or federal funds, received to provide such service or product.”13 7 This deletion represents a major change in the law which previously gave clarity on a Constitutional test to determine the validity of various fees and charges were not “taxes.” It is unclear the full scope of activities the elimination of this general definition could apply to, and will open up new areas for legal disputes. 8 The effect of this change will be to require state agencies to keep a detailed and precise accounting of all costs because any charge cannot exceed the “actual” costs. This is a major change that will spark debates over minute details associated with calculating the cost of a state charge. An identical provision is also applied to local governments. 9 The injection of the term “reasonable” related to charges related to the rental or use of state property could limit amounts that the state can charge companies seeking to drill, mine or otherwise extract resources from state public lands. Opponents allege that this provision would reduce the ability of local governments to collect franchise fees from oil, utility, gas suppliers, cable companies, and other corporations that seek to use public property. 10 It is unclear which “state administrative enforcement agency” is being referred to here. Is this an existing agency, or is there an expectation that a new agency would be created? 11 This “adjudicatory due process” is not defined. Corporations facing fines for violation of law may use disputes over the meaning of this term to delay or attempt to avoid payment. 12 Such targeted exemptions raises the question over what programs or activities are being left out and now considered “taxes.” In addition, under this measure, any new or higher charges from these “exempted” entities would still require legislative approval. 13 Such a detailed definition will not only significantly expand the workload of state agencies to rigorously document and account for every possible penny of costs, it will likely foster a new industry of private accountants and litigators to argue over and contest every item. In some cases, a government service or product could be cancelled to avoid the excessive costs, arguments and litigation associated with attempting to offer it.
California Association for Local Economic Development Pg. 3, 04.26.22 Increased burden of proof: Increases the legal burden of proof for the state to establish that any levy, charge or exaction is not a tax, from the existing “preponderance of evidence” standard to a higher standard of “clear and convincing evidence.14” Under this Act, the state must prove both that the charge is reasonable and does not exceed the actual cost, which is more restrictive than the current standard (which this Act deletes).15 Retroactive repeal: Declares null and void any tax or exempt charge not adopted in compliance with the Act after January 1, 2022, and prior to the effective date of the Act, unless reenacted (consistent with this Act) within 12 months of the effective date of the Act. Poison Pills: Declares that the provisions of this measure should it receive, more affirmative votes shall supersede over any conflicting measure on the same ballot.16 Also, provides for the appointment of special counsel paid for by the state if the Attorney General declines to defend the Act against legal challenges. Effects on Local Government: 1) Expands the existing definition of “local government” to include an elector pursuant to Article II of the California Constitution, the initiative power.17 2) Prohibits an advisory measure (that would indicate that the revenue from the general tax will, would, or should be used for a specific purpose) from being placed on the ballot in conjunction for approval of a local general tax. 3) Declares that every levy, charge or exaction imposed by “local law” of any kind is either a “tax” or an “exempt charge.” Defines “tax” to mean every levy, charge or exaction imposed by a local law, that is not an “exempt charge.” 4) Requires any local ”exempt charge” to be imposed or increased by local ordinance.18 Prohibits any “exempt charge” from being imposed by local initiative. 5) Prohibits any (city or county) charter amendments which would impose, extend or increase a tax or an exempt charge from being submitted to or approved by the voters. 6) Prohibits property tax surcharges based on the value of property.19 7) Declares retroactively void any local tax or exempt charge adopted after January 1, 2022, and before the effective date of the Act, that is not in compliance with it, unless it is reenacted in compliance with this Act within 12 months. 8) Increases the legal burden of proof for the local government to establish that any levy, charge or exaction is not a tax, from the existing “preponderance of evidence” standard to a higher standard of “clear and convincing evidence.”20 14 Preponderance of the Evidence In most civil cases, the burden of persuasion that applies is called “a preponderance of the evidence.” This standard requires the jury to return a judgment in favor of the plaintiff if the plaintiff is able to show that a particular fact or event was more likely than not to have occurred. Some scholars define the preponderance of the evidence standard as requiring a finding that at least 51 percent of the evidence favors the plaintiff’s outcome. Clear and Convincing Evidence This burden of proof requires the plaintiff to prove that a particular fact is substantially more likely than not to be true. Some courts have described this standard as requiring the plaintiff to prove that there is a high probability that a particular fact is true. This standard sets a higher threshold than the preponderance of the evidence standard, but it does not quite rise to the widely recognized standard used in criminal cases, known as “beyond a reasonable doubt.” 15 Current standard being deleted includes the following phrasing: “amount is no more than necessary to cover the reasonable costs…and bear a fair and reasonable to the payors…burdens on, or benefits received from the governmental activity.” 16 Specifically references the Housing Affordability and Tax Cut Act of 2022 (which proposed a property tax surcharge) as conflicting with this measure. It is not clear if this measure is collecting signatures; it is not listed, among other proposed initiatives, by the Secretary of State as collecting 25% of needed signatures. 17 This change is designed to counter recent Court decisions, beginning with Upland, which held that the two-thirds vote requirement applicable to local special taxes only applied to measures placed on the ballot by the local legislative body, and not by voter initiative. Under this Act, local voter initiatives would be subject to the same approval thresholds (majority approval for general taxes and two-thirds approval for special taxes) as those placed on the ballot by legislative bodies. 18 This would require all manner of local fees to be imposed by the legislative body, rather than a local city/county department or agency. 19 Clarifies in this limitation that it does not affect taxes levied as part of a community facilities district levied as authorized by statute on December 31, 2021. 20 See footnote #14 on impact of similar changes applied to the state.
California Association for Local Economic Development Pg. 4, 04.26.22 9) Adds a definition of “local law” into the Constitution described as “including, but not limited to, any ordinance, resolution, regulation, ruling, opinion letter, or other legal authority or interpretation adopted, enacted, enforced, issued, or implemented by a local government.”21 10) Defines, exempt charge as follows: a. Repeals entirely the definition that provides that a tax does not include “a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of conferring the benefit or granting the privilege to the payor.22” b. Makes other similar changes and limitations to local government authority (not repeated here for brevity) that are detailed in comment 4, subdivisions (b) through (d), which apply to state activities. See page #2 and 3 of this analysis. c. Adds new categories of “exempt charge” applicable to local government, to include: i. Prohibits any levy, charge or exaction regulating or related to vehicle miles travelled that may be imposed as a condition of property development or occupancy.23 ii. Defines as “exempt charges,” assessments imposed on a business in a tourism marketing district, a parking and business improvement area, or a property and business improvement district. iii. Defines as an “exempt charge,” a charge imposed for a specific “health care service”24 provided directly to the payor and not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the health care service. 11) Uses the same definitions of “Actual cost,” “Extend,” and “Impose” as this Act applies to state activities. See page #1 of this analysis. 12) Requires the ballot labels associated with approval of a local tax must include the type and amount or rate of the tax, its duration and its use. If it is for general purposes, the phrase “for general government use” is required. This Act also prohibits local advisory measures. 13) Requires all proceeds from the taxation of property by the state or local governments to be apportioned according to law to the districts within the county.25 14) Grandfathers non ad-valorem taxes approved by a two-thirds qualified electors for community facilities districts created consistent with statute in effect on December 31, 2021. Comments: 1) Sponsors and Supporters: The sponsors and supporters of this measure which include the California Business Roundtable, California Business Properties Association, Howard Jarvis Taxpayers Association offer multiple arguments in favor of this measure in the findings and declarations of the Taxpayer Protection and Government Accountability Act including the following: a. Californians are overtaxed, paying the nation’s highest income, sales tax, and gasoline tax. Still state lawmakers continue to introduce new tax proposals totaling more than $234 billion in 2021. b. Californians pay billions more in hidden fees, in the price they pay for products, food, services, fuel, utilities and housing. Since 2010, government revenues from fees have more than doubled. c. These fees and taxes are pushing working families and job-providing businesses out of the state. 21 This Act requires all of these actions that are interpreted to be a “tax” or an “exempt charge” to be subject to approval either by the voters (if a tax) or by the legislative body (if an exempt charge). 22 One of the likely impacts of deleting this “general” definition in the Constitution, and then having only a list of specific exemptions (tourism marketing, health care service, etc.) is that any activity that is not specifically listed an ”exempt charge” will be determined to be a tax. 23 This is a major change of benefit to property developers in rural and suburban settings designed to blunt state and local efforts to reduce greenhouse gas emissions through recognizing the relationship between sprawling development patterns without sufficient access to transit and increased reliance on private vehicles. 24 Defined by cross reference to include clinics, out patients, and health facilities as listed in Chapters 1, 1.3 and 2 of Division 2 of the Health and Safety Code. 25 This is an effort by the proponents to counter prior efforts by the advocates for a split-roll property tax to levy and then distribute a state tax on properties valued over certain amounts.
California Association for Local Economic Development Pg. 5, 04.26.22 d. California voters have tried repeatedly, at great expense, to assert control over whether and how taxes and fees are raised, including by approving Propositions 13 (1978), 62 (1986), 218 (1996), and 26 (2010). Contrary to voter’s intent, these measures have been weakened and hamstrung by the Legislature, government lawyers and the courts, making it necessary to pass another measure to close loopholes and reverse hostile court decisions. e. Court decisions proposed to be reversed by this measure include: Cannabis Coalition v. City of Upland, Chamber of Commerce v Air Resources Board, Schmeer v. Los Angeles County, Johnson v County of Mendocino, Citizens Assn. of Sunset Beach v Orange County LAFCO, and Wilde v. City of Dunsmuir. Supporters Materials: https://naiopsv.org/wp-content/uploads/Taxpayer-Information-Packet-2-24-22.pdf 2) Opponents: An opposition coalition has formed which include the League of California Cities, California State Association of Counties, California Special Districts Association, California Professional Firefighters, California Alliance for Jobs, AFSCME, SEIU California, and the CA State Association of Laborers. Key arguments they make against the measure include: a. Gives wealthy corporations a major loophole to avoid paying their fair share, forcing local residents and taxpayers to pay more. b. Allows corporations to dodge enforcement when they violate environmental, health, public safety and other laws, by making it more difficult to issue fines and levies on violators. c. Jeopardizes vital local and state services, and puts billions of dollars used for funding state and local infrastructure and services at risk. Could force cuts to public schools, fire and emergency response, law enforcement, public health, parks, libraries, affordable housing, services for the homeless, mental health services and more. d. Opens the door to frivolous lawsuits, bureaucracy and red tape that will cost taxpayers and hurt our communities. e. Undermines voter rights, transparency and vital services, by retroactively canceling measures that were approved by local voters, limiting voter input on advisory measures, and make it more difficult for local and state voters to pass measures to improve local services and infrastructure. Opponents Materials: https://www.calcities.org/detail-pages/news/2022/03/30/opposition-mounts-to-wealthy-corporation-backed-ballot-measure-threatening-voter-rights-and-local-services 3) Reversing Multiple Court Decisions: The intent language in this Act state’s that its intent includes reversing the following CA Supreme Court and CA Appellate decisions decided over the last decade – on topics ranging from plastic bags, Cap and Trade emissions, annexations and cannabis taxes approved by local voters: a. Cannabis Coalition v. City of Upland (2017): The CA Supreme Court held that citizen initiatives which proposed a tax could be adopted with a majority vote. b. Chamber of Commerce v Air Resources Board (2017): The CA Supreme Court upheld an appellate decision affirming the ability of the State Air Resources Board to adopt the Cap and Trade emissions reduction program. c. Schmeer v. Los Angeles County (2013): CA 2nd District Court of Appeals upheld a Los Angeles County ordinance banning the sale of plastic bags and authorizing grocers to collect 10-cents per paper bag to offset their costs and encourage use of reusable bags. d. Johnson v County of Mendocino (2018): CA 1st District Court of Appeals upheld a county ordinance imposing a tax on commercial cannabis via majority vote, with an accompanying advisory measure. e. Citizens Assn. of Sunset Beach v Orange County LAFCO (2012): CA Court of Appeals rejected a challenge by property owners in territory annexed into a city who alleged that they shouldn’t have to pay the same taxes as other city residents without a 2/3rds vote.
California Association for Local Economic Development Pg. 6, 04.26.22 f. Wilde v. City of Dunsmuir (2020): The CA Supreme Court rejected a contention that local water rates and other utility charges could be challenged by referendum.26 4) Disruptive Changes to State and Local Governance: This Act proposes disruptive changes to the powers, authority and process of state and local governments and the people’s power over the initiative. By enacting new legal hurdles, definitions and criteria, these changes will make it more difficult for the state and local agencies to raise revenues, and slow administrative enforcement and regulatory activities. 5) Economic Development Considerations: Economic Development is the creation of wealth from which community benefits are realized. It is more than a jobs program, it’s an investment in growing your economy and enhancing the prosperity and quality of life for all residents. As such, economic development implementation is rooted in maintaining a thriving local economy which also benefits the prosperity and quality of life of residents. Given the multiple provisions in this measure, the sponsors are obviously frustrated by actions of the Legislature, state and local tax levels, regulatory activities, a series of Court decisions, and recent voter actions they disagree with. At the same time, local leaders are elected and accountable to voters, and need to retain the flexibility to govern, which includes raising revenues for services and adopting and enforcing regulations. CALED members should consider whether this measure effectively furthers their community’s economic development goals. ### Some Recent Press Coverage: January 23, Daily Breeze, OP-ED Jon Coupal, Howard Jarvis Taxpayers Association: https://www.dailybreeze.com/2022/01/23/the-fight-to-limit-taxation-continues/ February 22, Sacramento Bee https://www.sacbee.com/article258549943.html March 2, LA Times Editorial: https://www.latimes.com/business/story/2022-03-02/california-taxpayer-protection-and-government-accountability-act March 16, Sacramento Business Journal: https://www.bizjournals.com/sacramento/news/2022/03/16/california-roundtable-ballot-measure-taxes.html CONTACT: The California Association for Local Economic Development (CALED) is the voice of economic development practitioners and stakeholders. With more than 800 members, CALED is one of the largest economic development organizations in the country. We believe that through partnership and collaboration with local economic developers, the state of California can leverage the energy of California’s economic development network to create positive impacts that benefit our businesses and residents. http://caled.org or (916) 448-8252 26 It does not appear that this Act alters this Court decision. There is no mention of the power of referendum in the measure.
1 September 5, 2023
To: Stefan Chatwin, City Manager
Marlene Subhashini, Assistant City Manager
City of Foster City
From: Dane Hutchings
Managing Director
Renne Public Policy Group
RE: Assembly Constitutional Amendment 13 (Ward, 2023): Voting thresholds [As amended on August 17, 2023]
ACA 13 is a proposed constitutional amendment that began moving in the Legislature in mid-August.
This measure is backed by local government associations, including the League of California Cities, and labor organizations and is in response to the California Business Roundtable (CBRT) ballot measure that would be placed on the November, 2024 ballot to require new and stricter rules for raising taxes, fees, assessments, and property-related fees.
Assembly Constitutional Amendment (ACA) 13
If passed by the voters, it would require that an initiative measure that increases the voter approval requirement to adopt any state or local measure must receive a proportion of votes in favor of the initiative that is equal to or greater than the highest voter approval requirement imposed by the initiative for the adoption of a state or local measure. For example, if the measure includes a two -thirds vote threshold for future changes, then that enacting ballot measure would need to receive two-thirds of the vote to be approved. Add itionally, ACA 13 permits a local governing body, at any election, to hold an advisory vote concerning any issue of governance for the purpose of allowing voters within the jurisdiction to voice their opinions on the issue. It also provides that an advisory question is approved only if a majority of the votes cast on the question are in favor, and that the results of the advisory vote are not controlling on the local governing body.
Of note, t he provisions of this measure related to the vote requirement f or initiative constitutional amendments apply only to initiatives that seek to make it more difficult for voters to take a specified action by approving a ballot measure. It does not affect the vote requirement for initiative constitutional amendments that seek only to make it harder for a governmental body to approve a specified action by increasing the vote by which that body must approve an action.
The amendment is coauthored by Speaker Robert Rivas and lawmakers are aiming to put t he measure before voters on the March 5, 2024 ballot. Due to being a constitutional amendment and requiring two - thirds of both houses of the Legislature to pass, it is not subject to normal deadlines. I f passed by the Legislature, constitutional amendments do not go to the Governor and instead are referred to the Secretary of State for placement on the ballot. ACA 13 was amended on September 1 and is currently in the Assembly awaiting a Floor vote.
2 Background + CBRT Ballot Initiative Impacting Local Government Under existing law, any state ballot measure can be approved by a simple majority vote of the electorate, regardless of the changes to state law made by the measure. By contrast, some local ballot measures are subject to higher vote requirements. For instance, a local measure that is placed on the ballot by a local governing body and that proposes a special tax (a tax for which the proceeds will be used for a specifi c purpose) requires a two-thirds vote of the electorate.
If ACA 13 is approved by voters, it would mark the first time that any state ballot measure would require more than a simple majority vote to be approved. Specifically, state ballot measures that (1) are initiative measures (the term “initiative” refers exclusively to a proposed law that qualifies for the ballot through the collection of voters’ signatures on an initiative petition), (2) propose to amend the state constitution, and (3) propose to increase the vote required for voters to approve a state or local ballot measure, would be subject to a voter approval threshold that is greater than a simple majority vote.
On February 1, 2023, the Secretary of State certified that initiative #1935 (the CB RT ballot measure)—a measure that would amend the California Constitution to change the rules for how the state and local governments can impose taxes, fees, and other charges —is eligible to appear on the ballot at the November 5, 2024, statewide general election.
Among other provisions, initiative #1935 requires that any local special tax submitted by citizen initiative be approved by a two -thirds vote of the electorate to take effect, rather than the current majority vote threshold. Recent case law suggests that local special taxes that are proposed by a local initiative measure can be approved by a majority vote of the electorate. By contrast, local special taxes that are placed on the ballot by a local governmental body must be approved by a two -thirds vote of the electorate (this would remain the same under the CBRT proposal).
Additionally, initiative #1935 prohibits an advisory measure from appearing on the same ballot as a local measure that proposes a general tax if the advisory measure would indic ate that the revenue from the general tax will, could, or should be used for a specific purpose.
If ACA 13 were applied to the voter’s consideration of initiative #1935, it appears that initiative #1935 would need to be approved by two -thirds of the vote rs in order to take effect. However, while ACA 13 likely would affect the vote requirement for initiative #1935, its effects are not limited to that initiative.
Rather, the provisions of this measure would apply to any initiative constitutional amendment t hat appears on the ballot in the future and that proposes to increase the vote requirement for a state or local ballot measure.
Below we have provided a list of those registered in support and opposition of the measure as of August 17, 2023, which is the most recent public list available at this time.
Support
Alliance San Diego
American Federation of State, County and Municipal Employees, AFL-CIO Asian Pacific Environmental Network
California Calls
California Environmental Justice Alliance Action, a Project of Tides Advocacy California Federation of Teachers, AFL-CIO
3 California Green New Deal Coalition
California Labor Federation, AFL-CIO
California Professional Firefighters
California School Employees Association
California Special Districts Association
California State Association of Counties
California State Council of Service Employees International Union California Teachers Association
Catalyst California
Central Coast Alliance United for A Sustainable Economy City of San Diego
Communities for A New California
Community Coalition
Congregations Organized for Prophetic Engagement
Corporation for Supportive Housing
Courage California
Dolores Huerta Foundation
Innercity Struggle
League of California Cities
Million Voters Project
Oakland Rising
San Francisco Rising
Strategic Concepts in Organizing and Policy Education
Working Partnerships USA
Opposition
California Business Roundtable
Howard Jarvis Taxpayers Association
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