CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
4/8/2024
1 SUBJECT:
Resolution Opposing The Taxpayer Protection and Government Accountability Act, Initiative No. 21-0042A1
RECOMMENDED ACTION:
Adopt a Resolution opposing Initiative No. 21-0042A1, the Taxpayer Protection and Government Accountability Act.
STAFF CONTACT:
Kevin Woodhouse, City Manager
650-738-7409
[email protected]
BACKGROUND/DISCUSSION:
The League of California Cities, along with a broad coalition of local governments, labor and public safety leaders, infrastructure advocates, and businesses, strongly oppose this initiative and have requested for local governments across the state to also consider opposing this initiative due to the severe financial impacts it would bring to local governments.
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 Pacifica operations and core service delivery. The proposed constitutional initiative is sponsored by the California Business Roundtable.
Background
On Jan. 4, 2022, the California Business Roundtable filed the “Taxpayer Protection and Government Accountability Act” or AG# 21-0042A1. Information from the Legislative Analyst’s Office about the Ballot Initiative is here: <https://lao.ca.gov/BallotAnalysis/Initiative/2021-042> .
On Feb. 1, 2023, the measure qualified for the November 2024 ballot. 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.
Local governments, including Pacifica, levy a variety of fees and other charges to provide core public services. Major examples of types of fees and charges that would be impacted by this initiative are:
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• Nuisance abatement charges, such as for weed, 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 counciladopted increases to simply accommodate inflation, Cal Cities estimates the amount of local government fee and charge revenue at risk statewide 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.
In addition, the initiative would impact hundreds of local tax measures statewide that 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. While a preliminary review of Pacifica’s Measure Y in 2022, the ½ cent Transactions and Use Tax, appears to meet the requirements of the initiative and not be at risk of being voided without being reenacted, the initiative would create significant challenges for future potential revenue measures in Pacifica.
Finally, the initiative also impacts 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.
Specific Major Provisions of the Initiative
Major provisions of the Initiative are as follows:
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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.
Action by the Governor, Cal Cities and Other Cities
In late September 2023, the Legislature and Gov. Gavin Newsom filed an emergency petition with the California Supreme Court to remove the initiative from the November 2024 ballot. The petitioners allege it unlawfully revises the state constitution and would cripple essential government functions. Cal Cities, of which the City of Pacifica is a member, has filed an amicus letter in support of a legal challenge against the Initiative (Attachment A). In addition, the mayors of some of California’s biggest cities also filed a separate letter (Attachment B), urging the Court for a pre-election review of the initiative. Oral arguments before the California Supreme Court will likely be scheduled in the next few months.
ALTERNATIVE ACTION:
The City Council could choose to not take a position on this Initiative.
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RELATION TO CITY COUNCIL STRATEGIC PLAN PRIORITIES:
Opposition to the Initiative supports all of the City Council’s Strategic Plan Goals because if the Initiative were successful, critical revenue losses would impact the city’s core services.
FISCAL IMPACT:
There is no fiscal impact associated with the recommended action to oppose the Initiative.
However, were this Initiative to be enacted by the voters of California, there would be significant fiscal impacts to the City by imposing new and stricter rules for raising taxes and fees, and making it more difficult to impose fines and penalties for violation of state and local laws.
ORIGINATED BY:
City Manager's Office
ATTACHMENT LIST:
Attachment A: Cal Cities' Amicus Letter (PDF)
Attachment B: Mayors' Amicus Letter (PDF)
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RESOLUTION NO. __-2024
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA OPPOSING THE TAXPAYER PROTECTION AND GOVERNMENT ACCOUNTABILITY ACT, INITIATIVE NO. 21-0042A1
WHEREAS, an association representing California’s wealthiest corporations is spending tens of millions of dollars to promote a deceptive ballot measure currently eligible for the November 2024 statewide ballot; and
WHEREAS, the measure creates constitutional loopholes that allow corporations to pay far less than their fair share for the impacts they have on our communities, which could force residents and taxpayers to pay more to maintain services; and WHEREAS, the measure threatens billions of dollars every year in local government funding for services like fire and emergency response, law enforcement, affordable housing, services to support homeless residents, mental health services, and more; and WHEREAS, the measure is an attack on voters’ rights, containing undemocratic provisions that would make it more difficult for local voters to pass measures to fund services, provisions that retroactively cancel measures recently passed by voters, and provisions that prevent voters from passing advisory measures that provide direction on how they want their local tax dollars spent; and
WHEREAS, the measure contains intentionally restrictive language that will encourage hundreds of frivolous lawsuits against cities and local governments – costing taxpayers many millions and stopping investments in vital local services; and WHEREAS, the measure would make it much more difficult for state and local regulators to issue fines and levies on corporations that violate laws intended to protect our environment, public health and safety, and our neighborhoods; and
WHEREAS, the measure is opposed by hundreds of local governments, teachers, firefighters, working families and local elected officials; NOW, THEREFORE, BE IT RESOLVED that the City of Pacifica opposes Initiative #21- 0042A1 and will join the “Stop the Corporate Tax Trick” coalition, a growing coalition of public safety, education, labor, local government, and infrastructure groups throughout the state. • • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 8
th day of April, 2024, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________________
Sue Vaterlaus, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney