CITY COUNCIL STAFF REPORT
Meeting Date: February 27, 2023
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. __-23 OPPOSING INITIATIVE NO. 21- 0042A1, THE TAXPAYER PROTECTION AND GOVERNMENT
ACCOUNTABILITY ACT, AND DIRECT STAFF TO SEND A LETTER
OF OPPOSITION TO THE LEAGUE OF CALIFORNIA CITIES
DIRECTOR OF PUBLIC AFFAIRS
SYNOPSIS
The Taxpayer Protection and Government Accountability Act 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. The measure puts billions of local government tax and fee revenues at risk statewide with related core public service impacts and would have negative financial impacts to the City, which could affect funding for operations and core service delivery.
Staff supports the League of California Cities’ recommendation that the City Council adopt the proposed resolution opposing Initiative No. 21-0042A1, the Taxpayer Protection and Government Accountability Act, and direct staff to send the proposed letter of opposition to the Director of Public Affairs at the League of California Cities.
DISCUSSION
Background
On January 4, 2022, the California Business Roundtable filed the “Taxpayer Protection and Government Accountability Act” or AG# 21-0042A1. On February 1, 2023, the measure qualified for the November 2024 ballot. The League of California Cities (“Cal Cities”), along with a broad coalition of local governments, labor and public safety leaders, infrastructure advocates, and businesses, strongly opposes this initiative as local government revenue-raising authority is 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 Taxpayer Protection and Government Accountability Act adds and expands restrictions on voters and local government tax and fee authority and would be retroactive to January 1, 2022.
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 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 (driving under the influence). 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, and 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 fee and charge revenue at risk is approximately $2 billion per year including those adopted since January 1, 2022. Over ten years, $20 billion of local government fee and charge revenues will be at heightened legal peril.
Per Cal Cities, hundreds of local tax measures were approved in 20221that likely do not comply with the provisions of the initiative. Nearly $2 billion of annual revenues from these voterapproved 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 provided by the City, the County, and special districts, including fire and emergency response, law enforcement, streets and roads, drinking water, sewer sanitation, parks, libraries, public schools, affordable housing, homelessness prevention, and mental health services.
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].
1 http://www.californiacityfinance.com/Votes2211final.pdf 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.
Analysis
The Taxpayer Protection and Government Accountability Act 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. The measure puts billions of local government tax and fee revenues at risk statewide with related core public service impacts and would have negative financial impacts on the City of Pleasant Hill’s funding for operations and core service delivery.
I. MAJOR PROVISIONS
Fees and Charges2:
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.”3 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.
Taxes4:
Taxes and fees adopted after January 1, 2022, that do not comply with the new rules, are void unless reenacted5.
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.6 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.
2 Initiative No. 21-0042A1 (pgs.4-6; Section 1 (a)-(j)
3 Initiative No. 21-0042A1 (pg.5; (3))
4 Initiative No. 21-0042A1 (pgs.4-6; Section 1 (a)-(j)
5 Initiative No. 21-0042A1 (pg.7; Section 6 (Sec. 2)(g) 6 Initiative No. 21-0042A1 (pg.6 (3))
Fines and Penalties7
:
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.
Support the League of California Cities’ recommendation that the City oppose Initiative No. 21- 0042A1, the Taxpayer Protection and Government Accountability Act, and direct staff to send the proposed letter of opposition to the Director of Public Affairs at the League of California Cities.
FISCAL IMPACT
There is no fiscal impact to the City to adopt the resolution and email the proposed letter to the Director.
If it passes, the Taxpayer Protection and Government Accountability Act will take billions of dollars away from local government services statewide. Pleasant Hill would likely face fee revenue loss, increased legal defense costs, and significant staff time to be in compliance with this measure.
PUBLIC CONTACT
Public contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Senior Center, and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Adopt the proposed resolution opposing Initiative No. 21-0042A1, the Taxpayer Protection and Government Accountability Act and direct staff to send the proposed letter of opposition to the Director of Public Affairs at the League of California Cities.
ALTERNATIVES TO RECOMMENDED ACTION
Do not adopt the proposed resolution.
Give direction to staff to amend the resolution and/or letter.
ATTACHMENT(S):
Proposed Resolution
Proposed Letter Opposing Initiative 21-0042A1
7 Initiative No. 21-0042A1 (pg. 5 (4))
Summary of the Taxpayer Protection and Government Accountability Act Initiative No. 21- 0042A1
Fiscal & Program Effects of Initiative 21-0042A1 on Local Governments Correspondence
Prepared by: Danielle K. Habr, Principal Management Analyst/City Clerk Reviewed by: Erick Cheung, Finance Manager
Approved by: June Catalano, City Manager