City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2024-00922 4/30/2024 Consent Item 35.
Resolution Opposing November 2024 Statewide Ballot Initiative No. 21-0042A1, the Taxpayer Protection and Government Accountability Act (Two-Thirds Vote Required) File ID: 2024-00922
Location: Citywide
Recommendation: (1) Pass a Motion pursuant to Council Rule of Procedure 1.D, to waive Rule
7.K.1, which requires non-binding resolutions be referred to the Law and Legislation Committee before coming to council (Two-Thirds Vote Required); and (2) adopt a Resolution opposing the Taxpayer Protection and Government Accountability Act.
Contact: Consuelo Hernandez, Director of Governmental Affairs, (916) 808-7395, [email protected], Office of the City Manager Attachments:
1-Description/Analysis
2-Resolution
Description/Analysis
Issue Detail: 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 proposed constitutional initiative is sponsored by the California Business Roundtable.
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
File ID: 2024-00922 4/30/2024 Consent Item 35.
authority.
Fees and Taxes
Local governments levy a variety of fees and other charges to provide core public services.
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. · 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 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.
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
File ID: 2024-00922 4/30/2024 Consent Item 35.
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.
The City has tens of millions in fees and charges revenue supporting the General Fund and hundreds of millions supporting enterprise and other governmental funds. The proposed measure would impact the City by changing the allowable fee level from ‘reasonable’ to ‘actual cost’ with actual cost defined as the ‘minimum amount necessary’ and creating a new requirement that some fees must be ‘reasonable’ to the payor without defining ‘reasonable’. Given the ambiguity in the measure staff is not able to calculate an exact amount at risk, but we anticipate that if the measure passes there would be a substantial cost to ensure fees are in compliance, including litigation costs if people challenge whether a fee that is the ‘actual cost’ is not ‘reasonable. Parking fees, franchise fees, facility use charges, and many other fees and charges would be impacted if this measure passed.
The City can take a position on a statewide ballot measure or initiative in an open and public meeting. In order to allow the City’s positions on statewide ballot measures to be approved and communicated, the Council is requested to review and approve the proposed oppose position on the Taxpayer Protection and Government Accountability Act.
Policy Considerations: Approving positions in support of or opposition to statewide ballot measures is in alignment with the City Council’s Policies and Procedures.
Economic Impacts: Local government revenue reductions will likely result in reductions in staffing and buying power which resulting in a negative effect on the local economy.
Environmental Considerations: Not applicable.
Sustainability: Not applicable.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: To ensure that the City’s interests are protected and that the City’s position on the Taxpayer Protection and Government Accountability Act is discussed and shared publicly, staff is recommending that the proposed position on the November 2024 ballot measure be approved.
File ID: 2024-00922 4/30/2024 Consent Item 35.
Financial Considerations: The Taxpayer Protection and Government Accountability Act will take billions of dollars away from local government services statewide with a potential impact to the City in the millions of dollars requiring further reductions to core programs and services. The City currently budgets $70.1 million in fees and charges that could be at risk.
Local Business Enterprise (LBE): Not applicable.
RESOLUTION NO.
Adopted by the Sacramento City Council
[DATE]
OPPOSING THE TAXPAYER PROTECTION AND GOVERNMENT ACCOUNTABILITY ACT
BACKGROUND
A. On February 1, 2023, a ballot initiative submitted by the California Business Roundtable, an organization comprised of the senior executive leadership of major California employers, qualified for the November 2024 statewide election.
B. The ballot initiative, named “The Taxpayer Protection and Government Accountability Act” (Ballot Initiative No. 21-0042A1), seeks to amend the California Constitution by enacting new and stricter rules for raising and increasing taxes and fees (also referred to as exempt charges), and making it more difficult to pass measures needed to fund local services and infrastructure.
C. Among the proposed amendments, the Taxpayer Protection and Government Accountability Act (“Initiative”) requires that any new or higher tax be submitted to voters for approval.
D. The Initiative requires that all fees and other charges be approved either by voters themselves or by an elected governing body.
E. The Initiative requires that any tax measure placed on the ballot clearly state the type and rate of the tax, how long it will be in effect, and the use of the revenue generated by the tax.
F. The Initiative requires that fees and charges may not exceed the minimum amount necessary to reimburse the government for the cost of providing the product or service for which the fee is charged, and raises the burden on state and local governments to prove by clear and convincing evidence that a levy, charge or extraction is an exempt charge and not a tax.
G. The Initiative also requires that fees and charges paid for the entrance to or use of state and local government property, or the purchase, rental, or lease of such property be “reasonable” as opposed to the current “fair market value” basis.
H. The amendments proposed by the Initiative will apply to any tax or exempt charge adopted after January 1, 2022, and any tax or exempt charge not adopted in compliance with its requirements would be void 12 months after the Initiative’s adoption unless the tax or exempt charge is reenacted in accordance with the Initiative.
I. Hundreds of local tax measures were approved in 2022 that likely do not comply with the Initiative, and nearly $2 billion in annual revenue from these measures would cease unless those local tax measures were resubmitted for voter approval.
J. The California Legislative Analyst and Director of Finance have opined that the Initiative will lower annual state and local revenues, potentially substantially.
K. The Initiative would have significant negative impacts on the City’s operations and ability to deliver core services.
L. A broad coalition of local governments, labor, education and public safety leaders, infrastructure advocates, and businesses strongly oppose the Initiative.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The Sacramento City Council strongly the opposes the Taxpayer Protection and Government Accountability Act.
Section 2. The City of Sacramento will join the “Stop the Taxpayer Deception Act” coalition, a growing coalition of public safety, education, labor, local government, and infrastructure groups throughout the state.