TO: MAYOR AND CITY COUNCIL MEMBERS, CITY OF CHINO
FROM: LINDA REICH, CITY MANAGER
SUBJECT
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Resolution Opposing Initiative No. 21-0042A1.
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RECOMMENDATION
Adopt Resolution No. 2024-018, opposing Ballot Measure #1395, “The Taxpayer Protection and Government Accountability Act” (Initiative AG # 21-0042A1).
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FISCAL IMPACT
There is no direct fiscal impact.
The proposed measure, however, puts billions of local government tax and fee revenues at risk statewide, thereby jeopardizing core public services.
CITY OF CHINO MISSION / VISION / VALUES / STRATEGIC ISSUES
The recommendation detailed above furthers the City’s values and strategic issues that serve as key pillars on which identified priorities, goals, and action plans are built by fostering:
• Financial Stability
• Responsible Long-Range Planning
• Exemplary Leadership
• Public Service Excellence through Internal and External Partnerships
BACKGROUND
The California Business Roundtable (CBRT) filed Ballot Measure #1395, the Taxpayer Protection and Government Accountability Act (AG # 21-0042A1), on January 4, 2022. On February 1, 2023, the measure qualified for the November 2024 ballot.
The Taxpayer Protection and Government Accountability Act (Act) would revise the California Constitution with provisions that limit voter 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.
In 2022, CBRT attempted to place this measure on the November 2022 ballot but failed to obtain enough signatures. The League of California Cities (League), along with a broad coalition of local governments, labor, public safety, education, and infrastructure advocates, 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.
Major Provisions of AG #21-0042A1
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 January 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.
Local Government Revenues
Fees and Taxes
Local governments levy a variety of fees and other charges to provide core public services.
Significant 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, the League 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 fees and charge revenues will be at heightened legal peril.
Hundreds of local tax measures were approved in 2022 and 2023 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 in local government tax revenues impact 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 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.
ISSUES/ANALYSIS
The Taxpayer and Government Accountability Act, or AG# 21-0042A1, would make significant changes impacting local governments and voters, including the following:
1. Prohibiting local advisory measures, thus inhibiting the ability of voters to decide how tax dollars should be spent.
2. Setting a new standard for fees and charges paid for the use of local and state government property. The standard may significantly restrict the amount oil companies, utilities, gas companies, railroads, garbage companies, cable companies, and other corporations pay for the use of local public property.
3. Requiring voter approval to expand existing taxes (e.g., utility user tax, use tax, hotel tax) to new territory (e.g., annexation) or expand the base (e.g., new utility service). This would require additional tax measures and may deter annexations and land development in cities.
4. Prohibiting city charters from being amended to include a tax or fee.
5. Requiring that new taxes can be imposed only for a specified period of time.
6. Specifying that taxes adopted after January 1, 2022 that do not comply with the new rules are void unless reenacted.
Initiative 21-0042A1 threatens the autonomy of cities to finance public services. The League estimates that if the measure passes, approximately $2 billion in existing fees and charges, along with $2 billion in voter-approved measures, will be subject to legal challenge.
The proposal would require state and local tax measures to identify the type, amount, and duration of the tax. Tax measures must have an end date. It additionally prohibits local advisory measures that allow local voters to express a preference for how local general tax dollars should be spent.
Initiative 21-0042A1 would require that all new city taxes put before voters in elections include an end date for the measure. Taxes continuing indefinitely would not be allowed. Local special taxes also would require a two-thirds vote instead of a simple majority, per the attorney general’s summary of the initiative.
The proposal undermines voter rights, transparency, and accountability by retroactively canceling measures passed by local voters.
The proposal also includes undemocratic provisions that would make it more difficult for local voters to pass measures needed to fund local services and projects. If enacted, Initiative 21-0042A1 would invalidate the court decision that allows a majority of local voters to pass special taxes and instead specify that taxes proposed by initiative are subject to the same rules as taxes placed on the ballot by a city council.
This proposal does not benefit taxpayers, as the initiative’s name implies; in fact, it would hurt taxpayers by diminishing quality of life and minimizing voter input on how tax dollars are spent.
Initiative 21-0042A1 threatens the ability of cities to provide essential services and infrastructure to their residents and would make it more difficult for local voters to pass measures needed to fund local services and projects.
Attachments: Resolution 2024-018
Initiative No. 21-0042A1