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HomeMy WebLinkAbout031423-03.3 Packet 1 The Taxpayer Protection and Government Accountability Act Initiative No. 21-0042A11 Feb. 1, 2023 Effective date: Any new or increased tax or fee adopted by the Legislature, a city council, or the local voters after January 1, 2022, must comply with the Act’s new rules. Voters • Local advisory measures are prohibited. No measure may appear on the ballot asking for approval of a general tax that would allow the voters to express a preference for how the revenue from the general tax will, could, or should be used. • Overturns Upland decision which upheld a special tax that had been placed on the ballot by the voters to be approved by a majority vote. Taxes proposed by initiative will be subject to the same rules as taxes placed on the ballot by a city council. • Voters may not amend a city charter to impose, extend, or increase a tax or fee. Local taxes • Requires voter approval in order to apply an existing tax: o to territory that is annexed. o to a new service or product, for example when a utility user tax is applied to a new service. • All new or increased taxes adopted after Jan. 1, 2022, must include a sunset date. State taxes • All new or increased state taxes require statewide voter approval. • Prohibits a property tax “surcharge” (increase). Prohibits any allocation of property tax to the state. 1 This is a summary of some of the more significant provisions of the Act. Please review the Act for a complete understanding of the changes it makes to the Constitution. 2 Fees and charges • Fees and charges for services and permits 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.” Examples include planning services, excavation and encroachment permits, preparation of candidate statement, and permit parking. • State and cities have the burden of proving by “clear and convincing evidence” that a fee/charge is not a tax, that the amount is reasonable, and that it does not exceed “actual cost.” • Franchise fees — historically considered fees, not taxes — will more likely be considered taxes due to the elimination of an existing category of “fee” and the requirement that charges to entrance, purchase, rental, or lease of government property be “reasonable.” The state and cities issue franchises to oil companies, utilities, gas companies, railroads, garbage companies, cable companies, and other corporations. • No fee or charge or exaction regulating vehicle miles traveled can be imposed as a condition of property development or occupancy. Fines and penalties (administrative enforcement of state law and municipal codes) • May require voter approval of fines and penalties 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. Examples include nuisance abatement, organic waste reduction requirements, and failure to maintain a vacant property. CaliforniaCityFinance.Com Fiscal and Program Effects of Initiative 21-0042A1 on Local Governments If Initiative 21-0042A1 is placed on the ballot and passed by voters, it will result in:  Over $20 billion of local government fee and charge revenues over 10 years placed at heightened legal peril. Related public service reductions across virtually every aspect of city, county, special district, and school services especially for drinking water, sewer sanitation, and public health and safety.  About $2 billion of revenues each year from fees and charges adopted after January 1, 2021 subject to legal peril.1  Over $2 billion dollars of annual revenues from dozens of tax measures approved by voters between January 1, 2022 and the effective date of the act2 subject to additional voter approval if not in compliance with the initiative.  Indeterminable legal and administrative burdens and costs on local government from new and more empowered legal challenges, and bureaucratic cost tracking requirements.  The delay and deterrence of municipal annexations.  Substantially higher legal and administrative cost of public infrastructure financing which will delay and deter new residential and commercial development.  Service and infrastructure declines including in fire and emergency response, law enforcement, public health, drinking water, sewer sanitation, parks, libraries, public schools, affordable housing, homelessness prevention and mental health services. 1. Local Government Taxes and Services Threatened With regard to taxes, Initiative 21-0042A1:  Prohibits advisory, non-binding measures as to use of tax proceeds on the same ballot. o Voters may be less informed and more likely to vote against measures.  Eliminates the ability of special tax measures proposed by citizen initiative to be enacted by majority voter approval (Upland).3 o Because the case law regarding citizen initiative special taxes approved by majority vote (Upland) is so recent, it is unknown how common these sorts of measures might be in the future. This initiative would prohibit such measures after the effective date of the initiative. Any such measures adopted after January 1, 2022 through the effective date of the Act should it pass would be void a year after the effective date of the initiative.  Requires that tax measures include a specific duration of time that the tax will be imposed. This seems to require that all tax increases or extensions contain a sunset (end date). o This would require additional tax measures to extend previously approved taxes.  A city charter may not be amended to impose, extend, or increase a tax might interfere with the ability of cities that do not already have such authority in their charters to adopt Property Transfer Taxes. o There are no more than a few of these every few years, but it is a valuable tax for those that adopt it. 1 Assumes fee increases since January 1, 2022 would be subject to possible legal challenge if not adopted in compliance with the Initiative. 2 The effective date of the initiative would be sometime in December 2024, the date the California Secretary of State certifies the election results of the November 5, 2024 election. 3 Unlike the initiative 17-0050, this initiative does not eliminate that ability of cities and counties to adopt general taxes by majority voter approval. 2217 Isle Royale Lane • Davis, CA • 95616-6616 Phone: 530.758.3952 • Fax: 530.758.3952 Rev. January 14, 2023 – 2 – rev January 14, 2023 CaliforniaCityFinance.com  Requires that a tax measure adopted after January 1, 2022 and before the effective date of the initiative that was not adopted in accordance with the measure be readopted in compliance with the measure or will be void twelve months after the effective date of the initiative. o If past election patterns and elections in 2022 are an indication, over 200 tax measures approving more than $2 billion annual revenues to support local public services would not be in compliance and would be subject to reenactment. Most will be taxes without a specific end date and special taxes (including parcel taxes). Because there is no regularly scheduled election within the 12 months following the effective date of the initiative, the measures would each require declaration of emergency and unanimous vote of the governing board to be placed on a special election ballot within a year for approval or the tax will be void after that date. I would expect most to succeed, but some will not, in particular citizen initiative majority vote special taxes which would have to meet a higher voter approval threshold to continue.  Requires voter approval to expand an existing tax to new territory (annexations). This would require additional tax measures and would deter annexations and land development in cities. o If a tax is "extended" to an annexed area without a vote after January 1, 2022, it will be void 12 months later until brought into compliance. Because there is no regularly scheduled election within the 12 months following the effective date of the initiative, such extensions would each require unanimous vote of the agency board to be placed on a special election ballot or would be void a year later. 1.a. Number of Measures and Value of Local Taxes at Risk4 Over a hundred local measures were approved in 2022 that likely do not comply with the provisions of Initiative 21-0042A1. 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. We can expect a similar volume of measures in 2024 and a similar volume of non-compliance. So the combined total of annual local funding directly affected by Initiative 21-0042A1 due to its retroactivity provision is about $4 billion. Citizen Initiative Special Taxes in 2022. Special taxes placed on the ballot by citizen initiative and approved after January 1, 2022 by a majority but less than two-thirds of the voters are out of compliance with Initiative 21-0042A1. On June 7, 2022, there were three local special tax measures placed on the ballot by citizen initiative. Two failed to get majority voter approval. A one percent transactions and use tax (sales tax) for the John C. Fremont Healthcare District in Mariposa County received 69.6 percent approval, over the two thirds needed for any special tax under California Constitution Article XIIIC. So this measure was passed in compliance with Initiative 21- 0042A1. On November 8, 2022, there were 14 local special taxes placed on the ballot by citizen initiative. Seven of these 4 Source: Compilation and summary of data from County elections offices. June 2022 Initiative Special Taxes - majority voter approval Agency Name County Tax/Fee Rate Estimated Annual Revenue Use Sunset YES% John C. Fremont Healthcare District Mariposa Measure N Transactions & Use Tax 1 cent $ 150,000 hospital 40yrs 69.6%PASS County of Kings Kings Measure F Transactions & Use Tax 1/2 cent $ 11,700,000 fire none 37.6%FAIL Manhattan Beach USD Los Angeles Measure A School Parcel Tax $1095/yr $ 12,000,000 schools 12yrs 31.2%FAIL – 3 – rev January 14, 2023 CaliforniaCityFinance.com measures failed with less than majority voter approval. The other seven measures received majority, but less than two-thirds, voter approval. These measures passed under current law but are out of compliance with Initiative 21- 0042A1. Taken together these seven taxes will provide estimated annual revenues of from $900,000 to $1.4 billion in support of parks and recreation, zoo, library, affordable housing, transportation, homelessness prevention, and schools in these communities. Non-Specific Tax Durations in 2022 Voters approved 106 measures in June 2022 (10) and November 2022 (96) that do not provide a specific duration of time that the tax will be imposed (end date). Typically, the ballot titles for these measures state that the tax would be imposed “until ended by voters.” Four of these measures also did not include any estimate of the annual revenues that the tax would generate, another violation of initiative 21-0042A1. Taken together, these approved local measures generate $561 million per year that will expire a year after the effective date of the initiative if Initiative 21-0042A1 passes. November 2022 Initiative Special Taxes - majority voter approval Agency Name County Tax/Fee Rate Estimated Annual Revenue Use Sunset YES% Crockett Community Services District Contra Costa Measure L Parcel Tax $50/parcel $ 60,000 parks/recr none 62.8%PASS Oakland Alameda Measure Y Parcel Tax $68/parcel $ 12,000,000 zoo 20yrs 62.5%PASS County of Mendocino Measure O Transactions & Use Tax 1/8 cent then 1/4 cent in 2027 $ 4,000,000 library none 60.8%PASS Los Angeles Los Angeles Measure ULA Property Transfer Tax 4% if >$5m, 5.5% if >$10m $600 m to $1.1 b affordable housing none 57.3%PASS County of Sacramento Measure A Transactions & Use Tax same 1/2 cent $ 212,512,500 transportati on 40yrs 55.3%PASS San Francisco Proposition M Business Operations Tax $2500-$5000/ vacant resid unit $ 20,000,000 housing 30yrs 54.5%PASS Santa Monica Los Angeles Measure GS Property Transfer Tax $56/$1000 if >$8m $ 50,000,000 schools, homelessne ss, afford. housing none 53.3%PASS Total $900,000 to $1.4 billion Agency Name County Tax/Fee Rate Estimated Annual Revenue Use Sunset YES% County of Calaveras Measure A Transactions & Use Tax 1 cent $ 5,000,000 fire none 49.4%FAIL South San Francisco (for Schools)San Mateo Measure DD School Parcel Tax $2.50/sf $ 55,900,000 schools none 47.2%FAIL County of Fresno (for CSU ) Measure E Transactions & Use Tax 1/5 ct, 1/40 ct (Reedley) $ 36,000,000 Calif State Univ 20yrs 46.9%FAIL Santa Cruz Santa Cruz Measure N Parcel Tax $6k/vacant SFU xxx vacant property xxx 44.2%FAIL County of Monterey Measure Q Parcel Tax $49/parcel $ 5,500,000 childcare 10yrs 41.1%FAIL San Francisco City College San Francisco Measure O School Parcel Tax $150/sfu $ 37,000,000 schools 10yrs 36.7%FAIL Morro Bay San Luis Obispo Measure B Parcel Tax $120+/parcel $ 680,000 harbor none 36.0%FAIL Inverness Public Utility District Marin Measure O Parcel Tax $0.20/sf, $150/vacant $ 276,000 fire none 27.0%FAIL – 4 – rev January 14, 2023 CaliforniaCityFinance.com Measures in 2022 with Non-Specific Durations Agency Name County Tax/Fee Rate Annual Revenue Use Sunset YES% Oakland Alameda Measure T Business Tax General various $ 20,900,000 none 71.4%PASS Culver City Los Angeles Measure BL Business Tax General various $ 10,000,000 none 60.5%PASS El Segundo Los Angeles Measure BT Business Tax General various $ 3,000,000 none 51.2%PASS Pico Rivera Los Angeles Measure AB Business Tax General various $ 5,800,000 none 75.5%PASS Santa Ana Orange Measure W Business Tax General various neutral none 64.8%PASS Tracy San Joaquin Measure B Business Tax General various $ 3,200,000 none 72.6%PASS Burlingame San Mateo Measure X Business Tax General various $ 2,500,000 none 75.1%PASS Los Gatos Santa Clara Measure J Business Tax General various $ 1,100,000 none 53.4%PASS Santa Clara Santa Clara Measure H Business Tax General $45/employee, $15/rental unit $ 6,000,000 none 59.5%PASS Brisbane San Mateo Measure O Business Tax lodging busn $2.50/rm/day $ 250,000 none 69.2%PASS East Palo Alto San Mateo Measure L Business Tax resid. rentals 2.5% grossRcpts $ 1,480,000 none 69.9%PASS County of Santa Cruz Unincorporated Measure C Busn Tax - disp cups 12.5cents/cup $ 700,000 none 68.2%PASS South Lake Tahoe El Dorado Measure G Busn Tax Cannabis 6% retail, manufacturing $ 950,000 none 62.9%PASS McFarland Kern Measure O Busn Tax Cannabis 8% of gross receipts retail, $ 1,800,000 none 63.5%PASS Avenal Kings Measure C Busn Tax Cannabis $25+/sf or 15% gr rcpts $ 600,000 none 61.8%PASS Baldwin Park Los Angeles Measure CB Busn Tax Cannabis 4% grossRcpts $ 300,000 none 51.3%PASS Claremont Los Angeles Measure CT Busn Tax Cannabis 4%-7% gr rcpts, $1- $ 500,000 none 61.1%PASS County of Los Angeles Unincorporated Measure C Busn Tax Cannabis 4% gross receipts retail, $ 15,170,000 none 60.1%PASS Cudahy Los Angeles Measure BA Busn Tax Cannabis 15% grossRcpts $ 3,600,000 none 54.0%PASS El Segundo Los Angeles Measure Y Busn Tax Cannabis 10% GrossRcpt, $ 1,500,000 none 72.8%PASS Hermosa Beach Los Angeles Measure T Busn Tax Cannabis 10% GrossRcpt, $ 1,500,000 none 67.6%PASS Lynwood Los Angeles Measure TR Busn Tax Cannabis 5%to10% $ 3,000,000 none 66.4%PASS Santa Monica Los Angeles Measure HM Busn Tax Cannabis 10% gross Rcpts $ 5,000,000 none 66.4%PASS South El Monte Los Angeles Measure CM Busn Tax Cannabis 6% special excise tax on $ 126,000 none 53.7%PASS Monterey Monterey Measure J Busn Tax Cannabis 6% grossRcpt $ 1,300,000 none 65.2%PASS Pacific Grove Monterey Measure N Busn Tax Cannabis 6% grossRcpt $ 300,000 none 70.8%PASS Huntington Beach Orange Measure O Busn Tax Cannabis 6% retail, 1% other $ 600,000 none 54.7%PASS – 5 – rev January 14, 2023 CaliforniaCityFinance.com Notes ?= Ballot measure title did not include an estimate of annual revenues, also not in compliance with Initiative 21-0042A1. n/a*= Arcadia Measure SW passed but sports betting remains illegal after the failure of Propositions 26 and 27 on the November statewide ballot. Measures in 2022 with Non-Specific Durations Agency Name County Tax/Fee Rate Annual Revenue Use Sunset YES% Laguna Woods Orange Measure T Busn Tax Cannabis 4%-10% of gross receipts $ 750,000 none 61.1%PASS Corona Riverside Measure G Busn Tax Cannabis 9% of gross receipts for $ 5,000,000 none 61.6%PASS Montclair San Bernardino Measure R Busn Tax Cannabis 7% grossRcpts $ 3,500,000 none 70.3%PASS County of San Diego Unincorporated Measure A Busn Tax Cannabis 6% retail, 3% distribution, $ 5,600,000 none 57.4%PASS Encinitas San Diego Measure L Busn Tax Cannabis 4% to 7% of gross receipts $ 1,400,000 none 65.1%PASS Healdsburg Sonoma Measure M Busn Tax Cannabis 8% grossRcpt $ 500,000 none 72.7%PASS Exeter Tulare Measure B Busn Tax Cannabis 10% retail and other, $10/sf ? none 66.5%PASS Tulare Tulare Measure Y Busn Tax Cannabis 10% retail and other, $10/sf ? none 65.2%PASS Woodland Yolo Measure K Busn Tax Cannabis 10% grossRcpts ? none 66.2%PASS Redlands San Bernardino Measure J Busn Tax Distrib centers from $0.047/sf to $0.105/sf $ 530,000 none 53.5%PASS Arcadia Los Angeles Measure SW Busn Tax Sports Betting 5% grossRcpts n/a* none 63.9%PASS Albany Alameda Measure K ParcelTax $0.074+/sf $ 1,950,000 fire/EMS none76.0%PASS Cameron Park Airport District El Dorado Measure J ParcelTax by $600 to $900/parcel $ 117,900 airport/ streets none 78.2%PASS Highlands Village Lighting Benefit Zone El Dorado Measure L ParcelTax $140+/parcel $ 10,920 streets none 86.3%PASS Knolls Property Owners CSD El Dorado Measure P ParcelTax by $300+ to $600+/parcel $ 8,400 streets none 75.5%PASS Sundance Trail Zone of Benefit El Dorado Measure C ParcelTax $600+/yr $ 24,000 roads none 73.2%PASS South Pasadena Los Angeles Measure LL ParcelTax xxx ? library none 86.2%PASS River Delta Fire District Sacramento Measure H ParcelTax $90/yr $ 130,000 fire none 72.1%PASS Emeryville Alameda Measure O PropTransfTax $15/$1000 if $1m-$2m, $ 5,000,000 none 71.6%PASS San Mateo San Mateo Measure CC PropTransfTax by 1% to 1.5% if >$10m $ 4,800,000 none 71.8%PASS Alameda Alameda Measure F TOT by 4% to 14% $ 910,000 none 59.2%PASS Clovis Fresno Measure B TOT by 2% to 12% $ 500,000 none 69.7%PASS Kerman Fresno Measure G TOT 10% $ 40,000 none 62.3%PASS Trinidad Humboldt Measure P TOT by 4% to 12% $ 65,000 none 77.6%PASS Imperial Imperial Measure G TOT by 4% to 12% $ 600,000 none 56.2%PASS Arcadia Los Angeles Measure HT TOT by 2% to 12% $ 730,000 none 54.1%PASS Santa Monica Los Angeles Measure CS TOT by 1%, 3% home shares $ 4,100,000 none 73.7%PASS – 6 – rev January 14, 2023 CaliforniaCityFinance.com Measures in 2022 with Non-Specific Durations Agency Name County Tax/Fee Rate Annual Revenue Use Sunset YES% Anaheim Orange Measure J TOT online travel companies $ 3,000,000 none 59.2%PASS La Palma Orange Measure P TOT by 4% to 12% $ 200,000 none 71.1%PASS Colfax Placer Measure B TOT by 2% to10% $ 29,000 none 73.5%PASS Rocklin Placer Measure F TOT by 2% to 10% $ 300,000 none 59.8%PASS Roseville Placer Measure C TOT by 4% to 10% $ 3,000,000 none 73.0%PASS Big Bear Lake San Bernardino Measure P TOT by 2% to 10% $ 1,300,000 none54.4%PASS Grand Terrace San Bernardino Measure M TOT new 10% $ 250,000 none 51.9%PASS Yucca Valley San Bernardino Measure K TOT by 5% to 12% $ 1,300,000 none 71.9%PASS Imperial Beach San Diego Measure R TOT by 4% to 14% $ 400,000 none 67.4%PASS El Paso de Robles San Luis ObispoMeasure F TOT by 1% to 11% $ 750,000 none 61.2%PASS Belmont San Mateo Measure K TOT by 2% to 14% $ 600,000 none 79.3%PASS Millbrae San Mateo Measure N TOT by 2% to 14% $ 1,500,000 none 75.8%PASS County of Humboldt Unincorporated Measure J TOT by 2% to 12% $ 3,080,000 none 63.3%PASS County of Placer - North Tahoe TOT Area Measure A TOT by 2% to 10% $ 4,000,000 none 90.0%PASS County of Santa Cruz Unincorporated Measure B TOT by 1% to 12% $ 2,300,000 none 69.2%PASS County of El Dorado - East Slope Tahoe Measure S TOT 2/3 by 4% to 14% $ 2,500,000 none 81.8%PASS Chico Butte Measure H TrUT 1 cent $ 24,000,000 none 52.4%PASS Mendota Fresno Measure H TrUT 1.25 cent $ 493,498 none 57.2%PASS Blue Lake Humboldt Measure R TrUT 1 cent $ 30,000 none 55.4%PASS Rio Dell Humboldt Measure O TrUT 3/4cent $ 400,000 none 53.3%PASS County of Kern unincorporated areas Measure K TrUT 1 cent $ 54,000,000 none 50.8%PASS McFarland Kern Measure M TrUT 1 cent $ 579,662 none 62.2%PASS Tehachapi Kern Measure S TrUT 1 cent $ 4,000,000 none 57.2%PASS Avenal Kings Measure A TrUT 1 cent $ 500,000 none 72.5%PASS Susanville Lassen Measure P TrUT 1 cent $ 1,750,000 none 54.7%PASS Baldwin Park Los Angeles Measure BP TrUT 3/4 cent $ 6,000,000 none 58.1%PASS Malibu Los Angeles Measure MC TrUT 1/2 cent $ 3,000,000 none 52.6%PASS Monterey Park Los Angeles Measure MP TrUT 3/4 cent $ 6,000,000 none 58.5%PASS Torrance Los Angeles Measure SST TrUT 1/2 cent $ 18,000,000 none 55.0%PASS Larkspur Marin Measure G TrUT 1/4 cent $ 700,000 none 59.4%PASS Sand City Monterey Measure L TrUT by 1/2cent to 1.5cents $ 1,400,000 none 68.7%PASS Hemet Riverside Measure H TrUT same 1 cent $ 15,000,000 none 58.0%PASS Elk Grove Sacramento Measure E TrUT 1 cent $ 21,000,000 none 54.1%PASS Galt Sacramento Measure Q TrUT 1 cent $ 3,600,000 none 52.4%PASS Colton San Bernardino Measure S TrUT 1 cent $ 9,500,000 none 66.8%PASS Ontario San Bernardino Measure Q TrUT 1 cent $ 95,000,000 none 53.2%PASS Solana Beach San Diego Measure S TrUT 1 cent $ 3,000,000 none 66.7%PASS Brisbane San Mateo Measure U TrUT 1/2 cent $ 2,000,000 none 63.9%PASS Goleta Santa Barbara Measure B TrUT 1 cent $ 10,600,000 none 64.7%PASS Solvang Santa Barbara Measure U TrUT 1 cent $ 1,600,000 none 63.1%PASS – 7 – rev January 14, 2023 CaliforniaCityFinance.com Co-temporal Advisory Measures in 2022 At the November 2022 election, there was just one local general tax measure that was accompanied by an advisory measure as to the use of funds. The City of Santa Monica’s Measure DT property transfer tax failed with just 34 percent approval as voters instead chose the citizen initiative Measure GS. There was also just one such tax use advisory measure on the June 2022 election. Susanville’s voters passed Measure P, a 1 percent transactions and use (sales) tax that generates $1.75 million per year5 for general city services. The measure was accompanied by advisory Measure Q, accompanied the city’s It asked, “If Measure P passes, should the revenues be used to balance the budget to maintain and enhance existing public safety services (police and fire), and provide funding to support street infrastructure improvements and provide funding to support economic development efforts designed to increase businesses, jobs and visitors to Susanville?” Both measures passed. Under Initiative 21-0042A1, the tax will expire a year after the effective date of the initiative (i.e., in December 2025). 1.b. Additional Costs and Public Service Effects of the Tax Provisions Assuming a similar volume of local measures through 2024 as we saw in 2022, there will be over 200 local measures that will need to be redrafted to comply with the Initiative and placed back on the ballot for the taxes to continue after December 2025. The costs of re-drafting, re-placing and re-voting on these measures, previously legally approved by voters, will be in the tens of millions in total statewide. 2. “Exempt Charges” (fees and charges that are not taxes) and Services Threatened With regard to fees and charges adopted after January 1, 2022, Initiative 21-0042A1:  Subjects new fees and charges for a product or service to a new "actual and reasonable test."  Subjects fees and charges for entrance to local government property; and rental and sale of local government property to a new, undefined, “reasonable” test.  Allows legal challenge to any tax adopted before the effective date of the initiative and after January 1, 5 The Susanville measure also did not include a specific end date and so is included in the list and totals of those measures. Measures in 2022 with Non-Specific Durations Agency Name County Tax/Fee Rate Annual Revenue Use Sunset YES% Watsonville Santa Cruz Measure R TrUT 1/2 cent $ 5,000,000 none 64.4%PASS Vallejo Solano Measure P TrUT 7/8 cent $ 18,000,000 none 54.7%PASS Modesto Stanislaus Measure H TrUT 1 cent $ 39,000,000 none 62.8%PASS County of Colusa Measure A TrUT 2/3 1/2 cent $ 2,400,000 EMS none 69.4%PASS Atwater Merced Measure B TrUT 2/3 same 1 cent $ 4,000,000 police/fire none 73.7%PASS Truckee Nevada Measure U TrUT 2/3 by 1/4 cent to 1/2 cent $ 3,000,000 open space / trails none 76.4%PASS Palo Alto Santa Clara Measure L UtilityTransfer 18% gas $ 7,000,000 none 77.7%PASS Santa Clara Santa Clara Measure G UtilityTransfer 5 % $ 30,000,000 none 84.2%PASS Hercules Contra Costa Measure N UUT 8% $ 3,600,000 none 69.3%PASS Carson Los Angeles Measure UU UUT 2% electr, gas $ 8,000,000 none 78.4%PASS Sebastopol Sonoma Measure N UUT 3.75% (same) $ 700,000 none 83.5%PASS – 8 – rev January 14, 2023 CaliforniaCityFinance.com 2022. Such a lawsuit could enjoin (stop) the enactment of the tax pending the outcome of the legal challenge.  Subjects a challenged fee to new, higher burdens of proof if legally challenged. 2.a. Value on New Local Government Fees and Charges at Risk6 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 and increases in those fees simply to accommodate inflation, the amount of local government fee and charge revenue placed at risk is about $2 billion per year including those adopted since January 1, 2022. Of $2 billion, about $900 million (45 percent) is for special districts, $800 million (40 percent) is cities, and $300 million (15 percent) is counties.7 Major examples of affected fees and charges are: 1. Certain water, sanitary sewer, wastewater, garbage, electric, gas service fees. 2. Nuisance abatement charges - such as for weed, rubbish and general nuisance abatement to fund community safety, code enforcement, and neighborhood cleanup programs. 3. Emergency response fees - such as in connection with DUI. 4. Advanced Life Support (ALS) transport charges. 5. Business improvement district charges. 6. Fees for processing of land use and development applications such as plan check fees, use permits, design review, environmental assessment, plan amendment, subdivision map changes. 7. Document processing and duplication fees. 8. Facility use charges, parking fees, tolls. 9. Fines, penalties. 10. Fees for parks and recreation services. 2.b. Additional Costs and Public Service Effects of the Fee/Charge Provisions In addition to service delays and disruptions due to fee and charge revenues placed at greater legal risk, there would be substantial additional costs for legal defense. The risk to fees and charges will make infrastructure financing more difficult and will deter new residential and commercial development. *********** mc 6 Source: California State Controller Annual Reports of Financial Transactions concerning cities, counties and special districts, summarized with an assumed growth due to fee rate increases (not population) of 2 percent annually. 7 School fees are also affected but the amount is negligible by comparison. SAMPLE OPPOSE LETTER Email a copy to BallotMeasures@calcities.org as well as your Regional Public Affairs Manager. ***CITY LETTERHEAD*** DATE Bismarck Obando Director of Public Affairs, League of California Cities 1400 K Street, Suite 400 Sacramento, CA 95814 RE: Letter Opposing Initiative 21-0042A1 On DATE, the City/Town of __________ voted to oppose Initiative 21-0042A1, a deceptive, developer-sponsored proposition aimed for the November 2024 statewide ballot that would significantly jeopardize cities’ ability to provide essential services and infrastructure for our residents. The measure includes undemocratic provisions that would make it more difficult for local voters to pass measures needed to fund local services and projects and would limit voter input by prohibiting local advisory measures where voters can express a preference on how they want their local tax dollars spent. This measure creates new constitutional loopholes that allow corporations to pay far less than their fair share for the impacts they have on our communities, including impacts on local infrastructure and our environment. This measure also may 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. Unless defeated, the measure puts billions of dollars currently dedicated to local services at risk, and could force cuts to fire and emergency response, law enforcement, public health, parks, libraries, affordable housing, services to support homeless residents, mental health services, and more. PLEASE CITE SPECIFIC IMPACTS TO YOUR CITY THAT WOULD RESULT FROM THIS INITIATIVE. The measure benefits wealthy corporations and real estate developers while decimating our local communities and neighborhoods. You may list the City/Town of _____________in formal opposition to Initiative #21-0042A1 and include our city as part of the growing coalition of public safety, labor, local government, infrastructure advocates, and other organizations throughout the state opposed to this deceptive proposition. Sincerely, NAME TITLE CITY/TOWN of ______________ Sample Resolution to Oppose Initiative 21-0042A1 WHEREAS, an association representing California’s wealthiest corporations and developers is spending millions to push a deceptive proposition aimed for the November 2024 statewide ballot; and WHEREAS, the measure includes undemocratic provisions that would make it more difficult for local voters to pass measures needed to fund local services and infrastructure, and would limit voter input by prohibiting local advisory measures where voters provide direction on how they want their local tax dollars spent; and WHEREAS, the measure creates new constitutional loopholes that allow corporations to pay far less than their fair share for the impacts they have on our communities, including local infrastructure and our environment; and WHEREAS, the measure may 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 puts billions of dollars currently dedicated to local services at risk and could force cuts to fire and emergency response, law enforcement, public health, parks, libraries, affordable housing, services to support homeless residents, mental health services, and more; and THEREFORE, BE IT RESOLVED that the City/Town of [NAME] opposes Initiative 21- 0042A1; BE IT FURTHER RESOLVED, that the City/Town of [NAME] will join the No on Initiative 21-0042A1 coalition, a growing coalition of public safety, education, labor, local government, and infrastructure groups throughout the state. We direct staff to email a copy of this adopted resolution to the League of California Cities at BallotMeasures@calcities.org. PASSED, APPROVED, AND ADOPTED this day _____ of _____, 2023. M E M O R A N D U M Subject: Taxpayer Protection and Government Accountability Act OVERVIEW Under current law, local revenue authority is limited by both statute and a number of voter- approved constitutional provisions, including those added by Proposition 13 (1978), Proposition 218 (1996), and Proposition 26 (2010). Due to these restrictions, local governments have over time become more dependent on state and federal funding rather than general revenues, thus furthering the imbalance between economic/population growth and tax rates. The Taxpayer Protection and Government Accountability Act would amend the California Constitution to restrict the ability of the state, local governments, and the electorate to approve or collect taxes, fees, and other revenues. It would require voter approval of all state taxes, would further restrict local fee authority by limiting it to the “minimum amount necessary” to provide government services, and would require voter approval for local measures such as franchise fees. Its provisions would make it easier to challenge local revenue measures by increasing the burden of proof on local agencies while disallowing an agency’s characterization of a measure from being considered in court. The measure would prohibit city charter amendments that provide for any revenue whatsoever from being submitted to the electorate. It would also prohibit local agencies from placing advisory measures on the same ballot as any general revenue measure and would raise the threshold for voter approval of local revenue measures proposed by initiative to two-thirds. Notably, the threshold to pass this measure is only by majority vote. STATUS On February 1, 2023, the Secretary of State reported that after a full check of signatures, the Taxpayer Protection and Government Accountability Act sponsored by the California Business Roundtable (CBRT) submitted 1,075,585 valid signatures, thus exceeding the 997,139 valid signatures required to qualify for the ballot. Proponents previously attempted to qualify it for the 2022 general election ballot but opted to pursue the 2024 election instead. The initiative has received endorsements from California NAIOP, the Howard Jarvis Taxpayers Association, and other business affiliates of the CBRT. As of the latest campaign finance filings submitted on January 31, 2023, Californians for Taxpayer Protection and Government Accountability has received nearly $16.4 million in contributions. PROPOSED CHANGES TO LAW The purpose of the ballot measure is to make it more difficult for local governments and other local agencies and the state to raise revenue by any means. It places new and increased restrictions on every manner of revenue measure and narrows exceptions to its most onerous requirements. If enacted, this measure would increase city costs while reducing tax revenues, subject specific charges such as franchise fees to voter approval requirements, and subject cities to increased legal challenges pertaining to existing and proposed tax increases. Further, any clarifying language related to its implementation would need to be passed via another constitutional amendment and would require voter approval. 1. Defines Taxes and “Exempt Charges” The fundamental provision of the proposed initiative would be to designate every levy, charge, or exaction of any kind imposed by the state or a local agency as either a tax or an “exempt charge.” Every revenue measure not defined as an exempt charge would be subject to voter approval requirements, some of which the initiative newly imposes or increases. The list of exempt charges is based on the provisions of Proposition 26 (2010), with some changes. The list includes charges for the actual cost of a government service (such as utilities), charges for the regulatory costs of issuing licenses and performing related inspections and audits, charges for the lease or sale of government property, fines and penalties to punish violations of law, charges for tourism promotion, health care charges to increase Medi-Cal reimbursement rates, and, for local agencies, charges imposed as a condition of property development. As proposed, every state and local revenue measure not defined as an exempt charge would need to be submitted to the voters for approval. 2. Instates New Ballot Transparency Requirements Those tax measures would be required to include in both the title and summary and the ballot label the type and amount or rate of the tax, the duration of the tax, and the use of the revenue derived from the tax. In the case of local general taxes, the phrase “for general government use” would be required and it would be prohibited to include an advisory measure on the same ballot to determine how the electorate would like to see those revenues used. By specifying that a duration must be provided, the proposed ballot measure appears to require taxes to be time limited. 3. Raises Vote Threshold For Local Voter Initiatives From a Simple Majority to Two- Thirds Local voter initiatives that impose special taxes are currently subject to lower voting thresholds than those initiated by city governing boards. This measure would increase those thresholds from a majority vote to two-thirds. Ultimately, this measure is attempting to reassert the two-thirds voter threshold requirements for tax increases proposed via initiative special taxes. This special tax voter threshold was disputed by the California Supreme Court in cases like California Cannabis Coalition v. City of Upland and subsequent Court of Appeals decisions which have upheld that special taxes proposed by initiative require only simple majority voter approval. 4. Retroactively Cancels Recently Passed Revenue Measures This initiative would retroactively cancel other revenue measures passed by voters or approved prior to the time this initiative goes into effect, if they do not comply with this measure’s provisions, even if they complied with all laws in effect at the time they passed. The proposed initiative would give those cancelled revenue measures twelve months to re-comply. However, local tax measures can only be put to voters at regular elections where governing board members can also be elected, unless the governing board unanimously calls a special election, and no regular elections would take place in the twelve months after the initiative would take effect. Additionally, the measure specifically prohibits any tax or fee regulating or related to vehicle miles traveled imposed as a condition of property development or occupancy. This means that all local and state taxes or exempt charges passed on or after January 1, 2022, would be subject to reapproval within 12 months of the initiative’s adoption into law. 5. Prohibits Fees and Taxes From Exceeding “Actual Cost” – Increases Potential for Legal Challenges For most local fees, the measure would prohibit them from exceeding the “actual cost” and defines actual cost to “the minimum amount necessary,” opening up cities to litigation and judicial second-guessing about whether the city could have chosen a lower level of service or whether it could have achieved the result at a lower cost by other means. The proposed measure would increase the burden of proof on local agencies to prove that a revenue measure is not subject to voter approval requirements—and that the amount of the charge is reasonable and does not exceed the “actual cost,” or “minimum amount necessary”— from a preponderance of evidence to clear and convincing evidence. This means that the imposition of exempt charges like parking meter fees, regulatory fees, and judicial fines are likely to be fought by any member of the public that views them as “unreasonable.” Furthermore, the measure prohibits a court from considering how a local agency describes, or characterizes, a revenue measure in making its determination, whereas the use of the funds would be required to be a factor in that determination. This could factor into city processes like the sale of a parcel of land, which is defined within the measure as an exempt charge. To impose an exempt charge under the terms of the initiative, the governing body must pass an ordinance specifying the amount of the exempt charge, in this case, the amount charged to purchase the property. If a city resident contested the sale of the land and argued it was a tax rather than an exempt charge, the language would preclude a judge from assessing the situation under the factoring in the city’s description of the charge as being paid in exchange for an asset. Instead, the court would be required to consider as a factor the use of revenue derived from the charge. This would mean that the revenue generated from the sale of the property could not be used under the discretion of the governing body, and the governing body would need to demonstrate that the amount of the charge was both “reasonable” and “did not exceed the actual cost” of providing the product to the buyer. Thus, the selling, leasing, or renting of property would be restricted to the city’s cost for providing the parcel to the buyer, instead of selling at market rate or to the person offering the highest amount. 6. Increases State-Level Tax Increases to a Higher Vote Threshold At the state level, the measure would require all state taxes to receive voter approval, in addition to the current requirement for two-thirds approval of both houses of the Legislature. Any increase or imposition of any non-tax charge, however minor, would require approval of the Legislature if it results in any taxpayer paying a higher amount. This requirement would apply to everything from bar exam fees to State Fair ticket prices to any charge for a map, shirt, or deck of cards for sale at a state park. And due to the restrictions on the use of revenue from exempt charges, revenue from map, shirt, and playing card sales at state parks could not be used to support the maintenance of the park, but only to reimburse the minimum amount necessary to provide that map, sticker, or deck of cards to the purchaser. RECCOMENDATION The public’s view on this measure is likely to be influenced heavily by discontent sowed by the pandemic and its related restrictions, along with the current view that the state is imposing high taxes during a period of expansion and large cash reserves in 2022, followed by recent high inflation rates and a budget deficit. The messaging for this measure will be positioned as a “stick it to the government” and “increase tax transparency” which is likely to garner public support. TPA recommends the TVC Coalition draft a resolution in opposition to this initiative and/or submit a letter of opposition to inform the Coalition’s legislative delegation of its position. RESOLUTION NO. ___ A RESOLUTION OF THE COUNCIL OF THE CITY OF ________ OPPOSING THE “TAXPAYER PROTECTION AND GOVERNMENT ACCOUNTABILITY ACT” (INITIATIVE #1935) WHEREAS, the California Business Roundtable filed the Taxpayer Protection and Government Accountability Act (AG# 21-0042A1) to be considered for the November 2024 ballot, which would decimate vital local and state revenue-generating methods; WHEREAS, on February 2, 2023, the Secretary of State reported that proponents of the Taxpayer Protection and Government Accountability Act submitted 1,075,585 valid signatures, thus exceeding the 997,139 valid signatures required to qualify for the November 5, 2024 ballot; WHEREAS, the measure creates barriers for cities to maintain and generate revenue to provide services to communities, including local infrastructure, protecting our environment, water quality, air quality, and natural resources; WHEREAS, the measure includes undemocratic provisions that would make it more difficult for local voters to pass measures needed to fund local services and infrastructure; WHEREAS, a coalition local government, public safety, labor, and infrastructure advocates have joined together to fight against this measure; WHEREAS, according to municipal finance experts, should the Taxpayer Protection and Government Accountability Act be passed by voters, billions of local government fee and charge revenues placed at heightened legal peril. This will result in related public service reductions across virtually every aspect of city, county, special district, and school services especially for transportation, and public facility use; WHEREAS, hundreds of millions of dollars of annual revenues from dozens of tax and bond measures approved by voters between January 1, 2022 and November 9, 2022 subject to additional voter approval if not in compliance with the initiative; WHEREAS, this initiative would affect (list applicable local taxes and other local methods for revenue generation) WHEREAS, the measure puts billions of dollars currently dedicated to state and local services at risk, and could force cuts to fire and emergency response, law enforcement, public health, parks, libraries, harbors, affordable housing, services to support homeless residents, mental health services, and more. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF ________ that it hereby opposes Initiative #1935, deceivingly called the “Taxpayer Protection and Government Accountability Act,” and; BE IT FURTHER RESOLVED that the City of ________ will join the NO on Initiative #1935 coalition, a growing coalition of public safety, labor, local government, infrastructure advocates, and other organizations throughout the state. PASSED AND ADOPTED BY THE COUNCIL OF THE CITY OF ________ this [DATE] by the following vote: AYES: X COUNCILMEMBERS: NOES: X COUNCILMEMBERS: ABSENT: X COUNCILMEMBERS: ABSTAIN: X COUNCILMEMBERS: APPROVED: 2 DATE The Honorable Rebecca Bauer-Kahan California State Assembly 1020 O Street Sacramento, CA 95814 The Honorable Steven Glazer California State Senate 1020 O Street Sacramento, CA 95814 RE: Taxpayer Protection and Government Accountability Act (Initiative #1935) Tri-Valley Cities Coalition – Notice of Opposition Dear Senator Glazer and Assembly Member Bauer-Kahan: On behalf of the Tri-Valley Cities Association, which includes the Cities of Dublin, Livermore, Pleasanton, San Ramon, and the Town of Danville, we write to express our opposition to Initiative #1935, entitled by its proponents as the “Taxpayer Protection and Government Accountability Act Initiative,” which would amend the California Constitution to restrict the ability of the state, local governments, and the electorate to approve or collect taxes, fees, and other revenues. The measure would require voter approval of all state taxes, would further restrict local fee authority by limiting it to the “minimum amount necessary” to provide government services, and would require voter approval for local measures such as franchise fees. Its provisions would make it easier to challenge local revenue measures by increasing the burden of proof on local agencies while disallowing an agency’s characterization of a measure from being considered in court. Specifically, this proposed initiative has three main components. First, it would expand the definition of a tax to include charges that the state and local governments refer to as fees, such as certain charges that are imposed for a benefit granted to a payer but not granted to those not charged. This would significantly alter the functional definition of taxes and would subject much needed revenue generation tools to greater vote requirements. Current law already imposes regulations on how local governments can levy fees, by requiring charges associated with fees to not exceed the reasonable costs of providing the associated product or service. The revenue that is generated from our taxes and fees goes to funding essential services, such as fire, police, public works, and parks and recreation. Second, the initiative would establish new stringent approval requirements for increasing state and local taxes, whether sought by the governing body or the electorate. For local governments, any and all tax increases under the expanded definition of taxes mentioned above would first need to be approved by two‐thirds of the legislative body before it is presented to the electorate for consideration. Further, all proposed increases must be placed before voters on a regularly scheduled general election as opposed to a special election, except in cases of emergency, which can only be declared under unanimous agreement of the legislative body. Adding these new requirements to raise or impose taxes severely undercuts the ability for local governments to respond to the needs of its residents and remain nimble under varying conditions. In the event that there are immediate community needs that cannot conjure unanimous support from the legislative body to address, our communities will suffer. Third, this initiative would place any new tax or fee increase under extreme legal scrutiny and would invite anyone to take costly and lengthy legal action against a governing body. Specifically, the initiative would require that all new taxes or tax increases include highly technical information regarding its specified use, longevity, and estimated cost to the electorate. The inclusion of this explanatory criterion for the passage of new taxes would significantly increase liability for public officials that could result in significant damages. For instance, the initiative states that state and local governments bear the burden of providing clear and convincing evidence that the levy of a “fee” not subject to the onerous vote threshold requirements is not a tax under the new definition. In the event a private citizen or entity determines that the passage of a new fee or tax was unclear or that the amount is unreasonable, a local government could be subject to long and costly litigation. Ultimately, tax and fee public policy has always dominated the states’ initiative process for decades. It’s important to understand that California has been largely divided on the topic because it relies on individual circumstances. As written, this measure will empower the state’s tax reform extremists to decimate the state and local governing processes by fixating on the hyper‐specifics of tax policies, whose revenues are directed to serve the people. The imposition of taxes and fees to fund public services is an essential tool of government. The COVID pandemic laid bare the necessity of allowing governing bodies at all levels of government to act immediately in order to provide to their communities during times of emergency. The Taxpayer Protection and Government Accountability Act Initiative would impose onerous and undemocratic restrictions on local governments and local voters that would reduce local revenues by billions every year and would harm the function of virtually all local services. For these reasons, the Tri-Valley Cities Coalition opposes Initiative #1935. Sincerely, BELL, McANDREWS & HILTACHK, LLP Anabel Renteria Initiative Coordinator ATTORNEYS AND COUNSEL-ORS AT I.AW 455 C APITO L MALL, S UITE 600 SACRAMENTO, CALIFOE=INIA 95014 (916) 44;a-7757 FAX [916) 44-;a-77 59 www.bmhlaw.com January 4, 2022 2 1 -0 0 4 2 RECEI VED JAN O 4 2022 Office of the Attorney General State of California INITIATIVE COORDINATOR ATTORNEY GENERAL'S OFFICE PO Box 994255 Sacramento, CA 94244-25550 Re: Initiative 21-0042 -Amendment Number One Dear Initiative Coordinator: Pursuant to subdivision (b) of Section 9002 of the Elections Code, enclosed please find Amendment #1 to Initiative No. 21-0042 "The Taxpayer Protection and Government Accountability Act." The amendments are reasonably germane to the theme, purpose or subject of the initiative measure as originally proposed. I am the proponent of the measure and request that the Attorney General prepare a circulating title and summary of the measure as provided by law, using the amended language. Thank you for your time and attention processing my request. Sincerely, ~~ Thomas W. Hiltachk 2 1 -0 0 4 2 Arndt. # / The Taxpayer Protection and Government Accountability Act [Deleted codified text is denoted in strikeout. Added codified text is denoted by italics and underline.] Section 1. Title This Act shall be known, and may be cited as, the Taxpayer Protection and Government Accountability Act. Section 2. Findings and Declarations (a) Californians are overtaxed. We pay the nation's highest state income tax, sales tax, and gasoline tax. According to the U.S. Census Bureau, California's combined state and local tax burden is the highest in the nation. Despite this, and despite two consecutive years of obscene revenue surpluses, state politicians in 2021 alone introduced legislation to raise more than $234 billion in new and higher taxes and fees. (b) Taxes are only part of the reason for California's rising cost-of-living crisis. Californians pay billions more in hidden "fees" passed through to consumers in the price they pay for products, services, food, fuel, utilities and housing. Since 2010, government revenue from state and local "fees" has more than doubled. (c) California's high cost of living not only contributes to the state's skyrocketing rates of poverty and homelessness, they are the pushing working families and job-providing businesses out of the state. The most recent Census showed that California's population dropped for the first time in history, costing us a seat in Congress. In the past four years, nearly 300 major corporations relocated to other states, not counting thousands more small businesses that were forced to move, sell or close. (d) California voters have tried repeatedly, at great expense, to assert control over whether and how taxes and fees are raised. We have enacted a series of measures to make taxes more predictable, to limit what passes as a "fee," to require voter approval, and to guarantee transparency and accountability. These measures include Proposition 13 (1978), Proposition 62 (1986), Proposition 218 (1996), and Proposition 26 (2010). (e) Contrary to the voters' intent, these measures that were designed to control taxes, spending and accountability, have been weakened and hamstrung by the Legislature, government lawyers, and the courts, making it necessary to pass yet another initiative to close loopholes and reverse hostile court decisions. Section 3. Statement of Purpose (a) In enacting this measure, the voters reassert their right to a voice and a vote on new and higher taxes by requiring any new or higher tax to be put before voters for approval. Voters also intend that all fees and other charges are passed or rejected by the voters themselves or a governing body elected by voters and not unelected and unaccountable bureaucrats. (b) Furthermore, the purpose and intent of the voters in enacting this measure is to increase transparency and accountability over higher taxes and charges by requiring any tax measure placed on the ballot- 1 either at the state or local level-to clearly state the type and rate of any tax, how long it will be in effect, and the use of the revenue generated by the tax. (c) Furthermore, the purpose and intent of the voters in enacting this measure is to clarify that any new or increased form of state government revenue, by any name or manner of extraction paid directly or indirectly by Californians, shall be authorized only by a vote of the Legislature and signature of the Governor to ensure that the purposes for such charges are broadly supported and transparently debated. (d) Furthermore, the purpose and intent of the voters in enacting this measure is also to ensure that taxpayers have the right and ability to effectively balance new or increased taxes and other charges with the rapidly increasing costs Californians are already paying for housing, food, childcare, gasoline, energy, healthcare, education, and other basic costs of living, and to further protect the existing constitutional limit on property taxes and ensure that the revenue from such taxes remains local, without changing or superseding existing constitutional provisions contained in Section 1{c) of Article XIII A. (e) In enacting this measure, the voters also additionally intend to reverse loopholes in the legislative two- thirds vote and voter approval requirements for government revenue increases created by the courts including, but not limited to, 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 Local Agency Formation Commission, and Wilde v. City of Dunsmuir. Section 4. Section 3 of Article XIII A of the California Constitution is amended to read: Sec. 3(a} Every levy, charge. or exaction of any kind imposed by state law is either a tax or an exempt charge. illlJ1l ~ Any change in state statute Jaw which results in any taxpayer paying a new or higher tax must be imposed by an act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature, and submitted to the electorate and approved by a maiority vote, except that no new ad valorem taxes on real property, or sales or transaction taxes on the sales of real property, may be imposed. Each Act shall include: (A) A specific duration of time that the tax will be imposed and an estimate of the annual amount expected to be derived from the tax. (BJ A specific and legally binding and enforceable limitation on how the revenue from the tax can be spent. If the revenue from the tax can be spent for unrestricted general revenue purposes. then a statement that the tax revenue can be spent for "unrestricted general revenue purposes" shall be included in a separate, stand-alone section. Any proposed change to the use of the revenue from the tax shall be adopted by a separate act that is passed by not less than two-thirds of all members elected to each of the two houses of the Legislature and submitted to the electorate and approved by a maiority vote. (2) The title and summary and ballot label or question required for a measure pursuant to the Elections Code shall. for each measure providing for the imposition of a tax, including a measure proposed by an elector pursuant to Article II, include: {A) The type and amount or rate of the tax; (BJ The duration of the tax: and 2 (CJ The use of the revenue derived from the tax. (c} Any change in state law which results in any taxpayer paying a new or higher exempt charge must be imposed by an act passed by each of the two houses of the Legislature. Each act shall specify the type of exempt charge as provided in subdivision (e ), and the amount or rate of the exempt charge to be imposed. Ml._fbt As used in this section and in Section 9 of Article II, "tax" means every aA1f levy, charge, or exaction of any kind imposed by the State state law that is not an exempt charge. e1<eept the follo•Ning: (e) As used in this section. "exempt charge" means only the following: (1) a el:iarge imposes fer a s1=1eeifie eenefit eonferreEl or pri'+'ilege granteEl aireetly to tl:ie 13ayor tl:iat is not 1=1ro>viaeEl to tl:iose not et:iargeEI, anEI whiel:i aoes not e1<ceeEl tl:ie reasonal3Ie costs to tl:ie State of eonferring the benefit or granting the pri¥ilege to the 1=1a¥OF. ill {-2+ A reasonable charge irnposeEl 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 rnasonable actual costs to the State of providing the service or product to the payor. f.11 ~ A charge in,poseEl for the reasonable regulatory costs to the State incident to issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof. (3) A levy, charge. or exaction collected from local units of government. health care providers or health care service plans that is primarily used by the State of California for the purposes of increasing reimbursement rates or payments under the Medi-Cal program, and the revenues of which are primarily used to finance the non-federal portion of Medi-Cal medical assistance expenditures. (4) A reasonable charge iR'l13oseEl for entrance to or use of state property, or the purchase. rental, or lease of state property, except charges governed by Section 15 of Article XI. (5} A fine, or penalty, or other monetary el:large including any applicable interest for nonpayment thereot imposed by the judicial branch of government or the State, as a result of a state administrative enforcement agency pursuant to adiudicatorv due process, to punish a violation of law. (6} A levy, charge, assessment, or exaction collected for the promotion of California tourism pursuant to Chapter 1 (commencing with Section 13995) of Part 4.7 of Division 3 of Title 2 of the Government Code. flL~Any tax or exempt charge adopted after January 1, 2022 ~, but prior to the effective date of this act, that was not adopted in compliance with the requirements of this section is void 12 months after the effective date of this act unless the tax or exempt charge is reenacted B'l the begislatuFe anel signea into law ey tl:ie <iio¥ernoF in compliance with the requirements of this section. [gl[.JlJG:} The State bears the burden of proving by a preponEleranee oftl:le clear and convincing evidence that a levy, charge, or other exaction is an exempt charge and not a tax. The State bears the burden of proving by clear and convincing evidence that the amount of the exempt charge is reasonable and that the amount charged does not exceed the actual cost of providing the service or product to the payor. ,tR-a-t tl:ie amouRt is RO n,ore tl:ian neeessary to cover the reasonable costs of the go•.•emn,ental actii,•i:t>,• ane 3 that the manner in •Nhiel.:i these cests are allecated ts a pa·1er bear a fair er reasenable relatienshi13 ts the 13a·1or's b1:1relens on, or benefits reeei11eel from, the go•.ieFRmental actit.iit'( (2) The retention ofrevenue by, or the payment to. a non-governmental entity ofa levv. charge, or exaction of any kind imposed by state law, shall not be a factor in determining whether the levy. charge, or exaction is a tax or exempt charge. (3) The characterization of a levy, charge, or exaction of any kind as being voluntary, or paid in exchange for a benefit, privilege, allowance, authorization, or asset, shall not be a factor in determining whether the levy, charge, or exaction is a tax or an exempt charge. /4} The use of revenue derived from the levy, charge or exaction shall be a factor in determining whether the levy, charge, or exaction is a tax or exempt charge. (h) As used in this section: (1) "Actual cost" of providing a service or product means: (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 is not used by the government for any purpose other than reimbursing that cost. In computing "actual cost" 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. (2) "Extend" includes, but is not limited to, doing any of the following with respect to a tax or exempt charge: lengthening its duration. delaying or eliminating its expiration, expanding its application to a new territory or class ofpayor, or expanding the base to which its rate is applied. (3) "Impose" means adopt, enact, reenact, create, establish, collect, increase or extend. (4) "State law" includes, but is not limited to. any state statute, state regulation, state executive order. state resolution, state ruling, state opinion Jetter, or other legal authority or interpretation adopted, enacted. enforced, issued, or implemented by the legislative or executive branches of state government. "State law" does not include actions taken by the Regents of the University of California, Trustees of the California State University, or the Board of Governors of the California Community Colleges. Section 5. Section 1 of Article XIII C of the California Constitution is amended, to read: Sec. 1. Definitions. As used in this article: {a) "Actual cost" of providing a service or product means: (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 is not used by the government for any purpose other than reimbursing that cost. In computing "actual cost" 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. (b) "Extend" includes, but is not limited to. doing any of the following with respect to a tax. exempt charge, or Article XIII D assessment. fee, or 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 .lfl..W 11General tax" means any tax imposed for general governmental purposes. (d} "Impose" means adopt, enact, reenact, create, establish, collect, increase, or extend. {clJb} "Local government" means any county, city, city and county, including a charter city or county, any special district, or any other local or regional governmental entity, or an elector pursuant to Article fl or the initiative power provided by a charter or statute. (f) "Local law" includes. but is 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. {gl_{t} "Special district" means an agency of the State, formed pursuant to general law or a special act, for the local performance of governmental or proprietary functions with limited geographic boundaries including, but not limited to, school districts and redevelopment agencies. f11L{d} "Special tax" means any tax imposed for specific purposes, including a tax imposed for specific purposes, which is placed into a general fund. 111 i@} As used in this article, and in Section 9 of Article II, "tax" means every aRV-levy, charge, or exaction of any kind, imposed by a local go,;ernmeRt law that is not an exempt charge., exeept tl=le fellowiRg: (i) As used in this section, "exempt charge" means only the following: (1) A cl=large imposeel fer a speeifie beAefit eoAferreel or pri,;ilege graAteel eliFeetl')' to tl=le pa1,ior tl=lat is Rot pre1,•ieleel to these Rot ehargea, aA£l which £lees Rot exeeeel tl=le reaseAable costs to tl=le loeal gm,·ernFAeAt of conferriAg the beAefit or graAting tl:1e pri¥ilege. ill R} A reasonable charge imposes for a specific local government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasoAable actual costs to the local government of providing the service or product. fl1 WA charge im13ose£l for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof. W {4t A reasonable charge imposeel for entrance to or use of local government property, or the purchase, rental, or lease of local government property. Ml. fSt A fine, or penalty, or other FAOA@tar,· eharge including any applicable interest for nonpayment thereat imposed by the judicial branch of government or a local government administrative enforcement agency pursuant to adiudicatorv due process, as a res1,1lt of to punish a violation of law. ill -f6t A charge imposed as a condition of property development. No levv, charge, or exaction regulating or related to vehicle miles traveled may be imposed as a condition of property development or occupancy. f.i1 f7t An AssessFAeRts a Rel property relate el fees assessment. fee. or charge imJ;1oseel iA aeeoraanee witl=l the pro¥isio A5 of subject to Article XI 11 D, or an assessment imposed upon a business in a tourism marketing district, a parking and business improvement area, or a property and business improvement district. 5 (7) A charge imposed for a specific health care service provided directly to the payor and that is not provided to those not charged. and which does not exceed the reasonable costs to the local government of providing the health care service. As used in this paragraph, a "health care service" means a service licensed or exempt from licensure by the state pursuant to Chapters 1. 1.3, or 2 of Division 2 of the Health and Safety Code. The local government bears the b1:1rden of proving by a preponderance of the e .. ·ielence that a lew, charge, or other exaction is not a ta1<, that the amo1:1nt is no more than necessaPJ' to cover the reasonable costs of the go•,ernfflental acti•.«ity anel that tJ:ie manner in which those costs are allocateel to a pa•ror bear a fair or reasonable relationship to the pa•ror's blslrdens on, or bene:fits receiveel from, the go1a1ernmental acfa•ity. Section 6. Section 2 of Article XIII C of the California Constitution is amended to read: Sec. 2. Local Government Tax Limitation. Notwithstanding any other provision of this Constitution: (a) Every levy. charge. or exaction of any kind imposed by local law is either a tax or an exempt charge. All taxes imposed by any local government shall be deemed to be either general taxes or special taxes. Special purpose districts or agencies, including school districts, shall have no power to levy general taxes. (b) No local Jaw go,.·ernment whether proposed by the governing body or by an elector, may impose, extend, or increase any general tax unless and until that tax is submitted to the electorate and approved by a majority vote. A general tax shall not be deemed to have been increased if it is imposed at a rate not higher than the maximum rate so approved. The election required by this subdivision shall be consolidated with a regularly scheduled general election for members of the governing body of the local government, except in cases of emergency declared by a unanimous vote of the governing body. (c) An•r general tax imposed, el<tended, or increaseel, •.-.iitho1:1t •.·oter approval, lay any local go,.·ernment on or after Janlslary 1, 1995, ana prior ta the effecti,.·e date of this article, shall contin1:1e to be imposed only if appro,.·ea b1• a majority vote of the voters voting in an election OR the issye of the in:iposition, whicl::i election sl::iall be l::ield witl::iin t•Ne 1•ears ef the effectii.ie date of this article and in com13liance with slslbdi\·isien (b}. {El) No local law government. whether proposed by the governing body or by an elector. may impose, eMteRd, er increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote. A special tax shall not be deemed to have been increased if it is imposed at a rate not higher than the maximum rate so approved. {d) The title and summary and ballot label or question required for a measure pursuant to the Elections Code shall. for each measure providing for the imposition of a tax, include: (1) The type and amount or rate of the tax; (2) the duration of the tax; and (3) The use of the revenue derived from the tax. If the proposed tax is a general tax. the phrase "for general government use" shall be required, and no advisory measure may appear on the same ballot that would indicate that the revenue from the general tax will. could. or should be used for a specific purpose. (e) Only the governing body of a local government. other than an elector pursuant to Article II or the initiative power provided by a charter or statute. shall have the authority to impose any exempt charge. The governing body shall impose an exempt charge by an ordinance specifying the type of exempt charge 6 as provided in Section l(i) and the amount or rate of the exempt charge to be imposed. and passed by the governing body. This subdivision shall not apply to charges specified in paragraph (7) of subdivision (i) of Section 1. ff) No amendment to a Charter which provides for the imposition, extension, or increase of a tax or exempt charge shall be submitted to or approved by the electors. nor shall any such amendment to a Charter hereafter submitted to or approved by the electors become effective for any purpose. (q) Any tax or exempt charge adopted after January 1, 2022, but prior to the effective date of this act, that was not adopted in compliance with the requirements of this section is void 12 months after the effective date of this act unless the tax or exempt charge is reenacted in compliance with the requirements of this section. {h)(1) The focal government bears the burden of proving by clear and convincing evidence that a levy, charge or exaction is an exempt charge and not a tax. The local government bears the burden of proving by clear and convincing evidence that the amount of the exempt charge is reasonable and that the amount charged does not exceed the actual cost of providing the service or product to the payor. (2} The retention of revenue by, or the payment to, a non-governmental entity of a levy. charge, or exaction of any kind imposed by a local law, shall not be a factor in determining whether the levy, charge, or exaction is a tax or exempt charge. (3) The characterization of a levy. charge. or exaction of any kind imposed by a local law as being paid in exchange for a benefit. privilege, allowance, authorization, or asset, shall not be factors in determining whether the levy, charge, or exaction is a tax or an exempt charge. (4) The use of revenue derived from the levy, charge or exaction shall be a factor in determining whether the levy, charge, or exaction is a tax or exempt charge. Section 7. Section 3 of Article XIII D of the California Constitution is amended, to read: Sec. 3. Property Taxes, Assessments, Fees and Charges Limited (a) No tax, assessment, fee, 6f charge, or surcharge, including a surcharge based on the value ofpropertv, shall be assessed 13y a Ry ageRC'f upon any parcel of property or upon any person as an incident of property ownership except: (1) The ad valorem property tax impeseEI p1::1rsYaRt te described in Section 1(a) of Article XIII and Section 1/a) of Article XIII A, and described and enacted pursuant to the voter approval requirement in Section 1/b) Q[Article XII I A. (2) Any special non-ad valorem tax receiving a two-thirds vote of qualified electors pursuant to Section 4 of Article XIII A, or after receiving a two-thirds vote of those authorized to vote in a community facilities district by the Legislature pursuant to statute as it existed on December 31, 2021. (3) Assessments as provided by this article. (4) Fees or charges for property related services as provided by this article. 7 (b) For purposes of this article, fees for the provision of electrical or gas service shall not be deemed charges or fees imposed as an incident of property ownership. Section 8. Sections 1 and 14 of Article XIII are amended to read: Sec. 1 Unless otherwise provided by this Constitution or the laws of the United States: (a) All property is taxable and shall be assessed at the same percentage of fair market value. When a value standard other than fair market value is prescribed by this Constitution or by statute authorized by this Constitution, the same percentage shall be applied to determine the assessed value. The value to which the percentage is applied, whether it be the fair market value or not, shall be known for property tax purposes as the full value. (b) All property so assessed shall be taxed in proportion to its full value. (c) All proceeds from the taxation of property shall be apportioned according to law to the districts within the counties. Sec. 14. All property taxed by state or local government shall be assessed in the county, city, and district in which it is situated. Notwithstanding any other provision of/aw, such state or local property taxes shall be apportioned according to law to the districts within the counties. Section 9. General Provisions A. This Act shall be liberally construed in order to effectuate its purposes. B. (1) In the event that this initiative measure and another initiative measure or measures relating to state or local requirements for the imposition, adoption, creation, or establishment of taxes, charges, and other revenue measures shall appear on the same statewide election ballot, the other initiative measure or measures shall be deemed to be in conflict with this measure. In the event that this initiative measure receives a greater number of affirmative votes, the provisions of this measure shall prevail in their entirety, and the provisions ofthe other initiative measure or measures shall be null and void. (2) In furtherance of this provision, the voters hereby declare that this measure conflicts with the provisions of the "Housing Affordability and Tax Cut Act of 2022" and "The Tax Cut and Housing Affordability Act," both of which would impose a new state property tax (called a "surcharge") on certain real property, and where the revenue derived from the tax is provided to the State, rather than retained in the county in which the property is situated and for the use of the county and cities and districts within the county, in direct violation of the provisions of this initiative. (3) If this initiative measure is approved by the voters, but superseded in whole or in part by any other conflicting initiative measure approved by the voters at the same election, and such conflicting initiative is later held invalid, this measure shall be self-executing and given full force and effect. C. The provisions of this Act are severable. If any portion, section, subdivision, paragraph, clause, sentence, phrase, word, or application of this Act is for any reason held to be invalid by a decision of any court of competent jurisdiction, that decision shall not affect the validity of the remaining portions of this Act. The People of the State of California hereby declare that they would have adopted this Act and each and every portion, section, subdivision, paragraph, clause, sentence, phrase, word, and application not 8 declared invalid or unconstitutional without regard to whether any portion of this Act or application thereof would be subsequently declared invalid. D. If this Act is approved by the voters of the State of California and thereafter subjected to a legal challenge alleging a violation of state or federal law, and both the Governor and Attorney General refuse to defend this Act, then the following actions shall be taken: (1) Notwithstanding anything to the contrary contained in Chapter 6 of Part 2 of Division 3 ofTitle 2 of the Government Code or any other law, the Attorney General shall appoint independent counsel to faithfully and vigorously defend this Act on behalf of the State of California. (2) Before appointing or thereafter substituting independent counsel, the Attorney General shall exercise due diligence in determining the qualifications of independent counsel and shall obtain written affirmation from independent counsel that independent counsel will faithfully and vigorously defend this Act. The written affirmation shall be made publicly available upon request. (3) A continuous appropriation is hereby made from the General Fund to the Controller, without regard to fiscal years, in an amount necessary to cover the costs of retaining independent counsel to faithfully and vigorously defend this Act on behalf of the State of California. (4) Nothing in this section shall prohibit the proponents of this Act, or a bona fide taxpayers association, from intervening to defend this Act. 9