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ADOPT A RESOLUTION TO OPPOSE INITIATIVE 21-0042A1 - THE TAXPAYER PROTECTION AND GOVERNMENT ACCOUNTABILITY ACT
recommended action
RECOMMENDATION
It is recommended that City Council approves a resolution opposing Initiative 21-0042A1 - The Taxpayer Protection and Government Accountability Act.
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Summary
The Taxpayer Protection and Government Accountability Act (Attachment A) limits voters’ authority, adopts new and stricter rules for raising taxes and fees, and makes it more difficult to hold violators of state and local laws accountable.
DISCUSSION
Background
In 2018, the “Tax Fairness, Transparency and Accountability Act” was being circulated to qualify for the November 2018 ballot. This initiative would have drastically limited local revenue authority.
Through the successful work and advocacy of the League of California Cities (Cal Cities) and its coalition, the measure’s proponents withdrew the initiative from the ballot in June 2018.
On Jan. 4, 2022, the California Business Roundtable filed the Taxpayer Protection and Government Accountability Act. This measure is far more detrimental to cities than the measure filed in 2018, because it would decimate vital local and state services to the benefit of wealthy corporations.
Cal Cities, along with a broad coalition of local governments, labor and public safety leaders, infrastructure advocates, and businesses, strongly oppose this initiative (See Attachments B-D).
What would this Measure specifically do:
1) Limit voter authority and accountability
• Limits voter input. Prohibits local voters from providing direction on how local tax dollars should be spent by prohibiting local advisory measures. Measure B is an existing example of an advisory measure that would not be allowed if Initiative 21-0042A1 is approved by voters.
• Invalidates the Upland decision that allows a majority of local voters to pass special taxes. Taxes proposed by the Initiative are subject to the same rules as taxes placed on the ballot by a city council. All measures passed between January 2022 and November 2022 would be invalidated unless reenacted within 12 months.
2) Restrict local fee authority to provide local services
• Impacts franchise fees. Sets 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. Rental and sale of local government property must be “reasonable” which must be proved by “clear and convincing evidence.”
• 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.
3) Restrict authority of state and local governments to issue fines and penalties for violations of law
• Requires 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.
4) Restrict local tax authority to provide local services
• Requires voter approval to expand existing taxes (e.g., UUT, use tax, TOT) to new territory (e.g., annexation) or expanding the base (e.g., new utility service).
• City charters may not be amended to include a tax or fee.
• New taxes can be imposed only for a specific time period.
• Taxes adopted after Jan. 1, 2022, that do not comply with the new rules, are void unless reenacted.
• All state taxes require majority voter approval.
• Prohibits any surcharge on property tax rate and allocation of property tax to state.
5) Other changes
• No fee or charge or exaction regulating vehicle miles traveled can be imposed as a condition of property development or occupancy.
Passage of Initiative 21-0042A1 - The Taxpayer Protection and Government Accountability Act would create an unreasonable administrative burden on the City as it relates to fee rate development while also creating additional concerns and deficiencies related to annexations. There is the potential for additional legal costs associated with defending fees and justifying rate calculations.
Passage of this initiative would also put several millions of revenue dollars at risk, such as franchise revenues, fines and penalties, revenues from charges for service, along with collections of appropriate UUT, Use Tax, and TOT.
FINANCIAL SUMMARY
There is no impact to the City’s General Fund or any other unrestricted fund as a result of the recommended action.
Attachment A - Initiative 21-0042A1
Attachment B - CalCities Fact Sheet
Attachment C - CalCities Fiscal Analysis
Attachment D - CalCities Legal Analysis