REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution to Oppose Initiative 21-0042A1, “The Taxpayer Protection and Government Accountability Act”
Report
COUNCIL PILLAR
Enhance Community Engagement and Transparency
BACKGROUND
On October 9, 2018, Council adopted Resolution No. 18-8611 to approve a Legislative Advocacy Position (LAP) Policy. The LAP Policy establishes clear guidelines for advancing City goals and positions through legislative review and advocacy at the regional, State, and federal levels of government and to provide guidance for City officials who serve on regional, state, and national boards, committees, and commissions when they are asked to review public policy matters and issues.
The LAP Policy provides that, “If a Council policy relative to the legislation does not exist, the issue is politically controversial, or there is significant local interest in the issue, the proposed legislation including a recommendation to support, remain neutral, or not support the legislation is brought to Council for consideration.”
On May 10, 2022, the City Council adopted Resolution No. 22-9088 to oppose Initiative 21-0042 “The Taxpayer Protection and Government Accountability Act”, a proposition sponsored by the California Business Roundtable targeted for the November 2022 statewide ballot. The measure, (which ultimately did not garner enough signatures for the November 2022 ballot), would have amended the California Constitution to restrict the ability of the electorate as well as local and State governments, to approve or collect taxes, fees and other revenues.
On February 2, 2023, the Secretary of State announced that the proponents of the measure submitted enough valid signatures to qualify on the November 2024 statewide ballot. Staff and the City’s legislative advocacy consultant, Townsend Public Affairs, Inc. (Townsend) recommend the adoption of a new Resolution to oppose Initiative 21-0042A1 “The Taxpayer Protection and Government Accountability Act”.
DISCUSSION
The Attorney General of California has prepared the following title and summary of the chief purpose and points of the proposed measure:
LIMITS ABILITY OF VOTERS AND STATE AND LOCAL GOVERNMENTS TO RAISE REVENUES FOR GOVERNMENT SERVICES. INITIATIVE CONSTITUTIONAL AMENDMENT. For new or increased state taxes currently enacted by two-thirds vote of Legislature, also requires statewide election and majority voter approval. Limits voters’ ability to pass voter-proposed local special taxes by raising vote requirement to two-thirds. Eliminates voters’ ability to advise how to spend revenues from proposed general tax on same ballot as the proposed tax. Expands definition of “taxes” to include certain regulatory fees, broadening application of tax approval requirements. Requires Legislature or local governing body set certain other fees. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: Lower annual state and local revenues, potentially substantially lower, depending on future actions of the Legislature, local governing bodies, voters, and the courts.
The Legislative Analyst’s Office’s Fiscal Impact Estimate Report (Attachment 2) is included in this report for reference.
Townsend has prepared a memo that explains the ballot measure’s implications and their impacts in greater detail (Attachment 3) and recommends that the Council adopt a Resolution to oppose the Taxpayer Protection and Government Accountability Act.
The impact of the proposed amendment to the California Constitution is especially concerning to the City. On November 8, 2022, nearly 60% of Santa Clara voters passed Measure H to update the City’s Business License Tax program. The updated Business License Tax (BLT) program, which becomes effective July 1, 2023, will generate approximately $6,000,000 annually to support essential City services such as 911 response times, safe and clean public streets and facilities and the continued delivery of high-quality parks, recreation and library services. Voters also approved Measure G by 81.9% which continued the City’s long-standing transfer of 5% of utilities’ gross receipts to the General Fund. Arguably, however, the proposed constitutional amendment would not apply to the general fund transfer under Measure G because it was not a “new or increased tax.”
The Taxpayer Protection and Government Accountability Act would retroactively cancel the BLT measure and possibly other revenue measures passed by voters any time after January 1, 2022, if they do not comply with this measure’s provisions, even if they complied with all laws in effect at the time they were approved. The proposed initiative would give revenue measures approved after January 1, 2022, twelve months to be resubmitted to voters in accordance with the provisions of the Taxpayer Protection Initiative. Unless re-approved by voters, the previously-approved measures would become void after twelve months and the local government would no longer be able to collect revenue under those provisions.
In a joint press release dated February 2, 2023, the League of California Cities, Alliance for a Better California (a coalition of labor groups), California State Association of Counties, California Special Districts Association, California Alliance for Jobs, and the Contract Cities Association joined together to announce strong opposition to the Taxpayer Protection and Government Accountability Act (Attachment 4).
Staff agrees with Townsend’s recommendation to adopt a Resolution to oppose the Taxpayer Protection and Government Accountability Act. Such action aligns with the following legislative guiding principles outlined in the City’s LAP Policy:
• Support the League of California Cities and National League of Cities positions on priority bills that benefit Santa Clara
• Protect local revenue sources and prevent unfunded mandates
• Protect and/or increase local government discretion.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
As noted above, City voters passed Measure H on November 8, 2022 ballot, which is anticipated to generate approximately $6,000,000 annually to support essential City services. If passed, the Taxpayer Protection and Government Accountability Act would retroactively cancel Measure H since it was passed by voter after January 1, 2022 and did not comply with all the measure’s provisions (e.g., two-thirds voter threshold requirement for tax increases). Measure G, the utility transfer to the general fund, was not a “new or increased tax” and passed with approximately 80% of the vote and, therefore, will likely not be affected by the proposed law. In the event it is determined that the proposed law does apply to Measure G, it would endanger $30,000,000 annually flowing to the general fund.
The proposed initiative would give those revenue measures falling within the scope of the law and approved after January 1, 2022 twelve months to be resubmitted to voters in accordance with the provisions of the Taxpayer Protection Initiative. Unless re-approved by voters, the previously approved measures would become void after twelve months and the local government would no longer be able to collect revenue under those provisions. Should the ballot measure pass, and both Measures G and H found to fall within the scope of the new law, the City risks losing up to $36,000,000 in potential annual tax revenue.
Additionally, this ballot measure will negatively impact the City’s ability to effectively pass similar ballot measures in the future to generate revenue if the described thresholds are applied. Depending on the type of ballot measure and the likelihood of passage, this Act would make it more difficult to pass tax measures which could cost the City millions in potential revenue loss.
COORDINATION
This report was coordinated with Townsend Public Affairs, City Attorney’s Office, and Finance Department.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
Adopt a Resolution Opposing Initiative 21-0042A1 “The Taxpayer Protection and Government Accountability Act”.
Staff
Reviewed by: Cynthia Bojorquez, Assistant City Manager
Approved by: Office of the City Manager
ATTACHMENTS
1. The Taxpayer Protection and Government Accountability Act
2. Fiscal Impact Estimate Report
3. Townsend Memo with Recommendation
4. League of California Cities Joint Press Release
5. Resolution