SUBJECT
Title
Supplemental Information: Summary of Legislation Related to Tax Ballot Measures
Report
BACKGROUND
As the Council considers revenue opportunities, it is important to note that there are legislative issues that must be taken into account when considering the viability of successful ballot measures for the November 2018 election. Staff continues to monitor and analyze the potential impacts and will continue to transmit information as it becomes available. The following information is being transmitted to the Council for consideration in the context of considering revenue opportunities:
The Tax Fairness, Transparency, and Accountability Act of 2018
In January 2018, the California Business Roundtable crafted a potential measure for the November 2018 state ballot entitled, “The Tax Fairness, Transparency, and Accountability Act of 2018” (attached). This potential measure has a circulation deadline of July 25, 2018. If the necessary signatures are collected by this date, those signatures will be verified, and if so verified, the measure will qualify for the statewide November 2018 ballot.
Key elements of this measure include:
• Requiring a two-thirds voter approval to raise any and all new local taxes. Currently, local taxes for general purposes may pass by a majority vote, while only taxes for a special purpose require a supermajority vote.
• Expanding the definition of a tax to include some charges that local governments currently treat as nontax levies, such as regulatory and service fees. Consequently, this measure increases the number of revenue proposals subject to higher vote requirements.
• Retroactively voiding any voter-approved local taxes imposed in 2018, unless those taxes meet the criteria adopted by this measure.
• Mandating a two-thirds vote of the City Council to approve all fees and allowing a referenda process for voters to overturn fees.
• Requiring that tax ballot measures include a statement of how revenues can be spent, including for measures that increase local taxes. A statement of allowable uses must be included in the ballot question presented to voters; any change to the statement must be passed by a two-thirds vote of the City Council and a two thirds vote of residents.
• Increasing a city’s legal burden from “preponderance of the evidence” to “clear and convincing evidence” to establish that a fee is not a tax, and mandating that a city prove that the amount is reasonable and only covers actual costs, that an exempt charge is used solely for its stated purpose, and that it was enacted in compliance with the requirements of this measure.
Assembly Bill 195
Local agencies must comply with new election ballot requirements for initiative measures under AB195 (attached), which was signed by the Governor on July 24, 2017. AB195 requires that any ballot measure that imposes a tax or raises a tax to include in the ballot statement the amount of money to be raised annually and the rate and duration of the tax to be levied. It also requires that the ballot statement of the measure shall be a true and impartial synopsis of the purpose of the proposed measure, and shall be in the language that is neither argumentative nor likely to create prejudice for or against the measure. With AB195, Elections Code Section 13119 specifically outlines how the ballot measure question must be written.
APPLICATION OF LEGISLATION
Infrastructure Parcel Tax: Concern rests with prior community research that was conducted on the Infrastructure Parcel Tax and the data provided to assess viability of the measure. For instance, the ballot questions posed in community research was:
“Shall the City of Santa Clara protect, maintain and repair local parks and playgrounds; perform essential maintenance; keep park restrooms clean, improve access to open space; improve the City creek trails; use more recycled water for irrigation; build an energy efficient community recreation and swim center that accommodates early childhood education and afterschool programs, funded by raising up to $400 million in bonds and private contributions and requiring citizen oversight, annual audits and no money spent on administrator salaries?”
However, compliant with AB 195, the ballot questions posed in community research should have been:
“Shall Santa Clara maintain and repair local parks and playgrounds; improve access to open space; build an energy-efficient community recreation and swim center, funded by raising $400 million in bonds, for which $202 million will be used for principal financing capacity, at $12.1 million/year over 33 years, by imposing a parcel tax of $25 for each $100,000 in assessed land value, requiring citizen oversight and audits without money spent on administrator salaries?”
The reliability of the data is of serious concern and it is likely not reliable. The data originates from June and September 2017 and it may be no longer be representative of the voters’ opinion. In addition, the original ballot question may be non-compliant based on methodology for word count, as prescribed by California Election Code.
Cannabis Tax: I continue to be extremely concerned about staff workload and the realities of our ability to absorb a new regulatory program. Taxation methodology on cannabis may be approached in several ways including: gross receipts; square footage; and/or inventory weight. Based on the legislative schedule and the Registrar of Voters deadline, the Council would need to make the regulatory decisions on or before July 17 in order to have a measure placed on the November ballot. Given that the range of revenue is estimated at $1.2 - $1.4 million per year, the Council should heavily weigh the burden of absorbing a new program, significant impact to all City departments (Community Development, Police, Fire, Attorney, Manager’s Office, Finance, etc.), and required ramp up time to be knowledgeable in supporting these services with significant policy decisions outstanding on the part of Council (land use, public health and safety, etc.). In short, the revenue opportunity value, measured against the short time to establish regulatory policy and for staff to operationalize it within an already heavy workload, does not appear to be a productive foundation for the results that the Council and public seek for a regulatory program for which support has been expressed. Additional time for the City Council to establish policy in a thoughtful manner and, in turn, for staff to determine how to absorb the workload until more staff can be hired, should surface as part of the deliberations. It should be noted that San Jose and Oakland have dedicated staff to manage these regulations.
Staff
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. The Tax Fairness, Transparency, and Accountability Act of 2018
2. Assembly Bill 195