RPVCCA_SR_2010_10_19_08_Reso_Opposing_Prop_26CITY OF
MEMORANDUM
RANCHO PALOS VERDES
TO:
FROM:
DATE:
SUBJECT:
HONORABLE MAYOR &MEMBERS OF CITY COUNCIL
CAROLYNN PETRU,DEPUTY CITY MANAGE~
OCTOBER 19,2010
RESOLUTION OPPOSING PROPOSITION 26-
PROPOSED CONSTITUTIONAL AMENDMENT:STATE
AND LOCAL FEES AND CHARGES:VOTE
REQUIREMENTS AND LIMITATIONS
REVIEWED BY:CAROLYN LEHR,CITY MANAGER ~.
Project Manager:Sara Singer,Senior Administrative Analyst ~
RECOMMENDATION
ADOPT A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES IN OPPOSITION OF PROPOSITION 26 PROPOSED CONSTITUTIONAL
AMENDMENT:STATE AND LOCAL FEES AND CHARGES:VOTE REQUIREMENTS
AND LIMITATIONS.
BACKGROUND AND DISCUSSION
In 1997 the California Supreme Court decided Sinclair Paint Co.v State Board of
Equalization concerning a fee on businesses that made products containing lead.The
proceeds of the fee were used for programs to screen and treat children for lead poisoning
and to otherwise mitigate the social and environmental consequences of lead
contamination.The paint company argued that the charge was in fact a tax and as such
required the approval of two-thirds approval of each chamber of the Legislature under
Proposition 13.The Court disagreed,ruling that the proceeds of a fee need not benefit
those charged as long as the fee bears a reasonable relationship to the burden imposed by
those charged.Fees of this kind are called "regulatory fees."
State and local governments impose a variety of taxes,fees,and charges on individuals
and businesses.Taxes-such as income,sales,and property taxes-are typically used to
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RESOLUTION OPPOSING PROPOSITION 26 -PROPOSED CONSTITUTIONAL
AMENDMENT:STATE AND LOCAL FEES AND CHARGES:VOTE REQUIREMENTS
AND LIMITATIONS
October 19,2010
Page 2
pay for general public services such as local government services,education,public safety,
health and social services.Fees and charges,by comparison,typically pay for a particular
service or program benefitting individuals or businesses.There are three broad categories
of fees and charges:
1)User fees-such as permit fees or activity fees,where the user pays for the
cost of a specific service or program.
2)Regulatory fees-such as fees on restaurants to pay for health inspections and
fees on the purchase of beverage containers to support recycling programs.
These are fees which pay for programs that place requirements on the
activities of businesses or people to achieve particular public goals or help
offset the public or environmental impact of certain activities.
3)Property charges-such as charges imposed on property developers to
improve roads leading to new subdivisions and assessments that pay for
improvements and services that benefit the property owner.
Overthe years,there has been disagreement regarding the difference between regulatory
fees and taxes.This measure would recategorize a broad swath of state and local fees as
taxes,setting up supermajority voter approval hurdles for what are now regulatory and
impact fees that can be adopted by simple majorities of the State Legislature,City Councils
and Boards of Supervisors.
Proposition 26 would:
•Recategorize many local government fees and charges as taxes,subjecting them to
the approval requirements of special taxes including two-thirds supermajority voter
approval.With certain limited exceptions,a tax would include any charge that
provides benefits or privileges to those not charged.
•Recategorize many state imposed fees and charges as taxes,subjecting them to
the approval requirements as taxes including two-thirds supermajority approval of
each house of the Legislature.
•Expand the supermajority approval requirement for state taxes by requiring two-
thirds supermajority approval of each house of the Legislature for "any change in
state statute which results in any taxpayer paying a higher tax."
The Official Title and Summary of Proposition 26 (see Attachment A)as prepared by the
Attorney General has been attached to this report.To protect local government revenues,
staff has prepared the attached Resolution (see Attachment B)opposing the passage of
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RESOLUTION OPPOSING PROPOSITION 26 -PROPOSED CONSTITUTIONAL
AMENDMENT:STATE AND LOCAL FEES AND CHARGES:VOTE REQUIREMENTS
AND LIMITATIONS
October 19,2010
Page 3
Proposition 26 for Council consideration.
FISCAL IMPACT
The exact fiscal impact of this measure is unknown;however,if Proposition 26 passes,
there will be significant impacts on a variety of state and local revenues and the programs
and services they fund.
Attachments:
Attachment A -Official Title and Summary of Proposition 26
Attachment B -Resolution No.2010-XX
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ATTACHMENT A
PROPOSITION 26
REQUIRES THAT CERTAIN STATE AND LOCAL
FEES BE APPROVED BY TWO-THIRDS VOTE.
FEES INCLUDE THOSE THAT ADDRESS
ADVERSE IMPACTS ON SOCIETY OR THE
ENVIRONMENT CAUSED BY THE FEE-PAYER'S
BUSINESS.INITIATIVE CONSTITUTIONAL
AMENDMENT.
Official Title and Summary
Prepared by the Attorney General
REQUIRES THAT CERTAIN STATE AND LOCAL FEES BE
APPROVED BY TWO-THIRDS VOTE.FEES INCLUDE THOSE THAT
ADDRESS ADVERSE IMPACTS ON SOCIETY OR THE
ENVIRONMENT CAUSED BY THE FEE-PAYER'S BUSINESS.
INITIATIVE CONSTITUTIONAL AMENDMENT.
•Requires that certain state fees be approved by two-thirds vote of Legislature and
certain local fees be approved by two-thirds of voters.
•Increases legislative vote requirement to two-thirds for certain tax measures,
including those that do not result in a net increase in revenue,currently subject to
majority vote.
Summary of Legislative Analyst's Estimate of Net State and Local Government
Fiscal Impact:
•Decreased state and local government revenues and spending due to the higher
approval requirements for new revenues.The amount of the decrease would
depend on future decisions by governing bodies and voters,but over time could
total up to billions of dollars annually.
•Additional state fiscal effects from repealing recent fee and tax laws:(1)
increased transportation program spending and increased General Fund
costs of $1 billion annually,and (2)unknown potential decrease in state
revenues.
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ATTACHMENT B
RESOLUTION NO.2010-XX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO
PALOS VERDES IN OPPOSITION OF PROPOSITION 26 PROPOSED
CONSTITUTIONAL AMENDMENT:STATE AND LOCAL FEES AND
CHARGES:VOTE REQUIREMENTS AND LIMITATIONS.
WHEREAS,cities are the economic engine of California and the vitality of cities and
the state's economic recovery is dependant on their fiscal stability and local autonomy;and
WHEREAS,the City of Rancho Palos Verdes supports protecting local control and
funding for vital local services;and
WHEREAS,the City of Rancho Palos Verdes has had to cut its recent budget by 1.5
percent to ensure a balanced budget,and that unwarranted fiscal limitations imposed on
our community will lead to additional hardship and reduced services for our city's residents;
and
WHEREAS,all local taxes,assessments,and property-related fees (such as for
water and sewer services)already are required to be subject to local voter approvals;and
WHEREAS,similar voter approval requirements do not apply to tax increases
proposed by the state legislature.
WHEREAS,local governments have made the necessary cuts and enacted local
balanced budgets on time,which has not been the practice of the state legislature;and
WHEREAS,the state legislature has repeatedly sought to raid local funding rather
that adopt balanced budgets that reflect the state's resources;and
WHEREAS,Proposition 26 on the November 2,2010,California state ballot -while
attempting to address the authority of the state legislature to raise revenue -overreaches
and seeks to impose additional and unjustified constraints on local governments;and
WHEREAS,by arbitrarily imposing a new definition of "taxes"applicable to local
government in the state Constitution,Proposition 26,if approved,will invite additional
litigation and destabilize existing funding for local public safety,health,transportation,and
environmental protection;now,
THEREFORE,BE IT RESOLVED that the City of Rancho Palos Verdes opposes
Proposition 26 on the November 2,2010,California state ballot.
PASSED,APPROVED,AND ADOPTED this 19th day of October 2010.
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ATTACHMENT B
Mayor
ATTEST:
City Clerk
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )ss
CITY OF RANCHO PALOS VERDES )
I,Carla Morreale,City Clerk of the City of Rancho Palos Verdes,hereby certify that the
above Resolution No.201 O-XX was duly and regularly passed and adopted by the said City
Council following a roll call vote:
Ayes
Noes
Absent
at a regular meeting held on October 19,2010.
City Clerk
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