Proposition 218

PROPOSITION 218 Introduction California voters have spoken again. On November 6, they passed (56%) Proposition 218, marking the continued fiscal conservatism of the state’s electorate and their frustration with what has been characterized as the arrogance and inefficiency of government. (SF Chronicle Staff, SF Chronicle: 11/6/96). As Bob Therrien of Ventura stated in his letter to the LA Times “Prop 13 and Prop 218 are the direct result of taxpayer abuse by our elected officials. Its time for government to do some serious soul-searching as to its duties, including the right of the people to have minimum intrusive government.” (Therrien, LA Times, 10/13/96). There are two primary political impacts of Prop 218. The first is to take the power to levy taxes and assessments out of the hands of local government and put it into the hands of the general populace, and the second is to strengthen the control of the State government over local affairs.

In essence, combined with Prop 13, local government officials have been told by its citizenry – here’s a level of taxes, fees, charges and assessments you can collect from us without asking our permission for more. Mechanically, this is somewhat debilitating because getting voter approval is a slow and, often, expensive process. The schedule of elections does not allow for a rapid enough response to deal with the speed of today’s demands. A case in point has already occurred in the City of Inglewood where the City has pulled back its offer to help finance a sports arena because Prop 218 knocked out taxes needed to support this effort and it would not be able to go before its voters until April 1997. This has given the City of Los Angeles “a leg up in getting a new sports facility at its downtown Convention Center” and may cause Inglewood to lose both the Lakers and the Kings, which would result in a significant negative financial impact.

(Belgum & Merl, LA Times: 11/8/96).! In another example, the City of South Pasadena decided to cancel a special election for a utility tax which was scheduled in December and would have cost $25,000. (LA Times Staff, LA Times: 9/20/96). The LA Times, in a post-election article raised an interesting point when it said ” the legislature and the governor must come to terms with the huge new burdens put on local governments.. Sacramento, now flush with revenues, should help solve the problem by restoring property tax revenues to local government.” (LA Times Staff, LA Times: 11/7/96). Although a potential short-term solution, it does give the State government an additional level of control of local government action (the other golden rule – he who has the gold rules) and, in effect, directly contradicts one of the intents of Prop 218’s sponsors of putting more control in the hands of the local citizenry. It is my opinion that Prop 218 is another aspect of a developing trend toward a realignment of American society away from a representative democracy toward a desire for a general democracy (whether or not this will really work is another matter altogether).

It is part of the citizenry’s way of saying to both elected and appointed government officials that government has lost its trust. Background In 1978, the California electorate passed Prop 13 which set property taxes at a maximum rate of 1% of the property’s assessed value and limited annual assessment increases to 2% until the property is sold, at which time the assessment adjusts to sales price, or there is construction or improvements to the property. Prop 13 also requires approval of two-thirds of the Legislature to raise state taxes and two-thirds of the local voters to raise special taxes. Since the passage of Prop 13, local government and the State Legislature have devised a number of ways to finance their operations. These have included increasing the use of assessments from capital specific to revenue general, expanding the use of Community Facilities Districts to charge “fees” citywide, and charging user type fees and taxes (i.e. – utility, hotel occupancy).

Although challenged a number of times in court, California courts have, generally, upheld these practices. According to lawyers at O’Melveny & Myers (a major California law firm which represents many local governments), after a 1993 California Supreme Court decision affirmed these practices, “The Supreme Court seems to be encouraging experimentation in the use of assessments.” (Morain, LA Times: 10/8/96). Major Provisions of Prop 218 (Senate Office of Research, LA Times: 10/31/96). 1. It expands the law to require that charter cities secure a majority vote of the electorate to impose new general taxes or extend or increase current general taxes. Previously, only general law cities had this requirement.

2. It requires that assessments on property be approved by a majority of property owners by 7/1/97. Exempted from this provision are assessments used to support bonded debt and assessments imposed for water, sewer or vector control. 3. Government owned property would be subject to assessments. 4.

Provision in State law permitting an assessment to be levied based on a vote of an elected board or an override of property owners’ vote by 80% of an elected board would be superseded. Assessments would be restricted to the cost of the benefit for each property. All such assessments would be subject to a mail ballot of property owners. Owner’s ballot would carry the proportionate weight of their proportionate ownership of property within the assessment area. A weighted majority of owners would be required for passage.

5. With the exception of fees charged for water, sewer and garbage collection, all fees and charges (current and new) must obtain approval of 2/3 of the electorate and all assessments on property must obtain the approval of a majority of affected property owners. Fiscal Impact of Prop 218 According to the Office of Legislative Analyst, Prop 218 will “reduce local government revenue by more than $100 million annually. Over time, local government revenue would be .. lower ..

by hundreds of millions of dollars annually…{and} would result in comparable reduction in spending for local public services.” They went on to say that “..costs to hold elections, calculate fees and assessments, notify the public, and defend their fees and assessments in courts .. could exceed $10 million initially..” They further asserted that ” schools, community college districts .. and other public agencies would have to pay their share of assessments {which}.. could total over $10 million initially..” (Secretary of State, General Election Ballot Pamphlet, 1996: 75). The Debate Proponents Some of the proponents of Prop 218 include: Howard Jarvis Taxpayers Association Consumers First Paul Gann’s Citizens Committee California Taxpayers Association Council of Sacramento Senior Organizations Alliance of California Taxpayers and Involved Voters California Republican Party California Chamber of Commerce California Farm Bureau Orange City Council Yes on Prop 218 The arguments for Prop 218 were presented in the spirit of Proposition 13 and related to the reasons for tax limitations and citizens’ rights to control what they pay and for what they pay.

Joel Fox, President of the Howard Jarvis Taxpayers Association, the major sponsor of Proposition 218, in an editorial in the LA Times (Fox, LA times: 10/20/96) put forth the following: Proposition 13 was designed to protect property taxpayers. Due to Prop 13’s success, “bureaucrats looked for ways to raise revenue while avoiding Prop 13’s restrictions. They hit upon assessment districts which were historically used to fund capital improvements that directly benefited property.” With the courts’ support, assessment districts have been reformed to enable local governments to have unlimited taxing power on property without voter consent. According to Fox “Prop 218 would remedy this.. by giving the voters a ..

say in the taxes levied on them and their property. Prop 218 will continue the Prop 13 legacy of protecting property owners from being the cash cow forced to fund most local services.” Prop 218 returns assessment districts to what they were designed for and limits their use to “services which specifically benefits property.” Fox goes on to say that “government officials still will be able to raise taxes – if they can convince voters of the need fo! r an increase.” He concludes with his belief that the safest place for the power to control taxation is with the people. Opponents Some of the opponents of Prop 218 include: Congress of California Seniors California Teachers Association California Association of Highway Patrolmen League of Women Voters California Police Chiefs’ Association California Fire Chiefs’ Association California State Association of Counties Ventura County Supervisor John Flynn Los Angeles County Supervisor Zev Yaroslavsky Los Angeles County Board of Supervisors Stone & Youngberg La Palma City Council Ventura Economic Development Association Buena Park City Council Brea City Council Citizens for Voters’ Rights League of California Cities Davis City Manager John Meyer North Tahoe Fire Protection District Fire Chief Duane Whitelaw Sacramento City Manager Bill Edgar Sacramento Area Flood Control District El Dorado County Supervisor Ray Nutting El Dorado County CAO Michael Hanford Georgetown Fire Control District Fire Chief Rick Todd Cameron Park Community Services District Board Chair John McGinness El Dorado Hills Community Services District General Manager Wayne Lowery Placerville City Manager Phil Rose MBIA Insurance Corp. The San Francisco Chronicle The arguments against Prop 218 center on its fiscal effect, reduced services and the structure of the law. A numbe …