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HomeMy WebLinkAbout1996-10-01 - AGENDA REPORTS - PROPOSITION 218 (2)CITY OF SANTA CLARITA INTEROFFICE MEMORANDUM TO: Mayor Boyer and Members of the City C 1 it FROM: George A. Caravalho, City Manager DATE: October 1, 1996 SUBJECT: PROPOSITION 218 BACKGROUND In 1978, Proposition 13 sponsored by Howard Jarvis, was enacted by the voters. Proposition 13, among other things, limited the ability of local governments to increase property taxes. Eight years later, the Howard Jarvis Taxpayer Association sponsored Proposition 62, which was adopted by the voters in November 1986. Proposition 62 enacted statutory provisions requiring majority voter approval for general taxes and two-thirds voter approval for special taxes. Recently Proposition 218 qualified for the November 1996 ballot. This proposition, if approved, will become article XIIIC of the California Constitution and will further restrict the means by which public agencies can impose taxes, assessments, and fees which are related to the ownership of real property. Taxes One purpose of the proposition is to make major components of Proposition 62 a part of the California Constitution. This will require both general law and charter cities to seek majority voter approval for general taxes and two-thirds voter approval for special taxes. Proposition 218 is also applicable to special purpose districts, including school districts. The measure states that all future local general taxes, including those in cities with charters, must be approved by a majority vote of the people. The measure also requires existing local general taxes established after December 31, 1994 without a vote of the people, to be placed before the voters within two years. In addition to the voter approval requirements, Proposition 218 will authorize the voters to repeal or reduce taxes by initiative. Furthermore, with respect to cities, it will require the election to be consolidated with a regular election, unless the City Council declares an emergency by a unanimous vote. Assessments The provisions related to assessments would place extensive requirements on local governments charging assessments and would enable a minority of voters to defeat a proposed new or increased assessment. The Proposition appears to require the City to assess each parcel based upon size. Properties owned by governmental agencies, including state and federally owned properties, will be subject to all assessments unless the City can demonstrate by "clear and convincing evidence" that the property receives no special benefit form the assessment. The City will have the burden to establish if the property being assessed receives a special benefit over and above the benefit conferred on the public at large. The measure requires all new or increased assessments -and some existing assessments -to meet four conditions: • local governments must estimate the amount of "special benefit" a landowners receives, or would receive, from a project or service. Special benefit is defined as a particular benefit to land and buildings, not a general benefit to the public at large or a general increase in property values. It is the responsibility of local governments to establish which is a special benefit and which is a general benefit and charge the landowner only the cost of the special benefit. • The assessment must not exceed the cost of providing the improvement or service to the owner's property. • Schools and other public agencies will be required to pay their share of the assessments.. • Local governments must conduct mail -in elections for each assessment.. Only property owners and any renters responsible for paying assessments would be eligible to vote. Ballots cast in these elections would be weighted based on the amount of the assessment the property owner would pay. For example, if a business owner would pay twice as much assessment as a homeowner, the business owner's vote would count twice as much as the homeowner's vote. The City Council according to the measure would be prohibited from overriding a majority protest as is currently allowed for most assessments.. Furthermore, as with taxes, the measure authorizes the use of the initiative process to reduce or eliminate an assessment. Exemptions: The initiative exempts from its provisions assessments districts existing on or before November 6, 1996, if : • they were formed exclusively to finance sidewalks, streets, sewers, water, flood control, drainage systems or vector control. • the assessments were unanimously approved pursuant to a petition signed by persons owning all of the initially assessed property, but future increases in such districts are not exempt. • existing assessments approved by a majority of voters are also exempt. • assessments used exclusively to repay bonded debt are exempt if the failure to pay would violate the contract impairment clause of the federal constitution.. If not exempt, all existing, new or increased assessments would be required to comply with the proposed article. Property Related Fees This measure would restrict local governments' ability to charge "property -related" fees (water, sewer, and refuse collection service probably meet the measure's definition of a property -related fee. Gas and electric fees and fees charged to land developers are specifically exempted.) Specifically, the measure states that all local property -related fees must comply by July 1, 1997 with the following restrictions: • No property owner's fee may be more than the cost to provide service to that property owner's land. • No fee may be charged for fire, police, ambulance, library service, or any other service widely available to the public. • No fee revenue may be used for any purpose other than providing the property -related service. • Fees may only be charged for services immediately available to property owners. Additionally, the measure specifies that before adopting a new property -related fee or increasing an existing one, local governments must: Mail information to every property owner effected Reject if a majority protest in writing Hold an election on the fee General Impacts According to the Legislative Analyst by July 1, .1997, local governments would be required to reduce or repeal existing property -related fees and assessments that do not meet the measure's restrictions on (1) fee and assessment amounts or (2) the use of these revenues. The most likely fees and assessments affected by these provisions would be those for parks and recreation, library, and water service. Statewide, local government revenue reductions probably would exceed $100 million annually. The actual level of revenue reduction would depend in large part on how the courts interpret various provisions of the measure. Local governments would have significantly increased costs to hold elections, calculate fees and assessments, notify the public, and defend their fees and assessments in court. These local increased costs are unknown, but could exceed $10 million initially, and lesser after that. Schools and community college districts, state agencies, cities, counties, and other public agencies would have increased cost to pay their share of the assessments. The amount of this cost is unknown, but could total over $10 million initially, and increasing amounts in the future. Santa Clarita Analysis The City has identified the following funding mechanisms which will be impacted by Proposition 218. It appears as though the City's current assessments would not have to be submitted to the electors for a vote. However, any future increases in assessments would require a mail ballot election and receive a majority vote of the homeowners. The City would then incur the additional burden and cost of conducting elections for each assessment. The City Attorney and City staff will conduct further research to determine additional impacts. Section 5 (a) of the proposition states the following assessments existing on the effective date of this article shall be exempt from the procedures and approval process that any assessment imposed exclusively to finance the capital costs or maintenance and operation expenses for sidewalks, streets, sewers, water, flood control, drainage systems or vector control. Subsequent increases in such assessments shall be subject to the procedures and approval process. Therefore it appears as though the following districts are exempt until such time an increase is sought. • Drainage Benefit Districts NPDES • Via Dona Crista Special Benefit District • Landscape Maintenance Districts Section 6 (b) states requirements for existing, new or increased fees and charges shall not be extended, imposed, or increased by any agency unless it meets all the following requirements: 1) revenues derived from the fee or charge shall not exceed the funds required to provide the property related service. 2) revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee ro charge was imposed 4) no fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Fees or charges based on potential or future use of a service are not permitted.. In looking at this article, it appears that some problems may exist in the funding of the City's Solid Waste Program. Currently, the City collects a franchise fee for refuse collection, under the provisions of the above article, all funds must be used to provide that service. Under current practices monies received above the cost of providing the service are used for general purposes. The following assessments pay for a bond issuance and therefore would be exempt from the provisions. Valencia Town Center Public Financing Authority Golden Valley Assessment District RECOMMENDATION City Council receive, review and direct staff to continue to October 22, 1996 meeting.