HomeMy WebLinkAbout1996-07-09 - AGENDA REPORTS - STATE LEGISLATION BILL 1590 (2)v,
City Manager Approval
Item to be presented by:
Michael M. Murphy
CONSENT CALENDAR
DATE: July 9, 1996
SUBJECT: STATE LEGISLATION: SENATE BILL 1590
DEPARTMENT: City Manager's Office
On September 28, 1995, the California Supreme Court overturned lower court decisions and
validated Proposition 62, passed by the voters in 1986. The Supreme Court's action became
final on December 14, 1995. Proposition 62 requires that general and special taxes may only
be increased by a majority vote of the electorate.
Acting upon the earlier court rulings which declared Proposition 62 unconstitutional, many
local governments instituted or increased general and special taxes in response to shrinking
local government revenues. For example, utility user taxes were imposed by a number of
municipal governments to backfill revenue losses created by state legislative action which
shifted local funds to Sacramento during the early 1990s in an effort to balance the state
budget.
The Supreme Court's ruling in Santa Clara County Transportation Authority v. Guardino has
created havoc in California local government financial planning. Some legal experts believe
that the ruling requires that all funds not collected in compliance with the provisions of
Proposition 62, between 1986 and 1995, must be returned. Other experts believe that after -the -
fact tax validation elections are appropriate, in this instance, to enable the electorate to ratify
earlier tax actions.
The League of California Cities is sponsoring legislation which would avert fiscal disasters for
some cities by declaring valid tax increases and implementation actions enacted between the
1986 election and the December, 1995, Supreme Court ruling. Senate Bill 1590 authored by
Senator Jack O'Connell places the retroactive validation language into statute and will require
that all new taxes and increases enacted after December 14, 1995, be bound by the provisions
of Proposition 62.
As the City of Santa Clarita has not enacted any taxes in violation of Proposition 62, the impact
APPROVE1 Agenda Item:.
of the court's ruling is minimal. The only potential impact areas may be taxes, such as the
Transient Occupancy Tax, carried over from Los Angeles County, and if they were enacted or
increased post -Proposition 62, and adopted by the City at incorporation in 1987. An initial
review of those actions, thus far, has not yielded any areas of concern.
To protect all cities and to demonstrate statewide municipal solidarity, the League of California
Cities is requesting that all cities specifically endorse Senate Bill 1590, even if the individual
financial impact is minimal. The League is concerned that in the absence of SB 1590, cities
may be forced to return funds in a manner which will be financially devastating to individual
cities and, potentially, all California cities. California Contract Cities Association and
Independent Cities Association also actively support SB 1590.
SB 1590 has passed the State Senate and is presently under consideration by the Assembly.
RECOMMENDATION
Support Senate Bill 1590 and transmit statements of position to the Santa Clarita state
legislative delegation, Senator O'Connell, League of California Cities, California Contract
Cities Association and Independent Cities Association,
Senate Bill 1590
MPMA1590eg.709
Then, press <ENTER> to continue =>
In bill text, brackets have special meaning:
[A> <A] contains added text, and
[D> <D] contains deleted text.
California 1995-96 Regular Session
1995 CA SB 1590
Introduced
O'Connell
SENATE BILL
No. 1590
INTRODUCED BY Senator O'Connell
(Principal coauthors: Senators Craven and Solis)
(Coauthor: Senator Beverly)
FEBRUARY 16, 1996
An act to add Section 53716 to the Government Code, relating to
taxation.
LEGISLATIVE COUNSEL'S DIGEST
SB 1590, as introduced, O'Connell. Local taxation: court decision:
prospective application.
Existing law requires the imposition of a general tax by a local
government or district to be approved by a majority of the voters voting
on the tax at an election.
This bill would make the decision of the California Supreme Court in
Santa Clara County Transportation Authority v. Guardino (1995), 11 Cal.
4th 220, in which the court upheld the validity of this general tax
voter approval requirement, inapplicable to any tax that was first
imposed or increased by an ordinance or resolution adopted prior to
December 14, 1995.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State -mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature hereby finds and declares as follows:
(a) In City of Woodlake v. Logan, 230 Cal. App. 3d 1058 (hereafter
Woodlake), a California court of appeal determined that Proposition 62's
voter approval requirement for a general tax imposed by a local
government violated the provision of the California Constitution
prohibiting a referendum of a tax levy. The analysis of this case was
cited without question in the California Supreme Court's decision in
Rossi v. Brown, 9 Cal. 4th 688 (hereafter Rossi).
(b) The rule of law set forth in Woodlake was consistent with a long
line of cases that held that the California Constitution provided no
power of referenda or voter approval requirement with respect to general
tax measures (see, e.g. City of Westminster v. County of Orange, 204
Cal. App. 3d 623).
(c) Local governments relied extensively upon the longstanding
principles reiterated in the Woodlake case in enacting tax measures and
pledging the anticipated tax revenues to the repayment of bonds, to
development projects of benefit to the community, to payment of
long-term contractual obligations, and to the provision of services to
the community.
(d) Many of these tax measures were enacted in response to
reallocations of property tax revenue and other revenue losses resulting
from actions taken by the state in response to its own budgetary
problems during the last several years.
(e) The Woodlake case remained unchallenged until December 14, 1995,
when the California Supreme Court, in Santa Clara County Transportation
Authority v. Guardino, 11 Cal 4th 220 (hereafter Santa Clara), as
modified on denial of rehearing, held that the voter approval
requirement of Proposition 62 for general taxes did not violate the
constitutional prohibition against a referendum of a tax levy.
(f) Local governments could not reasonably have foreseen that the
Woodlake decision would be disapproved by the California Supreme Court,
in light of the fact that the court repeatedly declined to address the
issue of Proposition 62's constitutionality.
(g) Consequently, it would be manifestly unfair and unjust, and
would cause severe economic hardship, inequity, and disruption, to apply
the decision in the Santa Clara case retroactively so as to threaten
taxes previously imposed by local governments in reasonable reliance on
existing law, as embodied in the Woodlake and Rossi decisions.
(h) Local governments throughout the state and the recipients of the
public services those agencies provide, as well as parties to local
government contracts and holders of bonds and other debt instruments,
are dependent upon uninterrupted funding from those taxes potentially
affected by the Santa Clara case for the provision of essential public
services, including police, fire, and other public safety services.
(i) Public policy will be served by preventing the disruptive and
unjust effect of applying the Santa Clara case retroactively to threaten
or impair taxes initially imposed in reliance on the law at the time of
the Woodlake decision.
Q) The retroactive application of the Santa Clara decision to taxes
previously imposed pursuant to the Woodlake decision would require
layoffs of public employees, including public safety officers, would
impede or require termination of many public projects, threaten or
eliminate matching fund programs with the state and federal governments,
and adversely affect the state's economy.
(k) In Forster Shipbldg. Co. v. County of L.A., 54 Cal. 2d 450, the
California Supreme Court held that the Legislature, as well as the
courts, has the authority to apply California Supreme Court decisions,
that overrule a prior statement of the law, prospectively only. It is
the purpose of this act to limit the application of the Santa Clara
decision by having it apply only to those tax ordinances and resolutions
adopted after December 14, 1995, the date of the Santa Clara decision,
after which there could no longer be justifiable reliance on the
Woodlake line of cases.
SEC. 2. Section 53716 is added to the Government Code, to read:
53716. (a) The decision of the California Supreme Court in Santa
Clara County Transportation Authority v. Guardino, 11 Cal. 4th 220, as
modified on denial of rehearing, shall not be applicable to and shall
not control any action or proceeding in which the validity of a tax or
tax increase is contested, questioned, or otherwise in issue, if the
ordinance or resolution imposing or increasing that tax was adopted
prior to December 14, 1995.
(b) In no event shall any action or proceeding contesting,
questioning, or otherwise placing in issue the validity of any portion
of this section on any -grounds be filed any later than the 30th day`
after the effective date of this section.
END OF REPORT
Enter Bill # (or END to e)it) _>