HomeMy WebLinkAboutE-12 Staff Report - Resolution in Opposition of Initiative 21-0042A1CONSENT ITEM
E-12
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
VIA: SERGIO GONZALEZ, CITY MANAGER
FROM: NICO DE ANDA-SCAIA, DEPUTY CITY MANAGER
DATE: FEBRUARY 22, 2022
SUBJECT: CITY RESOLUTION OPPOSING THE “TAXPAYER PROTECTION AND
GOVERNMENT ACCOUNTABILITY ACT” INITIATIVE NO. 21-0042A1
BACKGROUND:
On January 4, 2022, the California Business Roundtable filed the “Taxpayer Protection and Government
Accountability Act”, or AG# 21-0042A1. This measure proposes to reduce local taxing authority, limit
voters’ input, adopt new and stricter rules for adjusting corporate taxes and fees, and makes it more
difficult to hold state and local law violators accountable.
At its December 2-3, 2021 meeting, the League of California Cities Board of Directors voted unanimously
to oppose the Initiative. Following the Board’s unanimous decision, a broad coalition of local
governments, labor and public safety leaders, infrastructure advocates, and other organizations throughout
the state have formed the ‘No on Initiative 21-0042A1’ Coalition.
The League of California Cities is asking member cities to adopt a city resolution in opposition to Initiative
21-0042A1, and in doing so join the ‘No on Initiative 21-0042A1’ Coalition.
RECOMMENDATION:
Staff recommends the City Council take the following actions:
1)Adopt Resolution No. 2022-C15, opposing Initiative No. 21-0042A1.
ANALYSIS:
In 2018, the “Tax Fairness, Transparency and Accountability Act” or AG# 17-0050 was being circulated
to qualify for the November 2018 ballot. This initiative would have drastically limited local revenue
authority. In part through the successful work and advocacy of the League of California Cities and various
coalition partners, the measure’s proponents withdrew the initiative from ballot consideration in June
2018.
APPROVED
CITY COUNCIL
2/22/2022
Resolution in Opposition to Initiative No. 21-0042A1
February 22, 2022
Page 2
On January 4, 2022, the California Business Roundtable filed the “Taxpayer Protection and Government
Accountability Act”, or AG# 21-0042A1. This measure is far more detrimental to cities than the measure
filed in 2018, because it would decimate vital local and state services to the benefit of wealthy
corporations.
The measure would create new constitutional loopholes that allow corporations to pay less than their fair
share for the impacts they have on communities, including local infrastructure, the environment, water
and air quality, and natural resources – shifting the burden to individual taxpayers. It would also make it
more difficult for state and local regulators to issue fines and levies on corporations that violate laws
intended to protect the environment, public health and safety, and other state and local laws. Further, the
measure also appears to undermine voter rights, transparency, and accountability by making it more
difficult for voters to provide input and pass measures needed to fund local services and infrastructure.
For additional legal and fiscal analysis on this initiative, please refer to Attachments 2 & 3 of this staff
report.
Proponents of the Initiative will need to submit nearly 1 million signatures by the State’s deadline in order
to qualify it for the November 2022 ballot. In anticipation of any potential ballot measure, the League of
California Cities is asking member cities to join coalition partners in opposing Initiative 21-0042A1, and
to adopt a city resolution of opposition.
The recommended action is in line with the City of Azusa’s current legislative priorities and City Council’s
adopted 2022 Legislative Platform.
FISCAL IMPACT:
There is no fiscal impact associated with the recommended actions.
Prepared by: Reviewed and Approved:
Nico De Anda-Scaia Sergio Gonzalez
Deputy City Manager City Manager
Attachment:
1) Resolution No. 2022-C15 – City Opposition to Initiative No. 21-0042A1
2) Legal Analysis by League of California Cities
3) Fiscal Analysis by CaliforniaCityFinance.Com
Page 1 of 3
RESOLUTION NO. 2022-C15
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
AZUSA, CALIFORNIA, OPPOSING INITIATIVE NO. 21-0042A1
WHEREAS, an association representing California’s wealthiest corporations is
behind a deceptive proposition aimed for the November 2022 statewide ballot; and
WHEREAS, the measure creates new constitutional loopholes that allow
corporations to pay far less than their fair share for the impacts they have on our
communities, including local infrastructure, our environment, water quality, air quality,
and natural resources; and
WHEREAS, the measure includes undemocratic provisions that would make it
more difficult for local voters to pass measures needed to fund local services and
infrastructure, and would limit voter input by prohibiting local advisory measures where
voters provide direction on how they want their local tax dollars spent; and
WHEREAS, the measure makes it much more difficult for state and local
regulators to issue fines and levies on corporations that violate laws intended to protect
our environment, public health and safety, and our neighborhoods; and
WHEREAS, the measure puts billions of dollars currently dedicated to state and
local services at risk, and could force cuts to public schools, fire and emergency response,
law enforcement, public health, parks, libraries, affordable housing, services to support
homeless residents, mental health services, and more; and
WHEREAS, the measure would also reduce funding for critical infrastructure
like streets and roads, public transportation, drinking water, new schools, sanitation, and
utilities.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of
Azusa does hereby OPPOSE Initiative 21-0042A1.
THEREFORE, BE IT FURTHER RESOLVED, that the City of Azusa,
California, will join the NO on Initiative 21-0042A1 coalition, a growing coalition of
local governments, labor and public safety leaders, infrastructure advocates, and other
organizations throughout the state.
SECTION 1. The City Clerk shall certify to the passage and adoption of this
resolution and the same shall thereupon take effect and is in force. City Staff shall email a
copy of this adopted resolution to the League of California Cities at
BallotMeasures@calcities.org.
Attachment 1
Page 2 of 3
PASSED, APPROVED AND ADOPTED this 22nd day of February, 2022.
____________________________________
Robert Gonzales
Mayor
ATTEST:
____________________________________
Jeffrey Lawrence Cornejo, Jr.
City Clerk
Page 3 of 3
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss.
CITY OF AZUSA )
I HEREBY CERTIFY that the foregoing Resolution No. 2022-C15 was duly adopted by the
City Council, at a regular meeting of said Agency held on the 22nd day of February 2022, by the
following vote of the Council:
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: COUNCILMEMBERS:
___________________________________
Jeffrey Lawrence Cornejo, Jr.
City Clerk
APPROVED AS TO FORM:
___________________________________
Best, Best & Krieger, LLP
City Attorney
The Taxpayer Protection and Government Accountability Act
Initiative No. 21-0042A1
January 21, 2022
Summary: The measure limits the voters’ input, adopts new and stricter rules for
raising taxes and fees, and makes it more difficult to hold state and local law
violators accountable.
Limiting Voter Authority and Accountability
•Limits voter input. Prohibits local voters from providing direction on how
local tax dollars should be spent by prohibiting local advisory measures.
•Invalidates Upland decision that allows majority of local voters to pass
special taxes. Taxes proposed by the Initiative are subject to the same
rules as taxes placed on the ballot by a city council. All measures passed
between January 2022 and November 2022 would be invalidated unless
reenacted within 12 months.
Restricting Local Fee Authority to Provide Local Services
•Franchise fees. Sets new standard for fees and charges paid for the use of
local and state government property. The standard may significantly
restrict the amount oil companies, utilities, gas companies, railroads,
garbage companies, cable companies, and other corporations pay for
the use of local public property. Rental and sale of local government
property must be “reasonable” which must be proved by “clear and
convincing evidence.”
•Except for licensing and other regulatory fees, fees and charges may not
exceed the “actual cost” of providing the product or service for which
the fee is charged. “Actual cost” is the “minimum amount necessary.” The
burden to prove the fee or charge does not exceed “actual cost” is
changed to “clear and convincing” evidence.
Restricting Authority of State and Local Governments to Issue Fines and Penalties
for Violations of Law.
•Requires voter approval of fines, penalties, and levies for corporations and
property owners that violate state and local laws unless a new, undefined
adjudicatory process is used to impose the fines and penalties.
Attachment 2
Restricting Local Tax Authority to Provide Local Services
• Expanding existing taxes (e.g., UUT, use tax, TOT) to new territory (e.g.,
annexation) or expanding the base (e.g., new utility service) requires voter
approval.
• City charters may not be amended to include a tax or fee.
• New taxes can be imposed only for a specific time period.
• Taxes adopted after January 1, 2022, that do not comply with the new
rules, are void unless reenacted.
• All state taxes require majority voter approval.
• Prohibits any surcharge on property tax rate and allocation of property
tax to state.
Other Changes
• No fee or charge or exaction regulating vehicle miles traveled can be
imposed as a condition of property development or occupancy .
CaliforniaCityFinance.Com
Fiscal and Program Effects of
Initiative 21-0042A1 on Local Governments
If Initiative 21-0042A1 is placed on the ballot and passed by voters, it will result in:
Billions of local government fee and charge revenues placed at heightened legal peril. Related public
service reductions across virtually every aspect of city, county, special district, and school services
especially for transportation, and public facility use.
Hundreds of millions of dollars of annual revenues from dozens of tax and bond measures approved by
voters between January 1, 2022 and November 9, 2022 subject to additional voter approval if not in
compliance with the initiative.
Indeterminable legal and administrative burdens and costs on local government from new and more
empowered legal challenges, and bureaucratic cost tracking requirements.
The delay and deterrence of municipal annexations and associated impacts on housing and commercial
development.
Service and infrastructure impacts including in fire and emergency response, law enforcement, public
health, drinking water, sewer sanitation, parks, libraries, public schools, affordable housing,
homelessness prevention and mental health services.
1.Local Government Taxes and Services Threatened
With regard to taxes, Initiative 21-0042A1:
Prohibits advisory, non-binding measures as to use of tax proceeds on the same ballot.
o Voters may be less informed and more likely to vote against measures.
Eliminates the ability of special tax measures proposed by citizen initiative to be enacted by majority voter
approval (Upland).
o Because the case law regarding citizen initiative special taxes approved by majority vote (Upland)
is so recent, it is unknown how common these sorts of measures might be in the future. This
initiative would prohibit such measures after the effective date of the initiative. Any such
measures adopted after January 1, 2022 through November 8, 2022 would be void after
November 9, 2023.
Requires that tax measures include a specific duration of time that the tax will be imposed. This seems to
require that all tax increases or extensions contain a sunset (end date).
o This would require additional tax measures to extend previously approved taxes at additional cost
to taxpayers.
Requires that a tax or bond measure adopted after January 1, 2022 and before the effective date of the
initiative (November 9, 2022) that was not adopted in accordance with the measure be readopted in
compliance with the measure or will be void twelve months after the effective date of the initiative
(November 9, 2023).
o If past election patterns are an indication, dozens of tax and bond measures approving hundreds
of millions of annual revenues may not be in compliance and would be subject to reenactment.
Most will be taxes without a specific end date. Because there is no regularly scheduled election
within the 12 months following the effective date of the initiative, measures not in compliance
would need to be placed on a special election ballot for approval before November 9, 2023 or the
tax will be void after that date. General tax measures would require declaration of emergency and
unanimous vote of the governing board.
2217 Isle Royale Lane • Davis, CA • 95616-6616
Phone: 530.758.3952 • Fax: 530.758.3952
Rev. January 7, 2022 Attachment 3
–2 –rev January 7, 2022
CaliforniaCityFinance.com
Requires voter approval to expand an existing tax to new territory (annexations). This would require
additional tax measures and would deter annexations and land development in cities.
o If a tax is "extended" to an annexed area without a vote after January 1, 2022, it will be void 12
months later until brought into compliance. Because there is no regularly scheduled election
within the 12 months following the effective date of the initiative, such extensions for general
taxes would, under current law, each require unanimous vote of the agency board to be placed on
a special election ballot or would be void after November 9, 2023.
1.a. Number of Measures and Value of Local Taxes at Risk1
In 2020, voters in California approved 293 local tax and bond measures for cities, counties, special
districts and schools (95 in March and 198 in November). The approved measures enacted $3.85 billion
in new annual taxes including $1.3 billion for cities, $302 million for counties, $208 million for special
districts (fire, wastewater, open space and transit districts), and $2.037 billion for schools (including for
school bonds).
Most tax measures go to the ballot during a presidential or gubernatorial primary or general election in an
even year. However, some tax measures are decided at other times. During 2019, there were 45
approved tax and bond measures (24 city, 14 special district, 7 school) adopting $154.0 million in new
annual taxes ($124.0 million city, $10.5 million special district and $19.2 million school).
Most tax and bond measures comply with the new rules in Initiative 21-0042Amdt#1 except:
Dozens of taxes would require end dates. This would require additional measures in future years
to extend the taxes further. Very few extensions of existing local taxes fail.
Majority vote general tax measures could not be accompanied on the same ballot with an
advisory, non-binding measure as to use of tax proceeds.
Special taxes placed on the ballot via citizen initiative would require two-thirds voter approval.
Bond measures have fixed terms. Historically, about 20 percent of other tax measures have included
specific durations (i.e. sunsets). Advisory measures as to use of revenues are uncommon. I do not expect
the provisions of 21-0042A1 to have any substantial effect on passage rates. However, some 2022
approved measures would likely have to put back on the ballot.
Based on history, a reasonable estimate of the annualized tax revenues estimated to be approved by
1 Source: Compilation and summary of data from County elections offices.
– 3 – rev January 7, 2022
CaliforniaCityFinance.com
voters in 2022 and placed at risk by this initiative is at least $1.5 billion, including $1.0 billion from
cities and $500 million from counties and special districts.2
1.b. Additional Costs and Public Service Effects of the Tax Provisions
In addition to service delays and disruption due to new tax revenues placed at greater legal risk, there will
be substantial additional costs for legal defense. The deterrence of taxes for annexations will delay and
deter municipal annexations.
2. “Exempt Charges” (fees and charges that are not taxes) and Services Threatened
With regard to fees and charges adopted after January 1, 2022, Initiative 21-0042A1:
Subjects new fees and charges for a product or service to a new "actual cost” test defined as “(i) the
minimum amount necessary to reimburse the government for the cost of providing the service to the
payor, and (ii) where the amount charged is not used by the government for any purpose other than
reimbursing that cost. In addition, subjects these same charges to a new, undefined, “reasonable”
standard.
Subjects fees and charges for entrance to local government property; and rental and sale of local
government property to a new, undefined, “reasonable” test.
Subjects a challenged fee or charge to new, higher burdens of proof if legally challenged.
Prohibits a levy, charge or exaction regulating or related to vehicle miles traveled, imposed as a
condition of property development or occupancy.
2.a. Value on New Local Government Fees and Charges at Risk3
Virtually every city, county, and special district must regularly (e.g., annually) adopt increases to fee rates and
charges and revise rate schedules to accommodate new users and activities. Most of these would be subject
to new standards and limitations under threat of legal challenge. Based on the current volume of fees and
charges imposed by local agencies and increases in those fees simply to accommodate inflation, the amount
of local government fee and charge revenue placed at risk is about $1 billion per year including those
adopted since January 1, 2022. Of this $1 billion, about $570 million is for special districts, $450
million is cities, and $260 million is counties.4
Major examples of affected fees and charges are:
1. Nuisance abatement charges - such as for weed, rubbish and general nuisance abatement to fund
community safety, code enforcement, and neighborhood cleanup programs.
2. Commercial franchise fees.
3. Emergency response fees - such as in connection with DUI.
4. Advanced Life Support (ALS) transport charges.
5. Document processing and duplication fees.
6. Transit fees, tolls, parking fees, public airport and harbor use fees.
7. Facility use charges, fees for parks and recreation services, garbage disposal tipping fees.
In addition to fees and charges, the measure puts fines and penalties assessed for the violation of state and
2 This does not include citizen initiative special tax approved by majority but not two-thirds. Because this approach is new, the
number of these measures and amount of revenue involved cannot be estimated.
3 Source: California State Controller Annual Reports of Financial Transactions concerning cities, counties and special districts,
summarized with an assumed growth due to fee rate increases (not population) of 2 percent annually.
4 School fees are also affected but the amount is negligible by comparison.
– 4 – rev January 7, 2022
CaliforniaCityFinance.com
local law at risk, making them taxes subject to voter approval under certain circumstances.
2.b. Additional Costs and Public Service Effects of the Fee/Charge Provisions
In addition to service delays and disruptions due to fee and charge revenues placed at greater legal risk,
there would be substantial additional costs for legal defense. The risk to fees and charges will make
infrastructure financing more difficult and will deter new residential and commercial development.
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