BILL ANALYSIS
ACA 10
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Date of Hearing: May 11, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
ACA 10 (Torlakson) - As Introduced: February 11, 2009
2/3 vote.
SUBJECT : Taxation: education finance district: special tax.
SUMMARY : Amends the California Constitution to lower the
constitutional vote requirement for approval of a special tax to
be levied by an education finance district from two-thirds to a
majority of the district voters. Specifically, this bill :
1)Modifies Section 2(d) of Article XIII C of the California
Constitution to authorize an education finance district,
formed pursuant to statute, to impose, extend, or increase a
special tax within its jurisdiction by a majority of the
voters voting on the proposition.
2)Specifies that a special tax imposed by an education finance
district is not deemed to have been increased if it is imposed
at a rate not higher than the maximum rate so approved.
3)Makes clarifying, non-substantive changes to Section 4 of
Article XIII A, Section 2 of Article XIII C, and Section 3 of
Article XIII D of the California Constitution.
EXISTING LAW :
1)Authorizes cities, counties, and special districts to impose a
general tax for general governmental purposes with the
approval of a majority of the voters.
2)Prohibits special purpose districts and agencies, including
schools districts, from levying a general tax.
3)Authorizes cities, counties, and special districts to impose a
special tax for specified purposes with the approval of
two-thirds of the voters.
4)Does not allow cities, counties, or special districts to
impose an ad valorem tax on real property or a transactions
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tax or sales tax on the sale of real property within that
city, county, or special district.
5)Allows school districts, community college districts, and
county offices of education to issue bonded indebtedness for
school facilities with 55% approval.
FISCAL EFFECT : Unknown
COMMENTS :
1)The author states that, "California's budget crisis must be
resolved without breaking the state's commitment to education.
Local revenue generation and local control for our schools
must be a component to how we get ourselves out of this budget
mess. The lower school bond threshold has been instrumental
in reviving California's school facilities. A majority vote
for local education finance districts promises to similarly
rebuild the education of our children."
2)The proponents argue that local communities should be able to
explore local resources to meet local priorities and that the
two-thirds vote requirement allows a minority of voters to
thwart the will of the majority. They assert that ACA 10, in
partnership with AB 267, would give education finance
districts the tools necessary to navigate these uncertain
economic times, by addressing their needs at the local level
and relying less on the timely passage of a state budget. ACA
10 provides an important option for local schools and their
communities to work together to raise desperately needed
revenues by a simple majority of the voters, rather than the
current constitutional requirement of two-thirds vote.
Further, the proponents believe that ACA 10 presents an
example of direct democracy, in that it would give voters an
opportunity to decide the appropriate vote requirement for a
special tax imposed by an education finance district.
3)The opponents argue that the voters of California have clearly
stated that special taxes should only be approved by a
two-thirds vote and that ACA 10 runs counter to the expressed
views of Californians. The opponents are also concerned that
expanding the tax authority to education finance districts
could cause duplicative and/or increased taxation. The
opponents believe that a two-thirds vote requirement ensures
that tax increases are a last resort and argue that
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long-standing taxpayer protections should not be thwarted
based on the need for revenue.
4)Committee staff notes all of the following:
a) Background . Constitutional requirements for voter
approval of local taxes were initiated with the passage of
Proposition 13 in 1978, followed by Proposition 62, which
was approved by voters in 1986. Proposition 62 guaranteed
that all local tax increases be approved by voters. After
Proposition 62, local government resorted to the use of
fees and assessments, which did not require voter approval,
to fill the void. Ten years later, in 1996, the passage of
Proposition 218 added Articles XIII C and XIII D, providing
voters with control over taxes regardless of whether they
were called assessments, fees, or charges. Proposition 218
also included a provision requiring that special taxes
receive thirds approval of the electorate. In 2000,
however, Proposition 39 provided a narrow exception to the
two-thirds vote requirement for special taxes by
authorizing the passage of local school construction bond
measures by approval of 55% of voters.
a) General tax v. special tax. While Proposition 13 did
not define the term "special tax," the courts, over time,
have opined that a tax is a "special tax" whenever
expenditure of its revenues is limited to specific
purposes, i.e. the proceeds of the tax are earmarked or
dedicated in some manner to a specific project or projects.
In contrast, a tax is a "general tax" only when its
revenues are placed into the general fund and are available
for expenditure for any and all governmental purposes. [Bay
Area Cellular Telephone Co. v. City of Union City (2008)
162 Cal. App.4th 686; Howard Jarvis Taxpayers Assn. v. City
of Roseville (2003) 106 Cal.App.4th 1178]. School
districts and special districts are prohibited from
imposing general taxes (Proposition 218), and thus, by
definition, any tax levied by a school district or
community school district is considered to be a special tax
subject to a two-thirds voter approval. Furthermore,
school districts are not allowed to impose a special tax
that is imposed on a particular class of property or
taxpayers. Therefore, thus far, school districts have only
imposed "qualified special taxes," under Government Code
Section 50079, in the form of a parcel tax.
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a) Parcel Tax. Under existing law, a school district may
impose a qualified special tax within that district;
however, the special tax must apply uniformly to all
taxpayers (other than persons over the age of 65) or real
property within the district and must be approved by a
two-thirds vote of the qualified electors of the district.
A parcel tax is a flat fee imposed by a city, county, or
special district on each parcel, residential as well as
commercial, rather than on the assessed value of property,
located within the local entity's jurisdiction. Because
the same dollar amount of tax is assessed on each parcel of
property, whether the parcel is one acre or 100 acres,
parcel taxes are generally regressive, which means owners
of smaller parcels of land pay a larger percentage of tax
compared to owners of larger parcels of land.
Some districts levy a rate at a fixed amount per square foot
of taxable land, and many include an annual inflation
adjustment. Existing law does not prescribe a maximum rate
of tax nor does it limit the period within which the
qualified special tax may be imposed. Therefore, the rate
of tax varies significantly among different school
districts. For example, EdSource reports that, in 2008, 21
school parcel tax propositions were placed on the November
4, 2008 ballot in 21 school districts. Seventeen of those
parcel tax propositions were approved, ranging from $23 per
parcel in Santa Barbara County to $193 per parcel in Marin
County, with terms as short as three years, and as long as
nine years. A number of school districts have adopted
permanent parcel taxes. Existing law does not limit how the
special tax proceeds may be spent, and therefore, a local
school board can specify in the ballot measure how the
funds will be used. Generally, local parcel taxes provide
secure funding for teacher salaries, books, materials and
supplies, computers, and art, music and sports programs.
As a special tax, a parcel tax levied by a school district
requires approval at an election of at least two-thirds of
the qualified electors of such district. Court have
interpreted the phrase "qualified electors of such
district" to mean the registered voters voting in the
election concerning the proposed tax. [Neilson v. City of
California City (2005) 133 Cal. App.4th 1296, 1312].
Nonresident landowners are not registered voters and are
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not included among the voters voting on the proposed parcel
tax. On the other hand, some registered voters who do not
own land within the district's boundaries are able to vote
on the parcel tax even though they will not be paying that
tax (at least not directly).
b) A lower voter threshold for education finance districts ?
ACA 10 would amend the California Constitution to remove
the two-thirds vote requirement for special taxes imposed,
extended, or increased by an education finance district,
which is being created by a companion measure, AB 267, and
would replace it with a majority vote requirement. The
author maintains that local school districts lost
substantial control over their own finances with the
passage of Proposition 13 in 1978. The author argues that
ACA 10 and AB 267, together, would broaden opportunities
for local school districts to raise local revenues through
a majority vote. According to Ed Source, between 1983 and
November 2006, voters voted on 414 parcel tax proposals.
Out of 414 elections, voters approved 211 parcel taxes and
166 proposals received a majority vote but not the
necessary two-thirds vote approval. The author asserts
that, under a majority vote scenario, those 166 proposed
taxes would have been approved, bringing the success rate
of local tax approval rate to over 90%.
c) But what about regular school districts ? If both this
measure and AB 267 are enacted, and ACA 10 is approved by
the voters, then an education finance district would be
able to levy qualified special taxes with only a majority
vote of its electorate. However, a special tax levied by a
regular school district will still be subject to a
two-thirds vote requirement of the electorate; that is
except for the San Francisco Unified School District
(SFUSD). Founded in 1851, SFUSD educates approximately
55,000 of San Francisco's pre-school, elementary, middle,
and high school students at 34 preschools, 102 K-12
schools, 8 county/court schools, and 9 charter schools. It
is a relatively large and diverse district. Because SFUSD
is a school district in the county that contains only one
school district, it will be allowed, under AB 267, this
measure's companion, to form an education finance district.
Once the education finance district is formed, it will be
able to impose a special tax with only a majority vote of
the electorate approving the tax. The Committee may wish
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to examine the rationale for lowering a constitutional vote
requirement for only one regular school district, without
affording the same favorable treatment to other school
districts in the state.
d) Voting (but not paying) and paying (but not voting).
This measure is designed to make it easier for voters to
approve parcel taxes, which are taxes on landowners. Some
argue that allowing non-homeowners to vote on a tax they
will not need to pay is unfair. On the other hand,
landowners who are non-resident are not allowed to vote in
the election, but must pay the tax, if the voters approve
the measure. Finally, a district may exempt taxpayers 65
years or older, or disabled persons, thus creating another
class of voters who will not bear the tax burden but,
presumably, will benefit from living a community that has a
well-funded school system and a more educated workforce.
Is it equitable to lower the vote threshold for new parcel
taxes when many voters will not bear the costs and those
who bear the tax burden are precluded from voting? The
Committee may also wish to consider whether the Legislature
or the voters of California should be given the opportunity
to answer this question.
e) Accountability. Special taxes are subject to additional
oversight and accountability provisions. Local agencies
must issue a statement indicating the specific purpose of
the tax and use the proceeds only for that purpose. In
addition, the agencies must create an account in which the
deposit the proceeds. Finally, they must issue an annual
report that includes the amount to money collected and
expended, along with the status of any project required or
authorized by the tax measure.
f) Effective date. If approved by the Legislature, this
measure would appear on the next statewide election ballot
and, if approved, would take effect as soon as the election
results are certified.
g) Companion measure . The Committee will consider this
measure and AB 267 (Torlakson), a companion measure, at its
May 11, 2009 hearing. AB 267 authorizes an education
finance district, as defined, to impose a qualified special
tax within the district. If both this measure and AB 267
are enacted, and ACA 10 is approved by the voters, then an
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education finance district would be able to levy qualified
special taxes with only a majority vote of its electorate.
If only AB 267 is enacted, then an education finance
district would still be able to impose those taxes but with
a two-thirds vote of the electorate.
5)Related Legislation .
ACA 9 (Huffman), introduced in the current Legislative Session,
makes changes to the voting requirements contained in the
California Constitution for special taxes and bonded
indebtedness for local government. ACA 9 passed out of the
Assembly Local Government Committee with a vote of 5 - 2 and
was re-referred to this committee.
ACA 15 (Arambula), introduced in the current Legislative
Session, lowers the constitutional vote requirements for
approval of a special tax specifically for providing funding
for local transportation projects from two-thirds to a 55%
majority. ACA 15 passed out of the Assembly Local Government
Committee with a 5 - 2 vote and was re-referred to the
Assembly Committee on Appropriations.
SCA 6 (Simitian), introduced in the current Legislative
Session, amends the California Constitution to authorize
school districts, community college districts, and county
offices of education to impose a parcel tax on real property
by a 55% vote of the voters in the district or county. SCA 6
is set for a hearing on May 13, 2009, in the Senate Revenue
and Taxation Committee.
SB 1430 (Torlakson), introduced in the 2007-08 Legislative
Session, as amended on April 10, 2008, was identical to this
bill. Its companion measure, SCA 18, also introduced in the
2007-08 Legislative Session, would have reduced the vote
threshold for special taxes levied by an education finance
district from two-thirds to a majority of the electorate.
Both SB 1430 and SCA 18 died in the Senate.
SCA 8 (Simitian), introduced in the 2005-06 Legislative Session,
was identical to SCA 6 (Simitian). SCA 8 died in the Senate.
REGISTERED SUPPORT / OPPOSITION :
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Support
California Tax Reform Association
Small School Districts' Association
San Francisco Unified School District
California School Employees Association
California Federation of Teachers
California Association of School Business Officials
California Teachers Association
Opposition
California Association of Realtors
California Taxpayers' Association
Analysis Prepared by : Oksana Jaffe / REV. & TAX. / (916)
319-2098