BILL ANALYSIS Ó SENATE GOVERNANCE & FINANCE COMMITTEE Senator Lois Wolk, Chair BILL NO: SCA 11 HEARING: 1/25/13 AUTHOR: Hancock FISCAL: No VERSION: 1/25/13 TAX LEVY: No CONSULTANT: Grinnell LOCAL GOVERNMENT: SPECIAL TAXES: VOTER APPROVAL Lowers the vote threshold for a local agency to levy, increase, or extend any special tax from 2/3 to 55%. Background and Existing Law The California Constitution states that taxes levied by local governments are either general taxes, subject to majority approval of its voters, or special taxes, subject to 2/3 vote (Article XIII C). Proposition 13 (1978) required a 2/3 vote of each house of the Legislature for state tax increases, and 2/3 vote of local voters for local special taxes. Proposition 62 (1986) prohibited local agencies from imposing general taxes without majority approval of local voters, and a 2/3 vote for special taxes. Proposition 218 (1996) extended those vote thresholds to charter cities, and limited local agencies' powers to levy new assessments, fees, and taxes. Local agencies generally propose to increase taxes by adopting an ordinance or a resolution at a public hearing. The Constitution further bars school districts from imposing general taxes, but allows school districts, community college districts, and county offices of education to issue bonded indebtedness for school facilities with 55% percent approval (Proposition 39, 2000). Proposed Law Senate Constitutional Amendment 11 lowers the vote threshold for local agencies imposing, extending, or increasing any special tax from 2/3 to 55%. The measure also makes conforming changes to the Constitution. State Revenue Impact SCA 11 - 1/25/13 -- Page 2 No estimate. Comments 1. Purpose of the bill . According to the author, "SCA 11 would lower the vote threshold for increasing most special taxes from 2/3 to 55%. By doing so, it would align the general requirement with that of school bonds under Proposition 39. It would lower the burden on cities, counties, and special districts to increase revenue for needed local services provided to Californians. It would apply to nearly all services, from schools, to transportation, to public safety agencies. SCA 11 would not mandate any increase on special taxes. Cities, counties, and special districts would still have to place proposals on the ballot, and local voters would still have to approve them. The existing exceptions to the 2/3 rule (for instance, sales taxes on real property sales) under Prop. 13 would remain in place. The only change SCA 11 makes is existing law is to lower the vote threshold so that 55% of local voters can choose to increase revenue for their city, county or special district." 2. More or less . Majority rule is a two-edged sword: democratically elected governments are supposed to enact policies that the voters want, but both federal and state systems restrict the majority due to fears about its ability to use its power to oppress minority interests. For the great majority of public issues, fifty-percent plus one of a legislative body or an electorate rule, but for others the United States and California Constitutions provide that a majority is not enough and a higher threshold is necessary, such as amending the U.S. Constitution, removing a president from office, ratifying a treaty, or overriding a veto. States largely import the 2/3 vote from the United States Constitution into their own for those same purposes, but also require 2/3 vote on taxes or other measures. In a series of voter initiatives, Californians have elevated local special tax increases and legislatively enacted state tax increases to this level, SCA 11 - 1/25/13 -- Page 3 while almost every other change can be enacted by majority vote; local agencies can enact general taxes, and voters can approve tax initiatives increasing state taxes by majority vote, as they did with Proposition 30 (2012). As such, local agencies need a majority vote to assess taxes and spend the proceeds on whatever purposes they want to, but 2/3 if they restrict the use of the tax proceeds. Supermajorities of the Legislature are necessary to increase taxes, but only majorities of voters can. SCA 4 partially reverses the previously elevated standard for local special taxes. If enacted, local agencies can enact special taxes for any purpose at 55% vote, paralleling Proposition 39's similar allowance for school bonds. The policy question for the Committee is: what should be the voting threshold for local special taxes? The Legislative Analyst's Office says there's no right answer, as requirements vary across states, but adds that the process should be easy enough for voters to understand and reflect overarching objectives for voter participation in tax decisions. The Committee may wish to consider the overall system of voter thresholds necessary to increase taxes. 3. Join the party . The Committee will hear five other measures that change the vote threshold for special taxes: SCA 3 (Leno) - allows school districts, community college districts, and county office of education to levy parcel taxes at 55% vote. SCA 4 (Liu) - allows local agencies to levy, extend, or increase special taxes at 55% vote for local transportation projects. SCA 7 (Wolk) - lowers the vote threshold for bonded indebtedness incurred to construct, reconstruct, rehabilitate, or replace public libraries; allows local agencies to levy, extend, or increase special taxes at 55% vote to fund public libraries. SCA 8 (Corbett) - allows local agencies to levy, extend, or increase special taxes at 55% vote for local transportation projects. SCA 9 (Corbett) - allows local agencies to levy, extend, or increase special taxes at 55% vote for community and economic development projects. Support and Opposition (05/09/13) SCA 11 - 1/25/13 -- Page 4 Support : American Association of University Women; Association of California Construction Managers; Association of California Healthcare Districts; California Association of Zoos and Aquariums; California Coalition for Adequate School Housing; California Park and Recreation Society; California Professional Firefighters; California Special Districts Association; California State Association of Counties; California Watershed Coalition; Chabot Space and Science Center; Chino Valley Independent Fire District; City and County of San Francisco; City of Rancho Cordova; Contra Costa County Fire Protection District; Cordova Recreation and Park District; Cucamonga Valley Water District; Desert Recreation District; East Bay Municipal Utility District; East Bay Zoological Society; Fulton-El Camino Recreation and Park District; Hesperia Recreation and Park District; Idyllwild Fire Protection District; League of California Cities; Leucadia Wastewater District; Livermore Area Recreation and Park District; Metropolitan Transportation Commission; Olivehain Municipal Water District; Olivehurst Public Utility District; Palos Verdes Library District; Reclamation District No. 1000; Running Springs Water District; Santa Clara County Board of Supervisors; Santa Clara County Open Space; Small School Districts Association; Three Valleys Municipal Water District; Tomales Village Community Services District; Vista Irrigation District; 1 individual Opposition : American Council of Engineering Companies, Apartment Association California Southern Cities; Apartment Association of Orange County; California; Apartment Association of Greater Los Angeles; Association of California Life and Health Insurance Companies; California Ambulance Association; California Apartment Association; California Business Properties Association; California Chamber of Commerce; California Grocers Association; California Healthcare Institute; California Manufacturers and Technology Association; California Restaurant Association; California Retailers Association; California Taxpayers Association; California Association of Winegrape Growers; East Bay Rental Housing Association; Howard Jarvis Taxpayers Association; National Federation of Independent Business; Nor Cal Rental Property Association; Orange County Business Council; San Diego County Apartment SCA 11 - 1/25/13 -- Page 5 Association; San Miguel Community Services District; Santa Barbara Rental Property Association; Union Pacific Railroad; Southwest California Legislative Council; Trinity Center Community Services District; Western Manufactured Housing Communities Association