BILL ANALYSIS Ó
REVISED (SUPPORT/OPPOSITION)
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SCA 7 HEARING: 5/15/13
AUTHOR: Wolk FISCAL: No
VERSION: 2/26/13 TAX LEVY: No
CONSULTANT: Grinnell
LOCAL GOVERNMENT FINANCING: PUBLIC LIBRARIES: VOTER
APPROVAL
Lowers the vote threshold for cities, counties, or library
districts to issue bonds or to levy special taxes from 2/3
to 55%.
Background and Existing Law
I. Taxes. 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.
Local agencies generally propose to increase taxes by
adopting an ordinance or a resolution at a public hearing.
Cities and counties that operate libraries can fund them
out of general tax revenue; library districts are often
funded from a share of the property tax. Current law
additionally allows cities, counties, or library districts
to levy parcel taxes to fund libraries. The agency may
implement these taxes, for as long as it wants, spend the
proceeds for any purpose, and apply any tax rate it
chooses. Voters must approve the taxes by a 2/3
SCA 7 - 2/26/13 -- Page 2
supermajority. Additionally, cities and counties may form
Community Facilities Districts, also known as Mello-Roos
Districts, to levy special taxes (parcel taxes). A
Mello-Roos Community Facilities District (CFD) issues bonds
against these special taxes to finance the public works
projects. Like all special taxes, Mello-Roos Act special
taxes require 2/3 -voter approval. If there are fewer than
12 registered voters, the affected land-owners vote.
City and counties can also impose transactions and use
taxes to fund libraries, provided that the combined rate in
the county does not exceed 2 percent, upon 2/3 vote of the
local agency's governing board and 2/3 voter approval.
II. Bonds. The California Constitution requires counties,
cities, and school districts to get voter approval for
long-term debt. Counties, cities, school districts,
community college districts, and some special districts can
issue general obligation (GO) bonds, secured by ad valorem
property tax revenues, with 2/3-voter approval, and
implemented in statute in the Government Code. 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 7 amends the Constitution
to authorize cities, counties, or special districts to
impose a special tax by a 55% vote of the voters in the
district or county under specified circumstances,
including:
The district governing board approves the
proposition by majority vote,
The ballot proposition contains a specific list of
programs and purposes to be funded, and a requirement
that funds be spent solely for those pro-grams and
purposes,
The ballot proposition includes a requirement for
annual independent audit of the amount of tax proceeds
collected and expended and the specified purposes and
programs funded, and
The ballot proposition requires the governing board
to create a citizens' oversight committee to review
SCA 7 - 2/26/13 -- Page 3
all expenditures of proceeds and financial audits, and
report its findings to the governing board and the
public.
SCA 7 also amends the Constitution to allow cities,
counties, and special districts to issue bonded
indebtedness to construct, reconstruct, rehabilitate, or
replace public libraries, including furnishings, equipment,
or leasing real property. The measure requires the
following accountability measures be in place as part of
the ballot question:
A requirement that bond proceeds be used solely to
construct, reconstruct, rehabilitate, or replace
public libraries, including furnishings, equipment, or
leasing real property, and not for any other purpose,
including personnel and operating expenses,
A list of the specific public library facility
projects to be funded,
Certification that the local agency has evaluated
the degree to which existing facilities are inadequate
to meet the needs of the residents of the area, and
the degree to which proposed facilities will meet the
needs,
A requirement for an annual independent performance
audit ensuring that bond proceeds have been used
solely for the listed projects, and
A requirement for an annual independent financial
audit of the bond proceeds until all have been
expended.
SCA 7 also makes clarifying and conforming changes to the
Constitution.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "SCA 7
would give local communities the opportunity to decide if
they would like to levy a tax for the support of library
services. Libraries provide vital services to the state's
SCA 7 - 2/26/13 -- Page 4
educational system and communities across the state. More
than 21 million people use California's public libraries
each year. As public schools are increasingly cutting
library services and even closing all together, citizens
rely on public libraries more than ever before. Children,
students, families, and seniors all depend on public
libraries for a variety of services from literacy programs
to resources for students. In addition public libraries
play a critical role in bridging the digital divide and
connecting people with technology who would otherwise not
have access to it. While demand for library services is
growing, many libraries are struggling to meet the needs of
their users, especially in the current economic climate.
In 2007, the California State Library conducted a thorough
"Needs Assessment," and determined that there were 662
library projects pending in the state, totaling $8 billion.
Many libraries' facilities are old and their technology is
inadequate. According to a special report issued by the
California State Library, entitled, "Thirty Years of
California Library Ballot Measures - 1980-2009," they note,
"Those library-related measures in California which only
required a simple majority were approved 77% of the time,
which is very close to the overall national average of 80%.
However, library measures which required a supermajority
were approved only 45% of the time. Lowering the voter
threshold to 55 percent to raise revenue for libraries
would give local governments the ability to keep libraries
open and support their communities with the resources they
need."
2. Who pays ? An old piece of tax policy wisdom attributed
to Louisiana Governor Russell Long states that, "Don't tax
you, don't tax me, tax the man behind the tree." SCA 5
lowers the threshold on parcel taxes, which are taxes on
landowners. Therefore, resident non-landowners, like
renters, are able to vote in the election, but do not pay
any of the taxes except as passed through in rents. In the
reverse, non-resident landowners are not able to vote in
the election, but must pay the tax if the voters approve
the measure. In addition, districts may exempt taxpayers
65 years or older, thereby creating another class of voters
who do not bear the incidence of the tax. The Committee
may wish to consider whether lowering the vote threshold
for new parcel taxes is equitable when many voters do not
bear the cost, and those who may bear the cost cannot vote.
SCA 7 - 2/26/13 -- Page 5
3. 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 of government restrict the majority's ability to
oppress a minority interests. For the great majority of
public issues, fifty-percent plus one of a legislative body
or an electorate rule. But for some issues, 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, while almost every other
change to the law 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 7 adds another layer onto the complex system above. If
enacted, local agencies can enact special taxes for library
purposes at 55% vote, paralleling Proposition 39's similar
threshold for school bonds. However, the measure doesn't
affect thresholds for taxes dedicated to other purposes.
The first 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 second is: should the thresholds be
different based on the use of the tax proceeds, like
libraries? The Committee may wish to consider the reasons
for affording library taxes special treatment when
contemplating the overall system of voter thresholds
necessary to increase taxes.
5. Signed, sealed, delivered . California allows cities,
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counties, and library districts to levy parcel taxes, which
are different in many ways from property taxes and general
obligation bonds. First, parcel taxes are not ad valorem,
or assessed based on the value of a property; instead they
are a flat rate assessed per parcel or per square foot,
regardless of its size. Essentially, parcel taxes are a
flat tax on property ownership. Secondly, the proceeds of
general obligation bonds must be spent on the acquisition
and improvement of property, or on school construction.
Parcel taxes give the imposing authority considerably more
flexibility to spend as they see fit. Proceeds are not
limited to certain uses; revenues may be used for ongoing
expenses, programs, or buildings at the local agency's
discretion
Parcel taxes are flexible ways of raising revenues at the
local level, but are subject to certain requirements.
Parcel tax elections must be held on "established election
dates", which means in March, April, or November of an
even-numbered year, or March, June, or November in an
odd-numbered year. Parcel taxes do not have a cap; Parcel
tax proposals voted on in the last ten years varied from
$26 per parcel to $765 per parcel, with terms as short as
two years, and others enacted permanently.
6. The ties that bind . SCA 7 not only lowers the vote
threshold for parcel taxes used for library purposes, but
also extends to libraries the lower voter threshold of 55%
for debt issuance the voters granted to school districts
and community college districts in Proposition 39 (2000).
Taxes and bonds are fundamentally different: a district's
voters can repeal a tax by referendum, but once an agency
issues a bond, it's irreversibly committed to pay principal
and interest according to schedule until the bond is
redeemed. While Proposition 39 led to more school
facilities in a state with a large student population, it
also led to savvy financial advisers coaxing districts into
borrowing too much or using unwise debt structures: some
districts issued bonds with 30 years of deferred principle
and interest payments, but triggered twelve to one debt to
principal ratios when repayments started becoming due in
year 30. Additionally, school districts are filing
lawsuits against potentially unsavory financial advisors:
the Willits Unified School District is suing Caldwell
Flores Winters, Inc., stating it had been "duped" into
overpaying the firm hundreds of thousands of dollars.
SCA 7 - 2/26/13 -- Page 7
While school districts and libraries are very different, is
there cause for concern that by lowering the vote
threshold, SCA 7 could give rise to similar problems in
libraries? The Assembly recently approved AB 182
(Buchannan), which substantially reforms school bond
issuance in response to the above problems, and this
Committee will hear the bill in June. The Committee may
wish to consider applying AB 182's reforms to any bonds
issued at the lower voter threshold of 55%.
7. 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 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.
SCA 11 (Hancock) - allows local agencies to levy,
extend, or increase special taxes at 55% vote for any
purpose.
Support and Opposition (05/13/13)
Support : California Library Association; Jeanne J. Boss,
Friends of the Santa Cruz Public Libraries Board Member;
League of California Cities; Milpitas Library Commission;
Santa Cruz Public Libraries; Sheridan Beuving, Chairman,
Stanislaus County Library Advisory Board; Ann Rivo, Ph.D,
Board Member San Rafael Public Library Foundation; Anne R.
Bernardo, President, California Library Services Board,
Director Tulare County Public Law Library; Arlene Sukolsky,
Trustee of the San Rafael Library Board; Berkeley City
Council; Bill Jeffrey Miller, Friends of the Hemet Public
Library; Bill Kampe, Mayor, Pacific Grove; Board of Library
Trustees of the Altadena Library District; Burbank Board of
Library Trustees; California Library Association; Libraries
Board Member; Kern County Library; League of California;
SCA 7 - 2/26/13 -- Page 8
California Park and Recreation Society; Castro Valley
Friends of the Library; City of Pleasanton Library
Commission; City of Rancho Cordova; City of Riverside; City
of San Diego Board of Library Commissioners; Constance Tse,
Retired Teacher; Contra Costa Board of Supervisors;
Danielle Maddox, President, Friends of the Sunnyvale
Library; David Glass, Mayor of Petaluma; David Rabbitt,
Sonoma County Board of Supervisors, Chair and Second
District Supervisor; Deborah Doyle, Chair, Friends of the
San Francisco Public Library; Fran Larson, Treasurer of
Pacifica Friends of the Library; Frank Scotto, Mayor, City
of Torrance; Friends of the Fortuna Library; Friends of the
Hemet Public Library; Friends of the Riverside Public
Library; Friends of the Sacramento Public Library; Friends
of the San Benito County Free Library; Friends of the San
Diego Public Library; Gary Knight, President, Escondido
Public Library Board of Trustees; Gary T. Ragghianti, San
Rafael Library Foundation Board member; Gretchen U.
Kingsbury, Retired Junior High School Teacher; Jean Quan,
Mayor, City of Oakland; Jeanne J. Boss, Friends of the
Santa Cruz Public; Jeffrey S. Schoppert, President, San
Rafael Public Library Foundation; Jennifer Newell, Santa
Maria Public Library, Retired Children's Librarian & Board
Member; Joan Ahlstrand Member of Turlock Friends of the
Turlock Library; JoAnn Levy, Award winning Author, Board
member, California State Library Foundation; Joanne F. del
Rosario, Mayor, Town of Colma; Karen Williams, Executive
Director, Stanislaus Literacy Center; Marc Sena Carrel,
California based bookseller, Literacy Teacher, Former Civil
Rights Investigator with the US. Department of Education;
Mark Landman, Mayor, City of Cotati; Mary Kathleen
Hanselmann, Defense Language Institute, Chief Librarian;
Michael J. Beck, City Manager, Pasadena; Mindy Kittay,
Mendocino County Librarian; Mrs. Caroline Barba,
Co-president Pacifica Friends of the Library; Mrs. Joan
Putz, co-president Pacifica Friends of the Library; Ojai
Valley Library Friends and Foundation; Palos Verdes Library
District; Patty Wong, Library Director Yolo County; Paula
Stillman, President, Daly City Public Library Associates;
Pomona Library Foundation; Redwood City Public Library
Board; Ron Serrano, Immediate Past President, Paradise
Friends of the Library, Member, Butte Country Library
Advisory Board; Santa Cruz Public Libraries; Santa Cruz
Public Libraries Joint Powers Authority Board; Sarah
Houghton, Director, San Rafael Public Library; Sharon
Arpoika, President, Friends of the Oakdale Library; Sharon
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Cohen, Director, Burbank Library Services Director;
Sheridan Beuving, Chairman, Stanislaus County Library
Advisory Board; Sonoma County Board of Supervisors;
Stephanie Beverage, City of Huntington Beach, Director of
Library Services; Steven M. Poulos, El Cerrito Commisioner,
Contra Costa County Library Commision, Chair, El Cerrito
New Library Community Campaign; Susan Staggs, Board Member,
Friends of the Amador County Library; Teresa Barrett, City
of Petaluma, Councilmember; Terry Woodrow, Chair, County of
Alpine Board of Supervisors; The Humboldt Library
Foundation; Torrance Library Commission; Town of Colma;
Ursula Davidson, San Rafael Public Library, Volunteer;
Valerie Lambertson, Member of South San Franciso Friends of
the Library; Vanessa Czopek, Stanislaus County, Library
Director; Wendy Rianldi, Board of Friends of the San
Francisco Public Library; Yolo County Board of Supervisors;
Yolo County Library Advisory Board, 63 individuals
Opposition : Apartment Association California Southern
Cities; Apartment Association of Orange County; California
Chamber of Commerce; California Manufacturers and
Technology Association; California Mortgage Bankers
Association; California Retailers Association; California
Taxpayers, George Runner, Member Board of Equalization,
District 2