BILL ANALYSIS                                                                                                                                                                                                    Ó






                           SENATE COMMITTEE ON ELECTIONS 
                            AND CONSTITUTIONAL AMENDMENTS
                           Senator Norma J. Torres, Chair


          BILL NO:   SCA 7                HEARING DATE:  6/18/13
          AUTHOR:    WOLK                 ANALYSIS BY:   Darren Chesin
          AMENDED:   2/26/13
          FISCAL:    NO
          
                                        SUBJECT
           
          Local government financing:  public libraries:  voter approval

                                      DESCRIPTION  
          
           Taxes
          
          Existing law  , pursuant to 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 of 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 of 1986 prohibited local agencies from  
          imposing general taxes without majority approval of local  
          voters, and a 2/3 vote for special taxes.  Proposition 218 of  
          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.

          Existing law  provides that 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.   
          Existing 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 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.

           This constitutional amendment  would 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 programs 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.

           The ballot proposition requires the governing board to create  
            a citizens' oversight committee to review all expenditures of  
            proceeds and financial audits, and report its findings to the  
            governing board and the public.

           Bonds
           
           Existing law  , pursuant to the California Constitution requires  
          counties, cities, and school districts to obtain 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.  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).

           This constitutional amendment  would allow cities, counties, and  
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          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 measure:

           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.
           A requirement for an annual independent financial audit of the  
            bond proceeds until all have been expended. 

           This constitutional amendment  also makes other clarifying and  
          conforming changes to the Constitution.

                                      BACKGROUND  
          
           Majorities and Super Majorities  .  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  
          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 U.S. Constitution  
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          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 of 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.

           Parcel Taxes  .  California allows cities, 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.  






                                       COMMENTS  
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           1.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 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  ?  SCA 7 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.  Is it equitable to lower the  
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            vote threshold for new parcel taxes when many voters do not  
            bear the cost, and those who may bear the cost cannot vote?

           3.Special vote thresholds for libraries  ?  If SCA 7 is enacted,  
            local agencies would be able to enact special taxes for  
            library purposes by a 55% vote, paralleling Proposition 39's  
            similar threshold for school bonds.  However, the measure  
            doesn't affect thresholds for taxes dedicated to other  
            purposes.  This begs the question of 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.  Furthermore, should  
            the thresholds be different based on the use of the tax  
            proceeds, like libraries?

           4.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.  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  
            (Buchanan), which substantially reforms school bond issuance  
            in response to the above problems.
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           5.Related Legislation  .  SCA 3 (Leno) which is also on today's  
            agenda allows school districts, community college districts,  
            and county offices of education to levy parcel taxes by a 55%  
            vote.  SCA 4 (Liu), which is pending in the Senate Committee  
            on Transportation and Housing, allows local agencies to levy,  
            extend, or increase special taxes by a 55% vote for local  
            transportation projects.  SCA 8 (Corbett), which is also  
            pending in the Senate Committee on Transportation and Housing,  
            allows local agencies to levy, extend, or increase special  
            taxes by a 55% vote for local transportation projects.  SCA 9  
            (Corbett) which is also on today's agenda allows local  
            agencies to levy, extend, or increase special taxes by a 55%  
            vote for community and economic development projects.  SCA 11  
            (Hancock), which is also on today's agenda allows local  
            agencies to levy, extend, or increase special taxes by a 55%  
            vote for any purpose.

                                     PRIOR ACTION
           
          Senate Governance and Finance Committee:5-2
                                           
                                      POSITIONS  

          Sponsor: California Library Association

          Support:  Alameda County Library; Alpine County; California  
                    Library Services Board, Anne R. Bernardo, President;  
                    Benicia Library Board of Trustees; Berkeley City  
                    Council; Board of Library Trustees of the Altadena  
                    Library District; 
                    Burbank Board of Library Trustees; Burbank Public  
                    Library; Burbank Public Library, Burbank Library  
                    Services Director, Sharon Cohen; 
                    California County Librarians Association, Teresa  
                    Landers; California Labor Federation; California  
                    Library Association; California Library Association's  
                    Advocacy and Legislation Committee; California Park  
                    and Recreation Society; California State Association  
                    of Counties; Castro Valley Friends of the Library;  
                    City of Burbank, Dave Golonski, Mayor; City of  
                    Concord; City of Cotati; City of Huntington Beach,  
                    Stephanie Beverage, Director of Library Services; City  
                    of Lafayette; City of Oakland's Library Advisory  
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                    Commission; City of Pacific Grove; City of Pasadena;  
                    City of Petaluma, Teresa Barrett, Councilmember;  City  
                    of Petaluma, David Glass, Mayor ;  City of Pleasanton  
                    Library Commission; City of Rancho Cordova; City of  
                    Riverside; City of San Diego Board of Library  
                    Commissioners; City of San Jose; City of Torrance,   
                    Frank Scotto, Mayor; Constance Tse, Retired Teacher;  
                    Contra Costa County Board of Supervisors; Contra Costa  
                    County Library Commission; County of Alpine Board of  
                    Supervisors; Daly City Public Library Associates,  
                    Paula Stillman, President; Danielle Maddox, President,  
                    Friends of the Sunnyvale Library; David Rabbitt,  
                    Sonoma County Board of Supervisors, Chair and Second  
                    District Supervisor; Defense Language Institute, Mary  
                    Kathleen Hanselmann, Chief Librarian; El Cerrito  
                    Commissioner, Steven M. Poulos; El Cerrito New Library  
                    Community Campaign; Escondido Public Library Board of  
                    Trustees, Gary Knight, President; Escondido Public  
                    Library, Cynthia Smith, Interim City Librarian;  
                    Friends of the Amador County Library, Susan Staggs,  
                    Board Member; Friends of the Castro Valley Library,  
                    Edward Lyke; President; Friends of the Fortuna  
                    Library; Friends of the Hemet Public Library; Friends  
                    of the Oakdale Library, Sharon Arpoika, President;  
                    Friends of the Oakland Public Library; Friends of the  
                    Riverside Public Library; Friends of the Sacramento  
                    Public Library; Friends of the Salinas Public Library;  
                    Friends of the San Benito County Free Library; Friends  
                    of the San Diego Public Library; Friends of the San  
                    Francisco Public Library, Deborah Doyle, Chair;  
                    Friends of the Santa Barbara Public Library Board,  
                    Elizabeth Bowman, Member; Friends of the Santa Cruz  
                    Public Libraries Board Member; Friends of the St.  
                    Helena Public Library; Friends of the Sunnyvale  
                    Library, Danielle Maddox, President; Friends of the  
                    Turlock Library, Joan Ahlstrand, Member; Glendale City  
                    Employees Association; Half Moon Bay Coastside Chamber  
                    of Commerce & Visitors' Bureau; Hercules Community  
                    Library Foundation; Huntington Beach Public Library,  
                    Stephanie Beverage, Director of Library Services; Jean  
                    Quan, Mayor, City of Oakland; JoAnn Levy, Award  
                    winning Author, Board member, California State Library  
                    Foundation; Kern County Library; League of California  
                    Cities; Library Advisory Board; Mendocino County  
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                    Librarian, Mindy Kittay; Michael J. Beck, City  
                    Manager, Pasadena; Morgan Hill Library Foundation;  
                    Mrs. Joan Putz, co-president Pacifica Friends of the  
                    Library; Ojai Valley Library Friends and Foundation;  
                    Organization of SMUD Employees; Pacific Grove, Bill  
                    Kampe, Mayor; Pacific Library Partnership, Teresa  
                    Landers; Pacifica Friends of the Library, Fran Larson,  
                    Treasurer; Pacifica Friends of the Library, Mrs.  
                    Caroline Barba, Co-president; Pacifica Library  
                    Foundation; Palos Verdes Library District; Pamona  
                    Public Library Foundation; Pasadena Public Library  
                    Commission; Patty Wong, Library Director Yolo County;  
                    Pomona Library Foundation; Redwood City Public Library  
                    Board; Retired Children's Librarian & Board Member;  
                    San Bernardino Public Employees Association; San  
                    Francisco Friends of the Library; San Luis Obispo  
                    County Employees Association; San Pablo City Council;  
                    San Rafael CA Library Board, Arlene Sukolsky, Trustee;  
                    San Rafael Library Foundation, Gary T. Ragghianti,   
                    Board member; San Rafael Public Library, Volunteer;  
                    Valerie Lambertson, Member; San Rafael Public Library  
                    Foundation, Jeffrey Schoppert, President; San Rafael  
                    Public Library Foundation;, Ann Rivo, Board Member;  
                    San Rafael Public Library, Sarah Houghton, Director;  
                    Santa Clara County Board of Supervisors; Santa Clara  
                    County Library District Joint Powers Authority Board;  
                    Santa Cruz City/County Library System, Teresa Landers;  
                    Santa Cruz Public Libraries Joint Powers Authority  
                    Board; Santa Cruz Public Libraries; Santa Maria Public  
                    Library; Santa Rosa City Employees Association; Sonoma  
                    County Board of Supervisors; Sonoma County Library  
                    Commission; Stanislaus County Library Advisory Board,  
                    Sheridan Beuving, Chairman; Stanislaus County, Library  
                    Director, Vanessa Czopek; Stanislaus Literacy Center,  
                    Karen Williams, Executive Director; Terry Woodrow,  
                    Chair, County of Alpine Board of Supervisors; The  
                    Humboldt Library Foundation; Torrance Library  
                    Commission; Town of Colma; Tulare County Public Law  
                    Library, Anne R. Bernardo, Director; Wendy Rianldi,  
                    Board of Friends of the San Francisco Public Library;  
                    Yolo County Board of Supervisors; Yolo County Library  
                    Advisory Board;

           
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            Oppose:     Apartment Association California Southern Cities;  
                   Apartment Association of Orange County; California  
                   Association of Realtors; California Chamber of  
                   Commerce; California Farm Bureau Federation; California  
                   Taxpayers; East Bay Rental Housing Association; George  
                   Runner, Member Board of Equalization, District 2  
                   (Ret.); Howard Jarvis Taxpayers Association;
                   Nor Cal Rental Property Association   



































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