BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SCA 9 HEARING: 5/15/13
AUTHOR: Corbett FISCAL: No
VERSION: 12/18/12 TAX LEVY: No
CONSULTANT: Grinnell
SPECIAL TAXES: VOTER APPROVAL
Lowers the vote threshold to levy, increase, or extend
special taxes for community and economic development
projects 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).
Current law additionally allows local agencies to levy
qualified special taxes that are uniform as applied to all
taxpayers with 2/3 vote of the electorate. The district
may implement these taxes, for as long as it wants, spend
the proceeds for any purpose, and apply any tax rate it
chooses.
Cities and counties may also impose transactions and use
taxes, basically additional sales and use taxes levied in
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their jurisdiction, provided that the combined rate in the
county does not exceed 2 percent, upon a 2/3 vote of the
local agency's governing board and voter approval according
to the above.
Citing a significant State General Fund deficit, Governor
Brown's 2011-12 budget proposed eliminating RDAs and
returning billions of dollars of property tax revenues to
schools, cities, and counties to fund core services. Among
the statutory changes that the Legislature adopted to
implement the 2011-12 budget, ABx1 26 (Blumenfield, 2011)
dissolved all RDAs. The California Supreme Court's 2011
ruling in California Redevelopment Association v.
Matosantos upheld AB X1 26, but invalidated AB X1 27
(Blumenfield, 2011), which would have allowed most RDAs to
avoid dissolution. RDAs' dissolution deprived many local
governments of the primary tool they used to increase the
supply of affordable housing.
Proposed Law
Senate Constitutional Amendment 4 lowers the vote threshold
for local agencies imposing, extending, or increasing a
special tax to fund local community and economic
development projects within their jurisdiction to 55%. The
constitutional amendment defines a project as one that
improves, upgrades, or revitalizes areas within the local
government's jurisdiction that have become blighted because
of deterioration, disuse, or unproductive economic
conditions. The measure also makes conforming changes to
the Constitution.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . According to the author, "SCA 9
proposes to California voters an amendment to the state
Constitution to allow local governments to impose, extend,
or increase a special tax for economic development
projects, upon approval of 55 percent, instead of
SCA 9 - 12/18/12 -- Page 3
two-thirds, of the voters within the appropriate
jurisdiction. Local government will require alternative
financial tools, if it is to continue economic development.
The Governor's plan for dissolving the redevelopment
program, also proposed a constitutional amendment to allow
local voters to approve tax increases and general
obligation bonds for economic development by a 55 percent
majority, instead of by a supermajority (two-thirds) vote.
Without alternative financing options, local governments
will have to use their General Fund to pay for
redevelopment projects - a fund that is overburdened for
most cities."
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 of government 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, 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 9 adds another layer onto the complex system above. If
enacted, local agencies can enact special taxes for
community and economic development purposes at 55% vote,
paralleling Proposition 39's similar allowance for school
bonds. However, the measure doesn't affect thresholds for
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any other kind of tax. 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 community and economic development
projects? The Committee may wish to consider the reasons
for affording community and economic development projects
special treatment when contemplating the overall system of
voter thresholds necessary to increase taxes.
3. 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 9
lowers the threshold on parcel taxes, among others, 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. 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.
Additionally, should cities and counties choose to impose
local transactions and use taxes at 55% voter approval
under SCA 9, any taxpayer purchasing tangible personal
property in the city or county's jurisdiction will pay
slightly more in tax. Ostensibly, the city or county will
use the proceeds to build a project themselves, or use the
redevelopment model whereby funds are given to developers
to build projects in specific areas. As such, everyone who
makes a purchase within the jurisdiction pays for community
and economic benefits that may be place or
project-specific. The Committee may additionally wish to
consider the equity and efficiency of local taxes to spur
community and economic development when determining whether
to lower the vote threshold to enact them.
4. Signed, sealed, delivered . California uniquely among
the states allows school districts to levy parcel taxes,
which are different in many ways from property taxes and
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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.
While subject to the 2/3 vote, Proceeds are not limited to
certain uses; revenues may be used for ongoing expenses,
programs, or buildings at the local agency's discretion,
although parcel taxes imposed at a lower voter approval
rate under SCA 5 cannot be used for administrative
salaries, among other restrictions.
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 some
being permanent.
5. Give it a go . SCA 9 lowers vote thresholds for special
taxes enacted for community and economic development
projects. However, no city or county has yet assessed, or
tried to assess, a special tax for this purpose under the
existing 2/3 vote standard, unlike special taxes for
education and transportation that have. Does the
Legislature know enough about how a special tax for
economic and community development projects would work to
lower the vote threshold for it? The Committee may wish to
consider deferring action on SCA 9 until a local agency
first tries to assess a special tax for this purpose at the
current threshold.
6. Lead and follow . SCA 9 lowers vote thresholds for
special taxes enacted for community and economic
development projects, defined as "projects that improve,
upgrade, or revitalize areas within the local government's
jurisdiction that have become blighted because of
deterioration, disuse, or unproductive economic
SCA 9 - 12/18/12 -- Page 6
conditions." While this definition is broad, the
Legislature can enact a statute following enactment of the
SCA 9 filling in its details, such as more specifically
delineate the kinds of projects and areas for which local
agencies can assess taxes at lower voter thresholds. Doing
so is consistent with other Constitutional changes, where
voters have enacted the broad strokes of change, but let
the Legislature subsequently fill in the details in
statute.
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) - 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; al-lows
local agencies to levy, extend, or increase special
taxes at 55% vote to fund public libraries.
SCA 8 (Corbett) - identical to this measure except
for the restriction on local agencies spending
proceeds from new taxes until completing capital
projects from previously imposed taxes.
SCA 11 (Hancock) - allows local agencies to levy,
extend, or increase special taxes at 55% vote for any
purpose.
Support and Opposition (05/09/13)
Support : California Special Districts Association;
California State Association of Counties; League of
California Cities
Opposition : Apartment Association of Greater Los Angeles;
Apartment Association California Southern Cities; Apartment
Association of Orange County; Associated Builders and
Contractors of California; California Ambulance
Association; California Apartment Association; California
Business Properties Association; California Chamber of
Commerce; California Farm Bureau Federation; California
Grocers Association; California Manufacturers and
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Technology Association, California Retailers Association;
California Taxpayers Association; East Bay Rental Housing
Association; National Federation of Independent Business;
Nor Cal Rental Property Association; Orange County
Association of Realtors; Orange County Business Council;
San Diego County Apartment Association; Santa Barbara
Rental Property Association; Southwest California
Legislative Council; Western Manufactured Housing
Communities Association