BILL ANALYSIS
ACA 9
Page 1
Date of Hearing: June 22, 2009
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles M. Calderon, Chair
ACA 9 (Huffman) - As Amended: April 27, 2009
2/3 vote.
SUBJECT : Local government bonds: special taxes: voter
approval
SUMMARY : Provides an additional exception to the general 1%
limitation on ad valorem taxes on real property, and lowers the
vote requirement for a city, county or special district to
impose a special tax. Specifically, this measure :
1)Provides that the 1% limitation would not apply to ad valorem
taxes or special assessments to pay the interest and
redemption charges on bonded indebtedness, approved by 55% of
the voters of a city, county, city and county, or special
district, as applicable, incurred for specified purposes.
These purposes would include:
a) The construction, rehabilitation, or replacement of
public improvements, including improvements to
transportation infrastructure, streets, highways, sewer
systems, water systems, wastewater systems, and park and
recreation facilities;
b) The construction, rehabilitation, or replacement of
facilities used exclusively to provide sheriff, police, or
fire protection services to the public;
c) The development of housing affordable to lower and
moderate-income households; and,
d) The acquisition or lease of real property for the public
improvements, facilities, and housing described above.
2)Provides that this exception to the general 1% limitation
would only apply if the approved proposition includes all of
the following accountability requirements:
a) A requirement that the bond proceeds be used only for
ACA 9
Page 2
the purposes specified;
b) A list of the specific projects to be funded and
certification that the city council, board of supervisors,
or special district governing body has evaluated the costs
of operating the public improvements, public facilities, or
affordable housing;
c) A requirement that the city council, board of
supervisors, or special district governing body conduct an
annual, independent performance audit to ensure that the
bond proceeds have been expended only on the specific
projects listed;
d) A requirement that the city council, board of
supervisors, or special district governing body conduct an
annual, independent financial audit of the bond proceeds
until all of those proceeds have been expended; and,
e) A requirement for a public process that solicits a wide
range of public comment from the community about the types
of facilities that should be funded.
3)Lowers the vote requirement for a city, county, or special
district to impose a special tax from a two-thirds vote of
qualified electors to 55%.
4)Makes technical and conforming changes to the California
Constitution.
EXISTING CONSTITUTIONAL LAW :
1)Prohibits any ad valorem tax on real property from exceeding
1% of the property's full cash value, subject to certain
exceptions. For example, this limitation does not apply to ad
valorem taxes or special assessments to pay the interest and
redemption charges on bonded indebtedness:
a) For the acquisition or improvement of real property
approved by two-thirds of voters; and,
b) Incurred by a school district, community college
district, or county office of education for the
construction or renovation of school facilities, approved
by 55% of the voters of the district or county, as
ACA 9
Page 3
appropriate. This exception only applies if the approved
proposition includes specified accountability requirements.
2)Provides that cities, counties, and special districts, by a
two-thirds vote of qualified electors, may impose special
taxes. A "special tax" means any tax imposed for specific
purposes, including a tax imposed for specific purposes, which
is placed into a general fund.
FISCAL EFFECT : The Board of Equalization (BOE) notes, "To the
extent that this bill makes it easier for local governments to
impose or extend local taxes, this bill, if approved statewide,
would increase local government revenues."
COMMENTS :
1)The author states:
In 1978 a simple majority of California voters adopted
Proposition 13, which added Article XIIIA to the
Constitution and included a one-percent cap on property tax
rates and established a two-thirds voter approval
requirement for taxes raised by local governments for a
designated ("special") purpose, among other added
provisions. Proposition 13 sought property taxpayer relief
and uniformity, but ultimately reduced property tax
revenues by more than half . . . .
In 1996 California voters adopted Proposition 218, which
added Article XIIIC to the Constitution to expand
restrictions on local government revenue-raising and
reiterated the requirement for voter approval for both
'special' taxes and 'general' taxes at two-thirds and
majority, respectively.
Like the state, local governments have been severely
impacted by the real estate crash, the mortgage foreclosure
crisis, and the general economic downturn. For many
communities around the state, the quality, and indeed the
viability of critical services like police and fire
protection, schools, libraries, parks, road maintenance,
and flood control will be in jeopardy without additional
revenues. Yet to secure essential funding for these
services, local governments face the daunting prospect of
ACA 9
Page 4
brining a special tax measure to the voters and winning
two-thirds approval. Such measures often fail despite
being supported by a strong majority of the community.
Restoring local control over local revenues is imperative
to local governments supporting their local agency programs
and local activities. To fund local needs, including
public safety, emergency services, transportation,
affordable housing and school operations, this measure
brings the conversation back to the voters to decide how to
fund local investments.
2)Proponents state, "Currently, the California Constitution
requires a two-thirds voter approval requirement for the
imposition of new special taxes imposed by a city, county, or
special district. Direct voter approval, or a 55% voter
approval requirement will allow voters to determine the
importance of improvements to their local infrastructure and
the need of funding for housing and other critical services.
The supermajority vote requirement for new fiscal obligations
will be protected, however lowering the two-thirds threshold
for all special taxes will provide Californians with the
ability to decide on the local level how and when to fund
critical needs."
3)Opponents state, "Long-standing taxpayer protections should
not be thwarted based on the need for revenue. Voter approval
of tax increases is necessary to ensure that tax increases are
carefully deliberated, fully debated, and general consensus is
achieved before action is taken. The two-thirds vote ensures
that tax increases are a last resort and spending restraint
remains a top priority."
4)Committee Staff Comments:
a) Proposition 13 and its progeny : In 1978, California
voters passed Proposition 13 which, among other things,
limited property tax rates and imposed supermajority voter
approval requirements for the passage of special taxes. In
1996, California voters passed Proposition 218, which
reduced the revenue-raising authority of local governments
by prohibiting the imposition of any general tax without
the approval of a majority of voters. As a result, the
Public Policy Institute of California notes that California
has some of the strictest rules in the nation for raising
ACA 9
Page 5
local revenues. [Ellen Hanak, Paying for Infrastructure:
California's Choices, Public Policy Institute of
California, 2009] For example, California is one of only
eight states with a supermajority vote requirement for the
passage of local general obligation bonds. Id.
b) Proposition 39 : Proposition 39, which was narrowly
approved by 53% of California voters in 2000, provides an
exception to the two-thirds vote requirement.
Specifically, Proposition 39 provides that the 1%
limitation on ad valorem taxes does not apply to ad valorem
taxes or special assessments to pay the interest and
redemption charges on bonded indebtedness incurred by a
school district, community college district, or county
office of education for the construction or renovation of
school facilities, approved by 55% of the voters. This has
arguably led to increased passage rates for local school
bonds.
c) Accountability : Proposition 39 requires any local
proposition taking advantage of the lower vote threshold to
include specified accountability requirements. ACA 9 seeks
to mirror those provisions by requiring any approved
proposition to include, among other things, a list of the
specific projects to be funded. Unlike Proposition 39,
however, ACA 9 also requires the approved proposition to
include a requirement for "a public process that solicits a
wide range of public comment from the community about the
types of facilities that should be funded . . . ." This
raises the following question: If the proposition must
include a list of the specific projects to be funded, how
can it also call for public input regarding the types of
facilities that should be funded? While the goal of
increasing public input is laudable, the author may wish to
amend the measure to clarify this issue.
d) Double-referral : This measure was double-referred with
the Assembly Committee on Local Government, which passed
the measure out on a 5-2 vote on May 6, 2009.
e) Related Legislation :
i) ACA 10 (Torlakson), introduced in the current
Legislative Session, would lower the constitutional vote
requirement for approval of a special tax to be levied by
an education finance district from two-thirds to a
ACA 9
Page 6
majority of the district voters. ACA 10 is pending on
the Assembly Floor.
ii) ACA 10 (Feuer), introduced in the 2007-08
Legislative Session, would have created an additional
exception to the 1% limit on ad valorem taxes on real
property for a city, county, or city and county to pay
for bonded indebtedness, incurred to fund specified
transportation infrastructure, that is approved by 55% of
the voters. ACA 10 died in committee.
iii) ACA 7 (Nation), introduced in the 2005-06
Legislative Session, would have authorized a city,
county, or special district to impose a special tax with
the approval of 55% of its voters. ACA 7 was held in the
Assembly Appropriations Committee.
f) Technical amendments : Committee staff recommends the
following technical amendments to the measure:
i) On page 4, line 11, delete "Development of housing"
and replace with "Housing";
ii) On page 4, line 12, insert a period after
"households";
iii) On page 5, line 13, insert "city and county," after
"county,";
iv) On page 5, line 15, insert "city and county," after
"county,";
v) On page 5, line 17, insert "city and county," after
"county,"; and,
vi) On page 8, line 1, delete "Development of housing"
and replace with "Housing".
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
ACA 9
Page 7
AFL-CIO
Association of California Water Agencies
Association for Los Angeles Deputy Sheriffs
California Association of Councils of Governments
California Association of Recreation and Park Districts
California Association of Sanitation Agencies
California Fire Chiefs Association
California Library Association
California Park & Recreation Society
California Public Securities Association
California Professional Firefighters
California Rural Legal Assistance Foundation
California Special Districts Association
California State Association of Counties
California Teachers Association
California Transit Association
Capitol Corridor Joint Powers Authority
City of Los Angeles
City of Orinda
City of Santa Rosa
East Bay Municipal Utility District
Fire Districts of California
Housing California
Joint Legislative Advisory Committee
Lagunitas School District
Larkspur School District
League of California Cities
Marin County Board of Supervisors
Marin County Council of Mayors and Council Members
Metropolitan Transportation Commission
Midpeninsula Regional Open Space District
Mosquito and Vector Control Association of California
Non-Profit Housing Association of Northern California
Novato Unified School District
Palos Verdes Library District
Peace Officers Research Association of California
Reed Union School District
Riverside Sheriffs' Association
Ross Valley School District
Sacramento Regional Transit District
San Diego County Water Authority
Santa Clara Valley Water District
Santa Cruz County Regional Transportation Commission
Solano County Board of Supervisors
South Bay Cities Council of Governments
ACA 9
Page 8
Squaw Valley Public Service District
Stallion Springs Community Services District
Transportation Agency for Monterey County
Transportation Authority of Marin
Western Center on Law and Poverty
5 members of the Showcase Ranches Community Services District
Board of Directors
Opposition
California Association of Realtors
California Taxpayers' Association
Howard Jarvis Taxpayers Association
1 individual
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098