3 PROPOSITION 218 IMPLEMENTATION GUIDE SEPTEMBER 2007 EDITION 3 This publication is provided for general information only and is not offered or intended as legal advice. Readers should seek the advice of an attorney when confronted with legal issues and attorneys should perform an independent evaluation of the issues raised in these materials. Copyright © 2000, 2007 by the League of California Cities, Sacramento, California All rights reserved. This publication, or parts thereof, may not be reproduced in any form without the League’s permission. For information, contact the League of California Cities, 1400 K Street, 4th Floor, Sacramento, CA 95814 (916) 658-8200. 3 The League of California Cities gratefully acknowledges the contributions of the Proposition 218 Implementation Guide Update Committee for their hard work and dedication in drafting the 2007 update: Michael Colantuono, Chair Colantuono & Levin, LLP City Attorney, Auburn & Calabasas Manuela Albuquerque City Attorney, Berkeley John D. Bakker Meyers, Nave, Riback, Silver & Wilson City Attorney, Greenfield Daniel S. Hentschke General Counsel, San Diego County Water Authority Kelly Salt Best, Best & Krieger, LLP Kevin D. Siegel Deputy City Attorney, Oakland Betsy Strauss Special Counsel to the League of California Cities City Attorneys’ Department Liaison Michelle Marchetta Kenyon, 2nd Vice President McDonough Holland & Allen City Attorney, Calistoga, Moraga, & Rohnert Park League Staff Patrick Whitnell, General Counsel Rhonda Boglin, Legal Assistant 3 Table of Contents Preface ...................................................................................................... 3 I. Overview............................................................................................ 5 • History of Voter-Approved Restrictions on Local Government Revenue-Raising .....................................................................5 • Summary of Proposition 218...................................................................... .7 II. Taxes.................................................................................................. 9 • Introduction and Overview ........................................................................... 9 • Key Changes Proposition 218 Makes to Tax Law ...................................... 10 • Proposition 218’s Substantive Effect on Taxes .......................................... 10 • Proposition 218’s Procedural Requirements for New or Increased Taxes............................................................................. 14 • Relationship Between Proposition 218 and Proposition 62 ....................... 16 • Particular Types of Taxes .......................................................................... 17 • Procedures for Challenging a Tax .............................................................. 18 III. Assessments....................................................................................21 • Introduction and Overview ......................................................................... 21 • Key Changes Proposition 218 Makes to Assessment Law......................... 22 • Procedures for New Assessments ............................................................. 23 • Burden of Proof.......................................................................................... 36 IV. Property-Related Fees and Charges ..............................................49 • Introduction and Overview ......................................................................... 49 • Key Changes Proposition 218 Makes to Fee and Charge Law ................................................................................................49 • Fees and Charges Subject to Article XIIID .................................................50 • Fees and Charges Not Subject to Proposition 218.....................................53 • Fees and Charges That Might Not Be Subject to Proposition 218...........................................................................................55 • Procedural Requirements .......................................................................... 62 • Substantive Requirements ........................................................................70 V. Initiatives to Reduce or Repeal Taxes, Assessments, and Fees ................................................................. 77 • Introduction and Overview ......................................................................... 77 1 • Substantive Issues .....................................................................................78 • The Contract Clause of the U.S. Constitution and the Reduction of Taxes, Assessments, Fees and Charges...............................................................84 • Initiative Procedural Issues ........................................................................88 VI. Assessment Ballot Proceedings............................................................ 93 • Sample Resolution .................................................................................... 93 • Sample Notice of Public Hearing ............................................................... 98 VII. All Mail Elections ........................................................................................ 99 • Introduction and Overview ........................................................................ 99 • Sample Resolution Calling A Special Municipal Election ......................... 102 • Sample Resolution Establishing Drop Off Centers................................... 104 • Sample Resolution Requesting County To Render Specified Services ... 106 VIII. Attachments ................................................................................................ 109 • Proposition 218 Text ................................................................................ 111 • Ballot Materials (Title, Summary, Legislative Analyst’s Analysis, Arguments) .............................................. 119 • Howard Jarvis Taxpayers Association Annotated Version of Proposition 218 (December 6, 1996). .................... 125 • Proposition 218: Right to Vote on Taxes Act Statement of Drafters’ Intent (January 2, 1997)........................................ 141 • Legislative Analyst Post-Election Analysis on Proposition 218 ................ 161 • Proposition 218 Guidelines for Placing Flat Fees on the Secured Role, California State Association of County Auditors, April 1997 ................................................................................................. 183 • Comment Form ........................................................................................ 191 2 Preface On November 5, 1996, the California electorate approved Proposition 218, the self-titled “Right to Vote on Taxes Act.” Proposition 218 adds articles XIIIC and XIIID to the California Constitution, and makes numerous changes to local government finance law. Proposition 218 was approved by a 56.6 percent to 43.4 percent vote. This is the fourth edition of the League of California Cities’ Proposition 218 Implementation Guide. On October 15, 1996, a number of public agency officials met at the League's annual conference to discuss an implementation program in the event of Proposition 218's passage. The first edition of this guide was the result of the planning that occurred at that meeting. The second edition, published in April 1998, updated the first edition.1 The third edition, published in 2000, represented the League's continuing commitment to providing complete information and comprehensive analysis of the issues raised by Proposition 218, and was prepared under the auspices and review of the League's Proposition 218 Legal Issues Committee, a cross-department committee representing the city managers department, city attorneys’ department and fiscal officers’ department of the League. During the seven years between the third edition and the fourth edition, the California Supreme Court, and the Courts of Appeal, have answered many questions regarding the scope and application of Proposition 218. This fourth edition intends to bring the reader up to date and familiar with the courts’ interpretation of these Constitutional provisions. This edition was prepared under the guidance of the League’s City Attorneys’ Department Proposition 218 Committee.2 Many questions of interpretation have been answered since the third edition. However, as of the writing of the 2007 Edition, important questions relating to, for example, the process for determining “special benefit” under Article XIIID, section 4, Silicon Valley and the impact, if any, on Proposition 218’s provisions relating to fees and charges on regulatory fees, remain pending in front of the California Supreme Court. E.g. Bonander v. Town of Tiburon, Sup. Ct. No. S151370; Pajaro Valley Water Mgmt. Agency v. Amrhein (2007) 150 Cal. App. 4th 1364, pet. for review filed. Also included in this guide are sample ordinances adopting assessment ballot procedures and implementing all-mail ballot elections. Proposition 218 has imposed on public agencies increased requirements to conduct elections. A discussion of the law relating to public agency communications in elections is included. 1 The court in McBrearty v. City of Brawley, (1997) 59 Cal. App. 4th 1441 cited as authoritative the Proposition 218 Implementation Guide issued in January 1997. This will permit use of that document as authority in future cases involving Proposition 218. 2 The material in this guide is offered for information only