CSDA’s Board of Directors unanimously adopted an “Oppose” position on statewide ballot initiative #21-0042A1, arguably the most consequential proposal to restrict local revenues since the passage of Proposition 218 (1996) and Proposition 26 (2010). If enacted, public agencies would face a drastic rise in litigation that could severely inhibit their ability to meet essential services and infrastructure needs.
This initiative, proposed by the California Business Roundtable, would result in the loss of billions of dollars annually in critical state and local funding by adopting new and stricter rules for raising taxes, fees, assessments, and property-related fees. It amends the State Constitution, including portions of Propositions 13, 218, and 26 among other provisions, to the advantage of the initiative’s proponents and plaintiffs, creating new grounds to challenge these funding sources and disrupting fiscal certainty.
Among a litany of other provisions, initiative #21-0042A1 would amend the State Constitution as follows:
- With few exceptions, fees and charges could not exceed the “actual cost” of providing the product or service for which the fee is charged.
- “Actual cost” is defined as the “…minimum amount necessary...less other sources of revenue including, but not limited to taxes, other exempt charges, grants, and state or federal funds…”
- The burden placed on the local government to prove the fee or charge does not exceed “actual cost” would be heightened from a “preponderance of the evidence” to “clear and convincing evidence”.
- In addition to limiting fees and charges to the actual cost to the local government for providing the service, fees and charges must also be “reasonable” to the payor themselves; no definition is provided for this new subjective reasonableness test that is separate and apart from the test as to how closely the fee or charge is related to the cost of service.
- Increases the threshold for voters to pass a local special tax initiative placed on the ballot by voters from a simple majority to a two-thirds majority, likely to address concerns over the recent California Cannabis Coalition v. City of Upland court decision.
- Requires voter approval when an expansion of boundaries extends existing taxes or fees to new territory.
- New taxes can be imposed only for a specific duration.
- Interferes with local enforcement efforts, by making it more difficult to impose fines and penalties for state and local law violations related to activities such as water discharge, waste recycling, weed abatement, fireworks, and housing code violations and unlawful commercial marijuana sales, just to name a few.
Perhaps most harmfully, initiative #21-0042A1 would foster endless litigation challenging local fees claiming they are not the “minimum amount necessary”. For instance: Do roads need to be paved every 10 years or 50 years? Does infrastructure need to be upgraded or replaced or not improved at all? What is the minimum emergency response time necessary?
The totality of the above provisions could prevent virtually any new fees or assessments to fund water, sewer, trash, fire protection, parks and recreation, and other essential services and infrastructure. This could reduce the funding for these services by billions of dollars over time and jeopardize the public health and safety of communities by cutting off new revenue intended to pay for essential local services and infrastructure.
If initiative #21-0042A1 qualifies for the ballot and receives majority voter approval during the November 8, 2022 statewide election, it would go into effect immediately. However, it contains retroactive language designed to void all state and local taxes or fees adopted after January 1, 2022 if they did not align with the initiative. This may also affect indexed fees that adjust over time for inflation or other factors. Effectively, the initiative would allow voters in one part of California to invalidate the prior actions of local voters in another part of the state, undermining local control and voter-approved decisions about investments needed in their communities.
California’s Attorney General is expected to issue a formal title and summary for initiative #21-0042A1 on or before February 3, 2022. To qualify for the ballot, proponents must collect 997,139 valid signatures from California voters. The California Secretary of State’s recommended last day to submit signatures to counties to qualify for the November 8, 2022, statewide general election is April 29, 2022. The last day for measures to be certified for the ballot or withdrawn from the ballot is June 30, 2022.
CSDA members can download a Fact Sheet on Ballot Initiative #21-0042A1. CSDA will continue to participate in discussions around this measure in concert with other opponents that include the League of California Cities and the California Professional Firefighters and keep its members informed developments.
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