1. Funding Water Quality Mandates
California Soc’y of Municipal Finance Officers
February 24, 2011
November 30, 2018

2. MICHAEL G. COLANTUONO Colantuono & Levin, PC
Pleasant Valley Road
Penn Valley, CA
(213) (voice)
(530) (voice)
(530) (fax)
November 30, 2018

3. The basic revenue sources
Taxes
Assessments
Fees
Subventions
Proceeds from use of assets
Fines & Penalties
November 30, 2018

4. General Taxes Can be used for any lawful purpose
2/3 vote of Board or Council to propose (except charter cities) under Prop. 62
Simple majority of voters to approve
Must be placed on general election ballot on which legislative seats contested unless Council or Board unanimously declares an emergency justifying a special election
November 30, 2018

5. Special Taxes Legally restricted to a particular use
Majority vote of Board or Council to propose
2/3 majority of voters to approve
May be voted on any lawful election date
November 30, 2018

6. Taxes (cont.) Common tax bases:
Parcel taxes
Utility users taxes
Transactions and Use Taxes
Can draw any tax distinction which has a rational basis and is not illegally discriminatory
November 30, 2018

7. Assessments
Must identify an assessment statute (or charter city ordinance) that allows funding the projects or services in issue
Benefit Assessment Act of 1982 (M&O)
Improvement Acts of 1911, 1913, 1915 (capital and debt financing)
Lighting & Landscaping Act of 1972 (landscaping, lighting, park &recreation facilities)
November 30, 2018

8. Assessments Continued
Prop. 218 Requirements
Engineer’s report
Identify special benefit
Spread assessment in proportion to special benefit
Account for general benefit and provide non-assessment funding
November 30, 2018

9. Assessments (Cont.) Protest Proceeding
Mail ballots to affected property owners, weighted by assessment to be paid
Hold a noticed hearing 45 days later
Count protests received by end of hearing; if a majority vote “no,” you cannot proceed
Follow the notice and hearing procedures of the assessment statute, too.
November 30, 2018

10. Fees Property related fees subject to Prop. 218
Function like parcel taxes
HJTA v. Salinas (2002) (property-tax-roll fee was subject to Prop. 218; storm drains not “sewers” under 13D, 6(c))
Non-property related fees subject to Prop. 26
Inspection and permit fees, e.g.
November 30, 2018

11. Property Related Fees Majority protest proceeding Election
Mailed notice to property owners
Public hearing after 45 days’ notice
If a majority of property owners protest in writing, the fee cannot be imposed
Election
2/3 of registered voters in a “real” election
50% + 1 of property owners voting by mail, one vote per parcel
November 30, 2018

12. Non-property related fees
Under Prop. 26, all new fees are taxes unless an exception applies
Likely exceptions here:
Charge for benefit or privilege not provided to non-payors, limited to cost
Service or product on these same terms
License or permit issuance and enforcement
Development Impact Fee
November 30, 2018

13. Fees Generally All fee options are limited to cost recovery
Use of enterprise fund fees if you can show the operation of those enterprises has an impact on water quality programs
Water fees
Sewer fees
Trash fees
November 30, 2018

14. Subventions from other levels of gov’t
Pennies from heaven
If these were available in meaningful amounts, none of us would be attending this session
November 30, 2018

15. Proceeds from the use of Assets
Rent from land, interest from idle funds, licensing revenue
The proceeds from use of an asset generally have the same legal restrictions as the asset itself (interest follows principal)
Thus, proceeds which are flexible in use are likely general fund revenues you have other uses for
November 30, 2018

16. Fines are not Taxes
Cal. Taxpayers Ass’n v. Franchise Tax Board (2010) 190 Cal.App.4th 1139 (3rd DCA)
20% penalty on late corporate taxes raising $1.4b not a tax requiring 2/3 vote of Legislature
Distinguishing characteristics: label, revenues diminish over time, triggered by violation
No need for findings or good faith defense; post-payment remedy sufficient
November 30, 2018

17. Fines & Penalties
Those imposed to recover the time value of money paid late should be viewed as interest and treated as having the same restrictions as interest (and principal)
Others can be viewed as discretionary revenue to be allocated as the Council or Board thinks fit.
November 30, 2018

18. Questions?
November 30, 2018