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<br />61 <br />CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND <br />APPROPRIATIONS <br />The ability of the City to raise fees, taxes and other revenues is limited. Following is a <br />description of certain constitutional limitations on taxes and appropriations applicable to the City. <br />For a description of other factors relating to the revenues of the City, see “THE CITY AND CITY <br />FINANCIAL INFORMATION” herein. <br />Article XIIIA of the State Constitution <br />Section 1(a) of Article XIIIA of the State Constitution limits the maximum ad valorem tax <br />on real property to 1% of full cash value (as defined in Section 2 of Article XIIIA), to be collected <br />by counties and apportioned according to law. Section 1(b) of Article XIIIA provides that the 1% <br />limitation does not apply to ad valorem taxes to pay interest or redemption charges on (1) <br />indebtedness approved by the voters prior to June 1, 1978 or (2) any bonded indebtedness for <br />the acquisition or improvement of real property approved on or after June 1, 1978, by two thirds <br />of the votes cast by the voters voting on the Proposition. Section 2 of Article XIIIA defines “full <br />cash value” to mean “the county assessor’s valuation of real property as shown on the 1975–76 <br />tax bill under ‘full cash value’ or, thereafter, the appraised value of real property when <br />purchased, newly constructed, or a change in ownership has occurred after the 1975 <br />assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to <br />exceed 2% per year, or to reflect a reduction in the consumer price index or comparable data for <br />the area under taxing jurisdiction or reduced in the event of declining property value caused by <br />substantial damage, destruction or other factors. Legislation enacted by the State Legislature to <br />implement Article XIIIA provides that notwithstanding any other law, local agencies may not levy <br />any ad valorem property tax except to pay debt service on indebtedness approved by the voters <br />as described above. <br />The voters of the State subsequently approved various measures that further amended <br />Article XIIIA. One such amendment generally provides that the purchase or transfer of (i) real <br />property between spouses or (ii) the principal residence and the first $1,000,000 of the full cash <br />value of other real property between parents and children, does not constitute a “purchase” or <br />“change of ownership” triggering reassessment under Article XIIIA. This amendment could <br />serve to reduce the property–tax revenues of the City. Other amendments permitted the State <br />Legislature to allow persons over 55 or “severely disabled homeowners” who sell their <br />residences and buy or build another of equal or lesser value within two years in the same <br />county, to transfer the old residence’s assessed value to the new residence. <br />In the November 1990 election, the voters approved the amendment of Article XIIIA to <br />permit the State Legislature to exclude from the definition of “newly constructed” the <br />construction or installation of seismic retrofitting improvements or improvements utilizing <br />earthquake hazard mitigation technologies constructed or installed in existing buildings after <br />November 6, 1990. <br />Article XIIIA has also been amended to permit reduction of the “full cash value” base in <br />the event of declining property values caused by damage, destruction or other factors, provided <br />that there would be no increase in the “full cash value” base in the event of reconstruction of <br />property damaged or destroyed in a disaster.