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<br />The City currently imposes the following general taxes: business–operations tax and
<br />transient–occupancy tax. Since all of these taxes were imposed before January 1, 1995, and
<br />have not been extended or increased since that date, these taxes should be exempt from the
<br />requirements of Article XIIIC. Any future increases in these taxes, however, would be subject to
<br />the voter requirement of Article XIIIC.
<br />Article XIIID also adds several provisions making it generally more difficult for local
<br />agencies to levy and maintain fees, charges, and assessments for municipal services and
<br />programs. These provisions include, among other things, (i) a prohibition against assessments
<br />that exceed the reasonable cost of the proportional special benefit conferred on a parcel, (ii) a
<br />requirement that assessments confer a “special benefit,” as defined in Article XIIID, over and
<br />above any general benefits conferred; (iii) a majority protest procedure for assessments which
<br />involves the mailing of notice and a ballot to the record owner of each affected parcel, a public
<br />hearing and the tabulation of ballots weighted according to the proportional financial obligation
<br />of the affected parties, and (iv) a prohibition against fees and charges used for general
<br />governmental services, including police, fire and library services, where the service is available
<br />to the public at large in substantially the same manner as it is to property owners.
<br />On November 2, 2010, voters in the State approved Proposition 26. Proposition 26
<br />amends Article XIIIC of the State Constitution by expanding the definition of “tax” to include “any
<br />levy, charge, or exaction of any kind imposed by a local government” except the following: (1) a
<br />charge imposed for a specific benefit conferred or privilege granted directly to the payor that is
<br />not provided to those not charged, and does not exceed the reasonable costs to the local
<br />government of conferring the benefit or granting the privilege; (2) a charge imposed for a
<br />specific government service or product provided directly to the payor that is not provided to
<br />those not charged, and does not exceed the reasonable costs to the local government of
<br />providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a
<br />local government for issuing licenses and permits, for performing investigations, inspections,
<br />and audits, for enforcing agricultural marketing orders, and for the administrative enforcement
<br />and adjudication thereof; (4) a charge imposed for entrance to or use of local government
<br />property, or the purchase, rental, or lease of local government property; (5) a fine, penalty, or
<br />other monetary charge imposed by the judicial branch of government or a local government, as
<br />a result of a violation of law; (6) a charge imposed as a condition of property development; and
<br />(7) assessments and property–related fees imposed in accordance with the provisions of Article
<br />XIIID. Proposition 26 provides that the local government bears the burden of proving by a
<br />preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the
<br />amount is no more than necessary to cover the reasonable costs of the governmental activity,
<br />and that the manner in which those costs are allocated to a payor bears a fair or reasonable
<br />relationship to the payor’s burdens on, or benefits received from, the governmental activity.
<br />The City does not believe that any material source of its General Fund revenue is
<br />subject to challenge under Proposition 218 or Proposition 26.
<br />Article XIIIC also removes limitations on the initiative power in matters of reducing or
<br />repealing local taxes, assessments, fees or charges. No assurance can be given that the voters
<br />of the City will not, in the future, approve an initiative or initiatives which reduce or repeal local
<br />taxes, assessments, fees or charges currently comprising a substantial part of the City’s
<br />General Fund. If such repeal or reduction occurs, the City’s operations could be adversely
<br />affected.
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