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<br />59 <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. 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 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 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 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 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 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 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 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 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 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 permit the State Legislature to exclude from the definition of “newly constructed” the construction or installation of seismic retrofitting improvements or improvements utilizing <br />earthquake hazard mitigation technologies constructed or installed in existing buildings after 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 that there would be no increase in the “full cash value” base in the event of reconstruction of property damaged or destroyed in a disaster.