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<br />The City currently imposes the following general taxes: business–operations tax and 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 the voter requirement of Article XIIIC.
<br />Article XIIID also adds several provisions making it generally more difficult for local agencies to levy and maintain fees, charges, and assessments for municipal services and 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 requirement that assessments confer a “special benefit,” as defined in Article XIIID, over and 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 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 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 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 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 those not charged, and does not exceed the reasonable costs to the local government of 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, and audits, for enforcing agricultural marketing orders, and for the administrative enforcement 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 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 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, 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 subject to challenge under Proposition 218 or Proposition 26.
<br />Article XIIIC also removes limitations on the initiative power in matters of reducing or repealing local taxes, assessments, fees or charges. No assurance can be given that the voters 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 General Fund. If such repeal or reduction occurs, the City’s operations could be adversely affected.
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