Secret Ballot Not Required In Fee Elections Under Prop. 218

In Greene v. Marin County Flood Control and Water Conservation District (here), the Supreme Court held that a Article II, Section 7, which requires that Article II, Section 7, which provides that "voting shall be secret," does not require a totally secret ballot on fee elections under Prop. 218 (which requires an election on property-related fees except for water, sewer and garbage service). The Court relied on the provision in Article XIII D. Section 6(c), which provides that an agency may adopt procedures for fee elections that are similar to those compelled for assessment elections by Article XIII D, Section 4. Since that provision does not require secret ballots--indeed, it provides for weighted voting that requires that a voter's identity be known--neither does Article XIII D, Section 6(b). Because the agency in this case provided for a high degree of secrecy--ballots could only be inspected after the tabulation and then only by court order--the court found no constitutional violation. However, the court left open the possibility that lesser degree of secrecy might violate the constitution.

Congratulations to Mike Colantuono, who successfully represented the public agency defendant.

Park Assessment Fails To Comply With Prop. 218

In Beutz v. County of Riverside (here), the Court of Appeal held that a park assessment failed to comply with the requirements of Article XIII D, Section 4, part of Proposition 218. The court first held that the county had failed to separate the general benefit from the special benefit provided by the improvements in question (park landscaping) and also failed to spread the special benefit proportionately among the assessees (all of whom paid an equal assessment). In short, the opinion gives teeth to the requirements of Prop. 218, insofar as they relate to assessments.

Supplemental Assessment Violates Prop. 218

In Town of Tiburon v. Bonander (here), the Court of Appeal held that a supplemental special assessment violated the proportionality requirement of Article XIII D, Section 4(a). The court first found that the assessment was properly imposed to pay for the special benefits conferred by undergrounding utilities, and that the benefit conferred was not "general" merely because properties throughout the district shared the same benefit. With respect to proportionality, however, the court found two flaws. First, the assessment engineer created three "zones," based on cost, so that properties in the high cost area paid more for the same benefit. However, the court held that dividing up the assessment area by cost zones violated the provision in Article XIII D. Section 4(a), which requires that the assessment be based on "the entirety of the capital cost of a public improvement." Properties that receive the same special benefit should pay the same assessment, even if the cost to serve those properties is greater. Second, the Town excluded some properties from the assessment district even though they received a benefit from undergrounding. Although the utilities in the areas in which these properties were located were already underground, they received reliability and safety benefits from the undergrounding of the larger area.

This case raises a number of interesting issues in the area of assessment proportionality. Although it may be a little fact-specific, I wouldn't be surprised if the Supreme Court granted review.

A Charge To Collect A Tax Is, Guess What? (A Tax)

Ever since the enactment of Prop. 13 there have been dozens of cases demarcating the boundary line between taxes, which at the local level now require voter approval, and fees, which sometimes do not require such approval (even under Prop. 218). The latest battle in this saga is Weisblat v. City of San Diego (here). There the City tried to impose a fee to cover the costs of imposing a tax on renters of real property. Not surprisingly, the court held that the charge was a tax, not a fee, since it did not cover the cost of regulation or the cost of providing a service to these property owners. Accordingly, the case largely restates settled law, and is far from the sweeping victory that it has been portrayed as by anti-tax groups. In fact, the only novel thing about the case is its holding that the tax was a "general tax" under Prop. 218, rather than a "special tax," even though it was intended to cover specific costs. That holding should give local government a chance to levy more general taxes that require only a majority vote.

Water Charges Are Fees Not Assessments

In Paland v. Brooktrails Township (here), the Court of Appeal has clarified the scope of Proposition 218 as applied to water charges. The plaintiff claimed that a minimum monthly base rate imposed by a special district for water service that was available but not used constituted a "fee" that is required to comply with the requirements of Article XIII D. Section 6, rather than an "assessment" required to comply with Article XIII D, Section 4. The difference is important because, among other things, an assessment requires a vote of the assessees, while a fee (for water service) does not. Here's the holding: "[W]e conclude the water and sewer base rates imposed on parcels with water or sewer connections regardless of whether they are active or inactive, and whether or not the property owner uses the services, is a fee subject to the provisions of article XIII D, section 6, not an assessment subject to the requirements of article XIII D, section 4." Ungrammatical, but correct, in light of prior Supreme Court authority holding that water charges are fees.

Prop. 218 Claims Not Subject To Validation Statutes

In Bonander v. Town of Tiburon (here), the Supreme Court has held that claims that a utility undergrounding assessment is invalid under Prop. 218 don't need to comply with the strict requirements of the validation statute. The case turns primarily on statutory interpretation, but the result seems absolutely right. The validation statutes are a trap for the unwary and shouldn't be applied unless the governing law is absolutely clear, which it was not in this case.

Statement of Decision in LADWP Case

Here is the statement of decision in the case brought by the Howard Jarvis Taxpayers Association against the City of Los Angeles, concerning transfers from the LA Department of Water and Power to the City's Reserve Fund. Thanks to the HJTA's Tim Bittle for sending it to me.

LOs Angeles May Have To Refund $30 Million

Or maybe more. The Los Angeles Times reports here on a major victory for the Howard Jarvis Taxpayers Association, which sued to prevent the Los Angeles Department of Water and Power from transferring money to the City's general fund. The court's tentative decision enforces the provisions of Proposition 218, which restricts the use of utility fees for utility-related purposes. What will the city say in response? Stay tuned.

Secret Ballot Required In Prop. 218 Fee Elections

Article XIII D, Section 6(c) requires that local governments obtain electoral approval of certain property-related fees. But it does not spell out the procedures for such elections, other than to provide that local governments "may adopt procedures similar to those for increases in assessments in the conduct of elections under this subdivision." In Greene v. Marin County Flood Control and Water Conservation District (here), the court held that the secret ballot requirement contained in Article II, Section 7 ("Voting shall be secret") applies to fee elections under Article XIII D, Section 6(c). It then invalidated an election upholding a fee where the voters had not been assured that their ballots would be secret.

The opinion is pretty straightforward and seems to reach the right result, given the unqualified command of Article II, Section7, and the lack of any good reason not to have a secret election. The only troublesome part of the opinion is the court's holding that a secret ballot furthers the tax-limitation goals of Proposition 218. The court said that "[s]ecrecy in voting enhances free taxpayer consent to approve or reject a proposed fee in the face of local controversy about its merits and it makes it more difficult for government to extract revenue from unwilling taxpayers. Therefore, in liberally construing Proposition 218 to further its purposes, we construe the terms 'election' and 'voting' to mean secret voting." Given the anti-tax proclivities of the California electorate, this seems like a stretch, but it's utterly unnecessary to the opinion.

Would Extending the Sales Tax To Services Violate Proposition 218?

As part of his plan to solve California's fiscal crisis, the Governor is proposing to extend the sales tax to services. In an article (here), the Howard Jarvis Taxpayers Association contends that this would violate Prop. 218. Here's their rationale: extending the reach of the sales tax would also increase that portion of the tax (the Bradley-Burns tax) that goes to local entities. That can't be done under Proposition 218 without a vote of each local governing body and each local electorate.
Here's the contrary argument: Prop. 218 focused exclusively on tax measures approved at the local level. But Article XIII A, Section 3--part of Proposition 13--permits the Legislature to approve tax increases--whether state or local--by a two thirds vote. If that requirement is met, the constitution is satisfied. Indeed, the central vice of HJTA's argument is that it proves too much--under it, the Legislature could never expand the list of items subject to the sales tax. That can't be right.

Here's the comeback: By its terms, Article XIII A, Section 3 covers only "changes in state taxes enacted for the purpose of increasing revenues collected pursuant thereto." The local sales tax is not a "state tax" for purposes of this provision, since the revenue goes to local governments. Indeed, according to HJTA, the Governor's sales tax proposal expressly refers to "all current applicable state and local taxes." Since even the Governor recognizes that the sales tax includes both state and local taxes, you can't use Prop. 13 to get around Prop. 218.

In response, the State would have to argue that the entire sales tax is a "state tax" for purposes of Article XIII A, Section 3, regardless of whether the money winds up going to the state or local governments. That's a better argument than you might think, because for about half a century the sales tax has been almost entirely a creature of state law. For example, in 2004 the state enacted something colloquially known as the "triple flip," by which the local sales tax was reduced by .25 percent, the state sales tax was correspondingly increased (to pay for deficit reduction bonds), and local government's loss of revenue was backfilled through the property tax. Moreover, the sales tax is administered by a state agency pursuant to uniform statewide rules. And, most importantly for this issue, the universe of transactions subject to the tax is fixed by state law (and probably has been for the last half-century, well before the passage of both Proposition 13 and Proposition 218). So the sales tax is a "state tax" for purposes of Article XIII A, Section 3 regardless of where the money goes, at least insofar as state law determines which commercial transactions are subject to the tax and which are not.

If and when the sales tax is extended (perhaps a doubtful proposition in itself), it will be interesting to see how this plays out.