Funding Water Quality Mandates California Soc’y of Municipal Finance Officers February 24, 2011 November 30, 2018

MICHAEL G. COLANTUONO Colantuono & Levin, PC 11406 Pleasant Valley Road Penn Valley, CA 95946-9024 (213) 542-5739 (voice) (530) 432-7359 (voice) (530) 432-7356 (fax) MColantuono@CLLAW.US WWW.CLLAW.US November 30, 2018

The basic revenue sources Taxes Assessments Fees Subventions Proceeds from use of assets Fines & Penalties November 30, 2018

General Taxes Can be used for any lawful purpose 2/3 vote of Board or Council to propose (except charter cities) under Prop. 62 Simple majority of voters to approve Must be placed on general election ballot on which legislative seats contested unless Council or Board unanimously declares an emergency justifying a special election November 30, 2018

Special Taxes Legally restricted to a particular use Majority vote of Board or Council to propose 2/3 majority of voters to approve May be voted on any lawful election date November 30, 2018

Taxes (cont.) Common tax bases: Parcel taxes Utility users taxes Transactions and Use Taxes Can draw any tax distinction which has a rational basis and is not illegally discriminatory November 30, 2018

Assessments Must identify an assessment statute (or charter city ordinance) that allows funding the projects or services in issue Benefit Assessment Act of 1982 (M&O) Improvement Acts of 1911, 1913, 1915 (capital and debt financing) Lighting & Landscaping Act of 1972 (landscaping, lighting, park &recreation facilities) November 30, 2018

Assessments Continued Prop. 218 Requirements Engineer’s report Identify special benefit Spread assessment in proportion to special benefit Account for general benefit and provide non-assessment funding November 30, 2018

Assessments (Cont.) Protest Proceeding Mail ballots to affected property owners, weighted by assessment to be paid Hold a noticed hearing 45 days later Count protests received by end of hearing; if a majority vote “no,” you cannot proceed Follow the notice and hearing procedures of the assessment statute, too. November 30, 2018

Fees Property related fees subject to Prop. 218 Function like parcel taxes HJTA v. Salinas (2002) (property-tax-roll fee was subject to Prop. 218; storm drains not “sewers” under 13D, 6(c)) Non-property related fees subject to Prop. 26 Inspection and permit fees, e.g. November 30, 2018

Property Related Fees Majority protest proceeding Election Mailed notice to property owners Public hearing after 45 days’ notice If a majority of property owners protest in writing, the fee cannot be imposed Election 2/3 of registered voters in a “real” election 50% + 1 of property owners voting by mail, one vote per parcel November 30, 2018

Non-property related fees Under Prop. 26, all new fees are taxes unless an exception applies Likely exceptions here: Charge for benefit or privilege not provided to non-payors, limited to cost Service or product on these same terms License or permit issuance and enforcement Development Impact Fee November 30, 2018

Fees Generally All fee options are limited to cost recovery Use of enterprise fund fees if you can show the operation of those enterprises has an impact on water quality programs Water fees Sewer fees Trash fees November 30, 2018

Subventions from other levels of gov’t Pennies from heaven If these were available in meaningful amounts, none of us would be attending this session November 30, 2018

Proceeds from the use of Assets Rent from land, interest from idle funds, licensing revenue The proceeds from use of an asset generally have the same legal restrictions as the asset itself (interest follows principal) Thus, proceeds which are flexible in use are likely general fund revenues you have other uses for November 30, 2018

Fines are not Taxes Cal. Taxpayers Ass’n v. Franchise Tax Board (2010) 190 Cal.App.4th 1139 (3rd DCA) 20% penalty on late corporate taxes raising $1.4b not a tax requiring 2/3 vote of Legislature Distinguishing characteristics: label, revenues diminish over time, triggered by violation No need for findings or good faith defense; post-payment remedy sufficient November 30, 2018

Fines & Penalties Those imposed to recover the time value of money paid late should be viewed as interest and treated as having the same restrictions as interest (and principal) Others can be viewed as discretionary revenue to be allocated as the Council or Board thinks fit. November 30, 2018

Questions? November 30, 2018