Proposition 218

Proposition 218, the Right to Vote on Taxes Act, was passed by California voters in 1996.  Its purpose was to tighten loopholes that local governments had exploited post-Proposition 13.  It provides a number of protections that are enshrined in our state Constitution in article XIII C and article XIII D.

Voter Approval of Taxes

No local government - city, town, county, special district - may pass a tax without voter approval.  (art. XIII C, section 2.)  General taxes, which are used for general governmental purposes, require majority approval of the electorate.  Special taxes, which are used for special purposes, require two-thirds approval of the electorate.

Property Assessments

Property assessments must be supported by a detailed engineer's report that demonstrates how the properties burdened by the assessments are specifically benefited above and beyond the benefits bestowed on the public at large. (art. XIII D, section 4.)  Property owners paying the assessment must vote in favor of the assessment.  Votes are weighted based on each property owner's financial obligation.

Property-Related Fees and Charges

Water, sewer, and trash fees and charges are considered property-related because they are imposed as an incident of property ownership.  Such fees may not exceed the cost of providing the property service, meaning government utilities may not make a profit.  Revenues received cannot be used for non-utility purposes or for future services. And rates must be equitable based on the cost of providing service to each property owner.  (art. XIII D, section 6(b).)  Before imposing new or increased property related fees, the local agency must mail written notice and hold a public hearing.  If a majority of property owners protest, the local agency may not pass the fees.  (art. XIII D, section 6(a).)

Proposition 26

Proposition 26, passed in 2010, provides further protections for taxpayers.  It makes any levy, charge, or exaction by any state or local agency a tax, by default. (art. XIII A, section 3 (state) and art. XIII C, section 1 (local).) The burden of proving that the fee or charge fits into an exception (i.e. is not a tax) is on the government.  One of the exceptions that has been hotly litigated is whether fees for electricity exceed the cost of providing electric service.  Many government-owned electric utilities embed amounts to fund transfers to the government's general fund.  Courts have grappled with complex issues arising from these practices including how the availability of non-rate revenues (i.e. wholesale revenues) impact the analysis.