Election Results are in!
Election results are in for most of the California State propositions, two of which have potentially great impact on local government’s ability to manage our own affairs.
Proposition 22, with the slogan of “Keep Local Revenue Local”, helps prevent the State from arbitrarily taking revenue from cities and redevelopment agencies as they have done in the past. This will help cities conduct financial planning with greater certainty and stability, and assure that revenue collected in Hayward for local government and services stays within our city to serve our residents, businesses, and property owners. This is a good thing!
Proposition 26 is an entirely different matter and runs counter to Proposition 22. Proposition 26 was also approved by the voters, but in this case, winning is not in the best interests of local government. One only need look at the primary contributors and the amounts they gave to support the proposition to become suspicious, and recognize that Proposition 26 opponents were outspent three to one:
- Oil & Gas — $5,193,500
- Pro-Business — $3,977,323
- Food & Beverage — $2,601,500
- Tobacco — $2,250,000
- Alcohol Producers — $2,106,063
Disagreement has emerged in the past years regarding differences between regulatory fees and taxes, but the California Supreme Court has upheld the use of regulatory fees for mitigation of adverse consequences to the public due to business activities. Proposition 26 challenges that perspective and defines many regulatory fees as taxes going forward. Proposition 26 once again modifies the State Constitution rather than addressing the matter legislatively: amends Section 3 of Articles XIII A and Section 1 of Article XIII C of the California State Constitution.
Proposition 26 further erodes the ability of local elected officials to identify costs to local government and assess fees to the generators of those costs to pay for them. Generally, the types of fees and charges that would become taxes under the measure are ones that government imposes to address health, environmental, or other societal or economic concerns. This is because these fees pay for many services that benefit the public broadly, rather than providing services directly to the fee payer.
For instance, fees that are currently imposed on generators of hazardous waste to assist in paying for clean-up efforts if those same hazardous wastes are inappropriately dumped or released into the environment by an accident would become taxes in the future and require a two-thirds vote of the local electorate to approve them. They would no longer be available to local elected officials (our City Council) as a prudent fiscal protection and/or insurance for the community to be used in case of emergency clean-up need.
So what drove Proposition 26 to victory? In my opinion, voters responded to the gridlock in the State Legislature, to the inability of the State to approve a balanced budget on time, and to the State’s smoke-and-mirrors approach to moving revenue from one pot to the other: local government was collateral damage.
Proposition 26 will surely be tested in the courts and we may not know for some time exactly what part of it will stand to the legal challenge. It is yet another argument in favor of ballot initiatives being legally vetted BEFORE getting on the ballot, but that is a topic for another day.
In the meantime, we have greater local financial certainty with the approval of Proposition 22. And, we have greater local revenue uncertainty with the approval of Proposition 26 and its assumed-to-be long trail through the court system.