Sen. Hertzberg Targets Homeowners With Higher Water and Sewer Rates

Storm_DrainIt’s no secret that tax-and-spend interests have hated Proposition 13 since its adoption by the voters in 1978. Immediately after passage, Prop. 13 was the target of numerous lawsuits and legislative proposals seeking to create loopholes that would allow government to grab more tax dollars from California citizens.

These constant attacks compelled taxpayer advocates to go back to the voters with multiple initiatives to preserve the letter and spirit of Prop. 13. These included Prop. 62 in 1986 (voter approval for local taxes); Prop. 218 (closing loopholes for local fees and so-called “benefit assessments”); and Prop. 26 (requiring “fees” to have some nexus to the benefits conferred on the fee payers).

However, the latest tax-grabber to treat homeowners as ATMs is state Senator Bob Hertzberg, D-Van Nuys. If he gets his way, Californians will be spending a lot more on water and sewer service. He seeks to do away with the critical “cost of service” requirements for water rates as well as treat “stormwater runoff” (the rain that runs down street gutters) the same as “sewer service,” opening the door to virtually unlimited — and unvoted — sewer rates.

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‘Right to Vote on Taxes’ Case Now Before California Supreme Court

TaxesLast week the California Supreme Court agreed to hear a case that could determine whether the right to vote on local taxes, which is constitutionally guaranteed by both Propositions 13 and 218, will cease to exist.

The case, California Cannabis Coalition v. City of Upland, at first glance seems limited to a narrow technical question: When a local initiative seeks to impose a new tax, does the issue need to be put to the voters at the next general election or can the proponents, relying on other laws, force a special election? But in answering that question, the lower court ruled that taxes proposed by initiative are exempt from the taxpayer protections contained in the state constitution, such as the provision dictating the timing of the election.

The Howard Jarvis Taxpayers Association (HJTA), which filed the petition seeking Supreme Court review, was alarmed because the constitution’s taxpayer protections include the right to vote on taxes. If local initiatives are exempt from those protections, then public agencies could easily deny taxpayers their right to vote on taxes by colluding with outside interests to propose taxes in the form of an initiative, then adopting the initiative without an election.

The import of the case was not lost on those who dislike Proposition 13’s requirement that local special taxes – those imposed for specific purposes – receive a two-thirds vote of the local electorate. For example, backers of a tax to subsidize a new sports arena in San Diego were hoping that the lower court ruling would allow them to impose a special tax with only a simple majority vote.

Some legal scholars suggested that the lower court decision was not as far-reaching as feared by HJTA. But the fact that the Supreme Court granted review, which it does in only a fraction of cases it receives, validates the concern about the potential scope of the lower court ruling.

By way of background, the case began when the California Cannabis Coalition (CCC) circulated an initiative petition to legalize medical marijuana dispensaries in the City of Upland. The initiative requires each dispensary to pay the City an annual $75,000 tax. CCC collected enough signatures to qualify for a special election. But a provision of Proposition 218, the Right to Vote on Taxes Act, part of the California Constitution approved by voters in 1996, requires tax proposals to be presented at a general election for city council candidates. (This forces candidates to identify for or against the tax, which helps voters choose the taxpayer-friendly candidates.)

The Court of Appeal ruled that taxes proposed by a local initiative are not subject to Proposition 218. The ruling, however, was not limited to Proposition 218’s election date requirement. The Court said taxes proposed by initiative are exempt from all of 218.

HJTA, having sponsored Proposition 218, was so concerned by the decision, it offered to represent the City of Upland at no cost to take the case to California’s highest court. It was HJTA’s petition on behalf of the City of Upland that was granted.

Taxpayers of all stripes and interests will be watching this case very closely. California is already a hostile place for taxpayers so losing the right to vote on local taxes would simply be adding to the pain.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece was originally published by HJTA.org

Defending against tax increases

TaxesIn its 38-year history, Proposition 13 has been under constant assault. The attacks have come from the Legislature, the media and especially the courts. After initially being upheld against a myriad of constitutional challenges, the California Supreme Court then began punching loopholes in the landmark tax reform measure.

Prop. 13 was intended, first and foremost, to limit out-of-control property tax increases that were forcing tens of thousands of Californians out of their homes. It did this by imposing a 1 percent cap on the base property tax known as the ad valorem tax and limiting subsequent increases to 2 percent annually. But Howard Jarvis and the voters were well aware how creative local governments could be in dreaming up new kinds of taxes to make up for the tax relief conferred on property owners by Prop. 13. For that reason, it also imposed a two-thirds vote requirement on other local taxes. Today, because of court rulings and other constitutional taxpayer protections — including Proposition 218, sponsored by the Howard Jarvis Taxpayers Association — local taxes going into a general fund require a simple majority vote of the electorate while taxes intended for special purposes require a two-thirds vote.

The two-thirds vote is important because taxation is government’s most draconian power and as a prerequisite to its exercise the constitution requires a higher degree of consensus. Constitutionally imposed two-thirds vote requirements are common. The United States Constitution, for example, mandates supermajority votes in a dozen instances.

Not surprisingly, local governments and tax-receiving interests detest the two-thirds voter requirement as a burdensome impediment to their efforts to extract ever more tax dollars from local citizens. But the tax-and-spend crowd need to be reminded that one definition of democracy is two wolves and a sheep voting on what’s for dinner.

According to Prop. 13 detractors and some media reports, a recent Court of Appeal decision calls into question the viability of the two-thirds vote requirement. While the decision contains some troubling language, some of the commentary has significantly overstated the scope of that ruling.

The decision which is drawing so much attention is California Cannabis Coalition v. City of Upland and in determining this ruling’s impact on Proposition 13, it is important to note how the court itself defined the issues: “The issues raised here [are] whether the imposition of the [cannabis] Initiative’s $75,000 fee is a tax or a fee and whether pursuant to [Proposition 218] the Initiative must be placed on a special election ballot.” Glaringly absent is any mention of the two-thirds voter requirement imposed by Prop. 13.

Early in all attorneys’ legal training, we hear the maxim, “cases are not authority for matters not considered therein.” Nowhere in the CCC v. Upland decision did the court say that a local initiative can avoid the two-thirds vote requirement for the imposition of a tax.

Nonetheless, there is troubling language in the decision that is contrary to well-settled principles of initiative law. Specifically, the court ruled that Proposition 218’s rules and procedures relating to voter approval of taxes expressly applied to local governments and thus the implication is that these rules and procedures do not apply to taxes imposed by voters via the initiative power. (Again, the rule at issue was the timing of the local election on marijuana dispensaries, not the two-thirds vote requirement.)

If, for some reason, the dicta (legalese for superfluous language) in the CCC v. Upland decision says what Prop. 13 enemies say it does — and we don’t think it does — then the consequences would indeed be profound and dangerous. It would give local governments a huge incentive to collude with front groups to propose local initiatives which would purport to raise special taxes with a simple majority vote.

What the court did not cite — perhaps because none of the parties briefed the issue — were the host of cases that hold that the people’s power of initiative is coextensive with that of a legislative body. The Howard Jarvis Taxpayers Association has always argued in defense of the initiative power, saying that if the Legislature (or city council) can do it, so can the people via initiative. But the corollary to this principle is that if the Legislature can’t do something, then neither can the people via initiative. Therefore, because a local government entity may not impose a special tax with a two-thirds vote of the people, then neither can proponents impose a special tax with a simple majority. If, for some reason, the dicta (legalese for superfluous language) in the CCC v. Upland decision says what Prop. 13 enemies say it does — and we don’t think it does — then the consequences would indeed be profound and dangerous. It would give local governments a huge incentive to collude with front groups to propose local initiatives which would purport to raise special taxes with a simple majority.

While the tax-and-spend lobby may cheer this ruling and hope that the tax floodgates will open, we suspect that local government attorneys are quietly advising their clients to be careful about overreaching. They probably realize that this decision is simply inconsistent with existing law relating to initiatives. Moreover, if any local government or interest group attempted to rely on this case as justification for a pursuing a special tax with a simple majority vote, they know that they would quickly find themselves in front of a judge.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This column originally appeared as an op-ed in the San Diego Union-Tribune.

Gov. Brown’s Attack on Prop. 218 Threatens to Hike Water Rates

Water Drought SprinklerGovernor Brown has foolishly decided to poke a hornets’ nest with his signing of Assembly Bill 401. While AB401 itself isn’t particularly controversial, as it merely authorizes a couple of state agencies to devise a plan by 2018 to assist low-income individuals with paying their water bills, the problem is what Brown wrote in the letter approving the bill.

Although not common, governors occasionally issue a statement when they approve a bill passed by the Legislature. In signing AB401, Governor Brown exposed his disdain for the taxpayer and ratepayer protections set forth in Proposition 218, a Howard Jarvis Taxpayers Association initiative approved by voters in 1996. Brown stated that, “Proposition 218 … serves as an obstacle to thoughtful, sustainable water conservation pricing and necessary flood and stormwater system improvements.”

The governor could not be more wrong. Proposition 218 mandates that water rates be based on “cost of service” principles. Simply stated, “cost of service” means that you should not pay more for water, sewer or refuse collection than it costs to provide you with that service. The reason voters approved Proposition 218 in the first place is because politicians and bureaucrats had cleverly bypassed the property tax limits of Proposition 13 by imposing a myriad of fees, charges, assessments and other exactions to get money from taxpayers’ wallets.

Brown seems to be talking out of both sides of his mouth in his letter approving AB401. In blaming Prop. 218 as a major impediment to water conservation efforts, he ignores the fact that “cost of service” water rates actually encourage conservation. Conversely, water subsidies, which he expressly supports, are a disincentive to conservation.

What this means is that Brown believes water needs to be more expensive for the middle class in order to encourage conservation, as well as more expensive for wealth redistribution. And while he suggests that low-income people pay less than their fair share, he does not speak of conservation goals as they apply to these ratepayers. The kicker is that he wants the middle and upper classes to fund water service and to bear the burden of the majority of resource conservation. This isn’t fair at all and is precisely why voters enacted Proposition 218.

To those who believe that taxpayers are over-stating their case, consider this: Governor Brown wants to engage in the same sort of social engineering with water rates that he has with energy costs in California. It is painfully obvious that the results of these policies have been a disaster for California, particularly the middle class.

Let’s not let politicians like Brown force higher water rates on California’s ever shrinking number of working taxpayers and homeowners. Water rates should be based solely on the cost of providing that service without engaging in ill-fated social experimentation dreamed up by bureaucrats unhinged from the real world.

Originally published by HTJA.org

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

California Is Not Disneyland

At the Howard Jarvis Taxpayers Association, we have seen Proposition 13 blamed for just about everything. A national publication blamed the tax limiting measure for the not guilty verdict in the O.J. Simpson murder trial, while a high school physical education coach wrote in a community paper that the loss of shots by his track and field team was due to the lack of money to cut the grass, and this, of course, was due to Proposition 13.

Now we’re seeing attacks on HJTA sponsored Proposition 218, the Right to Vote on Taxes Act, which makes the taxing process more democratic by allowing voters to decide on local tax increases and to assure property owners that they would have a meaningful say on new assessments, fees and charges. One such attack was a recent opinion piece, calling for the repeal of Proposition 218, because it robs voters of their “democratic power.”

This critic argued that, because Proposition 218 guarantees the voters’ right to approve or reject new taxes, it prevents politicians from matching revenue to their spending: “ [L]ocal officials can give big pensions to cops, but don’t have the power to raise taxes to pay for those pensions.”

But this begs the obvious question: If officials are going to provide benefits to government employees that are unsustainable, wouldn’t it make more sense to limit spending rather than having an open season on taxpayers who are already among the most taxed in all 50 states?

Pundits who call for the repeal of Prop 218 are naïve. They see the state of our political environment as if it were from a sanitized civics textbook or perhaps like Disneyland, a well ordered theme park where fantasies can be made to come true.

DisneylandThe Magic Kingdom may seem genteel, filled with reasonable and well behaved people, when viewed from a tower in the Sleeping Beauty Castle, but outside the park in Realville, a battle is raging between those who work hard to support themselves and their families and those who believe politics is an extension of a grand spoils system where taxes are the preferred weapon to extract ever more money from those who earn it.

California politics is a bare knuckles contest where, by far, the largest and most powerful competitors are the government employee unions. Because of their ability to turn out members to vote for the union label and their ability to use mandatory union dues for any political purpose, they are able to elect a majority to the Legislature, a majority that owes them allegiance.  At the local level, they are just as influential, controlling a majority of votes on many city councils.

And the unions do not adhere to Marquis of Queensbury rules. In San Diego they sent out goon squads to intimidate signature gatherers for a reasonable ballot measure to reform pensions. And in Costa Mesa, they went so far as to hire private detectives to follow city council members, who refused to roll over under union pressure, in an effort to find incriminating information about them.

The result of this union power is evidenced by the recent bankruptcies of cities like Stockton and San Bernardino, where union-beholden council members voted increases in pay and benefits that were unsustainable.

Ironically, had officials been able to raise taxes without going to voters as required by Propositions 13 and 218, the communities would be worse off because California taxpayers and businesses have learned that they can vote with their feet by fleeing to more tax friendly communities or states.  Jurisdictions which lose their tax payers and are left with nothing but tax receivers don’t do very well.

In the real world of California politics, Propositions 13 and 218 are important checks against a corrupt political establishment that is beholden to special interests. So let’s not pretend that this is Fantasyland. The only thing that California politics has in common with Disneyland is that most of the laws enacted that hurt taxpayers are downright goofy.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This piece originally appeared at HTJA.org

Tiered Water Ruling — Water Agencies Shouldn’t Make a Profit Off Homeowners

Last week the California Court of Appeal issued an important ruling interpreting Proposition 218, the Howard Jarvis Taxpayers Association sponsored initiative approved by voters in 1996. Proposition 218 is entitled “The Taxpayers Right to Vote Act” for a very good reason. It reflects the policy that those who pay the bills for public expenditures – taxpayers – should have the final say over how much is taken out of their wallets and pocketbooks. It subjects virtually all local taxes and fees, especially those related to property, to voter or ratepayer control.

Proposition 218 was necessary because the Legislature and the courts had created loopholes in Proposition 13, the iconic California initiative that started the modern American tax revolt in 1978. While Proposition 13 was focused on property taxes, Proposition 218 was drafted to limit the explosion in other types of government exactions burdening homeowners including so-called “benefit assessments,” fees, charges and other sorts of property related levies.

What is important to note about Proposition 218, is that it did not ban property related fees but, rather, sought to return the imposition of fees like water, sewer and trash collection rates to the traditional concept of “cost of service.” Cost of service simply means what it says: The cost to a property owner for a service should not exceed government’s cost to provide that service.

In its ruling, the Court of Appeal concluded that “tiered” water rates, without being justified under “cost of service” principals, failed to comply with the constitutional mandates of Proposition 218. The lawsuit was brought by the Capistrano Taxpayers Association against the city of San Juan Capistrano for, among other transgressions, imposing water rates that were “tiered,” meaning those who used more water would be charged a higher amount per gallon.

The court ruling was immediately condemned by water agencies, state bureaucrats and even Governor Jerry Brown who decried the decision as putting a “straightjacket” on his policies to enforce water conservation. But the ruling did nothing of the sort. First, rather than saying all tiered water rates were automatically unconstitutional, the court merely stated that, whatever the methodology used to impose water rates, they must be based on cost of service.

The sin of San Juan Capistrano was its failure to justify its rate structure at all.

Second, local governments have an array of tools available to enforce conservation to deal with California’s current water shortage. Limiting landscape watering to once or twice a week; prohibitions against hosing down driveways or automobiles; rebates to homeowners and businesses to convert landscape to drought tolerate plants; water reclamation; desalination, such as the massive new project in San Diego County; and the list goes on and on.

So if water agencies have sufficient – and legal – tools available to them to incentivize conservation and deter waste, what is the basis for the shrill, over-the-top reaction to the Court of Appeal decision?  Simple. If these agencies are permitted to impose water rates divorced from “cost of service” principles, then they can generate taxpayer funds over their costs and make a “profit” from homeowners – something Proposition 218 was specifically drafted to prevent.

And in the case of Jerry Brown, he didn’t like the ruling because he is desperately searching for a revenue source for his ill-conceived “Twin Tunnels” project which, like his High Speed Rail debacle, simply isn’t ready for prime time.

There is an object lesson here. Droughts may be caused by Mother Nature, but water shortages are created by humans. California is now paying the price for not building new storage and conveyance infrastructure over the last several decades. Rather than complaining about “cost of service” requirements that are founded in common sense and rational policy, California should immediately correct the dereliction of prior political leaders and build what we need for a California in the 21st century.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

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