Public Finance in California's Central Coast Region

Public Finance Instruments

Grant programs

Examples

• 205j - under federal Clean Water Act

Taxes

Examples

• Tax increment financing (TAMC is considering this, SANDAG has one already)

Assessments

Examples

• Benefit Assessments - SVWP, MPRPD
• Constraints on assessments (Prop 218)

Barriers to Financing Water Projects in California

Proposition 13 (1978)

Prior to the passage of Proposition 13, municipalities and Special Districts, including water districts, could levy their own property tax rates. Prop. 13 changed property tax law, limiting the amount of property tax that local governments could levy to 1% of the property's value. This immediately decreased local property tax revenues by over 50%. This 1% property tax levy now must be split among all of the agencies, usually at the same proportion as before Prop. 13 .

Prop. 13 also requires that all changes in state taxes be approved by 2/3 in the legislature, and that local special taxes be approved by 2/3 of local voters .

Proposition 218 (1996)

After the passage of Prop. 13 limited property tax revenue, local governments and Special Districts turned to other funding sources, such as fees, charges, special assessments, and non-property related "general" taxes. Proposition 218 limited these practices through amendments to the state's Constitution, including  :

• clarified rules for local general taxes (requires majority voter approval) and special taxes (requires 2/3 voter approval)
• prohibiting Special Districts from levying general taxes
• placing burden of proof on agencies to show that assessments are proportional to benefits for each parcel
• requiring proposed assessments be approved through elections where votes are weighted in proportion to special benefit received

Specifically, water agencies must comply with the following standards prior to any change in fee structure or rate  :

• revenues from fees cannot exceed funds necessary to provide the service
• revenues from fees may only be used for the project for which it was charged
• a fee on a person/parcel cannot be more than the cost of service for that person/parcel
• a fee cannot be charged for a service that will not be used by the property owner (cannot be based on future or potential use)
• a fee cannot be charged for general services (available to the public in the same was as to the property owner)
• a public hearing must be held on the proposed change, and the change cannot be made if a majority of the property owners file a written protest

Generally speaking, assessments, fees, charges, and rates in place before July 1, 1997 are exempt from Prop. 218 .

Prop. 26 (2010)

Proposition 26 redefined the term "tax," such that state and local governments could not avoid the restrictions of Props. 13 and 218 by using the term "fee" instead of "tax."

The new definition of "tax" includes "any levy, charge, or exaction of any kind," with the following exceptions :

• a charge for a specific benefit, privilege, service, or product that is available only to the payor, and that does not exceed the reasonable costs of provision
• a charge for the reasonable regulatory costs associated with issuing licenses, permits, inspections, audits, enforcement, etc.
• a fine, penalty, or charge resulting from a law violation.

Links

Public Policy Institute for California Water Policy Center

Disclaimer

This page may contain student work completed as part of assigned coursework. It may not be accurate. It does not necessary reflect the opinion or policy of CSUMB, its staff, or students.