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Home My WebLink About2012-08-28; City Council; 20996; Citizen Presentation Regarding Franchise FeesCITY OF CARLSBAD - AGENDA BILL 15 20.996 AB# MTG. DEPT. CM 8-28-12 CITIZEN PRESENTATION REGARDING FRANCHISE FEES DEPT. DIRECTOR CITYATTORNEY g} CITY MANAGER (^jr^ RECOMMENDED ACTION: To receive a presentation from Gretchen Ashton regarding Franchise Fees. ITEM EXPLANATION: The City Council provides an opportunity for citizens and organizations to have an item placed on a City Council Agenda by submitting a request to the City IVIanager. Attached is a request from Gretchen Ashton (Exhibit 1) requesting that the City Council receive a presentation relating to Franchise Fees. ENVIRONMENTAL IMPACT: Pursuant to Section 15061 of the CEQA Guidelines, the activity is covered by the General Rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. FISCAL IMPACT: None. EXHIBIT: 1. June 6, 2012 E-mail from Grethen Ashton. DEPARTMENT CONTACT: Sheila Cobian (760) 434-2959, sheila.cobian@carlsbadca.aov FOR CiTY CLERKS USE ONLY. COUNCIL ACTION: APPROVED • CONTINUED TO DATE SPECIFIC • DENIED • CONTINUED TO DATE UNKNOWN • CONTINUED • RETURNED TO STAFF • WITHDRAWN • OTHER-SEE MINUTES AMENDED • COUNCIL RECEIVED THE REPORT/PRESENTATON S^hih^it I Sheila Cobian From: dngbythec@roadrunner.com Sent: Wednesday, June 06, 2012 7:23 PM To: Manager Internet Email Subject: City Council Agenda Request Dear Lisa Hildabrand, It has come to my attention that according to Article 13D of the California Constitution, Franchise Fees are not allowed as pass through fees to customers for all property-related fees. In particular, our recently approved solid waste contract is not in compliance with Article 13D. I am also concerned that the contract reads that Franchise Fees are charged on Gross Receipts "without deducting the franchise fees and AB 939 fees". Further, according to Article 13D, property-related fees are not to include any monies that go to provide general public services or beyond the costs of providing the service. I believe the legal and ethical implications warrant careful consideration by council along with the opportunity to make an informed decision regarding the matter. Please place this item on the City Council Agenda as soon as possible. Thank you, Gretchen Ashton 760 271-6069 7^ Of Carlsbad For feefefoacmato ofthe; ^ CITVCOUNCIL Date»fe:2 Cify Manager, SliiftPlllliSlii /?eweiv by a concemed citizen. Prepared: August 22, 2012 Distribution: ^ City Clerk _j Asst. City Cleric _ Deputy Cleric _ Book pSlS&VotectionProgramRegi|^tb^^ was part of this review regarding fe^f% fQllcf^waste services. Storm Water Fees are a#o,Qi^t^^, Mgijpational and state mandates, but justification.fprmQluaingfse'rvicea such as street sweeping have now be^ajji-plMded and are added on top of Solid Waste Service Fees. Executive Summary page 1, paragraphs 4 and 5 describe the two primary reasons for adding Storm Water Fees to solid waste service fees paid by the customer The first is based on the EPA's definition of storm water pollutants as solid waste. The second reads: "Furthermore, refuse collection fees are excluded from the voting provisions of Proposition 218. CA. Const. Art Xlll C, D). Specifically, California's Constitution, Article Xlll However, Proposition 218 includes additional compliance for property-related fees of water, sewer and refuse collection and whether or not they can be charged to the customer that should have been discussed and scrutinized as part of the storm water report. iiiiliiiiisiii; Prop 218: Provided for review and continued reference is a copy of "Understanding Prop 218" from the State of California Legislative Analyst's Office. Prop 218 is important legislation because it was written and approved by the citizens of California to limit local government. It is important to note Prop 218 requires comprehensive compliance. It does not allow for selective compliance or convenient interpretations. The areas of Prop 218 that relate specifically to concerns and examples presented herein are highlighted in red. SEC. 6. Property Related Fees and Charges, (a) Procedures for New or Increased Fees and Charges, An agency shall follow the procedures pursuant to this section in imposing or increasing any fee or charge as defined pursuant to this article, including, but not jimited to, the following: iii»iiSii iiiipli jj^^l5y-frne^pafcels.upqnswhich^aifee or charge Is proposed^for imposition shall be ldentified.-5he'amountof the fee or ctiarg6!proposfd*to;be<imposed upon each parcel sljall be calculated,'^ I nO'^agenCy shl^prdvide written notice by mail of the proposed fee or charge.to the record owner of each identified parcel upon which the fee or charge is proposed for imposition, the amount of the fee or charge proposed to be imposed upon each, the basis upon which the amount of the proposed fee or charge was calculated, the reason for the fee or charge, together with the date, time, and location of a public hearing on the proposed fee or charge. (2) The agency shall conduct a public hearing upon the proposed fee or charge not less than 45 days after maiUng the notice of the proposed fee or charge to the record owners of each identified parcel upon which the fee or charge is proposed for imposition. At the public heanng, the agency shall consider all protests against the proposed fee orcharge If written protosts against the proposed fee or charge are presented by a majority of owners ofthe identified parcels, the agency shall not impose the fee or charge. Agency is NOT required to impose the fee even if no majority protest - it is not automatic. (b) Requirements for Existing, New or Increased Fees and Charges. A fOe Or ChargO shall not be extended, imposed, or increased by any agency unless it meets all of the following requirements: Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service. (2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed. (3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. (4) No fee or charge may be imposed for a service unless that service is actually used by, or immediately avaiiabie to, the owner ofthe property in question. Fees or charges based on potential or future use of a service are not permitted. Standby charges, whether characterized as charges or assessments, shall be classified as assessments and shall not be imposed without compliance with Section 4. (5) No fee or charge may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. Reliance by an agency on any parcel map, including, but not limited to, an assessor's parcel map, may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership for purposes of this article. In any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance with this article. •»1 ^Tfils-isithe only portion of Prop 2% the storm Water Fee Report: iiiifeiSilsiiiisS ' • \ : •' ' ' no property related fee or charge shall be imposed or Increased unless and until that fee or charge is submitted and approved by a majority vote ofthe property : owners ofthe property subject to the fee or charge or, at the option of the agency, by a two-thirds vote of the electorate residing in the affected area. The election shall be conducted not less than 45 days after the public hearing. An agency may adopt procedures similar to those for increases in assessments in the conduct of elections under this subdivision (d) Beginning July 1, 1997. all fees or charges shall comply with this section SECTION 5. LIBERAL CONSTRUCTION. The provisions of this act shall be liberally construed to effectuate its purposes of limiting local government revenue and enhancing taxpayer consent. SECTION 6. SEVERABILITY. If any provision of this act, or part thereof, is forany reason held to be invalid or unconstitutional the remaining sections shall not be affected, but shall remain in full force and effect, and to this end the provisions of this act are severable. "Now local governments must prove that any disputed fee or assessment charge is legal." I asked for this proof 10 months ago regarding water fees and still have NO response. Si Concerns relating to Prop 218 compliance that I am bringing to your attention as examples are: • Franchise Fees: The new solid waste contract allows for Franchise Fees as pass - through costs to the customer. This is specifically not permitted in Prop 218. Franchise Fees go directly to the City's General Fund to provide general public services and to be utilized at Council's discretion, for other than solid waste services. Solid Waste Contract, Page 4, Section 1.37 "Franchise Fee" means the payments paid to city by the contractor pursuant to section 8.02" 8.02 "In consideration ofthe exclusive right, duty and privilege to collect, remove, and dispose all Solid Waste recycle all Recyclable Materials collected and divert all Green Waste collected, Contractor shall pay the City 7.5% of Gross Receipts less the amount collected for the Storm Water Fee for the term of the Contract " 8.03 "Contractor shall pay the city an AB 939 fee as established by resolution of the city council, at the same time and in the same manner as the Franchise Fee. As of the effective date, the AB 939 fee is 2.0 % of the Gross Receipts less the amount collected for the Storm Water Fee...." 8.04 "Contractor shall pay the city a Storm Water Fee as established by resolution of the city council, at the same time and in the same manner as the Franchise Fee..." • Further, the contract reads that the definition of Gross Receipts includes the monies from Franchise Fees and Franchise Fees are then calculated on Gross receipts. Looks like double- dipping. Solid Waste Contract, Page 5, Section 1.40 "Gross Receipts" means any and al! revenues received from Billings by City or Contractor tor ttie Collection, Processing, Disposal and Transportation of Solid Waste pursuant to ttiis Contract, in accordance witti generally accepted accounting principles, without subtracting the Franchise Fee, the AB 939 Fee, any other payment to the City, or any other cost of doing business. Revenue received by the Contractor from sale of Recyclable Materials, including California Redemption Value shall not be considered as Gross Receipts." iSSiS •lii OoWQWPfigeinddxr^ijhghVw solid waste 1^1 contract Utilizes CPI to determine and guarantee: cost increases to the contractor. : - CPI is based on inflation, not the actual cost of providing the services as stipulated in Prop 218. - CPI is problematic because it overstates inflation. - CPI has gone up 20% over the last 10 years. - CPI does not provide a measure of performance accountability. - CPI does not allow for cost savings from improvements in efficiency and technology. One explanation presented for using CPI was that the actual costs of implementing the new solid waste services would have driven the fees too high. In other words, purchasing all the new trash cans was costly. So the cost was spread out over time in a way customers wouldn't notice as much. Another explanation was that the cost of services continually increases each year and that the contractor needed the guaranteed increase to provide the services. However, the new automated system provides a new efficiency that should produce cost savings. I p r ' ! Bl lilil lliiiilii piililiilifc eview'^offRS'v.; - 2009 Fin; v of Waste : - Reque e included City iqing solid waste services to single-stream recyc....^ and fully automated services. The R3, March 28, 2011 Presentation to Council included survey results from Carlsbad residents regarding trash services: Keep the current system? 57% Replace with City provided containers? 36.3% Assume a $2/monthly increase. Considering the clear response of the people and the initial costs to implement the new services, these are obvious indicators that other options for trash services should have been researched, reported and discussed for consideration. ^^^^^ iiii iiiiii RecWds keeping: A month prior to the majority protest public hearing for the proposed solid waste contract, services and fees, I requested a copy of the proposed solid waste contract. Two weeks prior to the hearing I received an email that listed it as an attachment, but the contract was not attached. When I asked why, I was told the contract wasn't ready yet. The City initiated the contract process two years prior. Waiting to make the contract available 72 hours before with the agenda announcing the council meeting, does not allow for adequate time and study by the public before the majority protest hearing. A formal records request through the City Clerk's office, produced NO paper trail or documentation regarding the contract negotiation process other than the proposal from Waste Management. When compared to the contract, it appears the WM proposal was simply made into a contract with little if any changes. Apparently there is no record of other or edited versions than the final contract. However, I did discover some documents and information on my own with internet searches, staff inquiries, and from council meeting agendas. ' "t'lifc,*^"'!! rr; iiii lil "One year after implennenting RM contracts at several of its North American plants, GM realized a 20 percent reduction in overall waste generation (30,000 tons), a 65 percent increase in recycling (from 50,000 tons to more than 82,000 tons), and a 15 to 30 percent decrease in waste management costs." ^^ndardTrkct^^TOr Sblid^Wa Boirp^^^^^ references provided in the Storm^ Water RepoWtb lii^tronmental Protection Agency (EPA). I discove^d. thf re are available resources and standard practices for developing strategic solid waste contracts. Of particular interest are the Resource Management Contracts. "Unlike traditional solid waste service contracts, resource management (RM) compensates waste contractors based on performance in achieving waste reduction goals rather than the volume of waste disposed. As a result, RM aligns waste contractor incentives with the City's goals to explore innovative approaches that foster cost-effective resource efficiency through prevention, recycling, and recovery." These standard practices seem like a good tool and I wonder why they were not used in developing our solid waste contract. Waste Management is listed by the EPA as a Resource Management contractor. Our solid waste contract is a hybrid with some RM features, but does not have incentives for cost reduction, AND does NOT include a reduction in fees over time as recommended by EPA standard practices. mi- Hiill mpliance w d expense op 218. While soiTie citizens believe the solid waste services were put out to bid, the solid waste contract actually appears to be verbally arranged. It also appears that there are multiple, outdated (entire lease should be redone, not just amendments) $1.00 leases, and subleases at the Palomar Transfer Station. The City receives a hosting fee for every ton of trash at the Palomar Transfer Station (which may influence contractor selection). The City and Waste Management share billing responsibilities. The City gets free trash services The contractor is guaranteed rate increases. Franchise fees are allowed as pass-through costs. CPI is used to set rates instead of actual costs. AND much more... liliiiliiK mmmmmm Iiii am first throi . ..mpliance with Prop 218, Articles Xlll C,D ofthe California constitution, and then by any other forms of "do diligence" possible. I am asking the City to prove compliance with Prop 218 on the disputed charges presented herein and in any other areas of non- compliance that exist relating to Prop 218. More importantly I am asking that the wishes of the citizens of Carlsbad be more seriously considered, rather than avoided, in staff's recommendations and in the decision making process. I am asking that the information provided by staff for Council review be comprehensive and accurate. I am greatly concerned that from the "outside looking in", it appears there is a culture or agenda of limiting public information, education and involvement rather than limiting local government and encouraging public input. This is evident in "rushed" approvals without advance availability of information to the public. It is also obvious in the wording and sweeping generalizations in communications that are distributed by the City to the public. Last but not least, the City Clerk's office has been very helpful in my research. Staff has also provided some information in the form of documents and telephone questions and I appreciate their assistance. Thank you for your time and attention. Are there any questions or comments? 2^j2 ' Understanding Proposition 218 Legislative Analyst's Office, December 1996 Illlllll LAO Understanding Proposition 218 Table of Contents Introduction Chapter 1: How Proposition 218 Changes Local Finance and Governance Chapter 2: Understanding the Vocabulary of Proposition 218 Chapters: Are Existing Revenues Affected by Proposition 218? Chapter 4: What Must a Local Government Do to Raise New Revenues? Chapters: May Residents Overturn Local Taxes, Assessments, and Fees? Appendix I: Areas in Which Legislative or Judicial Clarification May Be Needed Appendix II: Text of Proposition 218 Introduction Proposition 218 significantly changes local govemment finance. This constitutional initiative--approved by the state's voters in November 1996-applies to each of Califomia's nearly 7,000 cities, counties, special districts, schools, community college districts, redevelopment agencies, and regional organizations. The purpose of this guide is to help the Legislature, local officials, and other parties understand Proposition 218, including the actions local govemments must take to implement it. The guide includes five chapters: . How Proposition 218 Changes Local Finance and Governance. • Understanding the Vocabulary of Proposition 218. • Are Existing Revenues Affected by Proposition 218? • What Must a Local Government do to Raise New Revenues? • May Residents Overturn Local Taxes, Assessments, and Fees? Finally the appendix to this guide summarizes nnajor areas of uncertainty pertaining to Proposition 218 (some'of which the Legislature rray wish to address), and includes the text of Proposition 218 (now Article XIII C and D of the Calffornia Constitution). ww.lao.ca.gov/1996/120196_prop_218/understandir1g_prop218_1296.html ^^^^ /12 Understanding Proposition 218 Chapter 1 How Proposition 218 Changes Local Finance and Governance Nearly two decades ago. Proposition 13 sharply constrained local governments' ability to raise property taxes, the mainstay of local government finance. Proposition 13 also specified that any local tax imposed to pay for specific governmental programs--a "special tax"--must be approved by two- thirds of the voters. Since that time, many local govemments have relied increasingly upon other revenue tools to finance local services, most notably: assessments, property-related fees, and a variety of snnall general purpose taxes (such as hotel, business license, and utility user taxes). It is the use of these local revenue tools that is the focus of Proposition 218. [n general, the intent of Proposition 218 is to ensure that all taxes and most charges on property Dwners are subject to voter approval. In addition. Proposition 218 seeks to curb some perceived abuses in the use of assessments and property-related fees, specifically the use of these revenue- •aising tools to pay for general govemmental sen/ices rather than property-related services. :n this chapter, we provide an overview and perspective on the impact of Proposition 218 on local 'inance and governance. Proposition 218 Changes Local Government Finance Proposition 218 makes several important changes regarding local government finance. Figure 1 lummarizes our observations regarding their fiscal impact. Figure 1 Proposition 21d's Impact on Local Finance 4 The measure's 'fiscal impact cannot be fully ascertained until the uncertain^ regarding some of its provisions a re resolved. 4 Most local revenues are not affected. 4 The impact on certain local govemments could be substantial. 4 Local govern men t revenue reductons will begin in 1997. 4 In the long term, local government revenues are likely to be some- what lower and come from different sources. ;ome Uncertainty Regarding Proposition 218's Provisions 'oposition 218's requirements span a large spectrum, including local initiatives, water standby larges, legal standards of proof, election procedures, and the calculation and use of sewer jsessment revenues. Although the measure is quite detailed in nnany respects, some important -ovislons are not conpletely clear. I this guide, we provide our interpretation ofthe measure's requirements. This interpretation is based i.QfcfiR^J^6/J2(JJSft.pF0p.218/understanding_prop2ia_1296.htnnl 2/23 22/-12 Understanding Proposition 218 on our extensive review ofthe measure, as well as consultations with the measure's drafters, local govemment officials, and legal counsel. In some cases, however, we are not able to fully ascertain the meaning or scope of a Proposition 218 requirement. We believe our uncertainty-frequently shared by other analysts of the measure-will be resolved only when the Legislature enacts implementing statutes or court rulings become available. Accordingly, throughout this guide we discuss Proposition 218 as we understand it. Where other parties have different opinions or the measure's requirements are not clear, we provide this information. Finally, we provide in Appendix I a summary of the areas in which clarifying legislative or judicial action may be necessary. Most Local Revenues Are Not Affected California local govemments raise more than $50 billion annually from taxes assessments and fees As Fiqure 2 shows, most of these local revenues are not affected directly by Proposition 218. Instead, Proposition 218's provisions apply to a relatively small subset of local govemment revenues. Figure 2 Which Local Revenues Are Affected by Proposition 2ie? Affected Hot Directly Affected New and some recently imposed "general" taxes. Property taxes. Bradley-Burns sales taxes. Special taxes. Vehicle license taxes. Redevelopment revenues. Mello- Roos ta xes. Timber taxes. Assessments All new or increased assessrrients. _j Mos^^^^^ Some existing assessments. : Property-related fees. (Fees : Fees that a re not property-related, imposed as an "incident of property • Gas and electric fees, ownership." not indudinq qas. elec- j Developer fees. trie, or developer fees.) : Given the relatively small number and dollar value of local revenue sources that are affected by Proposition 218, we think it is highly unlikely that the measure could cause more than a 5 percent annual decrease in aggregate local government own-source revenues. Impact on Certain Local Governments May Be Substantial The actual impact of Proposition 218 on local public services may be greater than our 5 percent estimate would suggest, however, for a variety of reasons. First, some govemnnents are highly reliant uDon the types of assessments and fees that would be restricted by this measure. These local govemments-typically, small, newly incorporated cities, and librar/, fire, and park and recreation -special districts-may sustain revenue reductions of much more than 5 percent. Sonne special districts also lack the authority to propose taxes to replace the lost assessment and fee revenues. VvW.laQ..ea.gov/1996/120196_prop_218/understa nding_prop218_1296.html 3/23 /12 Understanding Proposition 218 Second, many local governnnents have limited flexibility to reduce programs when revenues decline. •Most major county programs, for example, are subject to state and federal nnandates and spending requirements. As a result, relatively small revenue losses can trigger significant reductions to the few programs over which the local government has control. Finally, many local govemments will experience both revenue reductions and cost increases to comply with Proposition 218. For example, some local governments will lose part of their assessment and fee revenues, and have to pay: • Assessments charges to other local governments. • Increased election, property-owner notification, and administrative costs. These increased costs will increase the fiscal impact of this measure on local government programs. Fiscal Impact Begins in 1997 The fiscal impact of Proposition 218 will begin almost immediately. Within eight months of Proposition 218's passage, local govemments will need to reduce or eliminate certain existing assessments and fees to meet the measure's requirements. (These requirements are discussed in Chapter Three.) We estimate that these actions will reduce local government revenues by at least ^100 million in 1997-98. Proposition 218 also requires local govemments to place before the voters certain existing assessments and taxes. Unless the voters ratify these assessments and taxes, local governments will experience additional revenues losses, potentially exceeding $100 million annually. _ongerTerm: Different Revenue Sources, Probably Less Money 'reposition 218 restricts local govemments' ability to impose assessments and property-related fees-- md requires elections to approve many local government revenue raising methods. Because of this, it 5 likely that over the long term local governments will raise fewer revenues from assessments, )roperty-related fees, and some taxes. Jnless these reduced local revenues are replaced with other revenues, local government spending for Dcal public sen/ices will decrease accordingly. What other revenues could offset these revenue eductions? It is likely that local governments will pursue one or more of the following sources of )Otential replacement revenues: • Redevelopment revenues. • Developer exactions. • General taxes imposed on particular groups (such as business license, hotel occupancy, and sporting or entertainment admission taxes). • special taxes imposed on properties within small, discrete areas. • Intergovernmental transfers. • Non-property related fees. imited AbUity to Raise Replacement Revenues. Local governnnents' ability to expand these six ther revenue sources is not great. Various legal and practical restrictions limit a major expansion of ^development or developer exactions, for example. In addition, many local govemment observers elieve that existing hotel and business taxes are already high and not all parts of the state have lajor entertainment or sportiing centers. (We include these taxes on the above list because these axes are not paid directly by most voters. Thus, the likelihood of their being approved by a majority f voters may be higher than other general taxes.) imilarly, while local govemments In Callfomia have had difficulty securing the requisite two-thirds ote to impose special taxes, it is toly that some additional special taxes will be approved. Special o.ca.gov/1996/120196_prop_2ia/understanding_prc^2i8_J-296.html 4/23 22 ,^2 Understanding Proposition 218 ' taxes probably are more likely to be adopted in snnall, discrete areas of ^ community where the cor^rrxinality of interest is high, however, rather than on a community-wide basis. Thus, the likelihood of generating significant revenues from special taxes is not great. Additional major revenues from the state or federal govemment also do not ^^PPear likely, given the fiscal limitations faced by both these level of govemments. (Please see our Novennber 1996 publication, California's Fiscal Outlook, for our projections of the states fiscal condition.) This leaves the last revenue source on our list: non-property related fees. Ultimately, the ability of local government to expand this revenue source tums on how the term "property-related fee is defined by the Legislature or courts. If the definition of a property-related fee is broad then local governn^nt"^^^ to replace revenues lost by Proposition 218 is limited. Conversely, if this definition is narrow, then local govemment will have greater opportunities to replace lost revenues with expanded non property-related fees. (Even then, however, the state Constitution and statutes do not permit local government to charge fees in excess of costs.) All in all, our review indicates that most local govemments wiii have some ability to raise revenues to 44^.^'sorr^-of the^funding lost by Proposition 218. This ability, however, is limited Accordingly, we eTpect that in the long term, local govemments will raise somewhat less revenues than they would have otherwise-and local govemn^nt revenues will con^ fmm sonr^what different sources. These revenue reductions will result in lower payments by people and businesses to govemment-and decreased spending for local public services. Proposition 218 Changes Local Governance In addition to changing local finance, Proposition 218 changes the governance roles and responsibilities of local residents and property owners, local govemment, and potentially, the state While the full ramifications of these changes will not be known for years to come, some elennents are already apparent. Increased Role for Local Residents And Property Owners Prior to Proposition 218, the local resident and property owner's role in approving nnost new local govemment revenue-raising measures was minimal. Local govemments typically raised riew funds by imposing new or increased assessments or fees, or in the case of charter ^'ties general-purpose taxes on utility use, business licences, and hotel occupancy. In nnost cases, Cahfomia residents or property owners could object to these taxes or charges at a public hearing or during a statutory protest procedure, but these taxes or charges were not placed on the ballot. In short, locally elected governing bodies held most of the power over local revenue raising. Proposition 218 shifts most of this power over taxation from locally elected goveming boards to residents and property owners. In orderto fulfill this considerable responsibility, local residents and property owners will need greater information on local govemment finances and responsibilities. Even with this information, however, the task of local residents and property owners will be difficult, given the frequently confusing manner in which program responsibilities are shared between state and local government, and among local govemnnents. Local Government Remains Responsible for Expenditures Local govemment's powers, in contrast, become significantly constrained. While locally elected goveming boards continue to be fully responsible for decision-making regarding the expenditure of public funds, they now have very little authority to raise funds without a vote of the residents or property owners. In addition, Proposition 218 limits local govemment's authority to call an election to raise revenues. Specifically, except in cases of emergency, local govemnnents now nnay hold elections on general taxes only once eyfffy two years (consolidated with an election for mennbers of the 5/23 ww.lao.ca.gov/1996/120196_prop_218/understanding_prop218_1296.html '12 Understanding Proposition 218 governing board.) Moreover, Proposition 218 limits the amount of an assessment or property-related fee that may be put before the property owners for a vote. State Government Role May Expand Proposition 218 may also alter the state's role and responsibilities regarding local government in several important ways. First, the Legislature will be asked to play a large role in interpreting Proposition 218's requirements, and helping set the rules regarding local government finance. In some cases, local governments are likely to ask for urgency legislation to enact these nneasures because the deadline for compliance with sonne Proposition 218 provisions is July 1, 1997. Second, the Legislature will probably receive requests for fiscal assistance from local governments. These requests are likely to begin in the spring of 1997, as the fiscal consequences of the assessment and fee restrictions beconne apparent. Local governnnents are likely to turn to the state because it has more fiscal flexibility than local govemment. For example, the Legislature may raise taxes at any time with a two-thirds vote of its members. Finally, any effort to restructure state-local program responsibilities is now more complicated. 5pecifically, the Legislature will have less flexibility to realign programs in a manner that increases ocal government responsibility without providing a direct subvention of state funds. This is because ocal governments have little or no flexibility to adjust their own revenues. Chapter 2 Understanding the Vocabulary of Proposition 218 \ny discussion of Proposition 218 requires an explanation of several local government finance words md terms. This chapter explains the vocabulary. lA^hat Is a Tax? "axes are government's most flexible revenue raising tool. A tax is a charge on an individual or lusiness that pays for governmental services orfaciiities that benefit the public broadly. There need lot be any direct relationship between how much tax a person pays and how much service he or she eceives from govemment. Exannple of taxes include the property tax, sales tax, business licence tax, lotel occupancy tax, and utility users tax. Special Tax Versus General Tax . tax is called a "special" tax if its revenues are used for specific purposes and a "general" tax if its avenues may be used for any governmental purpose. This distinction is important because It etemines whether a tax must be approved by a majority vote of the electorate (general tax)--or a i^/o-thlrds vote (special tax). Vhat Is an Assessment? n assessment is a charge levied on property to pay for a public improvement or sen/ice that benefits avO'.gevflt|l96/J2PJSfe;p»sp_218/understanding_prop218_1296.htrnl 6/23 Understanding Proposition 218 12/12 landscaping. What Is a Fee? i fpp a charae imposed on an individual or business for a service or facility provided directly to an provide the sen/ice. A New Term: "Property-Related Fee" Proposition 218 restricts property-related fees, defined as fees '''^l^'l^'l"^^^^^ ^..inorehin •• At this time there is no consensus as to which fees meet this definition. 1 ne arartere or r n?iHnn 71R indicaT^\hat it was their intent to include most fees commonly collected on monthly water r^nage^enrfees. Other analysts of Proposition 218 contend that fees that vary by ^^^1 of JTfnr /v^nV a fee for metered water usage) should not be considered a property-related fee, Te^auL' s ba^e^i in se" ce^^^^^^^^ owne^hip. Because Proposition 218 does norr«trict nonproperty related fees', the definition of this term will be an important and sensrtive issue for the Legislature and courts. Overlapping Terms While the temis tax, assessment, and fee are each legally distinct, in Practice they overlap For Txamo e cor^nities in Califomia nay finance streets from taxes, assessments, arid/or fees. In addSn loc^ovemn^nt officials soUin^s call a charge one term, when it was legally adopted as ano t^er' As a result, the work of sorting out whether a particular charge nxist comply with Proposition 218's ^quire^nts for a tax, assessn^nt, or fee will not always be easy. Chapter 3 Are Existing Revenues Affected by Proposition 218? Local govemn«nts must bring their existing taxes, assessments and property-related fees into conformity with Proposition 218. The deadline for each of these actions is: . July 1, 1997"for assessment and property-related fees. • Novernber 6, 1998-for taxes. Below, we discuss Proposition 218's requirements regarding existing taxes, f/^^ssments and fees CThe requirenwnts for ne^v or Increased revenue raising tools is the topic of the next chapter.) After 7/23 ww.lao.ca.gov/1996/120196_prop_218/understanding_prop218_1296.htnnl '12 Understanding Proposition 218 each section, we answer some comnnon questions regarding Proposition 218's requirements. Requirements for Existing Taxes Proposition 218 does not affect existing special taxes or most general taxes. Proposition 218 affects only those general taxes that were imposed in 1995 or 1996 without a vote of the people. In orderto continue such a tax, Proposition 218 requires the governing body to place the tax before the voters by November 6, 1998. Unless the governing body unaninnously votes to declare the election an ennergency, the tax election must be consolidated with a regularly scheduled election for members Df the goveming body. The local government may continue an existing tax if it is approved by a majority vote. Questions Are §ei»sray taxes imp-»sed hcf9Fe iS95, with»ot a V9te of the peifpfe^jisfefr9mshai3enge.s^} N o. O ur review indicates that general law cities and cou nties that imposed general taxes in the eariy 1990s, without a vote of the people, contin ue to be vulnerable to ac hajlenge that they did not place their tax on thebalbtas required by Piopositbn 62. In 1995, the Califbmia Supreme Court reversed earlier lower court decisions and found Proposrtbn62 to be constitutbnal. Ate MeUo^fi^O:S tsxes affected? No. Me Ho-Roos taxes a re notaffectedby Propos Kb n 218. Mello-Roos taxes— us ua Iiy imposed on new s ubd hr is b ns to pay fo r i nf rastructure—a re spec ia I taxes a hd al ready leq ui re a two -thirds vote. T he re a re a \fe ry i im ite d numberof cases, howviever, whete a bea l govemment has used Melb-Roos lawto impose an^£«5sn7fi/7twithouta two'thindsvote. We believe local governments must bring these rassessments Into compliance with Proposition 2 ifi's assessments provisions (disc ussed below). [Requirements for Existing Assessments .ocal governnnents must review all existing assessments, including standby-charges (which the neasure defines as assessments). Figure 3 (see next page) shows the actions local governments nust take to bring their existing assessments into compliance with Proposition 218. ^^3^?I7?i5S6/>2$ft8fiLProp^218/understa ndingLpropZl8_1296.htm I 8/23 ;2/-i2 Understanding Proposition 218 Figure 3 Actloiis Recjuired for Existing Assessments ExMiine All j Asssssmente I Exempt List No Furtiier Action R&quired Action List ;I• Calculation I Requicemen! f iiecior! I Reqtiir€iiT0nt Impose Assessment The Examination Requirement: Many Assessments Will Qualify for Exempt List Local govemrr^nt must examine each assessn^nt to determine whether it meets one of the conditions for placement on the "exempt list." These conditions are: . The assessn^nt was previously approved by vote^-or by all the property owners at the time the assessment was created. . All of i-he assessment proceeds are pledged to bond repaynnent. : A tL assessrSrt proceeds are used to pay for sidewalks, streets, sewers, water, flood control, drainage systems, or "vector control" (such as mosquito control). Our review indicates that more than half of all existing assessments are likely to be exempt Generally, ?Z ifh^ause the assessment's funds are used for one of the approved purposes or are pledged to bond repay^^^^^^^^^ was agreed to by a land developer, the sole property owner at the time the assessnnent was established. If an assessment is not exempt, then the local govemment must eliminate the assessnnent or bring it nto comoL^^^^^^^ 218's assessn^nt calculation and election requirements (described belowrourreview ind^^^^^ that the types of assessn^nts that are not likely to satisfy any of the cond't^ions fo'e^^^^^^^ are: fire, lighting and landscaping, and park and recreation assessments. The Calculation Requirement: One of Proposition 218's Most Significant Changes ^ Local qovemments must recalculate all existing assessments that do not qualify for the exempt list. Our^rrS^^ that in many cases. Proposition 218's provisions regarding the calculation of WwJaQ.ca.gov/1996/120196_prop.218/understanding_prop218_1296.html 9/23 '12 Understanding Proposition 218 assessments will result in local governments lowering the annount they collect in assessnnents from •property owners, or eliminating the assessnnent. We identify the specific calculation provisions below. First: Determine Ifa Project or Service Provides Special Benefits. The local governnnent must determine whether property owners would receive a "special benefit" from the project or service to be financed by the assessment. Proposition 218 defines a special benefit as a particular benefit to land and buildings, not a general benefit to the public or a general increase in property values. If a project or service would not provide such a special benefit. Proposition 218 states that it may not be Financed by an assessment. Our review indicates that local governnnents will find it difficult to dennonstrate that some existing assessments for ambulance, library, police, business improvennent, and other services satisfy this tightened definition of special benefit. As a consequence, sonne existing assessments nnay need to be eliminated. Second: Estimate the Amount of Special Benefit. Local governnnent must use a professional engineer's report to estinnate the amount of special benefit landowners would receive from the project Dr service, as well as the amount of "general benefit." This step is needed because Proposition 218 allows local government to recoup from assessnnents only the proportionate share of cost to provide :he special benefit. That is, if special benefits represent 50 percent of total benefits, local government nnay use assessments to recoup half the project or service's costs. Local govemments must use other revenues to pay for any remaining costs. This limitation on the use of assessments •epresents a nnajor change from the law prior to Proposition 218, when local govemments could •ecoup from assessments the costs of providing both general and special benefits. rhird: Set Assessment Charges Proportionally. Finally, the local governnnent must set individual assessnnent charges so that no property owner pays more than his or her proportional share of the otal cost. This may require the local government to set assessment rates on a parcel-by-parcel )asis. Properties owned by schools and other governmental agencies--previously exempt from some jssessnnent charges--now must pay assessnnents. Election Requirement: All Property-Owners /ote on Assessments .ocal governments nxjst nnail information regarding assessnnents to all property owners. (Prior to 'reposition 218, large communities could publish assessnnent information, rather than mail it to every •roperty owner.) Each assessment notice must contain a mail-in ballot for the property owner to ndicate his or her approval or disapproval of the assessnnent. ifter nnailing the notices, the local governnnent must hold a public hearing. At the conclusion of the earing, the local governnnent must tabulate the ballots, weighing them in proportion to the annount of he assessment each property owner would pay. (For example, if homeowner Jones would pay twice s much assessment as homeowner Smith, homeowner Jones' vote would "count" twice as much as omeowner Smith's vote.) The assessment may be imposed only if 50 percent or more of the weighted allots support the assessment. 3.ca.gov/1996/120196_prop_21S/understendirH|_p«»p?liW29&Jitml 10/23 •)_2j.'i^2 •. Understanding Proposition 218 Questions WovJd part, or all, of an asxssment tte exempt if most of its proceeds are vsed for an approved program? Probably not. Proposition 218 states that an assessment B exempt if its proceeds are used exclusi^s^y for one or more of seven approved programs. However, the measure does not define what costs may be included under these approved programs. Thus, it is not clear if an assess me nt t hatf u nds stre ets (a n ap p roved p rog ra m) a nd c u rbs o rstne et lighting (not identified as approved prog rams) is exempt. Legislafive actbn may be needed to clarifjf this. Is the difference between "generai benefit- and "speoiai benefit' ciear? No. Proposition 218 defines a '^special benefit' as a distinct benefit to real property in a specific ai^a. All other benefits—including benefits to people's health, education, or safety, or general enhancements to property values-are considered "geneial benefrts." While these two benefits are distinct in concept, in practice they may be difficult to distinguish. Because of the importance of the term "special benefit," legislative or co urt action may be needed to clarify its definrtio n. Do renters get to vote? Renters mayvotBOhanassessmentiftheir teaseagreementspecifies thatthey are responsble forpayingthe assessment. T his type of provision in a lease agreement is more common for com mercial properties than for residential properties. on Who gets to vote when an assessment is to be levied pvbiic property or properties with maitipie owners? T his is not addressed in the measure.Thus, it would require clarificatbn. Requirements for Existing Fees As with assessments, local govemnnents must complete a multi-step review of all fees. Figure 4 summarizes the process. 11/23 .Iao.ca.gov/1996/120196_prop_218/undei?tsn?ltri9_prop218_1296.html /12 Understanding Proposition 218 AcUons Required fiof Existtng Fees Examine Ail Fees Property^Beiaied I ";"'T-^ No Fiiifim Action Required Prqjeriy-Relateci ResUk:tions on Use ol F€«S I ., Rat^ Calc^latio?! ftequirsinsnt ""^T Impose Fee Examination Requirement: Identifying Property-Related Fees .ocal government must begin by examining all existing fees to determine whether they are "property- elated" fees, innposed as an "Incident of property ownership." (We discuss this term and the :ontroversy surrounding it in Chapter Two). As Figure 4 shows, if a fee is not property-related, then he local government need not take any further action regarding the fee. Conversely, if the fee is )roperty-related, then the local governnnent must nnake sure that the fee complies with 'reposition 218's restrictions on use of fee revenues and the rate calculation requirennents. The leadline for these actions is July 1, 1997. slew Restrictions on Use of Fees 'roposition 218 specifies that no property-related fee may be: • Levied to pay for a general governmental service, such as police or fire service. • Imposed fora service not used by, or innmediately available to, the property owner. • Used to finance progranns unrelated to the property-related service. n order to comply with these restrictions, local governments will need to eliminate or reduce sonne xisting fees. For exannple, some snnall cities currently charge property owners fees for ambulance or re service. Proposition 218 does not permit governnnents to inpose property-related fees for these urposes. imilari/^ some cities collect "franchise fees" or "in-lieu property taxes" from their water departments nd deposit these revenues into their general funds. The cost of these franchise fees and taxes is assed ©nto local residents in terms of higher water fees. If water fees are considered property- ilated fees, then Proposition 218 would forbid this diversion of fee revenues. (Sonne local governnnent ,2^j^2 Understanding Proposition 218 Observers believe that this diversion of fee revenues was impermissible prior to Proposition 218, as well.) PossiWe Local Govemment Response to Fee Restrictions. In some cases, it may be Possible for ^ ^caffover^'nt to restructure a prt,perty-related fee so that it would no ^o^^er ^^^^^^^^^^ « imnosed "as an Incident of property ownership." For example, a mandator/ per parcel garbage Sectfon fern^y brconsider^d a preperty-related fee, while an optional garbage collection sen/ice charge r^y no^Sin^larly, some local govemments rrBy be able to show that their franchise fee or in- feuXp^rty tax represents their water department's reasonable share of central adn^nistrative expenses If so then Proposition 218 would not prohibit this transfer of revenues fron^ the water depart^nt pLlly, sonJ^local govemn^nts n^y elect to privatize certain functions fomially financed by property-related fees. Proposition 218 imposes no limit on pnvate fees. Fee Rate Calculation Requirement After complying with Proposition 218's restrictions on the use of property-related fees, the local nover^S ™st n^ke sure that its property-related fees conply with the n^asure's calculation equire^nu specifically, local govemments nu^st ™ke sure 'l^^'-P-f^;^^ ^"^^^^^ ''''''' t-h^n the nroDOrtionate cost to provide the property-related service to his or her parcel. Like assessr^nS' tWs reTuire^ ^y result in local govemn^nts setting property-related fee rates on a block-by-block, or parcel-by-parcel basis. This fee rate calculation requirement-son^tin^s called the ••P^'?P°^ZTtlar^l^^^^^ difficult for local govemment to continue certain programs, such as those that offer reduced rates to low-incor?,^ residents. This is because local governments typically finance these lower ra es by charTlnq^g^er r^tes to other property-owners. If these foes are considered property-related foes, the Ser S:^^^^ not be perrtvtted by Proposition 218. In order to continue these programs in ^he f^?ure,T^erefore' the local govemment would need to offoet the cost of the program with other revenues, such as general tax revenues. Question Are rsgniatory fees—such as rent control, alarm, and weed abatement fees—considered property-related fess? T h is is not c lea r Ge ne rally, we inle ip ret P roposrtio n 21 S's te mn rope rty - related fees" as including all fees that a property-owner has no feasble wayto avoid. T hat is, afee is property-related if land could not be owned and used without paying the fee. Accordingly, we do not consider fees fo r optio n a I ac tiv ities, s uc h as the reg ist ration of a la rm syste ms o r t he removal of weeds from neglected parcels, to be property-related. Rent control administrative fees are a closer call. Generally, we think these fees would be cons ide red property-related if there were no practical way that the owner could avoid the fee, short of selling the property or f u nda me nta Hy c ha ng i ng its use. C learJy. the def initio n of p rop e rty - na lated feeswillbeasensitiveandimportantissueforthe Legislatureand courts. Chapter 4 What Must a Local Government Do to Raise New Revenues? 13/23 / Jai5.gi.gov/1996/120196_prop_218/understanding_prop218_1296.html /12 Understanding Proposition 218 In orderto raise a new tax, assessment, or property-related fee, or to increase an existing one, local -governnnents must comply with nnany of the sanne provisions discussed in the previous chapter. In general, these requirennents are that local governnnents may use assessments and property-related fees only to finance projects and services that directly benefit property--and that most revenue- raising nneasures be approved in an election. Figure 5 summarizes the vote required in these elections. New or Increased Taxes, Assessment, and Fees What Vote is Needed? Type Vote Needed Who Yote Requiie me nt Taxes General ives ., iAII voters in commu- : nity or a ffected a rea. : Majority Special ires iAII voters in commu- ; ni^ or a ffected a rea. • Two-thirds Assessments All ives •Property owners (and renters responsible for paying a ssess- ments) in affected a rea. Majority, weighted in proportion to a ssessment iiability. Fees General, not property related No N/A N/A Pioperty related Yes, for an y service other than • water, • sewer, or refuse col- • Ie ction. ; Local govern ment ma y choose: • P roperty owners (and renters re- sponsible for pay- 1 inq fee) in affected '• area, or ! * Electorate in the j affected a rea. '< Majority of prop- erty owners or two-thirds of electorate. Local govern- ments may weight ballots in proportion to fee liabili^. "his chapter explains the steps local governnnent must take to raise a new tax, assessnnent or •roperty-related fee, or to increase an existing one. lequirements for New Taxes n orderto impose or increase a tax, local govemment must comply with the following provisions: • All general taxes must be approved by a majority vote of the people. (A 1986 statutory initiative--Proposition 62-- previously imposed this vote requirennerit on general law cities and counties. Proposition 218 expands this requirement to include charter cities, such as Los Angeles, Oakland, and San Francisco.) • Elections for general taxes must be consolidated with a regularly scheduled election for nnembers ofthe local governing body. (In an emergency, this provision may be waived by a unanimous vote of the goveming body.) • Any tax imposed for a specific purpose is a "special tax,"even if its funds are placed into the community's general fund. (Prior to Proposition 218, all taxes placed into a community's general fund were connmonly considered general taxes, requiring only a majority vote.) 3.ca.gov/1996/120196_prop_2ia/undBrstandinQupe>p2J15tJ??5^t^tml .14/23 •;2'i2 . Understanding Proposition 218 Requirements for New Assessments All new or increased assessments must follow the assessment calculation and election requirements discussed in the previous chapter. There are no exceptions to this requirement. As a practical matter, this requirement will mean that programs that benefit people rather than specific pr^pert^s-such as libraries, mosquito abaten^nt, recreation progranrs police protection, and so^ business improvement progran^-must be financed by general or special taxes or by other nonassessnnent revenues. Questions mvstalocal government comply with b*th Proposition 2iS's assessment approval process and the existing statutory pro cess for assessment approval? Following both of th^s©assessment approval proc&ss&s Is likely to be duplicative and confusing to property owners. Most local govern mentobserversagreethalsomeleglslativeaction to recon cile the two assess ment a pproval processes is needed. Is an assessment considered "new or increased' if it is raised by a cost-of- living factor that was part of the assess- ment's rate structure? This Is not clear. Proposition 21S states that a tax is notto be considered new or increased it it is increased to a levei previously approved by the voters. However, the measure does not include any such provision regarding assessments or fees. It is possi bie th at any increase I n assess me nts m ay be su bject to the new calculation and election requirements. Requirements for New Fees TO impose a new or increased property-related fee, local governnnent must comply with the fee restriction and fee rate calculation requirennents discussed in the last chapter. Local governments must also: - Mail information regarding the proposed fee to every property owner. : ^Sct ^^;o::^%:i^^^ ^y a n^jonty of the affected property . HoldTn election on any property-related fee, other than a fee for water, sewer, or refuse collection. (Figure 5 shows the vote required in these elections.) AS a practical matter, local govemments will find it much more difficult-and expensive-to innpose or fncLsTproperty-rel^ted fees. In so^ cases, local govemn^nts are probably more likely to try to raise revenues through non property-related fees or taxes. 15/23 ww.lao.ca.gov/1996/120196_prop_218/underst?nc{ing_prop218_1296,html /12 Understanding Proposition 218 Question Couid a local government impose a charge on property ' o wners that is not an assessment, tax, or property-related fee? No. Propositbn2t 8statBs:that all c harges onproperty as an incident of prop e rty ow neish ip mustbe a tax, assess ment, o rp rope rty -re lated fee. Proposltion215 furtherstates that if:5uc h a charge on property is not a tax oran assessment, it is a property-related fee. Chapter 5 May Residents Overturn Local Taxes, Assessments, and Fees? ^'reposition 218 expands Califomia residents' power to challenge local revenue raising nneasures. Greater Initiative Powers ^riorto Proposition 218, the extent to which local residents could use an initiative to challenge local government revenue raising nnethods was not certain. In a 1995 case, Rossi v. Brown, the Califomia Dupreme Court ruled that people had the power to use the initiative to repeal a minor tax. There have Deen no court rulings, however, addressing the question of whether an initiative may be used to •epeal a more substantial revenue source. 'reposition 218 eliminates any ambiguity regarding the power of local residents to use the initiative by Jtating that residents of California shall have the power to repeal or reduce any local tax, jssessment, or fee. In addition, the measure forbids the Legislature and local governments from mposing a signature requirement for local initiatives that is higher than that applicable to statewide itatutory initiatives. As a consequence of these provisions, the only limits on local residents' ability to )vertum local revenue raising nneasures appear to be those in the federal constitution, such as the ederal debt inpairment clause. Question Could a local initiative or lawsuit eliminate a re-venue stream that is pledged to bond repayment? Thisquestion has evokedconsiderablecontroversy. Generally, many bond specialists indicate that the debt impairinentclause in the federal coTtstrtutbn wouldprevent bcal residents from eliminating a new orexisting raven ue stream rf that action would jeopandire the sec iirity of bonded indebtedness. Some local government observers, however, would like the Legislature to place a time limit on local initiatives or take other action to provide greater security to bond holders. >h1ftlof Burden of Proof •jqa3f35i«/JS-2?/^2ittt<kp^ 16/23 ,2^2 " Understanding Proposition 218 Prior to Proposition 218's passage, the courts allowed local govemments significant flexibility in deterr^inTg^ee and as^ A business or resident challenging the validity of a fee or assesTm^nt carried the "burden of proof" to show the court that the fee or assessnnent was illegaL Propos^n 218Tha^ this legal standard by shifting the burden of proof to local govemments. Now local govemments must prove that any disputed fee or assessnnent charge is legal. Appendix I: Areas in Which Legislative or Judicial Clarification May Be Needed Ac; WP discuss throughout this guide, while Proposition 218 is quite detailed in many respects, some fmporta prov-^ons^ completely clear. This appendix sumnr^rizes the -Pr q-^^^^^^ -yarding Pmposition 218 that must be resolved so that local govemments can begin implementation. Rprause ProDosition 218 sets a July 1, 1997 deadline for local govemnnents to bring existing fees and aLess^n^^^^^^^^^ with t'he'n^asure's requirenwnts, legislative or judicial clarification on questions related to assessments and fees is needed as soon as possible. Property-Related Fees . What is included in the definition of a property-related fee? - Are water charges that are based on metered use of water property-related fees? . Are regulatory fees, such as rent control administrative fees, property-related fees? . A^e ITase pa^rr^nts and other such charges on govem^nt-owned assets property-related . HowVecisely must local govemment allocate shares of costs for a property-related service? S^loS govemnwnt set general fee rate categories, or must local govemment determine the actual cost of service to every parcel? Assessments . What is a "special benefit" and how can it be distinguished from a "general benefit?" - Existing assessments used exclusively for sidewalks, streets, sewers, water, flood control dSnage systen^, and vector control are exempt from the nrwasure's calculation and election requirements. How broadly should these exemptions be interpreted? ., . How precisely must local govemment allocate shares of costs for an assessment? Can local government set general assessment rate categories, or must local govemment detemnine the artual cost of service to every parcel? . Tan ex^^^^^^ is increased by a fomnula that was set forth at the time the existing assessment was imposed, must the assessment comply with the measure s calculation and elect1orrequirenwn?s? Similarly, need the nwasure go through these processes again if a future assessment is increased by a formula set forth at the time the new assessment was imposed? . How should the existing statutory assessment approval process be reconciled with Proposition 218's assessment approval process? . Sor^ assessments are annually re-imposed by local govemment. Must a local government annually repeat the calculation and election procedures required by Proposition 218? . If an assessnnent that is annually re-imposed by local govemment is currently eligible for the exempt list, must it comply with Proposition 218's calculation and election procedures when it is re-imposed next year? 17/23 ww.lao.ca.gov/1996/120196_prop_218/understandirtg_prop218_1296.html '12 , Understanding Proposition 218 Elections • What procedures should govern the assessment and fee elections? • Who may vote on referendums to repeal assessnnents, fees, or taxes? • How will a local government determine whether a renter is eligible to vote? • Who gets to vote when a parcel is owned by multiple parties, or by a governmental entity? Taxes • Are Mello-Roos taxes affected in any way? Similarly, how should assessments imposed under Mello-Roos law be treated? • Is the measure's requirennent that certain existing taxes be ratified by the voters an unconstitutional referendum on taxes? Debt • Could a local initiative jeopardize a revenue stream pledged to the payment of existing (or future) debt? Appendix II: Text of Proposition 218 This initiative measure adds Articles XIII C and D to the California Constitution. RIGHT TO VOTE ON TAXES ACT SECTION 1. TITLE. 'his act shall be known and may be cited as the "Right to Vote on Taxes Act." SECTION 2. FINDINGS AND DECLARATIONS. 'he people of the State of Califomia hereby find and declare that Proposition 13 was intended to •rovide effective tax relief and to require voter approval of tax increases. However, local governments lave subjected taxpayers to excessive tax, assessment, fee and charge increases that not only njstrate the purposes of voter approval for tax increases, but also threaten,the economic security of II Califomians and the California econonny itself. This nneasure protects taxpayers by limiting the nethods by which local governnnents exact revenue from taxpayers without their consent. ;ECTI0N 3. VOTER APPROVAL FOR LOCAL TAX LEVIES. .rticle^XIILOis added to the Califomia Constitution to read: ARTICLE XIII C * Understanding Proposition 218 •2/12 SECTION 1. Definitions. As used in this article: (a) "General tax" means any tax imposed for general governmental purposes. ^^^nda/SlS /J^t not liwite^i to, schooi districts and rede.e/opment agencies. (,) ••special tax" means any tax imposed for specific purposes, induding a tax imposed for specific purposes, which is placed into a general fund. SEC 2 Local Government Tax Umitation. Notwithstanding any other provision of this Constitution: general taxes. by a unanimous vote of the governing body. government on or after January i, i^^o ^ H wn^P^<; vntino in an election on the issue of in compliance with subdivision (b). (d) NO local government may Impose, extend orir^rease^ Z^T^^I TaxlhaTnoThl limed fo l1T^!L1nTeat:^^^^^^^^ SEC. 3. initiative Rower for Local Texes, Assessmerits Fe^^^^^^^^^^ T^^^^Ttl^^^^e statutory initiatives. SECTION 4. ASSESSMENT AND PROPERTY RELATED FEE REFORM. Article XIII D is added to the Califomia Constitution to read; ARTICLE XIII D itVnmTcTrt^aut'hi^^^^^^^^ In this article or Article Xlll C shall he construed to: (ayprovide any new authority to any agency to impose a tax, assessment, fee, or charge. 1 -WwJm'^*:9Ov/1996/120196_prop_218/understanding_prop218_1296.html 12 Understanding Proposition 218 (b) Affect existing laws relating to the imposition of fees or charges as a condition of property ^development. [c) Affect existing laws relating to the imposition of timber yield taxes. SEC. 2. Definitions. As used in this article: 'a) "Agency" means any local government as defined in subdivision (b) of Section 1 of Article XIII C. 'b) "Assessment" means any levy or charge upon real property by an agency for a special benefit :onferred upon the real property. "Assessment" includes, but is not limited to, "special assessment," 'benefit assessment," "maintenance assessment" and "special assessment tax." 'c) "Capital cost" means the cost of acquisition, installation, construction, reconstruction, or -epiacement of a permanent public improvement by an agency. 'd) "District" means an area determined by an agency to contain all parcels which will receive a '.pecial benefit from a proposed public improvement or property-related service. e) "Fee" or "charge" means any levy other than an ad valorem tax, a special tax, or an issessment, imposed by an agency upon a parcel or upon a person as an incident of property mnership, including a user fee or charge for a property related service. f) "Maintenance and operation expenses" means the cost of rent, repair, replacement, ehabilitation, fuel, power, electrical current, care, and supervision necessary to properly operate md maintain a permanent public improvement. g) "Property ownership" shall be deemed to include tenancies of real property where tenants are 'irectly liable to pay the assessment, fee, or charge in question. h) "Property-related service" means a public service having a direct relationship to property w ners hip. I) "Special benefit" means a particular and distinct benefit over and above general benefits onferred on real property located in the district or to the public at large. General enhancement of roperty value does not constitute "special benefit." EC. 3. Property Taxes, Assessments, Fees and Charges Limited, (a) No tax, assessment, fee, or harge shall be assessed by any agency upon any parcel of property or upon any person as an icldent of property ownership except: 1) The ad valorem property tax imposed pursuant to Article XIII and Article XIII A. 2) Any special tax receiving a two-thirds vote pursuant to Section 4 of Article XIII A. 3) Assessments as provided by this article. t) Fees or charges for property related services as provided by this article. •)) For purposes of this article, fees for the provision of electrical or gas service shall not be deemed harges or fees imposed as an incident of property ownership. EC. 4. Procedures and Requirements for All Assessments, (a) An agency which proposes to levy an ssessment shall identify all parcels which will have a special benefit conferred upon them and upon hich an assessment will be Imposed. The proportionate special benefit derived by each identified 3rcel shall be determined in relationship to the entirety of the capital cost of a public improvement, ?e maintenance and operation expenses of a public improvement, or the cost of the property )lated service being provided. No assessment shall be imposed on any parcel which exceeds the '.asonable cost of the proportional special benefit conferred on that parcel. Only special benefits are ;sessable, and an agency shall separate the general benefits from the special benefits conferred on ).ca.gov/1996/120196_prop_2ia/ufKlerstandin5t;fmtrp2ia2;US!&.htnil 20/23 ,2/12 Understanding Proposition 218 a parcel Parcels within a district that are owned or used by any agency, the State of California or the United States shall not be exempt from assessment unless the agency can demonstrate by clear and convincing evidence that those publicly owned parcels In fact receive no special benefit. (b) All assessments shall be supported by a detailed-engineer's report prepared by a registered professional engineer certified by the State of California. fc) The amount of the proposed assessment for each identified parcel shall be calculated and the record owner of each parcel shall be given written notice by mail of the proposed assessment, the total amount thereof chargeable to the entire district, the amount chargeable to the owners particular parcel, the duration of the payments, the reason for the assessment and the basis upon which the amount ofthe proposed assessment was calculated, together with the date, time, and location of a public hearing on the proposed assessment. Each notice shall also include, ina conspicuous place thereon, a summary ofthe procedures applicable to the completion return, an^ tabulation of the ballots required pursuant to subdivision (d), including a disclosure statement that the existence of a majority protest, as defined in subdivision (e), will result in the assessment not being imposed. {d)Each notice mailed to owners of identified parcels within the district pursuant to subdivision (c) shall contain a ballot which Includes the agency's address for receipt of the ballot once completed by any owner receiving the notice whereby the owner may indicate his or her name, reasonable identification of the parcel, and his or her support or opposition to the proposed assessment. (e) The agency shall conduct a public hearing upon the proposed assessment not less than 45 days after mailing the notice of the proposed assessment to record owners of each identified parcel. At the public hearing, the agency shall consider all protests against the proposed assessment and tabulate the ballots. The agency shall not Impose an assessment If there is a niajority protest A majority protest exists if, upon the conclusion of the hearing, ballots submitted in opposition to the assessment exceed the ballots submitted in favor of the assessment. In tabulating the ballots, the ballots shall be weighted according to the proportional financial obligation of the affected property. (f) In any legal action contesting the validity of any assessment, the burden shall be on the agency to demonstrate that the property or properties in question receive a special benefit over and above the benefits conferred on the public at large and that the amount of any contested assessment is proportional to, and no greater than, the benefits conferred on the property or properties in question. (q) Because only special benefits are assessable, electors residing within the district who do not own Drooerty within the district shall not be deemed under this Constitution to have been deprived of the right to vote for any assessment. Ifa court determines that the Constitution ofthe UnitedStates or other federal law requires otherwise, the assessment shall not be imposed unless approved by a two-thirds vote of the electorate in the district in addition to being approved by the property owners as required by subdivision (e). SEC 5 Effective Date. Pursuant to subdivision (a) of Section 10 of Article II, the provisions of this article shall become effective the day after the election unless otherwise provided. Beginning July 1, 1997 all existing new, or increased assessments shall comply with this article. Notwithstanding the foregoing, the following assessments existing on the effective date of this article shall be exempt from the procedures and approval process set forth in Section 4: (a) Any assessment imposed exclusively to finance the capital costs or maintenance and operation expenses for sidewalks, streets, sewers, water, flood control, drainage systems or vector control. Subsequent Increases In such assessments shall be subject to the procedures and approval process set forth in Section 4. (b) Any assessment imposed pursuant to a petition signed by the persons owning all of the parcels subject to the assessment at the time the assessment is initially Imposed. Subsequent increases in such assessments shall be subject to the procedures and approval process set forth in Section 4. ww.lao.ca.gov/1996/120196_prop_218/understandirtg_prop218_1296.html 21/23 12 Understanding Proposition 218 fc) Any assessment the proceeds of which are exclusively used to repay bonded indebtedness of which the failure to pay would violate the Contract Impairment Clause of the Constitution of the United States. (d) Any assessment which previously received majority voter approval from the voters voting in an election on the issue of the assessment. Subsequent Increases in those assessments shall be subject 'o the procedures and approval process set forth in Section 4. SEC. 6. Property Related Fees and Charges, (a) Procedures for New or Increased Fees and Charges. An agency shall follow the procedures pursuant to this section In Imposing or increasing any fee or zharge as defined pursuant to this article, including, but not limited to, the following: '1) The parcels upon which a fee or charge is proposed for imposition shall be identified. The amount jf the fee or charge proposed to be imposed upon each parcel shall be calculated. The agency shall orovide written notice by mail of the proposed fee or charge to the record owner of each identified larcel upon which the fee or charge is proposed for imposition, the amount of the fee or charge proposed to be imposed upon each, the basis upon which the amount of the proposed fee or charge vas calculated, the reason for the fee or charge, together with the date, time, and location of a jublic hearing on the proposed fee or charge. '2) The agency shall conduct a public hearing upon the proposed fee or charge not less than 45 days )fter mailing the notice of the proposed fee or charge to the record owners of each identified parcel ipon which the fee or charge is proposed for imposition. At the public hearing, the agency shall •onsider all protests against the proposed fee or charge. If written protests against the proposed ee or charge are presented by a majority of owners of the identified parcels, the agency shall not npose the fee or charge. b) Requirements for Existing, New or Increased Fees and Charges. A fee or charge shall not be 'Xtended, imposed, or increased by any agency unless it meets all of the following requirements: 1) Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service. 2) Revenues derived from the fee or charge shall not be used for any purpose other than that for /hich the fee or charge was imposed. 3) The amount of a fee or charge imposed upon any parcel or person as an Incident of property wnership shall not exceed the proportional cost of the service attributable to the parcel. 4) No fee or charge may be imposed for a service unless that service is actually used by, or nmediately available to, the owner of the property in question. Fees or charges based on potential r future use of a service are not permitted. Standby charges, whether characterized as charges or ssessments, shall be classified as assessments and shall not be imposed without compliance with ection 4. 5) No fee or charge may be imposed for general governmental services including, but not limited to, ollce, fire, ambulance or library services, where the service is available to the public at large in ubstantially the same manner as it is to property owners. Reliance by an agency on any parcel lap, including, but not limited to, an assessor's parcel map, may be considered a significant factor I determining whether a fee or charge is imposed as an incident of property ownership for purposes f this article. In any legal action contesting the validity of a fee or charge, the burden shall be on le agency to demonstrate compliance with this article. :) Voter Approval for New or Increased Fees and Charges. Except for fees or charges for sewer, ater, and refuse collection services, no property related fee or charge shall be imposed or creased unless and until that fee or charge is submitted and approved by a majority vote of the 'operty owners of the property subject to the fee or charge or, at the option of the agency, by a va-thtsls rote of the electorate residing in the affected area. The election shall be conducted not ss than 45 days after the public hearing. An agency may adopt procedures similar to those for ),W^»^9ii/K(>MfiUmJpt21*/understa nding_prop218_1296.htm I 22/23 •)2i^2 ^ Understanding Proposition 218 increases in assessments in the conduct of elections under this subdivision, (d) Beginning July 1, 1997, all fees or charges shall comply with this section. SECTION 5. LIBERAL CONSTRUCTION. The provisions of this act shall be liberally construed to effectuate its purposes of limiting local government revenue and enhancing taxpayer consent. SECTION 6. SEVERABILITY. If any provision of this act, or part thereof, is for any reason held to be invalid or unconstitutional, the remaining sections shall not be affected, but shall remain in full force and effect, and to this end the provisions of this act are severable. This report was prepared by Marianne O'Malley Underthe supervision of Mac Taylor. To request publications call (916) 445-2375. This report and others are available on the LAO's World Wide Web site at http://www.lao.ca.gov. The Legislative Analyst's Office is located at 925 L Street, Suite 1000, Sacramento, CA 95814. Note Understanding Proposition 218 was published in December 1996, less than one month after the state's voters approved Proposition 218. The report was written as a layperson's guide to Proposition 218 and has not been updated since 1996. If you have questions about local finance or Proposition 218, you may wish to consult an attorney or review other online publications. For example, the sponsors of Proposition 218 (the Howard Jarvis Taxpayers Association) and the California League of Cities offer materials regarding Proposition 218 on their websites. The League of Cities' primary document regarding Proposition 218 is called "Proposition 218: Implementation Guide. " Retum to LAO Home Page rf?Wte'0:ey.go^ll»6/^130196_prop_218/understa nding_prop218.1296.html 23/23 SOLID WASTE CONTRACT, FEES AND PROP 218 - ARTICLE XIII C, D Review by a concerned citizen. City of Carlsbad Prepared: August 22, 2012 •Storm Water Fees: The City of Carlsbad Storm Water Pollution Protection Program Regulatory Fee Study Report was part of this review regarding fees for solid waste services. Storm Water Fees are associated with national and state mandates, but justification for including services such as street sweeping have now been included and are added on top of Solid Waste Service Fees. Executive Summary page 1, paragraphs 4 and 5 describe the two primary reasons for adding Storm Water Fees to solid waste service fees paid by the customer. The first is based on the EPA’s definition of storm water pollutants as solid waste. The second reads: •“Furthermore, refuse collection fees are excluded from the voting provisions of Proposition 218. CA. Const. Art XIII C, D). Specifically, California’s Constitution, Article XIII Section 6c, excepts new or increased “fees or charges for sewer, water, and refuse collection services” from the broad voter approval requirements of this Article.”” •However, Proposition 218 includes additional compliance for property-related fees of water, sewer and refuse collection and whether or not they can be charged to the customer that should have been discussed and scrutinized as part of the storm water report. WTSWF WHAT THE STORM WATER FEES? •Prop 218: Provided for review and continued reference is a copy of “Understanding Prop 218” from the State of California Legislative Analyst’s Office. •Prop 218 is important legislation because it was written and approved by the citizens of California to limit local government. It is important to note Prop 218 requires comprehensive compliance. It does not allow for selective compliance or convenient interpretations. The areas of Prop 218 that relate specifically to concerns and examples presented herein are highlighted in red. •SEC. 6. Property Related Fees and Charges. (a) Procedures for New or Increased Fees and Charges. An agency shall follow the procedures pursuant to this section in imposing or increasing any fee or charge as defined pursuant to this article, including, but not limited to, the following: PROP 218 – ARTICLE XIII C, D •(1) The parcels upon which a fee or charge is proposed for imposition shall be identified. The amount of the fee or charge proposed to be imposed upon each parcel shall be calculated. The agency shall provide written notice by mail of the proposed fee or charge to the record owner of each identified parcel upon which the fee or charge is proposed for imposition, the amount of the fee or charge proposed to be imposed upon each, the basis upon which the amount of the proposed fee or charge was calculated, the reason for the fee or charge, together with the date, time, and location of a public hearing on the proposed fee or charge. •(2) The agency shall conduct a public hearing upon the proposed fee or charge not less than 45 days after mailing the notice of the proposed fee or charge to the record owners of each identified parcel upon which the fee or charge is proposed for imposition. At the public hearing, the agency shall consider all protests against the proposed fee or charge. If written protests against the proposed fee or charge are presented by a majority of owners of the identified parcels, the agency shall not impose the fee or charge. Agency is NOT required to impose the fee even if no majority protest – it is not automatic. •(b) Requirements for Existing, New or Increased Fees and Charges. A fee or charge shall not be extended, imposed, or increased by any agency unless it meets all of the following requirements: PROP 218 – ARTICLE XIII C, D •(1) Revenues derived from the fee or charge shall not exceed the funds required to provide the property related service. •(2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed. •(3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. •(4) No fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Fees or charges based on potential or future use of a service are not permitted. Standby charges, whether characterized as charges or assessments, shall be classified as assessments and shall not be imposed without compliance with Section 4. •(5) No fee or charge may be imposed for general governmental services including, but not limited to, police, fire, ambulance or library services, where the service is available to the public at large in substantially the same manner as it is to property owners. Reliance by an agency on any parcel map, including, but not limited to, an assessor's parcel map, may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership for purposes of this article. In any legal action contesting the validity of a fee or charge, the burden shall be on the agency to demonstrate compliance with this article. PROP 218 – ARTICLE XIII C, D •This is the only portion of Prop 218 presented in the Storm Water Fee Report: (c) Voter Approval for New or Increased Fees and Charges. Except for fees or charges for sewer, water, and refuse collection services, no property related fee or charge shall be imposed or increased unless and until that fee or charge is submitted and approved by a majority vote of the property owners of the property subject to the fee or charge or, at the option of the agency, by a two-thirds vote of the electorate residing in the affected area. The election shall be conducted not less than 45 days after the public hearing. An agency may adopt procedures similar to those for increases in assessments in the conduct of elections under this subdivision. •(d) Beginning July 1, 1997, all fees or charges shall comply with this section. •SECTION 5. LIBERAL CONSTRUCTION. •The provisions of this act shall be liberally construed to effectuate its purposes of limiting local government revenue and enhancing taxpayer consent. •SECTION 6. SEVERABILITY. •If any provision of this act, or part thereof, is for any reason held to be invalid or unconstitutional, the remaining sections shall not be affected, but shall remain in full force and effect, and to this end the provisions of this act are severable. •“Now local governments must prove that any disputed fee or assessment charge is legal.” I asked for this proof 10 months ago regarding water fees and still have NO response. PROP 218 – ARTICLE XIII C, D Concerns relating to Prop 218 compliance that I am bringing to your attention as examples are: •Franchise Fees: The new solid waste contract allows for Franchise Fees as pass – through costs to the customer. This is specifically not permitted in Prop 218. Franchise Fees go directly to the City’s General Fund to provide general public services and to be utilized at Council’s discretion, for other than solid waste services. •Solid Waste Contract, Page 4, Section 1.37 “Franchise Fee” means the payments paid to city by the contractor pursuant to section 8.02” 8.02 “In consideration of the exclusive right, duty and privilege to collect, remove, and dispose all Solid Waste recycle all Recyclable Materials collected and divert all Green Waste collected, Contractor shall pay the City 7.5% of Gross Receipts less the amount collected for the Storm Water Fee for the term of the Contract…..” 8.03 “Contractor shall pay the city an AB 939 fee as established by resolution of the city council, at the same time and in the same manner as the Franchise Fee. As of the effective date, the AB 939 fee is 2.0 % of the Gross Receipts less the amount collected for the Storm Water Fee….” 8.04 “Contractor shall pay the city a Storm Water Fee as established by resolution of the city council, at the same time and in the same manner as the Franchise Fee…” •Further, the contract reads that the definition of Gross Receipts includes the monies from Franchise Fees and Franchise Fees are then calculated on Gross receipts. Looks like double- dipping. Solid Waste Contract, Page 5, Section 1.40 “Gross Receipts” means any and all revenues received from Billings by City or Contractor for the Collection, Processing, Disposal and Transportation of Solid Waste pursuant to this Contract, in accordance with generally accepted accounting principles, without subtracting the Franchise Fee, the AB 939 Fee, any other payment to the City, or any other cost of doing business. Revenue received by the Contractor from sale of Recyclable Materials, including California Redemption Value shall not be considered as Gross Receipts.” WTFF WHAT THE FRANCHISE FEES? •Consumer Price Index: The new solid waste contract utilizes CPI to determine and guarantee cost increases to the contractor. –CPI is based on inflation, not the actual cost of providing the services as stipulated in Prop 218. –CPI is problematic because it overstates inflation. –CPI has gone up 20% over the last 10 years. –CPI does not provide a measure of performance accountability. –CPI does not allow for cost savings from improvements in efficiency and technology. •One explanation presented for using CPI was that the actual costs of implementing the new solid waste services would have driven the fees too high. In other words, purchasing all the new trash cans was costly. So the cost was spread out over time in a way customers wouldn’t notice as much. Another explanation was that the cost of services continually increases each year and that the contractor needed the guaranteed increase to provide the services. However, the new automated system provides a new efficiency that should produce cost savings. WTCPI WHAT THE CPI? •Survey of Carlsbad Residents: A review of R3 Consulting’s 2009 Final Report – Review of Waste Management’s Request for a Rate Increase included a notation that the City was interested in changing solid waste services to single-stream recycling and fully automated services. •The R3, March 28, 2011 Presentation to Council included survey results from Carlsbad residents regarding trash services: Keep the current system? 57% Replace with City provided containers? 36.3% Assume a $2/monthly increase. •Considering the clear response of the people and the initial costs to implement the new services, these are obvious indicators that other options for trash services should have been researched, reported and discussed for consideration. WTS WHAT THE SURVEY? •Records Keeping: A month prior to the majority protest public hearing for the proposed solid waste contract, services and fees, I requested a copy of the proposed solid waste contract. •Two weeks prior to the hearing I received an email that listed it as an attachment, but the contract was not attached. When I asked why, I was told the contract wasn’t ready yet. •The City initiated the contract process two years prior. Waiting to make the contract available 72 hours before with the agenda announcing the council meeting, does not allow for adequate time and study by the public before the majority protest hearing. •A formal records request through the City Clerk’s office, produced NO paper trail or documentation regarding the contract negotiation process other than the proposal from Waste Management. When compared to the contract, it appears the WM proposal was simply made into a contract with little if any changes. Apparently there is no record of other or edited versions than the final contract. •However, I did discover some documents and information on my own with internet searches, staff inquiries, and from council meeting agendas. WTRR WHAT THE RECORD KEEPING? •EPA Standard Practices for Solid Waste Contracts: Following references provided in the Storm Water Report, to the Environmental Protection Agency (EPA). I discovered there are available resources and standard practices for developing strategic solid waste contracts. •Of particular interest are the Resource Management Contracts. “Unlike traditional solid waste service contracts, resource management (RM) compensates waste contractors based on performance in achieving waste reduction goals rather than the volume of waste disposed. As a result, RM aligns waste contractor incentives with the City’s goals to explore innovative approaches that foster cost-effective resource efficiency through prevention, recycling, and recovery.” •These standard practices seem like a good tool and I wonder why they were not used in developing our solid waste contract. Waste Management is listed by the EPA as a Resource Management contractor. Our solid waste contract is a hybrid with some RM features, but does not have incentives for cost reduction, AND does NOT include a reduction in fees over time as recommended by EPA standard practices. WTCP WHAT THE CONTRACT PROCESS? “One year after implementing RM contracts at several of its North American plants, GM realized a 20 percent reduction in overall waste generation (30,000 tons), a 65 percent increase in recycling (from 50,000 tons to more than 82,000 tons), and a 15 to 30 percent decrease in waste management costs.” •Contract Process: It appears that the City and WM are so intertwined that they are actually doing business together for profit at increased expense to the citizens and without compliance with Prop 218. –While some citizens believe the solid waste services were put out to bid, the solid waste contract actually appears to be verbally arranged. –It also appears that there are multiple, outdated (entire lease should be redone, not just amendments) $1.00 leases, and subleases at the Palomar Transfer Station. –The City receives a hosting fee for every ton of trash at the Palomar Transfer Station (which may influence contractor selection). –The City and Waste Management share billing responsibilities. –The City gets free trash services –The contractor is guaranteed rate increases. –Franchise fees are allowed as pass-through costs. –CPI is used to set rates instead of actual costs. AND much more… WTCP WHAT THE CONTRACT PROCESS? •I am asking that the City reduce the cost of all property-related fees, first through full compliance with Prop 218, Articles XIII C,D of the California Constitution, and then by any other forms of “do diligence” possible. I am asking the City to prove compliance with Prop 218 on the disputed charges presented herein and in any other areas of non- compliance that exist relating to Prop 218. •More importantly, I am asking that the wishes of the citizens of Carlsbad be more seriously considered, rather than avoided, in staff’s recommendations and in the decision making process. •I am asking that the information provided by staff for Council review be comprehensive and accurate. •I am greatly concerned that from the “outside looking in”, it appears there is a culture or agenda of limiting public information, education and involvement rather than limiting local government and encouraging public input. This is evident in “rushed” approvals without advance availability of information to the public. It is also obvious in the wording and sweeping generalizations in communications that are distributed by the City to the public. •Last but not least, the City Clerk’s office has been very helpful in my research. Staff has also provided some information in the form of documents and telephone questions and I appreciate their assistance. •Thank you for your time and attention. Are there any questions or comments? PLEASE FIX ALL OF THIS!