HomeMy WebLinkAboutAgenda Bill 3.D 10/04/2010~ALU~,
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DATE:
TO:
FROM:
SUBJECT:
October 4, 2010
~~,~iart~.#3.~
Honorable Mayor and Members of the City Council
Scott Brodhun, Assistant City Manager
.Resolution Opposing Proposition, 26, the "Proposed Constitutional Amendment:
State and Local Fees and'Charges: Vote Requirements and Limitations".
1tECOMM'ENDAT>[ON
It is recoinmended.that:the City Council adopt the attached resol'ution.opposing Proposition 26,
the "Proposed Constitutional Amendment: State and Local Fees and Charges: Vote
Requirements and.Lrnitations".
BACKG120IINI)
Proposition 26' is a statewide initiative on the November ballot sponsored by the California
Chamber of Commerce and'Galifornia Taxpayers Association,. along with a coalition of
taxpayers, employers and small businesses. The Proposition would broaden the definition of a
state or local tax to :include manypayments currently`considered to be fees or charges, and would
increase the number of revenue proposals that would'be subject to voter approval.requirements.
Proposition 26 would require` a 2/3 `vote, for any law that increases 'the taxes of any taxpayer,
regardless of its overall effect on state revenues.. Under this Proposition, a tax is defined as "any
levy, charge, or exaction of any kind imposed by a'local government" except. as,provided by the
measure's exemptions.. The word "tax" is currently not defined either in the State Constitution or
in state statutes.
ID><SCUSSION
State and.,local .governments 'impose a variety of taxes, fees and. charges on individuals and
businesses. Taxes, such as income, sales and property taxes,. are typically used to pay for general
public services such.. as education, .prisons, health and social services. Fees and charges, by
comparison, typicallypay for a particular service or program benefitting individuals or
businesses:
The League of California Cities opposes Proposition 26 out of concern for the many potential
negative ,effects this measure would have on local revenue raising authority. If passed by voters,
Agenda Review:
City Attorney Finance Director City,Manager
this initiative would restrict in various ways the ability of state and local governments to adopt
fees.
Proposition 26 includes a list of exemptions:. for local government, including, but not limited to
user fees for specific government services;.charges .for use of government property; fines,
penalties, or other charges for violating the law; charges imposed for reasonable regulatory costs
incident to issuing licenses and permits, performing investigations;. inspections and audits; and,.
.charges imposed as a condition of_property development. However; examples provided by the
measure's coalition, of fees that could be viewed as taxes; list the types' of fees the sponsors
believe. would be affected; which.. in some' cases appears to contradict the exceptions in the
measure. For example, traffic impact and public safety impact fees are listed as examples, but
would also be exceptions, as charges~mposed as a condition ofproperty development (and paid
by developers, not'the general public). The list of examples also. includes (but is .not limited to)
fees on alcohol to mitigate public: nuisance associated with sale or consumption; accident fees
(for costs of responding to and' treating victims); trenching; fees for diminution of road durability
from utility installations; and; parking impact .fees, air qualty`impact fees, restaurant health
inspection fees, etc. A complete list is included in Attachment #2.
A "yes" vote on this .measure means. the definition of taxes would be broadened to include many
payments currently defined.. as .fees or charges. As a-result, many local proposals to increase
revenues would require approval bytwo-thirds of Petaluma voters. A "no"'vote on this measure
would keep the current constitutional requirements regarding fees :and taxes in place.
FINAN.CIAI. IMPACTS
Thee financial impacts to Petaluma are unknown. at this time. If this measure is approved by
voters, it is anticipated that the interpretation of how its provisions are applied would likely take
years oflitigaton. Local :agencies would need to examine fees they charge to determine how the
specific definitions used in the measure would apply. B'y expanding the scope of what- is
considered a tax, the measure would make it more difficult for state and local governments to
pass new laws that raise revenues. This change would,affect many environmental, health, and
other regulatory fees as well as some business assessments and other levies. New laws to create,
extend or:increase these types of-fees. and. charges would be subject to the two=thirds approval
requirement. The fiscal effect of this change would depend on future actions Eby the
Legislature, local governing boards, and'local voters. Given the range of fees. and charges that
would be subject to the higher approval threshold for taxes; the changes could be major and
could potentially reduce ~governmerit.revenues and programs statewide and locally.
ATTACIIMEN~'S
1: Text of Proposition 26
2. League: of California Cities Analysis
3. Analysis of the State of California, Legislative Analyst's Office
4. Resolution
a
Attachment 1
Novem~er ~:~,,- z o o ~ "4 ~ --
v~~.~i~~sowA~ ~1~>;~a~RY
The Horiarable ~Earnund G Brown ,lt
Attorr-ey=Genera_ i .
1300 1 Street.
•Sacramerito, CA95814
~~/
^IOV 2 3.20
'pt~i?'I,~ ~ IVY CC~~DINATCl
AT7~~R~JirY ~,Elv~w,~.L'3 G~~{sr~°
Attention: Krystal Faris, !n'i#iat~ve:,Coa~diriator.
Re Request'fc~r T~tle~and3.Summary- lnitiative~C~nstitutionai.Amendment
~l~ear~tvtc. Brawn;
~Pucsuant to ~rticfe fl, Section 1`Q{d) of the~C~ilifocnia Constifutiori anci,Se;;tion
,.
~OC}2 of_the Elections Code, l haeer~y request that a title~and suiniriary be prepared for-
;the attached ini±iative constitutional amendment: EncloseWd is a checkfbr~~'~t}QA.O: N1y~
residence';address.ES attached:
All°ii~quir~s or;c~rrespondence .:relative to this iriitiati~e 5houltl tie d~recfed fa
NieEsen;;Mlerksamer; Pacrinefio,, Mueller 8 Naylor, LLP, 141 ~ Street,~Suite 92010,
Sacsanierti,, C~A 958=14, 9=1'6 '446=6752; Attentlori`SteweLucas,{telepPone' 4~15~389-
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68t1~),.
Tkank you for"your assistance
-Sincerely,.
•Allan:Zaremberg; Prci'neint
Enclosure.-Prcipaser~ initiative
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Attachrn~ent 2 ~~
'~ ~ '`~ ~_! ~' 1400 K Street, Suite 400 ®8acramento, California 95814
~- ;iC ~ [~ ,~::1Li I t ~~~~`~i l ~. ~ Phone: 916.658.8200 Fax: 916.658:8240
'~ `~ ,~ ~ www.cacities.org
~1C®~OSI>CYOri ~6
League Position: Oppose. The League of California Cities is OPPOSED to Proposition 26;
Proposed Constitutional Amendment: State and Local Fees and' Charges: Vote. Requirements and
Limitations. This opposition position was taken following review by the Zeague's Revenue and
Taxation Committee and the League Board of Directors.
Reasons°for Opposition: City officials are concerned:about the. many potential negative effects
of this measure on local revenue;raising authority.
Text of Measure: http://a~.ca:eov/cros attachments/initiatives/pdfsli891 initiative 09-
0093:adf
Initiative Summary: Restricts' in various ways the ability of"the state and local governments to
adopt fees. More specifically, this initiative:
1) States via findings that:. (A) Since the enactment of Proposition I3 in 1978, increases in
state taxes require atwo-thirds vote in each house of the Legislature; (B) Since the
enactment of Proposition 2'L8.in 1996, local tax `increases must be.approved by voters;
(C) Despite these limtationa rates for state income tax, sales and use tax, and state and'
1oca~l business taxes continue to escalate; (D).Recently, the Legislature added another $12
billion in axes; (E) Thin, escalation in taxation does: not account for. the. recent
phenomenon whereby the Legislature and local governments have disguised'new taxes as
"fees" without having. to abide, by (Prop 13 and. Prop. 218) vo4ing requirements; (F) Fees
that are couched as "regulatory" which exceed the reasonable costs ofactual regulation,
or are simply imposed~to raise. revenue for a new program. and are not part of any
licensing or permitting program, are actually taxes,andshould be subject?to the.
limitations applicable to the imposition of taxes; and'(G) the.measure states that it defines
a "tax" for state~and'`local purposes so that neither the Legislature nor local governments
can circumvent these restrictions by simply defining new or expanded taxes as "fees."
2) Changes applicable. to,the'STATE:
o Amends Section 3 ofArficle XIII A to delete- language tlat~requires a two-thirds vote
of both houses ofthe-Legislature for "any change to state taxes enacted for~the
purpose of increasing revenues collected thereto, whether by increased rates or
changes; in computation "and instead sulistitutes a: new standard which~requres a
tw,o-tli'rds vote of both houses of the Legislature. for "Any change'in state statute
w/ieh;resulfs,in any taxpayer paying a higher~tax."' ,This changed standard
appears designed to eliminate recent legislative interpretations of the existing phrase
"purpose o~increasing revenues "that allow, via majority vote, one tax to be
.increased if another tax is dowered by an equivalent amount: ,
Creates a definition of a "tax" to include any levy, charge or exaction of any kind
imposed by the state except for:
a. A charge imposed for a specific benefit conferred or privilege granted directly to
tli'e payor that: (1) is riot provided to those not charged, and (2), does not exceed
u
the "reasonable costs to the state of conferring the benefit or granting the
°privilege.
b. A charge imposedfor. a specific governmental service or product provided
directly to the payor that` (1) is notpro~ided to~those not charged, and (2) does
not exceed the reasonablecosts to "the state of providing the product or service.
c. A charge imposed for the reasonable regulatory costs to the state "incident to "
issuing licenses and permits, performing investigations, inspections, and audits,
enforcing agricultural marketing orders;'andthe administrative enforcement and
adjudication thereof.
d. A charge imposed for entrance or use of state property; or its purchase-rental or
lease, except.for Article XI, Section 15 (The Constitutional reference to Vehicle
License Fees VLF). While.this reference to the VLF is awkwardly located in this
measure, im a clause 'That otherwise relates to state property, it presumably
reflects that VLF~charges are already considered taxes at the state level).
e. A fine; penalty, or other`monetary charge imposed by the judicial branch or the
State as the result of a violation of law.
® Applies the -above changes to any state statute tax adopted after January 1,.2010.
Declares any tax adopted prior to the effective date of the.Act that is notin
compliance with theabove~requirements and definitions. is void 12 monthsafter the
.effective. date, unless the tax is,reenacted by the Legislature. and signed by'the
Governor in conformance with its provisions.
3) Changes applicable to-Local Governments:
® ,Amends Section 1 of Article'XI~II C to add to definitions applicable to local taxation
authority a definition of "tax" that is virtually°identical;to the definition applicable to
the state outlined above (See Paragraph #2); with the following "additions" (added to
the local definition) and `-`exceptions" (included in the state defnit'on,but missing
from the local. definition):
a. Additions: There: are two additional items-- that are only applicable to local
governments -- that are added to the list of exceptions from the definition of
"tax," de"scribed inparagraph #2, they are: (1`) a charge imposed as a condition
of property development, and (2) .assessments and' property-related fees imposed
in,accordance with the provisions of Article-XIII .D; adopted by Proposition 218
in 1996.
b. Exceptions: While language used in the definition of"tax" applicable to state
and local government is very similar, in several ;instances the wording.in the local
= government section is slightly different.. The reason.to point this out is thaYthese
.differences may .lead to future different-legal `interpretations: (1) the term "to -the
payor" is dropped.from the end of two provisions describing an.exception to a
tax applicable to (A) benefits conferred or~a prix"ilege granted, and (B) a specific
governmental service or product provided; (2) the term `for'' is used in the
language related to licenses and permits applicable to local government, as
opposed-to the potentially-broader "incident to" in language applicable to the
stated and (3) the exception related to Vehicle License Fees included in the state
definition is missing from the local defnition. Thisomission may or may not be
designed to reflect that in some instances local governments have levied a local
`fee" on VLF registrations; such as in Sam Mateo which imposes a local vehicle
registration fee (a .regulatory fee) for various congestion management relief and
storm water cleanup programs. That said, other provisions of this measure may
capture the San Mateo type `fee " as a "tax. "
4) Changes'applicable to'both.Sfate: and' LocaLGover:nments°
m Requires both the state ~aridaoeal governments to bear the burden of proof by a
"preponderance of-the evidence" that a levy; charge or exaction is: (f) not a tax; (2)
that the amount is no more than necessary to cover reasonable costs of the
governmental activity; and (3) that the manner in whi,ch.those costs are allocated to a
payor bear a fair and reasonable relationship to the payor's burdens on, or benefits
received from, the •governmental activity. (This is currently the standard recognized
by the California,Supreme Go.urt.)
5) Includes a ``conflicting measures" provision stating that should another measure appear on
the. same ballot relating to thelegislative or local votes required toy enact taxes or fees that
the provisionof this measure shall prevail in its entirety should it receive a greater
number of affirmative votes, and. the conflicting measure be deemed null and void. The
measure also contains a "severability clause" which. permits any provisions that,are not
'held to be invalid,orunconstitufional to remain in:effect:.
Background:
This initiative is .fueled, in part, 6y, recent legislative budgetary battles where the business
community has become concerned with proposals put forth by Legislative Democrats which
include the following:
A budget package sent to'the Governor in December of 2008 which proposed to repeal all
taxes on gasoline. and replace. it with an equivalent fee.
A legal interpretation proffered by Legislative Democrats, and supported by Legislative
Counsel, that the Prop 13 two-thirds. legislative vote. requirements do not apply to a
measure which decreases a state tax then enacts a replacement tax by an equivalent
.amount because it.is not a: "change to state taxes enacted for- the pureose: o .increasing
revenues.." The recent "gas tax swap" is an example of this concept.. Earlier'uersions of
fhe gas°tax' swap, which were;not adopted, also•included a proposal to allow regions to
levy their own "fees" on gas to pay for transit and other services.
A concern that legislators are seeking to save General F.•und"dollars whenever,possible by
enacting new fees.
Other features;of this initiative (through the.narrow and precise exceptions to the new definition
of "tax')' seek to addresslongstandingconccrns in the business "community with the deeision in
Sinclair Paint v. State Board of Equalization .(1997). In;tlie Sincla"ir Paint case, the Court upheld
a fee imposed exclusively on paint-manufacturers that had used `read°in "the production of paint, to
mitigate health effects of lead on cYiil"dren. The fee supported a;program that provided evaluation,
screening, and; medically necessary follow-up services for children who were potential victims,of
lead poisoning. = In upholding the fee, the Court found that the fee was a mechanism to;;require.
manufacturers'and•.otherpcrsons whose products -have exposed children to lead contamination. to
bear a fair share of the cosf of'mitigating the adverse health effects their products created in the
community. [Z]
[2~ The Court referred to th"e;';follo.wing valid regulatory fees: regulatory#ee imposed on.A.B~C. licensees to
support pilot project o:abate nuisances associated with sale•of alcoholic beverages-, landfill,fee based on
land use to reduce illegal waste.disposal; waste disposal surcharge imposed on waste•haulers; fee to
support emissions-based formula for. recovering direct and indirect costs of pollufion emission permit
programs.
C;~
Undercurrent law, a "regulatory. fee;"°may not exceed the reasonable cost of providing services
necessary to the actvityfor which.tlie fee:is charged and may not be levied for unrelated revenue
purposes: '°To d'emonstrate that a regulatory fee is not a special .tax, the government must prove
(1) the estimated costs of the service or regulatory activity; and (2) the basis for determining'the
manner in -which the costs are apportioned, so that charges allocated to a payorbear afair or
reasonable relationship to the payor's burdens on, or benefits from- the regulatory activity.
Whether the fees collected exceed the. cost of the regulatory program need,not be proved on an
individual basis. Rather, the agency is allowed to employ a flexible assessment of proportionality
within a broad range of reasonableness insetting. fees.
Recently another regulatory fee=was upheld ~in a. case called'Cal forma Building Industry
Association v. San Joaquin: Palley Air District (2009) 178 Ca1.App.4`~' 120.. The CBIA challenged
the District's indirect source review (ISR) rules which are intended to>encourage developers to
reduce indirectpgllution (mobile source emissions, caused bynew development projects)..
Under the, ISR, the developer can reduce: emissions by incorporating~pollution-reducing features
in-tle project, or paying a fee to fund,"off-site projects that will reduce<emissions, or a
combination of the two. The Court upheld the. ISR (fee) as<a valid:regulatory fee which maybe
charged to coyer the reasonable. cost. of a service or program connected to aparticular activity;
which may not exceed the amount required to carry out the purposes and provisions of the
regulation;.and'-which bear a reasonable relationship to.the fee payor's-burdens on or benefits
from the°regulatory system..
Fi§cal Impact:
The analysis by the Legislative Analyst and Director of Finance f nds ``P.otentially major decrease
in state and.local revenues. and spending, depending upon future a_ ctions of the Legislature, local
governing bodies, and local voters."
Existing League Policy:
As an initial reference point, the League~adopted an Oppose position to both.Proposition 13 in
1978, and. Proposition 218. in 1996;. due to their significant-.limitations on local revenue raising
authority. 'Based upon theatated findings, this initiative measure is designed to "ensure the
effectiveness of these constitutional limitations. "
'.The:Leagueal'so opposed a similar measure, Proposition'37'of 2000. Prop. 37 required atwo-
thirds vote of State Legislature, or either. majority or two-thirds: of local. electorate, to impose on
any activity fees used to pay foi monitoring; studying, or mitigating• the environmental, societal or
economic, effects of that activity when the fees impose no:regulatory,:obligation upon the payor.
The measure; also sought to redefine various fees as taxes, and;cont'ained exclusions for certain
real property related;fees, assessments and development.fees, and damages, penalties; or "expenses
recoverable from a-specific event. It also confained.a provision. that stated it`did not apply`to .fees
enacted before July 1, 1999, or increased fees due to,inflation or, greater workload, as'sp"ecified.
Prop. 37 failed with a narrow 4,8% Yes; and 52% "No" vote at the,November, 2000; election.
While there are no,adopted; League policies that encompass all aspects of this measure; here are
three related policy reference points:
• League's 2010 Strategic Goals. One of the three strategic priorities adopted by the
League Board and, leadership for 2010 is to: "Protect Local Control and Funding for
Vital Local~$ervices. Use statewide ballot measure and legislative and legal advocacy to
achieve reforms that protect local control and abolish the power of.the state to borrow,
~l
,1
divert or-impose restrictioris~on"the use of>all local revenue.sourees, including locally
imposed or levied taxes, he„local shares: of all "transportation°tax revenues (including.
,public .transit"funding), the-redevelopment tax'inerement; and any other local revenue
source used to fund vital local services."
The most applicable League' Revenue and Taxation policy is under the subject' of
"Additional Revenue" and reads:- "Additional revenue's "required in the state/local
revenue structure. There is not enough money generated by tfie current system or
allocafedao the local level by the current system to meet the requirements of a growing
population and deteriorating. services and facihfes. (N:ote: the underlined wording`above
was added to League policy at the Committee's previous meeting)
League policy from the Housing, Community and Economic Development Committee
reads: "The 'League supports providing local discretion.in the assessment, collection and
usage of development fees. The state should provide infrastructure funding to help local
communities meet California's.growth demands and;to increase housing affordability.
The League opposes limiting the ability bf cities to levy fees to "provide for infrastrucfure
or services."
Comments:
1) Sponsor's Intent: The "Stop Hidden Taxes" initiative is sponsored by the California
Chamber of Commerce and California Taxpayers' Association, with~coalition of taxpayers,
employers and small,businesses. In their view, passing this measure would restrict what they
describe as "loopholes in the,law," which allow taxes to be raised on'products and ser-vices
because they are called."fees." Another objective of this coalition;is fo oppose initiative #09-
0057, the "On Time Budget.. Act of 201,0;" an initiative proposal which would allow legislative
budgets to be adopted with a;majority vote, and is a potential target. of the "conflicting
measures" clause included in-this initiative.
2) Definition of "Tax": The word "tax" is not-now defned,eifher iu the Constitution or in the
state statutes.~'i This initiatve,defines.a ax`to include "any levy, charge, or exaction of any
kind" with certain enumerated exceptions. Included. within=the'list.ofexeeptions for local
government are:
® User~fees or charges for a specific government°service or:product.
® Charge for entrance to oi•'use of government,property (e.g, park).
A fine, penalty or otlier`charge imposed for violating the law.
o Charge'imposed for a.specfic beneft conferred or privilege granted.
o Charge;imposed forreasonable regulatory costs incident°to issuing,licenses and permits;
.performing investigations, inspections, and audits, enforcing`agricultural`marketing
orders
® A charge"imposed as a;condition,of property development.
o ,Assessments and property-related fees. unposed in accordance with Proposition 218.
If this measure is approved by the voters; the true interpretation of how it will apply will likely
take years of litigation.. Local agencies"will need to individually examine local fees charged to
~'~ The Courts have said that "tax" has "no fixed meaning;' that it is a legal issue for the courts to decide
based upon an independent review of the facts. Government Codesection 50076 defines what is not a
tax ("a fee that exceeds the reasonable costs of providing a service") but does not define what a tax is.
~~
determine how`the specific definitions used in this measure may affect an existing fee. As an
example, the fol'lowirig are examples of fees that appear to be excluded' from the list of exceptions
and, therefore, wquTdbe "taxes" underthe~new definition:
.® A fee°imposed to mitigate the significant environmental. impacts of a project.
® An assessment to abate a nuisance.
® A charge.for a specific government service or product"which is'not paid by all persons
receiving the service or product'(e.g. could not.give a senior orlow-income exception).
m A charge imposed for a regulatory program designed ;to mitigate the social or economic
burdens created by tfie ope "rations of the fee payers. This means that, for example, the
following two fees would be taxes: the ARB's fee imposed on sources of greenhouse gas
emissions fo pay for:implementation-ofthe AB' 32,program; and the proposed
"transportation fee" that was originally included in the Democrats' gas tax swap
proposal:
o A charge imposed by Fish:& Game to review Environmental Impact Reports.
3) .Burden of Proof: Under existingaaw; the. government has the burden of proving that a fee. or
charge. isnot a tax; that the?;amount is no°more than is necessary to cover the reasonable costs
of the governmental activity; and that.the manner in which-the: costs. are allocated to a payor
are propgrtionaP to the payor's burdens on, or benefits received -from the governmental
activify. The initiative.incorporates this :rule into the. Constitution.. City attorney's report. that
there are three basic -legal' ests of the burden of proof: preponderance. of evidence (lowest);
clear and convincing evidence (mid=range); and beyond.reasonatile doubt (highest).
4) Applicationto,Exsting Fees: It is unclear how this measure willbe~-construed to apply to
existing fees thathave been, adopted by state or local governments. Tfie section that applies to
'the state would void•nori conforming, statutes enacted between January 1, 20:10, and.before the
effective date of the Act. No specific date is mentioned for the provsions`that apply~to local
government. Both state,,and local existing fees could become.subject to challenge that they are
"unconstitutional."
NOTE: The "Stop Hidden Taxes" coalition.produced alist of the following (verbatim examples of
fees that presumably could'be viewed as `taxes"ifthe measure passes.. While this list does not
represent a legal conclusion on-,any of these'"fees," it provides°some: context for the types of fees
the sponsors desire to capture. Also, dependirig on the specificcircumstances, changes could be
made fo narrow he scope, use or application of a fee to ~fit'the exceptions provided in the
measure:
SPECIFIC INDIISTRYEXAMPLES
Restaurants:
• Fees on alcohol to litigatepublie nuisance associated~with-sale or consumption
o Fees on canned beverages to.mitigate waste/recycling
® Fees on soda to mitigate obesityand other negative health effects
® Fees on unhealthy foods, fats; sugar to mitigate negative health effects
• Health°inspect'ion/monitoring fees
m Traffic impact fees
b~
o Parking-impact fees
• Asir quality impact fees
® Water.quality impact fees
• Fees on waste,production
• Energy use surcharges and fees
• Fees on snack food
• Fees on food packaging for takeout orders
® Public safety cost mitigation fees
Public Utilities
• Trenching fees for diminution in durability or-longevity of roads, traffic congestion
mitigation, mitigate potential damage to existing infrastructure
• Alternative energy fees
• Fossil fuel consumption fees
• Eco-impairment fees for hydro facilities
Alcohol
• Mitigation fees to address public: nuisances associated with sale or consumption
• Mitigation fees to pay for health services provided by government (mental and
physical) for alcoholics.or those injured or otherwise affected by alcoholics
• Fees to fund public programs to prevent illegal consumption by minors or discourage
abuse by adults through :education; research into causes and possible cures for alcoholism
Oil
• Carbon consumption fees for pollution mitigation (injuries related to .effects of pollution)
• Eco-Impairment fees (effects of drilling, storage, or consumption on habitat or parks
and recreation areas)
• Carbon consumption fees to discourage consumption and encourage use of alternative
fuel sources. Additionally;, fuel consumption as a meansfor measuring "road damage fees"
• Oil severance fee to~mifigate oil,spill clean-up, and build larger response and enforcement
capabilities
• Hazardous waste fees to support general hazardous waste/substances. programs.
• An Air District might impose a refinery gate fee to mitigate `harm from diesel exhaust
emissions::. A city or county might impose pipeline fee to: enhance public safety to respond to
pipeline accidents
• A state: o_r local agency,ricay impose gasoline fee at the:pump for clean-up and mitigation
of MTBE con_tamingtion at setw`ice tations or in lakes and groundwater.
• A locat`.or, regional agency might impose a gasoline fee at the pump for mass transit..
(Note• fees' could still be assessed if connected to a pecific regulation, problem or
liability identifiable. to the fee,payer.)
Tobacco
• Mitigation fees: Fees. for mitigating the adverse health effects of tobacco products
(including evaluation, screening, and necessary follow-iip services who are. deemed
potential victims of tobacco related injuries)
• Deterrence fees` Fees to discourage consumption (by increasing cost of product)
anal/or to educate the general public on the consequences of tobacco consumption. Fees
to prevent illegal consumption by minors
1'~
Telecommunications
• Cellular. Fees to':reduce the impacts of DWTs (Drivitig While Talking), burdens on the
911 system, potential future effects of close proximity radio frequency exposure
• Trenching fees for diminution in durability of roads, traffic congestion mitigation
mitigate potential damage to existing infrastructure
Technology Companies
® Fees to mitigate the Digital Divide
• Ergonomic and repetitive motion injury mitigation
• Site location fees for,traffic mitigation and growth impacts
® Youth and video game violence prevention fee
• Hardware disposal fees
• Toxic/Waste fees
Agriculture
• Chemical/gene/hormone and other "altered food" products fees (a perceived threat for
"altered food" could result in fees 'being levied for research, screening, testing and
treatment should adverse •consegzences materialize or simply ds a means of discouraging
their use-out. of perceived:n~egative externalities)
• Spoiled/infected food~mitgation fees
• Insecticide abatement fees
Food (Retailers/Grocers/Malls)
• Traffic impact fees (malls and Big Box retailers)
• Public safety impact fees (added security necessary because of increase concentration of
people)
Fa_ st Food
• Traffic impact fees (where traffic backs-up at the drive-through)
• Litter abatement fees
• Fees to fund education, outreach, screening and treatment for obesity (fast foods
having high concentrations of fat) or• similar programs to discover, measure and treat
the adverse health consequences of high cholesterol' or, caffeine
TAXES,
Entertainment
• -Arenas/promoters/sports -teams: Traff c impact fees. Public safety cost mitgdtion fees
• Television/movies.: Location nutigalion; fees (relating to traffic impacts, clean-up;
public afety and emergency services). Fees on television and movie programming
to mitigate effects of violence on youth or similar anti-social consequences linked to
pr•ograrimng
Non=Indian Gaming
® Public safety mitigation. fees (for expenses associated-with a perceived increase in a
criminal element associated with activity-including increase police presence,
specialized investigation units)
• Fees to mitigate effects on compulsive gamblers or other associated addictive
consequences including screening, education, and treatment
~~
Pharmaceuticals.
• Mitigation for subsequently discovered health risks potentially associated with a particular
drug product
• Fees to fund drug education
• Fees related to health research
o Fees to fund health treatment
• Emergency care fees
• Fees covering the cost`of fhe uninsured or underinsured
• Pharmaceutical cost fees to cover the poor and/or elderly
• Fees related to coveringimmunizations for children
Railroads
Generally protected by the:federal "4-R Act" enacted by Congress to protect railroads from.
discriminatory local taxes. However, the 4-R Act applies to "taxes"and not fees or
assessments. So long as the :exaction does not contribute to the general fund of the
government; it may not.be considered a "tax" under the 4-R Act. See Wheeling & Lake Erie
Railway Co. v. Public Utility Commission, et. al., Nos. 96-3,703,.3704 (1;998)
• Consequently,. fees ;o mitigate:railroad-crossing accidents are potential
• Eco-impairment fees for effects. of train traffic on ecosystems or potenfial.effects of rail
accidents
• Pollution abatement fees (whether for emissions or sound)
• Carbon consumption fees
Airlines
• Pollution abatement fees,
® Noise. abatement fees (also,affected by any carbon consumption fees).
• Crash.mitigation fees (reimbursing local governments for costs of search and rescue,
recovery or salvage and.investigation)
• Runwaymaintenancefees
• Ground traffic congestion/mitigation fees
Truckers
• Road, damage fees to mitigate damage•to streets and highways caused by heavy truck
traf~c/spills
' ;: - •: Fees to mitigate the adverse effects of long haul trucking and or fund:programs to
research evaluate and reduce potential of trucking gceidents: Fees, to mitigate Health,
• costs related to injuries of7ruck drivers or increased risk of traffic fatalities due to size
of trucks used' (SUV plus mitigation fee). Could be affected by carbon fuel consumption fees
or_pollution:,rnitigation fees
.Auto Manufacturing
® Carbon fuel consumption fees. Road damage fees based:on size of vehicle
• Accident fees (for costs of responding to and ~treatingvictims) based on size/safety rating of
vehicle.
® A deterrence fee based onfuel efficiency to fund mass transit
• Tire disposal fees to mitigatecosts and hazards oftire disposal
• Off-road.mitigation fee on 4-wheel drive and all-terrain vehicles to offset eeo-damage of off-
.~'v
road automobile use
Chemicals
o Most closely related to .Sinclair paint circumstance where a product is deemed
hazardous, its use discontinued, and then after the fact businesses are pursued for
mitigation fees
® Mitigation fees to offset adverse health effects of a~:chemeal"or chemical by-product
o Accident/hazard mitigation fees' (educating public on proper usage, storage and
disposal of household chemicals; offset health costs in responding to accidents
relating to household cheriiical~, accidents)
General Business
® Fees on; businesses to fund indoor air quality maintenance. and investigation programs
® Hazardous waste fees to supportgeneral hazardous waste%substances programs
Insurance
o Fees on property casualty insurers for firefighting; earth"quake-.and flood
mitigation/prepara'tion; uninsured drivers and auto.case court costs, among many others
® ..Fees on health insurers for"such things as premium assistance for lower income
consumers and those-who lackcoverage, cover costs of certain;medicalprocedures and
tests and fees for consumer protection/intervention services against insurers "
Support:
"Stop Hidden Taxes" is a coalition of taxpayers, employers and small businesses and is sponsored
by'the California Chamber of Commerce and California'Taxpayers' Association
Arrierican Rental Association
Americans for Prosperity
Americans :for Tax Reform
Anaheim'Cfiamber of Commerce
Association 'of California Life and Health.-Insurance Companies
California Automotive Wholesalers' Association
Califgrnia;Beer & Beverage Distributors
California.Black Chamber°of Commerce
Galifornia;:Busness Alliance
California.Business Properties Association
Calfornia.Cotton,Ginners and Growers Association
California Distributors Association .
California Forestry Association
California Grocers. Association.
Californa,Hispanic Chambers of Commerce
California Hotel & Lodging Association
California Landscape Contractors Association
California League of Food Processors
California Manufacturers & Technology Association
California Metals Coalition
California Retailers Association
~~
California Small Brewers Association
California Taxpayer Protection Committee
Chemical Industry Council of California
Chino Valley Chamber of Commerce
Citizens for California Reform
Coalition of Labor,Agriculture & Business of Santa Barbara County
Contra Costa Taxpayers Association
Dana Point Chamber'of'Cornmerce
Family Winemakers of'Califomia
Howard Jarvis Taxpayers Association
Industrial Environmental Asso_cia_fion
.Latin Business Association.
.Milpitas Chamber of Commerce
National Federation of Independent Business -California
National Taxpayers Union
Newport Beach Chamber of°Commerce
.Nisei Farmers League
North Valley Hispanic~Ghamber of Commerce .
Orange County Taxpayers Association
Oxnard Chamber ofCommerce
Pleasant Hill Taxpayers Association
Pomona Chamber of Commerce
Redlands Chamber of Commerce
Sacramento Hispanic Chamber of Commerce
San Diego Tax Fighters
Sma11 Business Action Committee
Temecula Valley, Winegrowers Association
The Wine Group
Valley Industry 8i Commerce_Assocation-
Valley Taxpayer's.Coalitiori
Ventura County Taxpayers Association
Western Agricultural Processors Association
Western:Home Furnishings Assoc_ ation
All Star Rents
Ampelos Cellars
Anders'-Lane Artisan Wines, LP
A-V Equipment Rentals,, Inc.
Award Painting Co.
B~amey's Beanery
Bart Enterprises, Inc.
BIvIP Consulting Services; `LLC
Bray Vineyards
Brochell'e Vineyards
Bryant'Farnily Vineyard
Cal=West Rentals
_ ..
Caritara Cellars
Cedar Mountain Winery
Cedar Roof Care
Celebrations Party Rentals & Tents
Chandelle of Sonoma
Chase Family Cellars
Cheer EDU
Clos ~Saron
Cloverdale Saw' & Mower Center
Consilience Wines
Cooper-Garrod Estate Vineyards
Cottonwood Canyon Vineyard
Diageo
Drew Family Cellars
Duckhorn Wine Company
Duralast Construction, Inc.
E-Marc Engineering,`Inc.
Fallbrook Winery
Fong Enterprise
Foster's Wine'Estates Americas
Four Brix Winery'
Gandrud Financial Services Corporation
Heidrun Meadery
Heringer Estates, LLC
Honig Vineyard & Winery
Hopper Creek Winery.
ISU Insurance Services - ARMAC Agency
Jada Vineyard.& Winery
Joe's Buggy Haus, Inc.
John Christopher Cellars
Korbel
Lafond Winery and Vineyard
La Honda Winery
Lamborq Family Wine
Lancaster Estate
Liquid Bamboo, Inc..
Lost Coast Vineyards, `Lnc.
M.A.C. Wines, I,LC dba Three, Wine Company
Marine Mechanical.Repair,,,Inc.
McGrail Vineyards & Winery
Midsummer Cellars
Mokelumne Glen Vineyards.
Napa Barrel Care
The'Nipomo Wine Group -Phantom Rivers Winery
Paraiso Vineyards.
PBG Capital, .Inc:
Pedrizzetti; Winery
Per Basco Cellars .
Performance Design & Landscape
Pil'ot;Reak Vineyard and Winery.
Pleasant Valley Vineyards,, Inc. •
Pleasanton Rentals; Inc:
ProTravel International.
Rhodes Landscape'::D'esgn, Inc.
Rocca Family Vineyards
Rochioli Winery
Rodney Strong Vineyards
~~
Sausal. Winery
.Sawyer'-Cellars
Scheid Vineyards
Schmidt Family Properties
Schug Carneros Estate Winery
Scott Valley Chiropractic
Seghesio Family Vineyard
Shadow Mountain Vineyards & Winery, Inc.
Silver Mountain.
SkyDance Skydiving
Solune Winegrowers
Steltzner Vineyards
Stiles Truck Body & Equipment, Inc.
Still Waters. Vineyards
Summit Lake Vineyards & Winery L.L.C.
Terravant Wine Company
Terry Hoage Vineyards
Tolosa Winery
Tre Anelli
Trinchero Family Estates
V.Santoni & Co.
Vie-Del Company
Weibel Family Vineyards and. Winery
Westbrook Wine Farm
William Knuttel Winery
Windsor Oaks Vineyards & Winery'
Opposition:
California Tax Reform Association
(A coalition is forming to oppose this measure titled "Taxpayes,Against Prgtecting Pollufers."
While opponents have yet to officially register, the opposition is~expected to mirror the opponents
of Prop. 37, which included environmentalists, labor, health issue groups and others.)
a~
L~LI 5«emap
.~ ..~ ..i k!' .
SuBject,Areas Produc#s
Other Resources
Sut+mitted July 15, 2010
Proposition 26
• _ - ;
-- -Attachment 3 .
,.r
increases Legisia,tive Vote Req;ui~eent to "f~-o-Thirds for
State Levies and Charges. rv~pos~s,Additonal
to ~4pprove' Local Levies and
Charges V1/ith Limited Exce~ti®ns. ~nitia~i a Constit~tionai
Amend~e~t.
Summary of Legislative Analyst's Estimate of Net State and Local Government Fiscal Impact
m Fiscal Impact: Depending do decisions by governing bodies and voters, decreased'state and local
government revenues, and spending, (up to billions of dollars annually)., Increased transportation
spending and state General Fund costs ($1 billion annually).
Yes/No Statement
A YES vote. on this measure means: •The definition of taxes wduld be broadened to include many payments
currently considered to be fees or charges: As a result, more state and local proposals to increase revenues
would require approval by two-thirds of each house of the Legislature oi- 6y local voters.
A NO vote on this measure means: Current constitutional requirements regarding: fees and taxes would not be
changed.
~C~~1'®d991~
State: and local. governments impose a variety of taxes, fees, and charges on' individua'Is and businesses. Taxes-
such as income, sales,. and property taxes-are typically used to pay for general, public services such as
education, prisons, health, and social ervices. Fees and charges, by comparison, typically pay for a particular
service or program benefitting individuals or businesses: There are three broad categories of fees and charges:
User fees-such as state park entrance- fees and garbage fees, where .the user pays for the cost. of a
specific service or program.
Regulatory fees-such; as fees on .restaurants to pay for health inspections and fees on the purchase of
beverage containers to support recycling programs. Regulatory fees pay for programs that place
requirements :on the activities of businesses or people to achieve p""articular public goals or help offset the
public or environmental impact of certain activities.
Property charges-such as charges imposed on property developers to improve roads leading to new
subdivisions and assessments that pay for improvements and services Shat tienefit the property owner.
State law has different approval requirements .regarding taxes, .fees,. and property charges. As Figure 1 shows;
state or Idcal governments.usually rah create or increase a :fee or charge with a majorihy vote of the governing
body (the'Legislati.ire, city council, county.board of supervisors; etcetera).: In contrast; increasing tax,reyenues
usually requires approval by two-thirds of each house of the state Legislature (for°state proposals) or a vote of
the people (:for local proposals).
Figure 1
Approval Regt~irernents State and Local Taxes, Fees, and Charges
State. Local
Tax Two-thirds of each house of he Legislature ® Two-thirds of,local voters if the local government specifies how
fbrmeasures increasing stall: revenues. the funds will.be used.
m Majorityof local voters ifttte local government does not specify
how the funds will.be used.
Fee Majority of each house of the Legislature. Generally, a majority of the governing body.
Pro_ perty Majority of each house of the Legislature. Generally; a~majo_ city of-the governing body. Some also require approval
Charges bya,majority of property>,owners ortwo-thirds of local voters.
Disagreements Regarding Regulatory Fees.. Over th'e years; there has been di"sagreement regarding the
difference between .regulatory fees and taxes, particularly when the "money is raised fo pay for a program of ~\
broad' public benefit. ,In 1991, for example, the state, began imposing a regulatory fee'on.6usinesses that made
Reguire~raent for V®ters
products contaihing lead. The state uses this money to .screen children. at .risk for lead poisoning; follow up on
theirt~eatmeht; and identify sources of lead contamination responsible fbrthe poisoning: In court, the Sinclair
Paint Company argued that'this regulatory fee was a tax because: (;1) the' program provides a broad public.
benefit; not a~benefit tp the regulated business, and (2) the ebmpanies that pay the fee have no duties regardinc
the lead poisoning program dther than. payment of the fee.
]n 1997, the Califor.,nia Supreme Cburt ruled that this charge on businesses was a regulatory "fee, not a tax. The
cou"rt said .government may impose re,gulato,ry-fees on .companies that make contaminating products in brdeyto
help correct: adverse health effects related to those products. Consequently., regulatory fees of this type can be
created or increased by (1) a .majority vote of each house of the Legislature or (.2) a majority vote of a local
goverhing body.
Proposal
This measure expands th"e definition of a `tax:and a tax increase.so that'mo~e propdsals would require approval
by two-thirds of the Legislature or by local voters. Figure 2 summarizes its main provisions.
Figure 2
Major Provisions of Proposition. 26
Expands4he Scope of What Is a,State or:Local Tax
m Classifies as'taxes some fees and,charges. thatgovernment,cun-ently: may impose with a majority vote.
m As a result,'more,state revenueproposals would require approval by twd-tlnrds of each house of the Legislature and more
local revenue proposals would require local voter approval:
Raises the-,,Approval Requiremeht fo~'Some State`Revenue Proposals
m Requires,atvo-thirds vote of each house of the Legislature'to approve' lawsafia4 increase taxes on any taxpayer, even if
the law's dverall fiscal effect;iioes not increase state revehues.
Repeals-Recently'Passed,;Conflicfing State Laws
m Repeals recent state laws that conflict with"this measure, unless they~are, approvedlagain by two-thirds of each house of
the Legislature. Repeal becomes effective in November-2011.
Definition of a Stale or Local Tax
Expands Definition. This! measure broadehs the .definition. of a state or local tax to include many payments
curreptly considered to be :fees or charges. As a result,'the measure would have the effect of increasing the
number of revenue proposals-subject to the higher approval requirements summarized in Figure 1. Generally, the
types of fees and cha"rges that would become taxes under the measure are ones: that government imposes to
address health, envi~onmerital, or other- societal or economic concerns. Figure 3 provides examples of some
regulatory fees that could be considered taxes, in part or in ,whole, under the .measure. This is because these fees
pay for many services that^6eriefit the public broadly; rather than providing services directly to the fee payer.
The state currehtly uses these types of regulatory fees to pay~for most of its environmerital programs.
,Figure 3;
Regulatory Fees'That•Benefit"the Public Broadly
Oil Recycling Fee
The state imposes a regulatory fee ohioiLmanufacturers and uses the fuhds for:
^ Rublc'=iriformation and education prbg'rams.
m Payments to~local:used:oil collection programs.
':m Paymenfofrecycling'incentives.
is Research;:and demonstration, projects
m Inspections and enforcement of used'-oil recycling facilities.
Flazardous: INaterials' Fee
The~sfate imposes a_;regulatory fee on;businesses that treat, dispose of; or recycle hazardous waste and usesthe funds for:
m Clean. updf toxic waste sites:
m Prbmotion;df pollution prevention..
m Evaluation of'waste source reduction plans. '
^ Gertiftcation of new environmental technologies.
Fees on Alcohol Retailers
Some cities impose a fee on alcohol retailers-and use the funds for.
m Code and law enforcement:
m Merchant education to reduce public nuisance prdblems assdciated with alcohol (such as violations of alcohol laws, violence,
loitering, drug dealing, public drinking,'and graffiti).
Certain other fees and charges also could be considered to be taxes and"er the measure. For example, some
business assessments could" be considered fo be taxes t5eeause goverhment uses the assessment revenues to
improve shopping districts {such as providing parking, street lightirig, increased security, and marketing.), rather
than providing a direct and; distinct service to the business owner.
Some Fees and Charges,Are Not Affected The change in the definition of .taxes would_ hotaffect most .user
fees, property development charges, and property assessments. This is because these fees. and charges genera
comply with, Proposition 26's requiremehts already, or are exempt from its provisions: In addition, most other
fees or charges in existence at the time of the November 2, 2010 election would not be affected unless:
® The. state or local government later increases or extends the fees or charges. (In this case, the state or
local gdver..nmehE°would have to comply with the approval requirements of Proposition 26.)
Fiesfees•or charges were created or increased by a state law-passed between January 1,,2010 and
® T "°
November 2, 1010-that conflicts with Proposition 26 (discussed further below).
Approval RequiYeme,n:t for State Tax Measures
Current Requirement. The State Constitution currehtly specifies that laws enacted "for the purpose of
increasing revenues"must be approved by two-thirds of each hduse of the Legislature. Under current practice,
law that increases the amouhf of taxes charged to some taxpayers but offers an equal (or larger) reduction in
taxes for other taxpayers has been viewed as not increasing revenues. As such, it can be approved by a majori
vote of the Legislature.
New Approva/ Requirement. The measure specifies that state lawsthat result in any taxpayer paying a high.
tax must be approved by two-thirds of each house of the Legislature.
State Laws in Conflict With Proposition 26
Repeal Requirement. Any state law adopted. between January 1, 20T0 and. November 2, 2010 that conflicts
with Proposition 26 would be repealed one year after the proposition is approved. This repeal, would not take
place, however, if two-thirds of each house of the Legislature passed the, law again.
Recent Fuel Tax Law Changes. In the spring of 2010, the state increased fact taxes paid by gasoline supplier
but decreased other fuel taxes paid by gasoline retailers. Overall, Ehese changes do not raise more state tax
revenues, but they give the state greater spending flexibility over their use.
Using this flexibility, the state hilted about $1 billion of annual transportatioh bond costs from the state's
General Fund to its fuel tax funds. (The General. Fund is the state's main funding source for schools, universities
prisons, health, and social, services programs.) This action decreases he amdunt of money available for
transportation programs, but helps the state balance its General Fund budget. Because the Legislature approves
this tax change with a majority vote in each house, this law would be repealed in November 2011-unless the
Legislature approved the tax again with atwo-thirds vote in each house.
Other Laws. At the time this analysis was prepared (:early in the summer of 2010), the Legislature ahd
Governor were considering many new laws and funding changes to address the state's .major budget difficulties.
In addition, parts of this measure would be subject to future interpretatdn by the courts. Asa .result, we cannot
determine the full range of state laws that could be affected or repealed by the measure.
~~5~~~ ~~~~C~S
Approval Requirement Changes. By expanding the scope of what is considered a tax, the measure would
make it more difficult for state and local goverhmenfs to pass "new laws that raise. revenues. This change would
affect. many ehvironmental, health, and dthei- regulatory fees (similar to the dues in Figure 3), as well as some
business assessments and other'IeJi'es. New laws to create'or extend-these. types of fees and charges would b
subjedt tothe higher approval requirements for taxes.
The. fiscal effect of`this.chahge would; depend `oh future actions by the Legislature, local governing boards, and
local voters. If the. increased vdting'"requiremerits resulted in some prdposals hot.being approved, governmeht
revenues would be lower than otherwise: would have occurred. This, in turn; likely would result in comparable.
decreases inrstate spehding:
Given. the range of fees and charges that would be subject to the higher approval threshold for taxes, the fiscal
effect. of this change could be major. Over time, we estimate that it could reduce government revenues and
spending statewide by up to billions of dollars annually compared with what otherwise would have occurred.
Repeal of Conf/icting. Laws. Repealing conflicting state laws cduld have a variety of fiscal effects. For example,
repealing ttie ceceht fuel tax laws would increase state General Fund costs by about $1 billion annually for about
two decades and increase funds available for transportation programs by the sarrle amount.
Because this measure could repeal. laws passed after this analysis was prepared and some, of the measure's
provisions would be subject to-future interpretation by the .courts, we cannot estimate the full fiscal effect of this
repeal provision. Given the. nature of the proposals the state was considering in 2010, however, it is likely that
repealing any adopted proposals would decrease state revenues (or in some cases ihcrease state General Fund
costs). Under this proposition, these fiscal effects could be avoided if the Legislature approves the laws again
with atwo-thirds vote of each house.
~~
Attachment 4
RESOLUTION OPPOSING PROPOSITION 26; THE': "P.ROPOSED CONSTITUTIONAL
AM NDIVIENT; STATE AND LOCAL FEES: AND CHARGES: VOTE REQUIREMENTS
AND LIMITATIONS"'
WHEREAS, :cities are the economic engine of California.. and the vitality of cities and the
state's economic recovery is dependent on their fiscal stability and local autonomy; and.
WHEREAS, the City of'Petaluma supports protecting local control and funding for vital
local services; and
WHEREAS, the City of Petaluma has had to significantly.reduce its budget and programs
to ensure a balanced budget, and that unwarranted fiscal limitations imposed on our community
will lead to additional hardship and reduced services for our City's residents; and
WHEREAS',. Proposition 26, sponsored by the California Chamber of Commerce,
California. Taxpayers Association and. a coalition of taxpayers, employers and small businesses,
is a statewide initiative that has qualified for the November 2010 ballot; and
WHEREAS, this proposed Constitutional amendment would redefine the definition of
taxes to include manypayrnents currently considered to be fees or charges, resulting in more
state and local revenue proposals.requiring atwo-thirds approval from local voters; and
WHEREAS; under Proposition 26, a tax would be defined as "any levy, charge, or
exaction of any kind imposed by a local government" except as provided by the measure's
exemptions; and
WHEREAS, by expanding the scope of what is considered a tax, the. measure would
make it more difficult :for `state and local governments to pass new laws- that raise revenues
because new laws to create, extend or increase these types of fees and charges; and
WHEREAS; :the League 'of California Cities opposes Proposition 26 out of concern. for
the many potential negative effects this measure would have on local. revenue raising authority.
If passed by voters, this initiative would restrict in various ways the ability of state and local
governments'to adopt.fees.
NOW, THEREFORE; BE IT RESOLVED THAT the City"`Council. of the City of
Petaluma hereby opposes Proposition 26.
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