SR-071310-8B (2)City Council Report
City of
Santa Monica
City Council Meeting: July 13, 2010
Agenda Item: ~~
To: Mayor and City Council
From: Rod Gould, City Manager
Subject: Tax Measure for November 2010 Ballot
Recommended Action
Staff recommends that the Council:
1. adopt an ordinance enacting a transactions and use tax subject to a vote of the
electorate at the November 2, 2010 election (Attachment A); and either,
2. adopt a resolution placing a measure on the November 2, 2010 ballot that would:
(a) offset severe state cuts, stabilize City finances, and, protect/maintain
essential -City services including: police, fire, paramedic and emergency 9-1-1
services, school/educational/atterschool programs, public transit, services for the
disabled, gang/drug prevention programs, environmental, library and other
general fund services, by enacting a City of Santa Monica one-half percent
transactions and use tax, with independent audits, and no money going to
Sacramento (Attachment B);
(b) authorize certain members of the Council to submit arguments and
rebuttals concerning the measure;
(c) direct the City Attorney to prepare an impartial analysis of the measure;
or
3. Consider and adopt a resolution that includes everything in Recommendation 2
above, and that also includes an advisory measure concerning allowing the
voters to express their preference on how the tax funds are to be spent
(Attachment C).
Executive Summary
On July 6, 2010 Council held a discussion on possible revenue options to place before
the. voters in order to partially address the structural deficit caused by continuing State
theft of local funds and an anemic economic recovery. A summary of recent polling on
voter attitudes regarding City priorities and potential funding solutions was presented on
July 6. Council gave direction to prepare ballot language for aone-half cent transaction
and use tax to be added to the sales tax. Staff now requests adoption of a resolution
placing a proposition on the November 2010 General Municipal Election ballot. The
ballot measure and proposed ordinance are attached.
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In addition, Council provided direction on a companion advisory measure
Over the past six years, the State has taken over $40 million from the City of Santa
Monica budget. These raids on local revenues are predicted to continue given the
State's fiscal crisis. The effects throughout California will likely include loss of human-
and social services, further erosion of support for education,. and additional public safety
cuts.
Background
The City anticipates a structural deficit of $4.1 million for FY 2010-11 despite actions
taken through a variety of measures including expenditure reductions in services and
capital replacement and fee adjustments. Future operating costs associated with
capital projects that are underway will add to this deficit. The City's five-year forecast
projects expenditures growing at a rate that exceeds revenue growth, causing the
structural deficit to grow over time. Further, the anticipated continued State raids on city
and county revenues necessitate discussion of potential revenue solutions. Future
operating costs associated with capital projects that are underway will add to this deficit.
Staff will continue to evaluate opportunities to close the structural deficit with the (east
impact to the community. Strategies currently underway. include business process
improvements, including use of technology to reduce costs, and negotiations with
employee groups to ensure that compensation costs are sustainable while continuing to
be competitive and fair to employees. However, the State budget continues as a
significant threat beyond City control. In all over the last six years, the State has
diverted over $40 million from the City of Santa Monica budget.
The proposed State budget includes significant cuts to close the projected $20 billion
budget deficit through June 2011. Persistent State revenue grabs will exacerbate county
social service and public safety costs, vastly complicate local government efforts to
meet the needs of the most vulnerable, and police local streets. Local schools also
have been battered by State retrenchment in educational funding and the erosion of
Proposition 98 revenues. State impacts have resulted in larger class sizes, reduced
programs and significant teacher layoffs. Santa Monica has provided support to schools
against past threats through a facilities lease. However, it is prudent to consider ways
to further bolster general funds for services such as police and fire services, education
and school programs, parks and recreation and other general #und services given the
ongoing State fiscal crisis.
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Summary of Poll
Between June 27 and June 30, 2010, Fairbank, Maslin; Maullin, Metz & Associates
(FM3) conducted a telephone survey of 500 voters in the City of Santa Monica who are
likely to vote in the November 2010 General Election. Almost two-thirds of respondents
(63%) perceive the City has a "great" or "some additional" need for funds to provide the
level of services that Santa Monica residents need and want. A majority of voters (59%)
would initially vote in favor of a % cent sales tax measure to fund essential City services
if an election were held today, while 38% would oppose it. Once voters are provided
with additional information on this simple majority measure, support for the measure
increases five percent, from 59% to 64% and opposition decreases by seven percent,
from 38% to 31 %.
Seventy-one percent of respondents are more inclined to vote yes on the measure
when they hear that over the last six years Sacramento has taken over $40 million from
the City of Santa Monica budgets and that this measure will ensure local control of
funds to maintain vital services.
Staff intends to develop a public outreach and education program that would provide
factual, objective, and balanced information to update and inform the community about
these issues and seek input.
Discussion
As envisioned, this .would be considered a general tax and as such would require a
simple majority (50% plus one vote) for voter approval. If the measure were to
specifically limit the uses of the revenue, it would be considered a special tax and,
therefore, require atwo-thirds majority for voter approval.
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Attachment B is the resolution submitting the measure to the voters of the City of Santa
Monica. The title is as follows:
PROPOSITION " ": Shall an ordinance be adopted to offset severe state budget cuts,
protect and stabilize City finances, and maintain essential services including: police, ire,
paramedic and emergency 911 response, school, educational and afterschool
programs, public transit, services for the disabled, gang and drug prevention
programs, environmental, library and other general fund services, by enacting a City of
Santa Monica % percent transactions and use tax, subject to independent annual
audits, and no money going to Sacramento?
In addition, the resolution authorizes the City Council to submit arguments and rebuttals
concerning the measure. The City Council may designate one to five members to
submit arguments and rebuttals for the measure. Finally, the resolution directs the City
Clerk to transmit a copy of the measure to the City Attorney and directs the City
Attorney to prepare an impartial analysis of the effects of the measure on the existing
law and operation of the measure.
Arguments and rebuttals shall be submitted in accordance with State Elections Code
Sections 9280-9287, and Santa Monica Municipal Code Section 11.04.125. The
Elections Official will set the deadline for submitting arguments as 14 days from the date
the election is called on the measure and the deadline for submitting rebuttals to
arguments as 10 days after the deadline for submitting arguments on the measure.
If Council opts to place a tax measure on the ballot, it has been suggested that Council
concurrently place on the ballot a purely advisory measure asking the voters whether
they would favor allocating one-half of any new revenue raised by the measure to
benefit the Santa Monica Malibu Unified School District (School District). The results of
such a measure would not, in any way, bind this or future City Councils as to the use of
the revenues. Rather, such a measure would merely provide information about the
voters' preferences. Such advisory measures have been paired with transaction and
use tax measures in many other jurisdictions throughout the state.
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Attachment C contains both the ballot measure stated above and asks an advisory
question:
PROPOSITION " ": ADVISORY VOTE ONLY. If a local transactions and use tax is
enacted in the City of Santa Monica, should half of its revenue be used to support
school, educational and afterschool programs, with half of its revenue being used for
general City services such as: police, fire, paramedic and emergency 911 response,
public transit, services for the disabled, gang and drug prevention
programs, environmental, library and other general fund services?
This advisory measure does not raise taxes; it only expresses Santa Monica voter
preference if the transactions and use tax measure is approved by the voters.
The City Attorney has undertaken a preliminary analysis as to whether such an advisory
measure would affect the status of the proposed transaction and use tax as a general
tax. She reports that there is case law supporting the conclusion that it would not. In
Coleman v. County of Santa Clara, 75 Cal.Rptr.2d 516 (1998), taxpayer advocates
challenged the validity of a county sales tax measure, which was approved by a simple
majority of the voters. They claimed that the measure actually proposed a special tax,
basing their claim on the ground that a companion advisory measure, asking whether
the voters favored spending the increased revenue on transportation improvements,
showed that the tax increase was, in fact, intended for a special purpose and therefore
required atwo-thirds-voter approval. The trial court ruled in the County's favor, granting
summary judgment.
Oh appeal, plaintiffs argued that the measures were designed to circumvent the
supermajority requirements imposed by Propositions 13 and 62 and that the advisory
measure demonstrated the county's intent to use the revenue specifically for
transportation purposes. The Court of Appeal rejected their claims. It reasoned that
because the spending priorities in the advisory measure were not compulsory, the
county was free to spend the tax revenues for any and all county purposes. Moreover,
the text of the measures as well as the legal analysis and ballot arguments made clear
that the two measures were legally separate and distinct. Therefore, there was no
factual or legal basis to hold that the presence of the advisory measure on the ballot
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subjected the tax measure to the supermajority requirements of Propositions 13 and 62.
Finally, the appellate court refused to delve into the county's motives based on the
fundamental legal principle that the courts should determine the validity of legislation
based on its own terms and not on the motives of, or influences upon, the legislators
who enact it.
The Santa Clara decision is thus authority for the proposition that an advisory measure
on how tax revenue could be spent does not transform a concurrently proposed general
tax into a special tax. However, it is always possible that a court deciding a similar case
on a different record; could reach a different conclusion. The ballot language in Santa
Clara was analyzed under Propositions 13 and 62, which define special taxes as "taxes
imposed for specific purposes." Proposition 218, which was on the ballot at the same
time as the Santa Clara measures and was not considered in the Santa Clara, defines
"special tax" a little more restrictively as "any tax imposed for specific purposes,
including a tax imposed for specific purposes, which is placed into a general fund."
Thus, given different facts and this difference in the law, a court deciding a similar case
today could reach a different conclusion. However, of the many instances in which a
tax and advisory measure have been paired in California since the Santa Clara
decision, none has been challenged on the ground that the advisory measure showed
that the tax required supermajority approval. Therefore, assuming that the tax and
advisory measures are carefully formulated, that they and the remainder of the record
make clear that the tax proceeds would be available for general governmental
purposes, and that the tax is not being proposed for a specific purpose, the result would
likely be the same as in Santa Clara.
Staff has evaluated the advantages of a companion ballot measure with the sales tax
measure being accompanied by an advisory measure. This approach would further
enhance the close working relationship developed between the City and School District
for the benefit of the Santa Monica community. The recent polling suggests the
intensity of support increases the percentage of voters who say they will definitely vote
for the measure when voters are informed that a portion of the revenues will go to
support Santa Monica schools and education programs. Based on Council direction on
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July 6, it appears the City is willing to share the revenues equally with the School
District. While there is some evidence that advisory measures may confuse voters and
lead them to vote yes on only one of the two companion measures, staff believes in this
case that a companion measure will galvanize support in the community and lead to
efforts to explain the relationship between both measures so that, all Santa Monica
voters can make an educated choice. On balance, staff recommends this companion
ballot measure approach.
Alternatives
Council may choose not to adopt the resolution and thereby avoid placing a measure on
the ballot. If so, staff would propose further adjustments to the City's FY 2011-12
budget for Council action, in order to maintain a balanced budget.
Financial Impacts & Budget Actions
The cost of placing the measure on the ballot will be covered by the FY2010-11 election
budget. Voter approval of the measure would secure approximately $12 million
annually in revenue for the General Fund based on current estimates. Approximately
one-quarter of the new revenue is estimated to be generated by visitors and tourists.
Prepared by: Kathryn Vernez, Assistant to the City Manager for Community and
Government Relations
Approved: Forwarded to Council:
~"~
od Gou od Goul
City Manager City Manager
Attachment A: City of Santa Monica Transactions and Use Tax Ordinance
Attachment B: Resolution Placing a Proposed Measure on the Ballot and Text of
Proposed Measure, with related actions
Attachment C: Resolution Placing a Proposed Measure on the Ballot with Text of
Proposed Measure and Advisory Question, with related actions
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Attachment B
City Council Meeting 7-13-2010 Santa Monica, California
RESOLUTION NUMBER (CCS)
(City Council Series)
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF SANTA MONICA SUBMITTING TO THE VOTERS
A MEASURE PROPOSING TO ENACT AONE-HALF PERCENT TRANSACTION AND
USE TAX AT THE GENERAL MUNICIPAL ELECTION TO BE HELD ON TUESDAY,
NOVEMBER 2, 2010, AND
AUTHORIZING CITY COUNCIL MEMBERS TO FILE WRITTEN ARGUMENTS FOR
OR AGAINST THE PROPOSITION AND DIRECTING THE CITY ATTORNEY TO
PREPARE AN IMPARTIAL ANALYSIS OF THE MEASURE
WHEREAS, the State of California has forecast that its operating deficits
will be approximately $20 Billion in its 2010-2011 fiscal year; and
WHEREAS, over the last several years the State of California has gone from one
financial crisis to another with no end in sight; and
WHEREAS, during the past several years the State of California has reduced
funding to the City of Santa Monica and to counties and school districts in order to fund
its deficits and the State is expected to continue to do so into the foreseeable future,
with the City of Santa Monica's funding being reduced by over $ 40 Million since 2004;
and
WHEREAS, the City of Santa Monica needs dependable and local
sources of revenue that are not subject to being taken by the State to fund and to
support essential, necessary and appropriate general city services such as
police, fire, paramedic and emergency 911 response, school, educational and
afterschool programs, public transit, services for the disabled, gang and drug
prevention programs, environmental, library and other general fund services; and
WHEREAS, many residents live in the City of Santa Monica because it
offers a higher level of service, programs and quality of life than other
neighboring cities and creating and preserving local revenue sources will ensure
that the City can maintain and improve the high quality of programs and services
that residents desire and expect; and
WHEREAS, the measure enacts aone-half (1/2) percent transaction and
use tax in accordance with state law; and
WHEREAS, all city revenues and expenditures are subject to annual
independent audits with public review of the Budget being widely available,
including at City Hall, on-line and at the library; and
WHEREAS, on June 8, 2010, the City Council adopted Resolutions calling for
and giving notice of a General Municipal Election on November 2, 2010; and
WHEREAS, California Elections Code Section 9222 and Revenue and taxation
Code Section 7285.9 authorize the governing body of a city to place a proposed
ordinance on the ballot; and
WHEREAS, the City Council of the City of Santa Monica wishes to place the
following proposition adding Chapter 6.62 to the Santa Monica Municipal Code on the
ballot at the General Municipal Election to be held on November 2, 2010,
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA
DOES RESOLVE AND PROCLAIM AS FOLLOWS:
SECTION 1. A General Municipal Election has been called for or November 2,
2010, for the purpose, among other things, of electing City Council members and
submitting measures and ballot propositions to the voters.
SECTION 2. At the General Municipal Election called for November 2, 2010, the
following initiative proposition shall be submitted to the qualified electors of the City of
Santa Monica:
PROPOSITION " ": Shall an ordinance be adopted to offset
severe state budget cuts, protect and stabilize City finances, and Yes
maintain essential services including: police, fire; paramedic
and emergency 911 response, school, educational and
afterschool programs, public transit, services for the disabled,
gang and drug prevention programs, environmental, library
and other general fund services, by enacting a City of Santa No
Monica % percent transactions and use tax, subject to
independent annual audits, and no money going to Sacramento?
SECTION 3. The City Clerk shall transmit to the City Attorney, in accordance
with Elections Code Section 9280, a copy of the initiative measure. The City Attorney
shall prepare an impartial analysis of it, which analysis shall not exceed 500 words in
length each. The impartial analysis shall be filed by the date set by the City Clerk for
the filing of primary arguments. In accordance with Santa Monica Municipal Code
section 11.04.190 and California Elections Code Section 9295, not less than 10
calendar days before the City Clerk submits the official election materials for printing,
the City Clerk shall make a copy of all applicable elections materials available for public
examination in the City Clerk's office.
SECTION 4. The City Council authorizes its members, as follows, to file written
arguments for or against the measure described above and which is contained in
Exhibit 1 to this Resolution, which Exhibit is incorporated by reference herein:
FOR:
AGAINST:
All written arguments filed by any person in favor of or against any measure,
including any rebuttal arguments, shall be accompanied by the names and signatures of
the persons submitting the argument as required by applicable law, and any names,
signatures and arguments may be filed until the time and date fixed by the City Clerk in
accordance with applicable law, after which no change may be submitted to the City
Clerk unless permitted by law.
SECTION 5. The City Clerk shall cause the text of the initiative measure, which
is contained in Exhibit 1, together with the City Attorney impartial analysis, and any
arguments for or against the measure, as well as any rebuttal, to be mailed to all
qualified voters with the sample ballot. In addition to other notices and publications
required by law, the City Clerk, not less than forty (40) days and not. more than sixty (60)
days before the General Municipal Election, shall cause the text of the- measure to be
published once in the official newspaper and in each edition thereof during the day of
publication. The City Clerk is authorized to give such notices and to fix such times and
dates as are required by law or which are appropriate to conduct properly. the election.
SECTION 6. The provisions of Resolution Numbers 10482 (CCS), 10483 (CCS),
10484 (CCS), and 10485 (CCS) are referred to and incorporated as necessary for more
particulars concerning the General Municipal Election to be held on November 2, 2010
and the placing on the ballot of this measure and the conduct of the election. In all
.respects the election shall be held and conducted as provided for by applicable law,
including resolutions. The City Clerk is authorized and directed to procure and furnish
any official ballots, notices, printed materials and all supplies or equipment that may be
necessary in order to properly and lawfully conduct the election.
SECTION 7. The City Clerk shall certify to the adoption of this Resolution, and
thenceforth and thereafter the same shall be in full force and effect.
APPROVED AS TO FORM:
~ £A9----
MA HA JO E MOUTRIE ~~ ~-
City Attorney
Reference Resolution No.
10512 (CCS) and
Ordinance No. 2316
(ccs).