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Home My WebLink AboutMINUTES - 10091984 - 2.1 TO:' BOARD OF SUPERVISORS FROM: Phil Batchelor, Contra County Administrator Costa DATE: October 8, 1984 County SUBJECT: Finance Impact of Proposition 36 - The Jarvis Initiative 44 'on the November 6, 1984 Ballot SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION ` RECOMMENDATION It is recommended that the Board oppose Proposition 36 because it will: 1. Reduce the ability bf local government to provide even the current, often strained, level of service. 2. Restrict the ability of local government to provide for the construction and maintenance of the infrastructure needed to support new development. 3. Result in taxpayers subsidizing those persons who benefit from public services for which a fee is charged because they cannot be charged full cost. 4. Further increase property tax inequities which currently exist. 5. Restrict the ability of communities to tax themselves for a .service even they are willing to pay for it. 6. Impair the credit rating of local agencies thereby increasing financial costs. BACKGROUND The Board of Supervisors directed our office to analyze and report on the impact of Proposition 36, the Jarvis Initiative, which is on the November 6, 1984 ballot. Our findings are as follows: Property Taxes Proposition 36 would reverse several California Supreme Court decisions concerning the date for application of the inflation adjustment factor (2%) to property value and certain voter approved property tax rates. In addition, Proposition 36 makes significant changes to property assessment procedures, benefit assessments and user fees which will adversely affect many homeowners and substantially reduce the ability of local government to provide public services. The estimated financial impact on m r taxing jurisdictions in Contra Costa County from the property tax 1 ss factor only (excluding fees and assessments) is indicated below: CONTINUED ON ATTACHMENT: XX' YES SIGNATURE: XX RECOMMENDATION OF COUNTY ADMINISTRATOR. RECOMMENDATION OF BOARD COMMITTEE xx APPROVE OTHER SIGNATURE(S) ACTION OF BOARD ON �' < � % (� APPROVED AS RECOMMENDED X OTHER VOTE OF SUPERVISORS X UNANIMOUS (ABSENT IV ) 1 HEREBY CERTIFY THAT THIS IS A TRUE AYES: NOES: AND CORRECT COPY OF AN ACTION TAKEN ABSENT: ABSTAIN: AND ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. CC: County Administrator ATTESTED ��% 9 �98� 00133 Phil Batchelor, Clerk of the Board of Supervisors and County Administrator un M382/7•83 BY K.f DEPUTY l v 2 . ESTIMATED REVENUE LOSS 1985-1986 1984-1985 Annual Taxing Jurisdiction First Time Loss County $11, 210, 000 $645 ,000 Fire Districts 3, 700, 000 200,000 Other Special Districts 4, 830 , 000 290 ,000 Cities 4, 230 ,000 243,000 Schools* 14, 070, 000 809 , 000 Redevelopment Agencies 11960,000 113, 000 Total $40, 000 , 000 $2, 300, 000 This tax loss results from a roll back of the 2% inflationary adjustment factor in Article XIII-A for certain properties from fiscal year 1978-1979 to fiscal year 1975-1976. The County will be responsible for administering the property tax refunds which will be a significant undertaking. Development and implementation of the system for property tax refunds will require identification of the eligible property owners and a computation of the refund and interest earn- ings. It will take a number of months to complete and will cost an esti- mated $1. 0 million aside and apart from any detrimental impact on existing data processing oprations . Current authority for local governmental agencies to impose, with 2/3 voter approval, a per parcel tax for law enforcement, fire protection, street lighting, education or any other purpose will be terminated. This will have a severe impact in our County upon a number of special districts and service areas the residents of which have authorized per parcel taxes for additional police, fire protection and lighting services. Fees Fees (which include municipal utility rates) under the initiative are restricted to the direct cost of providing services and prohibited are the inclusion of pension and overhead costs of services . It is uncertain as to which cost components will be allowable for inclusion in the fee but it is clear that governmental agencies will not be able to recover full cost of providing services. Consequently, there will be a transfer of costs from the user of specific services to all taxpayers . After August 15, 1983, a 2/3 voter approval is required to impose any new fees or to increase existing fees above the prior 12-month CPI increase. The practical affect of this provision is to further restrict the ability of recovering the full cost of providing services . The major impact of this provision will be on the County and special districts such as sanitation, water and hospital districts . For example, the cost of health care increases for years has substantially exceeded the CPI. There is no basis for believing that cost containment measures in hospital care can restrict cost increases to the annual CPI increase. Consequently, County and district hospitals will be faced with substantial losses unless further fee increases are approved by 2/3 of the electorate. As a result health services may have to be reduced and the quality of health care suffer. *The property tax loss for Schools will have to be made up from other State revenues. 00134 3. It is difficult to quantify the immediate financial impact of the fee provision; however, the County does realize a total of about $80 million from charges for services. Assuming a 10% reduction in fees to reflect "direct" cost only and the CPI ceiling, the County could lose up to $8. 0 million annually depending upon subsequent interpretation of the initiative. By prohibiting full cost recovery, there will be a shift of costs from those persons receiving the benefit of specific services to all taxpayers. Assessments and Special Taxes Under existing law, local agencies may levy non ad valorum benefit assess- ments, and 2/3 voter approved special taxes, on real property to pay for the cost of specified services . The initiative would prohibit such special taxes and would restrict assessments to the cost of local capital improve- ments that directly and specifically benefit the property assessed; excluded are operations and maintenance costs, and the cost of services which indirectly benefit the property owners. The County is using these arrange- ments for county service areas for street lighting ($150, 000) and police ($220 , 000) and for fire districts ($300 ,000) . Cities and independent districts, largely those providing sanitary and street lighting services, are also dependent on such financing. This initiative will impact these agencies also, therefore . Summary of Fiscal Effects The revenue reductions to the County in fiscal year 1984-1985 assuming the refunds are made in that year are estimated as $11,210 , 000 from property taxes and up to $8. 0 million from fee reductions. The property tax loss equates to about 10% of the total County discretionary funding available. This reduction will result in a loss of some Federal and State matching funds for "partnership" programs which will have a further adverse service impact. Inasmuch as approximately one-half of all discretionary County funds are allocated to public protection activities, the service impact will be significant in this area of public service which includes police protection and the entire law and justice system. Severe cuts will also have to be made in other public services, for example, public health. which is largely financed by property taxes. The impact upon special districts will also be damaging in that these agencies rely, in most instances, entirely upon property taxes, fee charges, and benefit assessments for financing. The loss of $8, 530 ,0.00 in property taxes and the additional loss in fees, charges and benefit assess- ments could be devastating. Most of the fire protection, flood control, drainage maintenance, and sewer services in Contra Costa County are, of course, provided by county and independent special districts. Other Effects The property tax refund resulting from the passage of Proposition 36 will be made to those owners who acquired property before March 1, 1977 . It has been estimated by some that about 1/3 of the property owners are in this category. The remaining 2/3 of the residents of our County reside in homes purchased after March 1, 1977, or rent; consequently, they will receive no reduction in assessed valuation. As a result of the decrease in value of properties owned before March 1, 1977, property tax levies for voter-approved bonded indebtedness will be inadequate; consequently, the property tax rates for all property owners for bonded indebtedness will have to be increased somewhat. Property owners who are paying the least amount of property taxes (those who owned property before March 1, 1977) will be the main beneficiaries of this initiative. This includes most industrial properties inasmuch as there is very little change in ownership in this category. All property owners will have a small tax increase to cover the tax rate increase required 6r bonded debt. 00135