1996 California Proposition 218 (Local Initiative Power)

Proposition 218 is an adopted initiative constitutional amendment in the state of California that appeared on the November 5, 1996, statewide election ballot.California Secretary of State, Statement of Vote November 5, 1996, p. xii. Proposition 218 revolutionized local and regional government finance in California. Called the “Right to Vote on Taxes Act,”Prop. 218, § 1. Proposition 218 was sponsored by the Howard Jarvis Taxpayers Association as a constitutional follow-up to the landmark Proposition 13 property tax revolt initiative constitutional amendment approved by California voters on June 6, 1978. Proposition 218 was drafted by constitutional attorneys Jonathan Coupal and Jack Cohen.

One of the most significant provisions of Proposition 218 constitutionally reserves to local voters the exercise of the initiative power to reduce or repeal any local tax, assessment, fee, or charge.Cal. Const., art. XIII C, § 3. This includes a significantly reduced signature requirement making ballot qualification easier for local voters.Cal. Const., art. XIII C, § 3. Proposition 218 was the first successful initiative measure in California history to alter the scope of the constitutional initiative power.California Statewide Initiatives 1912-2000 (2003), Initiative & Referendum Institute.

Overview of local initiative power under Proposition 218

The initiative is the constitutionally reserved power of the voters to propose laws and thereafter to adopt or reject them.Cal. Const., art. II, § 8, subd. (a). The local initiative power under Proposition 218 is a powerful tool available to voters, particularly when local elected officials are not responsive to their constituents in matters relating to local taxes, assessments, fees, and charges.

The specific constitutional language applicable to the local initiative power under Proposition 218 (contained in Section 3 of Article XIII C of the California Constitution) states:

The Impartial Analysis of Proposition 218 prepared by the California Legislative Analyst, as contained in the Official Ballot Pamphlet provided to California voters, stated:

Shortly after the passage of Proposition 218, the California Legislative Analyst wrote the following about the local initiative power under Proposition 218:

Reduced signature requirement

The local initiative power under Proposition 218 is also subject to a significantly reduced signature requirement which cannot exceed the requirement applicable to statewide statutory initiatives. Thus, the specific maximum signature requirement under Proposition 218 is five percent (5%) of the votes cast for all candidates for Governor at the last gubernatorial electionCal. Const., art. II, § 8, subd. (b). within the territory of the local government.Cal. Const., art. XIII C, § 3.

Data needed to compute the applicable signature requirement for a local government with respect to the exercise of the local initiative power under Proposition 218 (total number of gubernatorial election votes) is generally available from local county registrars of voters. The Supplement to the Statement of Vote published by the California Secretary of State also contains data needed to calculate the applicable signature requirement in counties as well as cities, and a copy of the supplement must legally be made available upon request to any California voter.Cal. Elec. Code, § 15502.

Example uses

The local initiative power under Proposition 218 can be used to reduce or repeal local taxes like utility user taxes, sales taxes, business taxes, parcel taxes, and also to reduce or repeal local fees and charges such as stormwater fees, groundwater fees, public ambulance/paramedic fees, public park/sports fees, public parking fees, or utility fees and charges for water (including drought fees and surcharges), sewer, or refuse collection services.

The local initiative power under Proposition 218 has been used to propose the repeal of local taxes in sanctuary cities. Significant controversy has also occurred from use of the local initiative power under Proposition 218 to reduce or repeal public agency domestic water rates and charges.

Accountability Tool

Exercise of the local initiative power under Proposition 218 gives voters a powerful tool to use such as when local government officials are not responsive to the needs of their constituents, when local voters have not previously voted on a particular levy (including special taxes for services in many Mello-Roos Districts), when there has been significant waste or mismanagement by a local government, when there has been a controversial expenditure of revenue proceeds by a local government, when the amount of a local levy is excessive or unreasonable, or when promises previously made by local politicians about the imposition of a levy are broken.

Sometimes even the mere mention or threat by voters to pursue a local reduction or repeal initiative under Proposition 218 will result in local government officials being more responsive to the concerns of the public regarding a particular local tax, assessment, fee or charge.

Alternative to Litigation

The local initiative power under Proposition 218 can also be used as an alternative to litigation (such as when cost, time delay, or legal risk issues might not make litigation an attractive option), and has also been successfully used as a legislative remedy to reduce or repeal a local levy following the defeat of a lawsuit challenging the validity of the levy under Proposition 218.Brooktrails Township Community Services District v. Board of Supervisors of Mendocino County, 218 Cal. App. 4th 195 (June 2013). There have also been instances where the local initiative power under Proposition 218 has been successfully used concurrently with pending litigation.North San Joaquin Water Conservation District v. Howard Jarvis Taxpayers Association, 2010 Cal. App. Unpub. LEXIS 7197 (September 2010) [groundwater fee].

When Legal Remedy Not Available

The local initiative power under Proposition 218 is also an available legislative remedy in situations where a legal remedy may not be available such as when the applicable statute of limitations has run or when other legal procedural impediments are present (e.g., exhaustion of remedies, standing, or claims requirements).

Example Levies Subject to Reduction or Repeal

The local initiative power under Proposition 218 can be used to target specific components of a local government levy to better achieve public policy goals as well as to increase the chances of a local initiative being approved by voters. This approach is especially useful in situations where a local levy repeal is politically or legally problematic. Often, a more specifically targeted levy reduction will have a significantly better chance of being approved by local voters and withstanding a legal challenge.

Local Utility User Taxes

An example application involves local utility user taxes. Utility user taxes are imposed on one or more utility services, including water, electricity, sewer, gas, telephone, cable television, and refuse collection.Rivera v. City of Fresno, 6 Cal. 3d 132 (November 1971).

Utility user taxes are sometimes a significant revenue source for a local government. This can make the complete repeal of a local utility users tax politically problematic. Rather than providing for a complete repeal of a local utility user tax, a local initiative could target tax relief for just the residential utility customers while leaving utility tax rates for commercial customers unchanged. Another application could target a particular utility service for tax relief while leaving the tax rate for other utility services unchanged. Similar to the foregoing would involve reducing just a utility users tax for electric service to offset historical and/or current electricity utility fee transfers to the general fund of the local government, which transfers the courts have generally allowed.Citizens for Fair REU Rates v. City of Redding, 6 Cal. 5th 1 (August 2018).

Yet another application could target local utility user tax “modernization” measures that have been approved by voters over the past few years. In some instances, voters may have unknowingly authorized the imposition of a tax on online video streaming services in approving a local utility user tax “modernization” measure. The local initiative power can be used to reduce or repeal a local tax on online video streaming services previously approved under a utility user tax “modernization” measure.

Local Utility Fees and Charges

Another example involves the reduction or repeal of local government utility fees and charges, particularly local utility fees and charges for domestic water or sanitary sewer services which are not subject to a mandatory election under Proposition 218 prior to their imposition.Cal. Const., art. XIII D, § 6, subd. (c).

Drafting an initiative to reduce or repeal local utility fees or charges generally requires the assistance of expert legal counsel because of numerous legal issues that must be properly addressed, especially if federal contract impairment issues may be present. Furthermore, if state statutes or other laws require local utility rates to be set at specified service levels, those issues must also be taken into consideration and satisfactorily addressed in drafting an initiative.Mission Springs Water District v. Verjil, 218 Cal. App. 4th 892 (August 2013).

Local government utility rate repeals are more drastic in their impact, are often more difficult to legally defend, and historically are more difficult to get approved by local voters. Utility rate reductions, especially more modest reduction amounts or reductions spread over time, generally have a better chance of being approved by local voters and withstanding legal scrutiny.

Local Stormwater Fees and Charges

New or increased stormwater fees and charges imposed by local governments in California (also sometimes referred to as “clean water” fees) are subject to a mandatory property-related fee or charge election under Proposition 218.Cal. Const., art. XIII D, § 6, subd. (c); Howard Jarvis Taxpayers Association v. City of Salinas, 98 Cal. App. 4th 1351 (June 2002). However, local government imposed stormwater fees and charges existing before Proposition 218 was enacted are not subject to a mandatory election by local voters so long as those fees and charges are not increased. A local initiative could target for reduction or repeal local government stormwater fees and charges existing before Proposition 218 became law, including existing local street cleaning or sweeping fees and charges.

Any new or increased stormwater fee or charge imposed by a local government without complying with the election requirement under Proposition 218 may also be reduced or repealed by the electorate using the local initiative power under Proposition 218. This includes any attempt by a local government relying on SB 231 (2017)Stats. 2017, ch. 536. to evade the constitutional election requirement for stormwater fees and charges under Proposition 218.Howard Jarvis Taxpayers Association v. City of Salinas, 98 Cal. App. 4th 1351 (June 2002).

Local Sales Taxes