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<br />taxes, benefit payments from retirement, unemployment insurance and disability insurance
<br />funds. "Proceeds of taxes" include, but are not limited to, (a) regulatory licenses, user charges,
<br />and user fees (but only to the extent such proceeds exceed the cost of providing the service or
<br />regulation), and (b) the investment of tax revenues. Article XIIiB includes a requirement that if
<br />an entity's revenues in any fiscal year and the fiscal year immediately following it, exceed the
<br />amounts that may be appropriated in that fiscal year and the fiscal year immediately following it,
<br />the excess would have to be returned by revising tax rates or fee schedules over the
<br />subsequent two years.
<br />
<br />Proposition 218
<br />
<br />General On November 5, 1996, the voters of the State approved Proposition 218, the
<br />so-called "Right to Vote on Taxes Act" Proposition 218 adds Articles XIIIC and XIiID to the
<br />State Constitution, which affect the ability of local governments to levy and collect both existing
<br />and future taxes, assessments, fees and charges. Proposition 218, which generally became
<br />effective on November 6, 1996, changes, among other things, the procedure for the imposition
<br />of any new or increased "fee" or "charge," which is defined as "any levy other than an ad
<br />valorem tax, a special tax or an assessment, imposed by a [local government] upon a parcel or
<br />upon a person as an incident of property ownership, including user fees or charges for a
<br />property related service" (and referred to herein as a "property-related fee or charge").
<br />
<br />Specifically, Article XIiID requires that, before any property-related fee or charge may be
<br />imposed or increased, written notice must be given to the record owner of each parcel of land
<br />affected by such fee or charge. The City must then hold a hearing upon the proposed
<br />imposition or increase, and, if written protests against the proposal are presented by a majority
<br />of the owners of the identified parcels, the City may not impose or increase the property-related
<br />fee or charge.
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<br />Further, revenues derived from a property-related fee or charge may not exceed the
<br />funds required to provide the "property-related service" and may not be used for any purpose
<br />other than that for which the fee or charge was imposed. Further, the amount of a property-
<br />related fee or charge may not exceed the proportional cost of the service attributable to the
<br />parcel and no property-related fee or charge may be imposed for a service unless that service
<br />is actually used by, or is immediately available to, the owner of the property in question.
<br />
<br />Interpretation of Proposition 218. Since Proposition 218 was enacted in 1996, appellate
<br />court cases and an Attorney General opinion have indicated that fees and charges levied for
<br />water and wastewater services are not property-related fees and charges and thus are not
<br />subject to the above described requirements regarding notice, hearing and protests in
<br />connection with any increase in the fees and charges being imposed.
<br />
<br />However, in Richmond v. Shasta Community Services District (9 Cal. Rptr. 3rd 121), the
<br />California Supreme Court addressed the applicability of the notice, hearing and protest
<br />provisions of Article XIiID to certain water service-related charges. In Richmond, the Court held
<br />that connection charges, including those similar to the City's "Facilities Fees," are not subject to
<br />Proposition 218. The Court also indicated in dicta that a fee for ongoing water service through
<br />an existing connection could, under certain circumstances, constitute a property-related fee and
<br />charge, with the result that a local government imposing such a fee and charge must comply
<br />with the notice, hearing and protest requirements of Article XIiID.
<br />
<br />In July 2004 the California Court of Appeal, Fourth District, held, in Bighorn-Desert View
<br />Water Agency v. Beringson (180 Cal. App 4th 890), that the costs of water services are not
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