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qID- "appropriations limit" which limits the ability to spend certain moneys which are called "appropriations subject to limitation" (consisting of tax revenues and certain state subventions together called "proceeds of taxes" and certain other funds) in an amount higher than the "appropriations limit." Article XM does not affect the appropriation nf monies which are excluded from the definition of "appropriations limit" including debt ser tce on indebtedness existing or authorized as of September 1, 1979, or bonded indebtedness subs, juently approved by the voters. In general terms, the "appropriations limit" is to be based on certain 1978 -79 expenditures, and is to be adjusted annually to reflect changes in the consumer price index, population and services provided by these entities. Among other provisions of Article X1IIB, if those entities' revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years. Proposition 62 Proposition 62 was a statutory initiative adding Sections 53720 to 53730, inclusive, to the California Government Code. It confirmed the distinction between a general tax and special tax, established by the State Supreme Court in 1982 in City and County of San Francisco v. Farrell by defining a general tax as one imposed for general governmental purposes and a special tax as one imposed for specific purposes. Proposition 62 further provided that no local government or City may impose (i) a general tax without prior approval of the electorate by majority vote or (ii) a special tax without such prior approval by two -thirds vote. It further provided that if any such tax is imposed without such prior approval, the amount thereof must be withheld from the levying entity's allocation of annual property taxes for each year that the tax is collected. By its terms, Proposition 62 applies only to general and special taxes imposed on or after August 1, 1985. In September 1995, the California Supreme Court invalidated a one- half cent sales tax imposed in 1986 by 54.0% of Santa Clara County's voters to fund local transportation projects (Santa Clara County Local Transportation Authority v. Guardino). The Court determined that the tax was a "special tax ", one whose proceeds are dedicated to a special purpose (in this case, transportation). Consequently, the California Constitution required a two- thirds voter approval. The Court relied in part upon the provisions of Proposition 62, even though the California Appellate Courts had previously ruled Proposition 62 unconstitutional in most respects. The City believes that loss of amounts equal to the general fund revenues derived from general taxes imposed on or after August 1, 1985, either retroactively and /or prospectively, would not adversely affect the City's ability to pay the Lease Payments. Proposition 218 In 1996. California voters approved Proposition 218, which added Articles XIIIC and XIIID to the California Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property- related fees and charges. Proposition 218 states that all taxes imposed by local governments shall be deemed to be either general taxes or special taxes. Special purpose districts, including school districts, have no power to levy general taxes. No local government may impose, extend or increase any general tax unless and until such tax is submitted to the electorate and approved by a majority vote. No local government may impose, extend or increase any special tax unless and until such tax is submitted to the electorate and approved by a two- thirds vote. Proposition 218 also provides that no tax, assessment, fee or charge shall be assessed by any agency upon any parcel of property or upon any person as an incident of property ownership except: (1) the ad valorem property tax imposed pursuant to Article XIII and Article XIIIA of the California Constitution, (ii) any special tax receiving a two- thirds vote pursuant to the California Constitution, and (iii) assessments, fees and charges for property related services as provided in Proposition 218. Proposition 218 further adds voter requirements for -19-