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Tax law proposal may jeopardize local tax revenue efforts

The initiative is titled the Taxpayer Protection and Government Accountability Act, but municipal government officials, including in Kern County, argue that name is misleading
tehachapi water tower (file)
Posted at 8:32 PM, Apr 05, 2023
and last updated 2023-04-08 07:18:11-04

TEHACHAPI, Calif. (KERO) — The City of Tehachapi is sounding the alarm about a new proposed legislative initiative that would change the law on how municipal governments in California are allowed to impose taxes. Enough signatures have been collected to put the initiative in front of voters statewide on next year's ballot.

The initiative is titled the Taxpayer Protection and Government Accountability Act, but municipal government officials, including in Kern County, argue that name is misleading and that the proposed legislation would cause a lot of harm to local and municipal services.

At its base, the initiative would require new or increased taxes to be passed by two-thirds legislative vote in each chamber of the legislature in addition to being submitted for a public vote to be approved by a majority of voters. Current state tax law only requires one, either the two-thirds legislative vote or the public vote.

The proposed legislation would also require new tax measures to have an expiration date, which is an issue in Kern County communities, including the Cities of Tehachapi, McFarland, and Ridgecrest. Those cities have sales tax measures without expiration dates.

This "sunset clause" is what the City of Tehachapi discussed in a recent city council meeting.

"We need it," said Tehachapi City Councilwoman Joan Pogon-Cord. "We will be hurting for years, especially with our law enforcement."

The City of Tehachapi thought they were in the clear since their sales tax measure, Measure S, passed last year without a sunset date. The proposed act includes a provision that retroactively eliminates any sales tax measure passed without an expiration date in 2022, which is putting the city budget in jeopardy.

"We decided for the next 18 months, or until we have more clarity of what is happening, we are not going to spend those funds that Measure S generates," said Tehachapi Assistant City Manager Corey Costelloe. "We are going to put them into an account. We do not want to budget long-term and hav to bring something back because of these greedy corporations trying to put this on the ballot."

According to Costelloe, the city had estimated that Measure S would bring in $5 million annually for Tehachapi to pay for police and fire services. The city now can't count on that revenue being available, as well as how much might need to be spent fighting this proposed initiative.

The legislation is sponsored by the California Business Roundtable, an organization whose members include many Kern County businesses. The organization says this is about addressing the high cost of operating and living in California, and putting the power back in the voters' hands, according to California Business Roundtable President Robert Lapsley.

"Businesses in California are getting taxed at every turn. So are the people of California, and as we pile every tax, the businesses are concerned that people are leaving the state," said Lapsley.

According to Lapsley, the proposed legislation would give more power to the people, which is why the initiative also asks for more transparency and detail when proposing new taxes, requiring that the language on the ballot include exactly where the money will be spent.

Meanwhile, Tehachapi isn't the only city that's concerned about the proposed act. Kern County Chief Administrative Officer Ryan Alsop released a statement expressing similar frustration, given that Measure K, which passed last November, would be impacted.

Alsop's statement reads, in part:

If passed by statewide voters as currently written, the retroactive clause not only completely eliminates sorely needed additional revenue for Kern County’s General Fund, but effectively undermines local self-help efforts to mitigate massive tax revenue losses due to the State’s forced extinction of our large oil and gas industry, as well as the rights of local Kern County voters to decide for themselves what their communities need. How can it be legal for statewide voters in a 2024 election, to retroactively overturn, usurp, or completely void votes cast legally by local Kern County residents in the November 2022 election? These are questions that need to be answered.

According to Lapsley, the California Business Roundtable did think of what to do in this situation and how the retroactive clause would impact cities.

"All they have to do within the next year go back and have a vote of the people and get a two-thirds vote just like it has been any other election," said Lapsley. "Re-ratify and it is good to go."

The proposed legislation requires both a two-thirds vote from the people and two-thirds vote from the legislature. The City of Tehachapi says the change to the current tax law is confusing for voters.

Looking at the margins for each of the city tax measures that would be impacted if the Taxpayer Protection and Government Accountability Act were to be passed, it's also unlikely that municipalities would be able to pass new taxes under the act's new requirements.

Kern County's Measure K passed with 50 percent of the vote. Measure S in Tehachapi was passed with 54 percent. Measures P and M in Ridgecrest and McFarland respectively passed with 55 and 62 percent of the vote. None of these votes would meet the two-thirds required by the proposed legislation, despite all of them gaining a majority public vote.

The League of California Cities is representing the cities who are advocating against the proposed legislation arguing it eliminates corporate accountability.

As of now, the Taxpayer Protection and Government Accountability Act is scheduled to appear on the November 2024 California State Ballot.