Anaheim ‘Taxpayer Protection’ Act Council Transcript, Part 2: Laying Out the Dry Foundation

Clockwise from lower right: City Attorney Michael Houston, Councilmembers Vanderbilt, Murray, and Kring.

Clockwise from lower right: City Attorney Michael Houston, Councilmembers Vanderbilt, Murray, and Kring.

[Editor’s Note: This is part 2 of the preface to our series begins where the Voice of OC’s article on Tuesday night’s Anaheim Council meeting left off on the proposed “Anaheim Taxpayers Protection Act,” also known here as the “Protecting Anaheim Taxpayers from Their Own Opinions (“PATTOO”) Act.  The first section, on five relevant public comments, can be seen here.  This section covers the first 18 minutes of deliberation: reading and explaining the proposal, comments by Councilmembers Kris Murray and Lucille Kring, and then a long period of questions from Councilmember James Vanderbilt to City Attorney Michael Houston.  Orange Juice Blog recommends that, for your own safety, you do not try to read all of these transcripts at once.  (It will probably take three more to finish off the 66 minutes of discussion.)  They are just here to make it easy for us to refer to what was actually said when we start discussing all of this in earnest on Monday morning.]

TAIT:  Item is another off-consent calendar item.  Will the Clerk please read.

CLERK: Item 11 is a resolution of the City Council of the City of Anaheim calling and giving notice of a General Municipal Election to be held on Tuesday, November 8, 2016 and ordering the submission of a proposed amendment to the City Charter to the electors of said city at said election.  (Measure – Reequiring 2/3 vote of the City Council to Propose Taxes, aka “The Anaheim Taxpayer Protection Act.”

TAIT: Councilmember Murray, you asked that this be put on the agenda.  Would you like a Staff Report on this?

KRIS MURRAY:  Yes, please.

TAIT:  Mr. City Manager?

CITY MANAGER PAUL EMERY:  I’m going to defer to the City Attorney this evening, Mr. Mayor.

CITY ATTORNEY MICHAEL HOUSTON:  Good evening, Mr. Mayor, members of the City Council.  At Councilwoman Murray’s request, City Attorney’s office drafted a proposed Charter Amendment that would require a 2/3 vote of the whole City Council to place City Council-sponsored tax proposals before the voters.  Presently the Anaheim City Charter and law applicable to charter cities requires a majority vote of the City Council to place tax measures on the ballot, with the exception of certain transaction and use taxes and certain school facility bonds which do require a 2/3 vote and are applicable to charter cities.  As a charter city, Anaheim isn’t bound by Government Code Section 53724b, which is a provision of Proposition 62, which requires a 2/3 City Council vote to put general taxes on the ballot.  This is based on a 2002 appellate decision Trader Sports v. City of San Leandro, which held charter cities need not comply with this Government Code section.

Charter cities are generally allowed to establish procedural rules including necessary Council vote thresholds for certain actions taken by a city council unless preempted by state law or the Constitution.  … Our City Charter already includes examples of supermajority vote requirement for such things as waiving bid requirements found in Charter Section 1211, urgency ordinances found in Section 511, and you might recall former section 1222 which dealt with the sale of city-owned property, which allowed for a waiver of bidding requirements based on a supermajority vote of the City Council.

This proposed amendment would only apply to City Council-sponsored tax measures, meaning it would not apply to citizen-sponsored initiative petitions that are submitted to the City Council.  It would apply to both General and Special tax measures.  It would apply to all items deemed to be a tax, which include under state constitutional law the imposition, extension, or increase of taxes, and it would require a 2/3 vote of the City Council.

This charter provision does not and cannot alter constitutional requirements for voter approval, the timing of tax elections – for example, general taxes must be placed on an election where a governing body member is up for election, unless there is a unanimous vote by the City Council to do the contrary – or procedural requirements having to do with hearings and notices required [unintelligible] certain tax measures be placed on the ballot.  The attached resolution that is submitted in response to this request calls a general election on November 8, 2016, for this measure.  That concludes my report.  I’m happy to answer any questions you may have.

MURRAY: Thank you, Mr. City Attorney.

TAIT: Councilmember Murray.

MURRAY: Thank you.  I’d like to speak to my proposal tonight but open our discussion by moving to have this approved by Council consideration tonight.  I’d like to move and do I have a second?


TAIT: We have a motion and second.

MURRAY: Thank you.  I think it’s important for everyone’s benefit to speak to the fact that Proposition 62 was approved by California voters to put this 2/3 vote requirement in place for all General Law cities.  Charter cities are exempted from that because we are governed by our City Charter, a city constitution, therefore we individually have to consider amending our own charter to make this kind of law take effect here in Anaheim.  The state has more than 100 Charter Cities and they have been exempted from Prop 62 by the state courts.  Cities as large as Los Angeles and San Diego – and Anaheim, the largest of eleven cities in Orange County – are all classified as Charter Cities.  The state constitution requires new taxes or tax increases by cities to be approved by voters and this Charter Amendment will ensure that any proposed tax measure in Anaheim first receives the consideration of 2/3 vote of the City Council.

We have heard discussion in our city, and it has occurred in other cities around the county around the state, a discussion of putting additional tax measures before the voters.  We live in one of the highest-tax-rated states in the nation, and many cities don’t have a lot of choices but to look at taxes and fees.  But in Anaheim, because of the public-private partnerships we’ve enjoyed for decades, including the Resort Area as well as our stadiums and the convention center, have made it possible to generate the lion’s share of our city revenue through private development, through economic development, and it has worked well, and we have seen just in recent weeks that our revenues are exceeding projections, we are hitting our targets to hire for police and fire, and we’ve just adopted millions of dollars of new investment in our neighborhoods with the support of this Council.  I think it’s important that long-term we ensure that the same voter that the same voter protections and thresholds that are in place for General Law cities are also in place for Anaheim as a Charter City, and hopefully we lead the way for other charter cities to consider similar measures.  But this is truly about conformity with General Law cities, and ensuring the ultimate taxpayer protections here in Anaheim and I would ask the Council for your support tonight.  Thank you.

TAIT: Thank you.  Councilmember Kring.

KRING: Oh, OK.  I wasn’t going to speak but I left my light on.

TAIT: Mayor Pro-Tem Kring, excuse me.

KRING: That’s OK.  Thank you, Mr. Mayor.  We had a couple of speakers who came in and said that this should be not voted on, it should be pulled, and they also said that – should be a 4-1.  Well last March and then in the later part of last year, on a 4-1, we did support redoing the bonds for the Convention Center, and out of that we’ve received $20 million that’s going directly into the neighborhood.  That was a 4-1 vote.  That group also sued the City twice and I’m glad to say that the City won twice.  So I will be supporting this.  This 2/3 is a number that the other General Cities use.  I think it’s a substantial amount.  It does not take the right away of the taxpayer to vote.  This puts the Council, if you have 2/3 of the Council members putting it on the ballot, then the people have a right to say “yea” they want to be taxed or “no” they choose not to be taxed.  So this is not taking any taxing away or any vote away from the citizens of Anaheim.

TAIT: Councilmember Vanderbilt.

JAMES VANDERBILT: Mr. City Attorney, may I ask you a question?


VANDERBILT: I’m trying to step back on this topic and just talk about it from a more broad perspective.  So one thing that was intriguing about your report was the statement that Charter Cities were I think clumped together as a result of proposition 62 but then there was a lawsuit that was filed.  Are you familiar with what the basis of the suit was?

HOUSTON: Absolutely.  In fact I have a printed copy of the appellate decision with me.  So if you’d like me to give you a little bit of background, if you would, is that what you were –?

VANDERBILT: I’m going to be a little more precise in what I’m trying to get at.  I’m just trying to understand this landscape, you know.  We have Charter Cities, we have General Law cities, there’s differences – I’m just asking in terms of what other Charter Cities are doing.  And it sounds like, at the very least, one of them took exception to the requirement that they would be clumped together into the 2/3 requirement.  And so I’m curious as to what their basis was of that argument.

HOUSTON: OK, fair enough.  With respect to a survey, best we can, of cities out there, I’m not aware, and did not survey whether other charter cities have adopted a similar provision to this one.  The charter city at issue with respect to the taxes was the city of San Leandro, and in that case the city adopted and placed on the ballot a tax measure without complying with the 2/3 vote that’s required in the Government Code section at issue.  They were then sued.  And their response in the lawsuit was “we need not comply with this section because it does not apply to Charter Cities.”  And the court agreed with that whole-heartedly.  So, as a result of that case law, it is established, because a Court of Appeal decision is precedential quality in the entire state, it is established that Charter Cities need not comply with Government Code 57324.  That code section is a portion of Proposition 62, which regulates – or regulated, if you will, the placement of tax measures on a ballot.  That proposition was a statutory amendment.  It was a statutory initiative, so it was not a constitutional amendment.  The vast majority of Prop 62 has been supplanted with the passage of prop 218, which is a constitutional amendment, and deals with procedures in the state constitution for placing general and special tax measures before the voters, including vote requirements and other procedural items.  Oddly, the one remaining vestige of Prop 62 that is still “in force,” if you will, is this provision relating to vote requirements to place general taxes on the ballot.  And because that is not part of our California constitution, and because of the Trader Sports decision, that is not applicable to charter cities.

TAIT: Any other questions?

VANDERBILT: Sure.  And then also, perhaps to help me and also the folks here and watching at home, in terms of the types of taxes you mentioned – special taxes, general taxes, and sort of the differentiation between them at least as far as this measure is concerned – can you define them, perhaps, in basic terms, what are examples of them, that sort of thing?

HOUSTON: Happy to do so.  A general tax is a tax that is levied for general governmental matters, and does not specify in particular terms the purpose or use that that tax would be put to.  A good example of that was the former Measure N that was on the ballot, in which we were asking to continue a transfer of certain utility revenues to the General Fund and there was no limitation on the use of those funds.  They were for general government purposes.  Special tax, on the other hand, is something that in common terms would be earmarked for a particular purpose.  It’s not “what is being taxed,” it’s “what the use those revenues are being put forward for.”  And, if they are for particularized purposes, they are special taxes.  This measure applies to both special and general taxes and requires a 2/3 vote of the City Council.

VANDERBILT: All right, if I may, then: in terms of the special tax.  The TOT tax was mentioned, and then there’s this new tax that the city will be applying to residences that will be using their homes for short-term stays – they’ll be sort of, I don’t want to say “grandfathered in,” but for short term rental.  The City Council is still in the process of considering that further?  Is there an upcoming hearing?

HOUSTON: Transient Occupancy Taxes in Anaheim are general taxes because they’re a tax on a transient occupancy but the funds are used for general government purposes, so they are general taxes.  It is the opinion of the City Attorney and the City Attorney’s Office that the taxation of short-term rentals is not something that requires further approval because it is already covered by our municipal code and by the prior voter approvals.  Even though the tax is going to be placed on a new use, if you will, the tax has already been approved.  It’s not much different, for example, from if a new hotel were to be built.  That hotel wasn’t around before the tax, but it’s now subject to the tax, so we don’t have to vote for that hotel to be taxed.  So that application of the tax to short-term rentals is not a new tax on them; it’s an existing tax being applied to that use.

VANDERBILT:  OK, so if we go back a little bit of time, then, as far as when the TOT tax was first implemented it was approved to be on the ballot by the City Council, the voters voted on it, and it became a tax.  And I suppose it was based on the special circumstances of the city having a robust – a robust Resort District that had a lot of potential.  And I would expect that most people supported it because they thought “well, this will be tourists who will be coming in and the tax won’t impact residents,” so they were in favor – I’m guessing that might have been their thoughts.  Anyway, that’s how the tax came about and the City has taken advantage of it, as some of the speakers have mentioned, and it’s been very helpful for the City’s municipal services.  At this point it’s hard to know what direction the City might go, and what others uses may be considered taxable, but the only thing this really changes is just the threshold.  So the City Council could still consider something, but they would have a higher bar to reach in order to put it on the ballot for residents to vote.  And then those residents would have the same bar, the same level of approval for it to pass.

HOUSTON: That is exactly right.  This changes the bar by which the City Council may place something on the ballot.  It does not change the bar by which voters must vote because that is established by the state Constitution.

VANDERBILT:  I’m sorry, just help me again with sort of illustrating the question of the impact of this.  I know that this City Council has been very careful about municipal marijuana dispensaries in terms of allowance.  If there was a statewide initiative that made them legal in the future, do you think there would be a taxing element that would probably happen at a statewide level or –

HOUSTON: With respect to MMDs?

VANDERBILT:  Sure. This is a use that isn’t in place, I mean it isn’t allowed, but if say state law forced it to be allowed, I suppose that there would be an opportunity for the City to tax it.

HOUSTON: That is correct.  I will say that the legislation that I am aware of at the state level historically that has dealt with medical marijuana has not itself imposed a special tax.  A number of cities that have engaged in the regulated allowance for uses that provide medical marijuana, some of those jurisdictions have enacted taxes.  In the event, hypothetically speaking, that the City of Anaheim were to regulate those uses and then desire to tax them, this measure would require that tax to comply with the same vote requirement that’s proposed – a 2/3, as opposed to a majority vote, which is now what the requirement is.

TAIT: Sorry, did I –

VANDERBILT: Let me step aside and [unintelligible] questions from other Council members.

[Next segment: Comic relief!]

About Greg Diamond

Somewhat verbose attorney, semi-retired due to disability, residing in northwest Brea. Occasionally runs for office against bad people who would otherwise go unopposed. Got 45% of the vote against Bob Huff for State Senate in 2012; Josh Newman then won the seat in 2016. In 2014 became the first attorney to challenge OCDA Tony Rackauckas since 2002; Todd Spitzer then won that seat in 2018. Every time he's run against some rotten incumbent, the *next* person to challenge them wins! He's OK with that. Corrupt party hacks hate him. He's OK with that too. He does advise some local campaigns informally and (so far) without compensation. (If that last bit changes, he will declare the interest.)