CFRW Capitol Update July 29, 2024

Bill No: ACA 1
Author: Aguiar-Curry (D), Berman (D), Haney (D), Lee (D) and Wicks (D), etal.
Amended: 9/5/23 in Assembly
Vote: 27
SENATE ELECTIONS & C.A. COMMITTEE: 5-2, 9/11/23
AYES: Glazer, Allen, McGuire, Menjivar, Umberg
NOES: Nguyen, Newman
SENATE APPROPRIATIONS COMMITTEE: 5-2, 9/12/23
AYES: Portantino, Ashby, Bradford, Wahab, Wiener
NOES: Jones, Seyarto
ASSEMBLY FLOOR: 55-12, 9/6/23 – See last page for vote

SUBJECT: Local government financing: affordable housing and public
infrastructure: voter approval

SOURCE: California Professional Firefighters
California State Building and Construction Trades Council

DIGEST: This constitutional amendment, subject to voter approval, allows a city,
county, or special district, with 55% voter approval, to incur bonded indebtedness
or impose specified special taxes to fund projects for affordable housing,
permanent supportive housing, or public infrastructure, as specified.

ANALYSIS:
Existing law:
1) Defines a “general tax” as any tax imposed for general governmental purposes.
2) Defines a “special tax” as any tax imposed for specific purposes, including a tax
imposed for specific purposes, which is placed into a general fund.
3) Specifies that all taxes imposed by any local government shall be deemed to be
either general taxes or special taxes. Special purpose districts or agencies,
including school districts, shall have no power to levy general taxes.
4) Prohibits a local government from imposing, extending, or increasing a general
tax unless and until that tax is submitted to the electorate and approved by a
majority vote.
5) Prohibits a local government from imposing, extending, or increasing a special
tax unless and until that tax is submitted to the electorate and approved by a
two-thirds vote.
6) Authorizes a city, county, or special district, by a two-thirds vote of the
qualified electors of such district, to impose special taxes on such district,
except ad valorem taxes on real property or a transaction or sales tax on the sale
of real property within such a city, county, or special district.
7) Caps the maximum amount of any ad valorem tax on real property at 1% of the
property’s full cash value. Provides that this limitation does not apply to ad
valorem taxes or special assessments to pay the interest and redemption charges
on bonded indebtedness for the acquisition or improvement of real property
approved on or after July 1, 1978, by two-thirds of the votes cast by the voters
voting on the proposition, or bonded indebtedness incurred by a school district,
community college district, or county office of education for the construction,
reconstruction, rehabilitation, or replacement of school facilities, approved by
55% of the voters of the district or county. Provides that any such proposition
relating to school facilities must include specified accountability requirements,
including an annual, independent performance audit.
8) Provides that every constitutional amendment, bond measure, or other
legislative measure submitted to the people by the Legislature shall appear on
the ballot of the first statewide election occurring at least 131 days after the
adoption of the proposal by the Legislature.
9) Provides that a proposed amendment or revision to the California Constitution,
if approved by a majority of votes cast thereon, takes effect on the fifth day
after the Secretary of State files, the statement of the vote for the election at
which the measure is voted on, but the measure may provide that it becomes
operative after its effective date.

THIS CONSTITUTIONAL AMENDMENT:

1) Allows a city, county, city and county, or special district to incur indebtedness
in the form of general obligation bonds to fund the construction, reconstruction,
rehabilitation, or replacement of public infrastructure, affordable housing, or
permanent supportive housing for persons at risk of chronic homelessness,
including persons with mental illness, or the acquisition or lease of real property
for public infrastructure, affordable housing, or permanent supportive housing
for persons at risk of chronic homelessness, including persons with mental
illness, to be approved by 55% of the voters voting on the proposition on or
after the effective date of the measure adding this provision. This provision
shall apply only if the proposition approved by the voters and resulting in the
bonded indebtedness all of the specified accountability requirements, including:
a) A requirement that the proceeds from the sale of the bonds be used only for
the purposes specified in 1) above, and not for any other purpose, including
city, county, city and county, or special district employee salaries and other
operating expenses. Provides that the administrative costs shall not exceed
5% of the proceeds from the sale of the bonds.
b) The specific local program or ordinance through which projects will be
funded and a certification that the city, county, city and county, or special
district has evaluated alternative funding sources.
c) A requirement that the city, county, city and county, or special district
conduct an annual, independent performance audit to ensure that the funds
have been expended pursuant to the local program or ordinance specified in
b) above.
d) A requirement that the city, county, city and county, or special district
conduct an annual, independent financial audit of the proceeds from the sale
of bonds until all of those proceeds have been expended for the public
infrastructure or affordable housing projects, as applicable.
e) A requirement the above audits be submitted to the California State Auditor
for review.
f) A requirement that the city, county, city and county, or special district post
the audits in a manner that is easily accessible to the public.
g) A requirement that the city, county, city and county, or special district
appoint a citizens’ oversight committee to ensure that bond proceeds are
expended only for the purposes described in the measure approved by the
voters. Members appointed to an oversight committee shall receive financial
educational training.
h) A requirement that proceeds from the sale of the bonds only be spent on
projects and programs that serve the jurisdiction of the city, county, city and
county, or special district.
i) A requirement that an entity owned or controlled by a local official that
votes on whether to put a proposition on the ballot will be prohibited from
bidding on any work funded by the proposition.
2) Specifies that a city, county, city and county, or special district may levy a 55%
vote ad valorem tax pursuant to 1), above.
3) Specifies that the imposition, extension, or increase of a sales and use tax, a
transactions and use tax, or a parcel tax imposed by a local government for the
purposes of funding the construction, reconstruction, rehabilitation, or
replacement of public infrastructure, affordable housing, or permanent
supportive housing for persons at risk of chronic homelessness, including
persons with mental illness, or the acquisition or lease of real property for
infrastructure, affordable housing, or permanent supportive housing for persons
at risk of chronic homelessness, including persons with mental illness, is subject
to approval by 55% of the voters in the local government voting on the
proposition, if both of the following conditions are met:
a) The proposition is approved by a majority of the membership of the
governing board of the local government.
b) The proposition contains similar accountability requirements as 1) above.
4) Limits the number of propositions authorized by the measure a local
government can place on the ballot until all funds from a proposition have been
committed, as specified.
5) Authorizes the Legislature, by two-thirds vote, to enact laws establishing
accountability measures in addition to those listed in this measure provided
such laws are consistent with this constitutional amendment.
6) Specifies that the Legislature may, by majority vote, enact laws for the
downpayment assistance programs, as specified.
7) Specifies that a special district, other than a board of education or school
district, shall not incur any indebtedness or liability exceeding any applicable
statutory limit, as prescribed by the statutes governing the special district as
they currently read or may thereafter be amended by the Legislature.
8) Allows the voter approval thresholds specified above in 1) and 3), above, to
apply to a local measure imposing, extending, or increasing a sales and use tax,
a transaction and use tax, a parcel tax, or general obligation bonded
indebtedness for the purposes specified above, submitted to voters at the same
election as ACA 1.
9) Provides that in the event that this constitutional amendment and another
measure or measures relating to state or local requirements for the imposition,
adoption, creation, or establishment of taxes, charges, and other revenue
measures shall appear on the same statewide election ballot, the other measure
or measures shall be deemed to be in conflict with this measure. In the event
that this constitutional amendment receives a greater number of affirmative
votes, the provisions of this measure shall prevail in their entirety, and the
provisions of the other measure or measures shall be null and void.

BACKGROUND
Special Taxes. The California Constitution states that taxes local governments
levy are either general taxes, subject to majority voter approval, or special taxes,
subject to two-thirds vote (Article XIII C), which local agencies use for specified
purposes. Proposition 13 (1978) required a two-thirds vote of each house of the
Legislature for state tax increases, and two-thirds vote for local special taxes.
Proposition 62 (1986) prohibited local agencies from imposing general taxes
without majority approval of local voters. Proposition 218 (1996) extended those
vote thresholds to charter cities and limited local agencies’ powers to levy new
assessments, fees, and taxes.
Bonds. Article XVI, Section 18 of the California Constitution generally prohibits
cities, counties, and school districts from incurring any debt or liabilities exceeding
any year’s revenues without two-thirds voter approval. One of the most common
reasons local agencies incur debt is to raise sufficient capital for a project or cost
that the local agency does not have sufficient cash on hand to immediately finance,
such as a public infrastructure project, and promise to pay off the principal and
interest on that debt over time. General obligation bonds, in the local government
context, refer to bonds payable from ad valorem property tax revenue. These
typically require two-thirds voter approval. However, Proposition 39 (2000)
amended the Constitution to decrease the two-thirds approval requirement to 55%
percent for school districts, community college districts, or county offices of
education, to issue general obligation bonds for the construction or rehabilitation of
school facilities.

COMMENTS
According to the author, under current law, local officials propose a local bond or
special tax, and then it is up to the voters in that community to decide whether they
support the idea or not. Local governments and local voters know best what their
communities need. In some neighborhoods, this means a new library or fire
station; in others this means an increase in the affordable housing stock, or
connecting their constituents to municipal broadband service. These investment
initiatives often fail to reach the legal requirement of a two-thirds vote, a threshold
under which opponents’ votes count twice as much as those community members
who support infrastructure investments.
ACA 1 will empower local governments to address local priorities without needing
to wait for state and federal funding initiatives. Voters would still need to
overwhelmingly support a bond or special tax in order for it to be approved with 55
percent of the vote.
ACA 1 will level the playing field and create parity between school districts and
cities, counties, and special districts, so that all local governments have a viable
financing tool to address community needs. It also contains historic transparency
and accountability measures, including a specific expenditure plan for the projects
and programs proposed, annual financial and performance audits which are
reviewed by the Bureau of State Audits, monitoring by a citizens’ commission with
members who’ve received financial training to assure resources are being spent as
proposed, and a cap on the administrative expenses at 5%.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No
According to the Senate Appropriations Committee, this constitutional amendment
would result in one-time General Fund costs to the Secretary of State in the range
of $738,000 to $984,000, likely in 2023-24, for printing and mailing costs to place
the measure on the ballot in a statewide election. Actual costs may be higher or
lower, depending on the length of required elements and the overall size of the
ballot.


ASSEMBLY FLOOR: 55-12, 9/6/23
AYES: Addis, Aguiar-Curry, Alvarez, Arambula, Bauer-Kahan, Bennett, Berman,
Boerner, Bonta, Bryan, Calderon, Juan Carrillo, Wendy Carrillo, Cervantes,
Connolly, Mike Fong, Friedman, Gabriel, Garcia, Gipson, Haney, Hart, Holden,
Irwin, Jackson, Jones-Sawyer, Kalra, Lee, Low, Lowenthal, Maienschein,
McCarty, McKinnor, Muratsuchi, Stephanie Nguyen, Ortega, Pacheco, Papan,
Pellerin, Quirk-Silva, Rendon, Reyes, Luz Rivas, Rodriguez, Blanca Rubio,
Santiago, Ting, Villapudua, Ward, Weber, Wicks, Wilson, Wood, Zbur, Robert
Rivas
NOES: Alanis, Megan Dahle, Dixon, Essayli, Vince Fong, Gallagher, Hoover,
Mathis, Jim Patterson, Joe Patterson, Sanchez, Ta
NO VOTE RECORDED: Bains, Chen, Davies, Flora, Grayson, Lackey, PetrieNorris, Ramos, Schiavo, Soria, Valencia, Waldron, Wallis
Prepared by: Scott Matsumoto / E. & C.A. / (916) 651-4106
9/13/23 11:29:20
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