HomeMy WebLinkAboutCC AG PKT 2001-06-11 Supplemental Information re: Increasing Street Sweeping/Tree Trimming FinesM E M O R A N D U M
TO: Quinn M. Barrow Fn.e No: S7296 -0001
FROM: Robert H. Pittman
DATE: June 11, 2001
RE: Increasing Street Sweeping and Tree Trimming Fees
At your request, I have researched the applicability of Proposition 218 to the increase
in street sweeping and tree trimming fees proposed by the City of Seal Beach (the "City "). This
memorandum provides ageneral discussionof the provisions of Proposition 218, analyzes its impact
on the City's street sweeping and tree trimming fees, and provides an overview of the procedural
requirements to increase the street sweeping and tree trimming fees. The conclusions set forth in
this memorandum are based on the facts set forth be low. This information was gamered through our
discussions and my review of the applicable provisions of the Seal Beach City Code ( "SBCC ") and
Resolution Number 3788 establishing the fees in question. Any other relevant information which
has not been provided may change the assumptions and conclusions drawn in this memorandum.
BACKGROUND FACTS
The City imposes street sweeping and tree rimming fees (collectively the "fees ")
pursuant to the authority setforth in Chapter22A ofthe SBCC. In 1988, the City adopted Ordinance
No. 1273 enacting Chapter 22A. Section 22A -2 of said chapter authorizes the City Council to
impose, by resolution, a community services fee upon "each dwelling unit and nonresidential
property" in the City. Section 22A -1 defines "community services" to mean "any type of public
service provided by the City to the residents and property owners of the City including, but not
limited to, tree trimming and street sweeping services." Prior to the enactment of Proposition 218,
the City Council adopted Resolution No. 3788 establishing the current fees. These fees no longer
cover the City's costs to provide street sweeping and tree trimming services.
The fees arebilled on a monthly basis and mustbe paid forall property located within
the City.' The fees are billed on the City's water bill for each propertywhich receives water service
from the City and is payable by the same person responsible for the water bill. If the City does not
furnish water service to a property, the fees must be pre -paid to the Finance Director annually on or
before July I" of each year. The fees are not collected on the County tax rolls and do not constitute
a lien against property unless the fees become delinquent.
' With the exception of certain gated communities (e.g. Leisure World and Surfside).
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ISSUE PRESENTED
Does Proposition 218 apply to increases to the City's street sweeping and tree
trimming fees?
SHORT ANSWER
Yes. Proposition 218 applies to all taxes, assessments, and property- related fees or
charges. Proposition 218 defines "fee" or "charge" to mean any levy other than an ad valorem tax,
a special tax, or an assessment, imposed by a local government upon a parcel or upon a person as
an incident of property ownership, including a user fee or charge for a property- related service.
Chapter 22A of the SBCC authorizes the City to impose community service fees upon property
within the city for community services and defines "community services" to include charges for
street sweeping and treetrimming services. By Resolution No. 3788, the City Council imposed fees
for street sweeping and tree trimming services pursuant to its authority under Chapter 22A. The
fees are used to provide street sweeping and tree trimming services to residents and property owners
of the City and are imposed upon certain dwelling units and nonresidential property in the City. As
the analysis below will illustrate, each property derives a direct benefit from the street sweeping and
tree trimming services provided by the City, separate and apart from the benefit to the general public.
The only way for a property owner to avoid the charge for these services is to sell the property. The
fees are imposed for property- related services and subject to the provisions of Proposition 218.
ANALYSIS
On November 5, 1996, the California voters approved Proposition 218, a state
constitutional amendment known as the "Right to Vote on Taxes Act" (hereinafter "Proposition
218 "). Proposition 218 added Articles NMC and XIM to the California Constitution. Unlike
Proposition 62, Proposition 218 applies to both general law and charter cities.
Although entitled the "Right to Vote on Taxes Act," this constitutional amendment
does more than expand the right to vote on local tax measures; it makes substantial changes to the
law governing property- related fees and assessments. Like many initiatives, Proposition 218
contains many ambiguous and poorly drafted provisions that court decisions and subsequent
legislation continue to attempt to clarify. The fee provisions ofProposition 218, in particular, were
hastily drafted and intended to prevent local governments from evading the measure's detailed
requirements for taxes and assessments by relabeling such a levy as a "fee." The fee provisions are
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June 11, 2001
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very uncertain in their expression and it has not been possible to achieve much in the way of
legislative clarification of their terms.
At your request, this report provides a general discussion of the provisions of
Proposition 218 which apply to the City's street sweeping and tree trimming fees (the "fees "),
analyzes the substantive provisions of the fees, and outlines the procedural requirement for
increasing the fees.
A. Proposition 218
Proposition 218 establishes substantive and procedural rules for the adoption,
extension and increase of taxes, assessments and property - related fees. It also expands the scope of
the voters' initiative power regarding these revenue - raising devices. The City's fees appear to fall
within the provisions governing property- related fees and charges.
Property- related fees.
Section 6 of Article XIIID2 governs property - related fees and charges. Section 2(e)
of this Article defines "fee" or "charge" to mean "any levy other than an ad valorem tax, a special
tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of
property ownership, including a user fee or charge for a property related service." Section 6(b)
further provides that after July 1, 1997, fees or charges as defined by Proposition 218 shall not be
extended, imposed or increased unless they meet the following substantive requirements:
1. Revenues derived from the fee shall not exceed the funds required to provide
the property- related service.
2. Revenues derived from the fee shall not be used for any purpose other than
that for which the fee was imposed.
3. The amount of a fee imposed upon any parcel or person as an incident of
property ownership shall not exceed the proportional cost of the service
attributable to the parcel.
4. No fee may be imposed for a service unless that service is actually used by,
or immediately available to, the owner of the property in question. Fees
2 All fintbw section references are to Article X® of the California Constitution unless otherwise noted.
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based on potential or future use of a service are not permitted. Standby
charges, whether characterized as charges or assessments, shall be classified
as assessments and shall not be imposed without compliance with Section 4
of Article XID D, which governs assessments.
5. No fee may be imposed for general governmental services including, but not
limited to, police, fire, ambulance or library services, where the service is
available to the public at large in substantially the same manner as it is to
property owners. Reliance by a city on any parcel map, including, but not
limited to, an assessor's parcel map, may be considered a significant factor
in determining whether a fee or charge is imposed as an incident of property
ownership for purposes of this article. In any legal action contesting the
validity of a fee or charge, the burden shall be on the city to demonstrate
compliance with this article.
Sections 6(a) and 6(c) additionally provide that, priorto imposing anew or increased
fee, a city must give every affected property owner mailed notice and hold a public hearing. If a
majority of all property owners file written protests against the new or increased fee, the fee may not
be imposed or increased. Those who do not file protests are deemed to consent to the fee and
therefore, majority protests under this section will not commonly occur. Finally, except for fees for
sewer, water, and refuse collection services, a local government may not impose a new fee or
increase an existing fee unless the proposed fee or increase is submitted to and approved by either
(i)a majority vote ofthe owners of theproperty subject to the fee; oyalternatively,(ii)atwo- thirds
vote of the electorate residing in the affected area. These elections may be conducted by mail.
Proposition 218 governs fees that are (1) imposed on a parcel or (2) imposed on a
person as an incident of property ownership, including a user fee or charge for a property - related
service. Unfortunately, Proposition 218 provides no definition of the terms "imposed on a parcel"
or "imposed as an incident of property ownership." Nor does Proposition 218 define the term "user
fee." Section 2(h) unhelpfully defines "property related service" to mean a public service having
a direct relationship to property ownership. Since Proposition 218 fails to define its key terms, and
no court decision has definitively defined "property related service" or "user fee" to include street
sweeping or tree trimming services, we are unable to predict with certainty whether a court will
determine that the City's fees are governed by Proposition 218. But, the basic characteristics of the
fees suggest they are subject to the provisions of Proposition 218.
The firsttype of fees governed by Proposition 218 are fees imposed on a parcel. Fees
which, at their inception, constitute an encumbrance or lien on a parcel (similar to an assessment or
a property tax) are likely be interpreted as fees imposed on a parcel and governed by Proposition
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218. As previously noted, the fees in question do not constitute a lien against property unless they
become delinquent. Thus, the dispositive issue for our purposes is whether the fees are imposed as
an incident of property ownership.
Like other key terms in Proposition 218, the phrase "imposed on a person as an
incident of property ownership" is not defined, and the proper interpretation of this phrase has
generated considerable debate. Nevertheless, the basic characteristics of the City's fees at issue
herein appear to fall squarely within even the narrowest definition of the phrase.
Black's Law Dictionary defines "incident," when used as a noun, to mean:
anything which inseparably belongs to, or is connected with, or inherent in, another
thing .... Also, less strictly, it denotes anything which is usually connected with
another, or connected for some purposes, though not inseparably.
If interpreted strictly, the phrase "fee or charge ... imposed ... on a person as an incident of property
ownership" appears to mean fees that a person must pay solely because that person owns property,
and for no other reason. This type of fee can be avoided only by selling the property, compared to
a fee that can be avoided by the property ownervoluntarily taking or not taking some action in using
its property. As previously noted, the City's fees are imposed upon all dwelling units and
nonresidential property in the City. The fees must be paid regardless of any voluntary actions taken
by the property owner. If aproperty receives water service from the City, the fees are billed monthly
on the water bill; but, in the event the City does not provide water service to a property, the fees
must be paid in advance annually. The only way for a property owner to avoid paying the fees is
to sell the property. Assuming the fees meet the substantive requirements, it appears clear the fees
we a property- related charge subject to the provisions of Proposition 218.
2. Substantive limitations.
Section 6 of Proposition 218 prescribes several substantive requirements which limit
a city's ability to imposeproperty- related fees. The fees imposed by the City forstreet sweeping and
tree trimming services must comply with each of these requirements.
First, the total revenue generated by the fees may not exceed the cost of providing
street sweeping and tree trimming services. Based upon the information provided, it is my
understand thatnot only does the total revenue generated by the fees not exceed the costofproviding
street sweeping and tree trimming services, the total revenue does not cover actual costs ofproviding
such services.
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Second, the revenue generated by the fees may only be used for the purpose of
providing street sweeping and tree trimming services. Given the fact that the total revenue collected
does not currently cover the costs of providing street sweeping and tree trimming services, it is
unlikely a court would find that the City is not complying with this requirement unless the City is
collecting the fees but not providing the services.
Third, the fees imposed upon each property may not exceed the proportional cost of
services to that property. This requirement raises some concerns with the City's fees. The fees are
assessed against residential properties based upon the number of dwelling units on the property.
Under this method, it is possible for properties with substantially similar street frontages to pay
drastically different fees. While this may not present a concern in the content of street sweeping
(since multiple residential properties arguably generate a greater demand for street sweeping
services), a strong argument could be with respect to tree trimming that multiple residential
properties are paying more than their proportional share for the services received. This argument
gains added strength when one consider: that nonresidential properties are charged by lineal street
frontage. I believe that a more proportional method of calculation would be a street frontage fee.
Fourth, the street sweeping and tree trimming services must be used by or
immediately available to the property owner. I understand that street sweeping and tree trimming
services are immediately available to all properties in the City.
Fifth, no feemay be charged forgeneral governmental services. It is unclearwhether
street sweeping and tree trimming services are a general governmental service. A good argument
can be made that the aesthetic benefit of sweeping the streets or trimming trees benefits the adjacent
property owner in a manner that is distinctly different than the public at large. Adding further
support to this argument, as opposed to the other types of services listed under the prohibition
against general governmental services' where a property may derive no benefit if the service is not
used, property owners actually receive a tangible benefits from street sweeping or tree trimming
services in the form of clean streets and manicured trees. Onthe otherhand, street sweeping and tree
trimming also provides aesthetic benefit to the public at large and provides other benefits to the
public, such as keeping the roadway free of debris that might impede or create hazards to vehicular
travel and preventing storm water from carrying pollution to the ocean. I cannot predict with any
certainty how street sweeping and tree trimming services will be characterized by the courts.
B. Procedure for Increasing Fees
3 Section 6((b)(6) p=Iudes imposing a fee forpoliw, fire, ambulance, or library services.
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In order to increase the fees charged for street sweeping and tree trimming, the City
must comply with the procedural requirements set forth in Proposition 218. These procedures are
outlined below.
Notice and Hearing
Prior to levying a new or increased fee, both Government Code Section 66018 and
Proposition 218 require the City to hold a public hearing on the proposed fee or fee increase. Notice
of the proposed fee increase and the time and place of a public hearing on the proposed fee increase
must be mailed to each person whose parcel is to be charged at least 45 days prior to the date of the
public hearing. The notice must contain a description of each parcel of real property to be charged
and the amount to be charged against each parcel. In addition, Proposition 218 requires that the
notice include the amount of the fee, the basis by which the amount was calculated, the reason for
the fee, and the date, time and place of a public hearing on the fee. Notice of the time and place of
a public hearing on the report must also be published two times, with at least five days between the
first and second publication, in a newspaper of general circulation in the City. The fast publication
must take place at least 10 days prior to the public hearing.
The public hearing on the proposed fee increase must be held as part of a regularly
scheduled meeting of the City Council. At the public hearing, the City must hear and consider all
protests against the proposed fee increase. If protests are made by the owners of a majority of
separate parcels subject to the fee, as discussed below, the City Council may not take any further
action with respect to the proposed fee increase. In the absence of a majority protest, the City
Council may make its determination ontheproposed fee increaseuponthe conclusionofthe hearing.
2. Majority Protest
Proposition218 precludes the City from imposing theproposedfeeincrease ifwritten
protests against the proposed fee increase are presented by a majority of the owners of the identified
parcels subject to the fee. The same majority protestrequirements apply each time the City proposes
to increase the street sweeping and tree trimming fees.
3. Election Renuired
Proposition 218 requires the City to submit proposed fees and fee increases to a vote
of the subject property owners or the electorate residing in the affected area after the public hearing.
Under the provisions of Section 6, the City may either submit the proposed fee increase to the
property owners affected by the increase or to the electorate residing in the affected area. The
election required by this provision must be held not less than 45 days after the public hearing and
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may be by either mailed ballot or by regular or special election. The election required under
Proposition 218 must comply with all applicable election procedures set forth in the City's
Municipal Code and any state election procedures the City has adopted by reference. The proposed
increase submitted to the voters should specify the effective date of the fee increase in the event the
voters approve the proposed fee increase, and must include a statement from the City Attorney
summarizing the proposed fee increase and astatementin favor and a statement againsttheproposed
increase.
Submission to Property Owners. If the proposed increase is submitted to the affected
property owners, a simple majority of the ballots cast is required to pass the increase. Logistically,
the easiest, and probably only, way to conduct such a vote is by mailed ballot. Section 4000 of the
California Elections Code authorizes cities to conduct any election required under proposition 218
wholly by mail.` Ballots must be mailed to the record owner of each affected property, as shown
on the latest equalized tax roll for the County of Orange.
Submission to Electorate. If the proposed increase is submitted to the electorate, a
two- thirds vote of the electorate is required to enact the increase. The election may be combined
with a regular election, or the City may call a special election. As with a vote of the property
owners, if the proposed increase is submitted to the electorate, the election may be conducted wholly
by mail.
4. Substantive Requirements
In addition to the procedural requirements outlined above, Proposition 218 requires
that all fees and charges comply with the following five substantive requirements:
(1) Revenues derived from the fee shall not exceed the funds required to
provide the financed service;
(2) Revenues derived from the fee shall not be used for any purpose other
than that for which the fee was imposed;
(3) The amount of a fee imposed upon any parcel shall not exceed the
proportional cost of the service attributable to the parcel;
Cal. Elm. Code. §4000(c)(9).
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(4) No fee may be imposed for a service unless that service is actually
used by, or immediately available to, the owner of the property in
question; and
(5) No fee may be imposed for general governmental services including,
but not limited m, police, fire, ambulance or library services where
the service is available to the public at large in substantially the same
mapper as it is to property owners.
The analysis above addresses the streetsweepingand tree trimming fees' compliance
with these requirements.
5. Adoption of Resolution
Following the conclusion of the public hearing, the City Council may adopt a
resolution approving the proposed fee increase and ordering that the proposed fee increase be
submitted to the voters. As described above, the election must be held at least 45 days after the
public hearing.
6. Implementation of the Proposed Increase
If the proposed fee increase does not receive the required approval from the voters,
the City may not impose the proposed increase. However, the City may continue to collect the fees
at their current rates. If the proposed fee increase receives the required approval from the voters, the
C V may impose the increased fees commencing with the effective date specified in the ballot
submitted to the voters.
For your convenience, I have attached a schedule of the actions required to increase
the street sweeping and tree trimming fees under Proposition 218. The election procedures will be
more fully outlined under a separate memorandum. If you have any questions regarding the
foregoing, or you wish to discuss this matter further, please do not hesitate to contact me.
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TENTATIVE SCHEDULE OF EVENTS FOR
INCREASING STREET SWEEPING AND TREE TRIMMING FEES
GOVERNMENT CODE SECTION 66018, PROPOSITION 218
AND SEAL BEACH MUNICIPAL CODE CHAPTER 22A
STEP DATE
I. Notice of proposed fee increase, the amount of the fee, the At least 45 days prior to
basis by which the amountwas calculated, the reason for the the public hearing.
fee, and the date, time and place of a public heating on the
fee is mailed to all property owners affected by the fee (July 13, 2001)
increase and any interested party requesting such notice.
2. Notice of proposed fee increase and the date, time and place At least 10 days prior to
of the public hearing is published. public hearing.
(August 16, 2001)
3. Notice ofproposed fee increase and the date, time and place At least 5 days after the
of the public hearing is published for the second time. fast publication.
(August 23, 2001)
4. City Council holds public hearing. At least 45 days after
notice is mailed and 10
days after notice lust
published.
(August 27, 2001)
5. In the absence of a majority protest, City Council adopts At the conclusion of the
resolution recommending the proposed fee increase and public hearing.
order the submission of the proposed fee increase to a vote
of the affected property owners or to the electorate residing
in the affected area.
6. Fee Increase is submitted to a vote of the affected property At least 45 days after the
owners or to the electorate residing in the affected area. public hearing.
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If approved by a majority of the affected property owners or Effective date specified
two -thirds of the electorate casting votes, the fee increase in the ballot.
goes into effect.
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