The City of Palo Alto is preparing to fight a ballot initiative set for 2024. The initiative, known as the taxpayer Protection and Government Accountability Act, is being led by the California Business Roundtable, a business advocacy group. If passed, it will make it harder for states and local governments to raise taxes and fees, potentially reversing two revenue measures approved by city voters in November 2020.
The bill would raise the bar for passage of new taxes at both state and local levels, broaden the definition of a tax, and classify some fees as taxes. State legislators would need two-thirds approval in each legislative house and a majority vote from statewide voters to pass new taxes. Proposals to enact taxes would also need to win a supermajority in Congress followed by a vote from voters.
The bill intends to reassert voter intent to limit bureaucracy and allow all fees and costs to be passed or rejected by voters or elected governmental agencies. However, city officials claim business groups’ proposals pose fiscal uncertainty and will significantly impact services. Specifically, the proposals threaten two bills passed after January 2022: Measure K, which established a business tax, and Measure L, which transferred funds out of the City of Palo Alto.
The bills are legally questionable because they prohibit advisory action and include guidelines dictating how funds should be spent. While the new business tax is a general tax, it includes guidelines for spending on public safety, affordable housing, and safety at railroad crossings. The proposed bill would mean that revenue from general taxes “may be used, or should be used for specific purposes,” limiting the city’s flexibility to monetize identified needs.
A coalition of unions and governmental organizations voiced opposition to the measure, with dozens of cities taking formal positions against the bill. According to the League of California Cities, the bill “imposes undemocratic restrictions on local voters and local governments and can force drastic cuts to critical services.”
An analysis by the Office of Analysts found that the proposed bill would make it harder for state legislators to increase any type of state revenue. Local governments also face greater restrictions than states on raising revenue, resulting in lower tax and fee income for local governments. Council member Pat Bart, chairman of the Finance Committee, said that future local tax and fee revenues are likely to be lower than they would have been without the bill.
Council member Tanaka was the only member who supported the bill, believing it would protect voters at a time of rising living costs. However, the city hopes that voters will maintain their interest in supporting services and opposing the bill’s limitations.