Oakland's Latest Parcel Tax Proposal Is Illegal

The latest parcel tax proposal is not only offensive, it is also illegal. Below is the text of the email I sent to Oakland officials today advising them of this fact. Not that illegality necessarily served as a deterrent in the past, but I hope they give some serious consideration to the points raised below. Hope some of you find the time to come to City Hall tonight to speak against this folly.

Dear Oakland Officials:

I urge you to vote against placing yet another parcel tax on the ballot. First, the tax is blatantly illegal, and violates the California Constitution. It will not pass legal muster and will only subject the City to additional litigation. Moreover, subjecting Oakland residents to yet another parcel tax, in light of the numerous betrayals that we have already suffered under Measure Y/BB will only add insult to injury. Lastly, the parcel tax is doomed to fail, and it would be a waste of City resources to even try to pass it.

I. The Tax Is Illegal

The proposed parcel tax is a flat $80.00 per parcel tax, with all funds to be deposited into the general fund, which may be used for any purpose. Therefore, the tax would clearly be considered a “general tax,” and a general tax imposed on property has been declared illegal as a matter of law in numerous published cases, and is expressly prohibited under the California Constitution and Proposition 218.

Ironically, Oakland has already lost a lawsuit on a similar parcel tax - Measure M. In 1988, then Director of Finance Richard Digre believed the tax to be unconstitutional, and refused to implement it. Oakland, in its infinite wisdom, filed a writ with the court of appeal to try to compel Mr. Digre to collect the illegal tax, and Oakland lost. The Court of Appeal held Measure M to be unconstitutional. City of Oakland v. Digre (1988) 205 Cal. App. 3d 99. The City tried to characterize the tax as “not a special tax” to avoid the 2/3 vote requirement of Proposition 13. However, the court noted that “Since Measure M monies go into Oakland’s general fund, the tax is a general tax even though the primary purpose of the tax is to fund specified city services.” Id. At 104. As a general tax, the court held that Measure M violated Article XIII, Section 1 of the California Constitution. Notably, California Constitution's Section 4 of Article XIII A (Proposition 13), states: "Cities, counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except ad valorem taxes on real property or a transaction tax or sales tax on the sale of real property within such city, county or special district." Therefore, under Proposition 13, cities could impose special taxes on property, but not general taxes.

More recently, in Neilson v. City of California City (2005) 133 Cal. App. 4th 1296, the court clarified when local agencies can legally impose parcel taxes. In that case, the plaintiff challenged a flat-rate parcel tax, which had been approved by a 2/3 majority vote, arguing, among other things, the tax was a general tax, despite its stated status as a special tax. The plaintiff argued that because the tax was designed to fund so many different city functions, all of which were typically funded from the general fund, the tax was actually a general tax disguised as a special tax. In analyzing the issue, the court noted that under Proposition 13, general taxes are subject to majority, as opposed to a 2/3 vote requirement. Since the passage of Proposition 13, voters have approved additional restrictions, including Proposition 62, passed in 1986, which added Sections 53720 through 53730 to the Government Code. Section 53721 provides: “All taxes are either special taxes or general taxes. General taxes are taxes imposed for general governmental purposes. Special taxes are taxes imposed for specific purposes. “ Section 53722 clarified that special taxes are subject to the 2/3 vote requirement of the electorate, as well as the public body voting to place the matter on the ballot, and Section 53723 clarified that general taxes were subject to a majority vote.

After Proposition 62, voters approved Proposition 218 to further limit taxes. “Proposition 218 allows only four types of local property taxes: (1) an ad valorem property tax; (2) a special tax; (3) an assessment; and (4) a fee or charge…..It buttresses Proposition 13’s limitations on ad valorem property taxes and special taxes by placing analogous restrictions on assessments, fees and charges.” Howard Jarvis Taxpayers Assn v. City of Riverside (1999) 73 Cal. App. 4th 679, 682, cited by Nielson at 1307. Sections 3 and 4 of Proposition 218 amended the California Constitution by adding article XIIIC, which concerns voter approval of local tax levies, and Article XIIID, which limit’s the ability of local governments to impose assessments, fees and charges. For example, Article XIII D, Section 6, Subdivision (b)(5) prohibits property related fees or charges for “general governmental services” such as police and fire. (Article XIIID.) The court in Nielson made it clear that general property taxes are not permitted, while special taxes are. Id. At 1308. It noted: “City does not dispute that a flat-rate parcel tax is unconstitutional if it is a general tax.” Id. At 1309, citing Digre, supra, and Thomas v. City of East Palo Alto (1997) 53 Cal. App. 4th 1084. The court went on to discuss the distinctions between a special tax and a general tax. A “general tax” is defined as “an tax imposed for general governmental purposes,” and a “special tax” is “any tax imposed for specific purposes, including a tax imposed for specific purposes, which is placed into a general fund.” Id. At 1309. “Pursuant to these definitions, a tax is special whenever expenditure of its revenues is limited to specific purposes; this is true even though there may be multiple specific purposes for which revenues may be spent…A tax is general only when its revenues are placed into the general fund and are available for any and all governmental purposes.” Id., citing Howard Jarvis Taxpayers Assn. v. City of Roseville (2003) 106 Cal. App. 4th 1178, 1185.

Government Code Section 50075 et seq., added in 2001, clarifies that cities may impose "special taxes" with a 2/3 majority, but requires that the special tax "shall provide accountability measures that include, but are not limited to, all of the following: (a) A statement indicating the specific purpose of the special tax; (b) a requirement that the proceeds be applied only to the specific purposes identified....; (c) the creation of an account into which the proceeds shall be deposited; (d) an annual report pursuant to Section 50075.3." The proposal incorporates none of these safeguards.

Under the legal authorities cited above, there can be no question that the tax you are being asked to consider is a general tax, disguised as a “special tax.” While the materials presented use the terminology “special tax” and concede that a 2/3 vote is required, the verbiage makes it clear that not only is all the money placed in the general fund (Part I, Section 3), but also that the purpose of the tax is “for any legal municipal purpose….” No special purpose is described. (Part 1, Section 1). Therefore, the proposed tax is clearly a general tax on property, and as such is constitutionally prohibited. The proposed tax is patently illegal and must be rejected.

II. The City Has Failed To Honor The Promises of Measure Y And Residents Will Not Support Another Tax

Property owners have enjoyed none of the benefits promised under Measure Y or BB. We were promised increased police staffing. We had a fully staffed force for less than six months since we voted for Measure Y in 2004. For the 2009/10 fiscal year, the City’s police force was not fully staffed for even one month, and the City collected Measure Y taxes anyway. The City’s decision to understaff the department was deliberate, and its collection of the tax was blatantly illegal. Many residents had a dedicated problem solving officer for only a year of the 6 years we have been burdened with Measure Y taxes. Some officers were illegally deployed outside of their beats for months at a time. The promised “crime reduction team” was never delivered. Measure BB promised a “restoration” of the problem solving officers, one for each beat. The police department then dissolved the 57 community policing beats into 35, so that now there are at least 8 beats in Oakland that don’t have their own problem solving officer, while other beats have more than one. This is an utter betrayal of the promises made with Measure BB. Now, property owners pay over $90.00 a year and we have 140 officers less than what we were promised under Measure Y. Crime is rising. You have lost your credibility. On March 14, 2010 my pending lawsuit will be heard, the City will lose, and the City’s credibility will be damaged even further.

It is patently unfair to tax residents, who are already paying higher taxes for an ever-dropping police force, when police officers contribute nothing to their pensions; when other City workers have not taken any real pay cut; when a substantial portion of the City’s budget is devoted to non-essential services under “Kids First;“ when the City Council supports giving tens of millions of dollars a year in no-bid contracts to non-profits, with little accountability and little track record of success. Voters, who are already struggling financially, and who have already defeated additional parcel and phone taxes, will not support this ill-advised effort. I urge you to vote against this proposal.