State of California
Pete Wilson, Governor

Governor's Office of Planning and Research
1400 Tenth Street
Sacramento, CA 95814

Lee Grissom, Director
Antero Rivasplata, Author
Tom Pace, Planning Intern

June 1997

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Chapter 6. LEASING


Appendix: Text of Proposition 218



California is often looked upon as a leader in innovative methods for financing new public infrastructure and programs. The citizens' "taxpayer revolt" of the late 1970's, represented by the twin measures of Proposition 13, the property tax limitation initiative, and the "Gann limit" on governmental appropriations, relieved many landowners of a property tax burden that they considered onerous. Once primarily dependent on property tax revenues to fund public works facilities, as well as other programs, local governments and school districts have sought alternative methods for raising funds to finance needed public works projects.

Today, local government relies upon a mixture of old and new procedures for raising revenue. Property taxes still do their part. However, revenue sources that were once considered minor, such as special taxes and benefit assessments, are becoming increasingly common. Impact fees and leaseback agreements are at the crest of a "new wave" of alternative financing mechanisms.

In November 1996, California voters enacted Proposition 218, a Constitutional amendment which "protects taxpayers by limiting the methods by which local governments exact revenue from taxpayers without their consent." Proposition 218 now requires voter approval prior to imposition of general taxes, assessments, and certain user fees. It radically changes the way in which local government, including charter cities, raises revenues. From now on, the process will be slower, the overhead costs will be greater, and, with the new ability of the electorate to repeal or reduce taxes, assessments, fees, and charges by initiative, there will be less certainty of a continuous revenue stream.

This paper has been extensively revised to reflect the changes made by Proposition 218. The new discussions note where there are uncertainties or ambiguities in the language of the measure. Existing statutes which appear to conflict with the provisions of Proposition 218 are also noted where possible. For the reader's convenience, the full text of Proposition 218 can be found in the Appendix.

Legislation intended to clarify Proposition 218 is expected to be introduced in 1997. And, as time passes, the courts will undoubtedly be called upon to interpret Proposition 218's intricacies. When new legislation or legal interpretations become available, we will update this paper.

At this time, the best single analysis of Proposition 218 and its impacts is Understanding Proposition 218 written by the California Legislative Analyst's Office. Interested readers may obtain a copy from the Legislative Analyst at 925 L Street, Suite 1000, Sacramento, CA 95814 (916/445-6442) or from the Legislative Analyst's internet site at: Additional analyses are listed in the Bibliography.

Ensuring that new development will be provided with adequate infrastructure and services is a primary consideration of local government. A Planner's Guide to Financing Public Improvements describes current statutory financing options available to California communities. Its primary purpose is to provide city and county planners with a general discussion of methods of public works financing that do not rely on state funds.

A Planner's Guide to Financing Public Improvements is only an introduction to the subject of local government finance. It is not intended to be a detailed text on any of these financing alternatives and is not an endorsement of any particular method.

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