An Update on the CBRT Initiative

As posted previously, a group of interested parties and corporations, which make up the California Business Roundtable (CBRT), placed the Taxpayer Protection and Government Accountability Act on the November 2024 ballot. Companies like AMR have further supported this initiative.

Upon further analysis, it is now believed that this initiative will severely undermine local control on a wide range of local government revenue tools, including utility rates, general fees, property-related fees, certain taxes, and benefit assessments that local agencies currently rely on to provide essential services and infrastructure. It is retroactive back to January 1, 2022, and would effectively cancel certain measures approved by the voters and fees/rates/charges approved by a legislative body since January 1, 2022.

Most recently, the Governor and legislative leaders have moved to have this CBRT measure taken off the November 2024 ballot, given the extreme effects it would enshrine and the manner it which it was placed on the ballot. They argue it amounts to a “revision” of the California Constitution that cannot be performed solely by initiative.

Your CSMFO Professional Standards Committee has been monitoring the movement of this initiative and collecting updated analyses and guidance as it’s become available. To clarify the CSMFO membership’s understanding of this ballot measure and the provisions found within, please note the following:

1. All special taxes would need to have a 2/3 approval. There can be no citizen initiatives at 50% approval.
2. The standard for developing fees changes from “reasonable cost” to “actual cost” of a service or product. In addition, any fee must be defined as the “minimum amount necessary,” net of other revenues “received to provide such service or product.” This is very concerning. (For example – must a building permit for one applicant be different from another with slightly differing circumstances?)
3. Any rental or other fees for the use of government property must be “reasonable.” Currently, governments have deference in determining rental and lease fees, aligning mostly to the local market rather than cost.
4. Retroactivity: Any taxes or fees approved after 1/1/2022 will sunset in 12/2025 if not (re)adopted in compliance with this measure. This retroactivity can be significant for agencies that have recently gone through fee adjustments and annexations or are planning to before November 2024.
5. The government will bear the burden of proof to justify its fees by “clear and convincing evidence,” which is a very high legal burden, just below that required for homicide cases.
6. Voluntariness or receipt of benefit, privilege or other exchange is not a factor in identifying a tax.
7. If this passes, the definition of “impose” will mean to “collect.” This may mean a potential for new lawsuits with every payment made by a taxpayer.

ACA 13, a constitutional amendment, passed both the Assembly and Senate. If approved by voters in November 2024, it would require future ballot measures that increase voter approval requirements to also pass by the same margin. If it passes, it would mean that this CBRT initiative would require a 2/3 vote to pass.

Lastly, related to local infrastructure, we will also see ACA 1 on the November 2024 ballot. If approved, ACA 1 will lower the necessary voter threshold from a two-thirds supermajority to 55 percent to approve certain local General Obligation (GO) bonds and special taxes for affordable housing and a wide-range of public infrastructure projects.

If you have questions regarding this topic, contact Daniel Buffalo, Chair of the Professional Standards Committee at standards.chair@csmfo.org.