This is a longer post about the law surrounding municipal fees. The short version is that our City Attorney confirmed that Special Event Fees are not subject to limitations of Prop 26 during our 8.15.23 meeting. The long version is as follows:
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There is an argument being made that charging a Special Event fee is somehow prohibited based on Prop 26 and Prop 218. For reference, here is the Cal Cities Prop 26 and 218 Implementation Guide (Guide). The Guide describes several examples and details out the application of both propositions.
Essentially, CA voters passed propositions over the past several decades defining what is considered a tax, and requiring voter approval of such taxes. Some of these requirements were added to the State constitution, specifically in Article XIII C. Here is how a Tax is defined in that Article:
(e) As used in this article, “tax” means any levy, charge, or exaction of any kind imposed by a local government, except the following:
(1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege.
(2) A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product.
(3) A charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof.
(4) A charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property.
(5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government, as a result of a violation of law.
(6) A charge imposed as a condition of property development.
(7) Assessments and property-related fees imposed in accordance with the provisions of Article XIII D.
If a local government is getting money in any way, it is a tax, unless it falls into one of the 7 exceptions above.
This argument is easily rebutted, and it is the CA constitution itself that rebuts it. Section (e)(4) above lists as an exception from the definition of "tax" to be "A charge imposed for entrance to or use of local government property, or the purchase, rental, or lease of local government property." As the Special Event Fee is a charge for the use of government property (i.e. streets, parks, sidewalks, etc.), it clearly falls under the exception to the definition of a tax in (e)(4) above. Therefore, Prong 1 fails.
The argument some are making is two pronged and goes something like this: Prong 1 - The Special Event Fee is a tax, and therefore subject to voter approval. Prong 2 - Even if the Special Event Fee is not a tax, then a local government is limited to only recovering its costs, and since the Special Event Fee is greater than actual costs, it is somehow prohibited.
To rebut Prong 2, we need to look at the other provisions of section (e) above. Looking at (1) - (3), each contains the phrase 'reasonable costs'. The Guide discusses that the language of this section of the State Constitution is from Prop 26, and mirrors previous language contained in Prop 13, which imposes a burden on local government to prove that the
amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in
which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits
received from, the governmental activity. In other words, history and courts have essentially defined "reasonable costs" to be actual costs, with some leeway for calculation and distribution of the fees.
But if we look at item (e)(4), this exception to the definition of what constitutes a tax is different than the ones before it. It does not contain the phrase "reasonable costs". This is important because there is a canon of statutory interpretation that says, casus omissus pro omisso habendus est. This generally means that if something is omitted, it is considered to be done intentionally. SCOTUS's rules for statutory interpretation say that "Every word within a statue is there for a purpose and should be given its due significance." "Where Congress includes particular language is one section of a statute but omits it in another ..., it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion."
Because the section in the Constitution from Prop 218 that talks about charges for the use of government property omits any reference to reasonable costs, courts have read this as the authors intended - renting government property is not subject to this limitation. This is also described in the Guide, "in Howard Jarvis Taxpayers Association v. Bay Area Toll Authority (2020) 51 Cal.App.5th 435, review granted
October 14, 2020, S263835, the Court of Appeal held that the reasonable cost limitation does not apply to charges
imposed for entrance to or use of state property or the purchase, rental, or lease of state property. The California Supreme
Court has granted review of both cases." The Guide was published in Aug 2021. Subsequent to that, the California Supreme Court let stand the case which means that the Court of Appeal's ruling stands. As a result, Prong 2 of the argument fails.
