State APA Update: Proposition 26 Could Endanger General Plan Fees

Nov 4, 2010

The passage of Proposition 26 which requires two-thirds voter approval for certain local fees won't stop the gears of land use planning and development approvals from churning. However, it does turn traditional thinking on its head a fee is a tax unless proven otherwise and it's certain to lead to some litigation that might affect planning and development on the margins in California. At least that was the conclusion Wednesday of League of California Cities lobbyist Bill Higgins, who spoke at the California Chapter, American Planning Association, conference at La Costa Resort in Carlsbad.

Philosophically, Proposition 26 represents a huge change in the way California views fees and taxes. There's now a new definition of taxes: "Any  levy,  charge  or  exaction  of  any  kind" imposed by the government, unless the fee falls within an exemption under the law. But the practical effect on planning may not be great.

Although television commercials made it seem as though all fees will be affected, in fact Proposition 26 has a very narrow target: Sinclair Paint Co. v. Board of Equalization, a 1997 court ruling that upheld regulatory fees on manufacturers of lead paint to pay for programs to assist children subject to lead poisoning. The intent of Proposition 26 is to outlaw fees imposed generally on an industry to pay for the mitigation of problems created by that industry's products, without tying the fees to specific impacts. In a nutshell, Proposition 26 takes the "special benefit" language from assessments and applies them to fees.

"Proposition 26 requires proportionality accounting on an individual user basis," Higgins said. In that sense, it's not unlike current rules on development impact fees and other obligations imposed on developers. In fact, development impact fees are exempt from Proposition 26. So are administrative costs associated with running the government but not, apparently, advanced planning and regulatory rulemaking, which would have to be paid for out of tax funds.

To that last point, Higgins said a broader question is whether other, more general fees imposed on developers for example, a General Plan fee used to stockpile funds to update the General Plan might get caught in Proposition 26's web.

More broadly, a variety of other fees that local governments rely on though not in the planning and development arena might be affected. For example, according to prominent municipal lawyer Michael  G.  Colantuono, franchise fees could be at risk. And municipal gas and electric rate increases which were exempt from Proposition 218 will now be subject to a two-thirds vote, even though rate increases for private utilities are not. Fees and rates covered by Proposition 218 are exempt from Proposition 26.