1.4 Local Government Revenue Sources – Security for and Repayment of Debt
Public agencies may structure their debt with a security or repayment pledge from a variety of taxes, assessments, fees, and charges (i.e., local government revenue sources). Broadly speaking, debt may be payable from income and taxes and/or from other, often limited, revenue sources.
Amendments to the California Constitution over the last several decades have imposed substantive limitations and procedural requirements for the tax levies, assessments, fees, and charges that comprise local government revenue. This in turn has affected the ability of local governments to generate revenues to pay debt service and has influenced the shape of the financing vehicles employed by public agencies. These limitations, and relief from certain of these limitations, have been enacted primarily through the people’s exercise of the initiative power. See Section 1.6, The Initiative and Referendum Powers.
Public agency revenue sources fall, for purposes of the California Constitution, into one of the categories described in Figure 1-1 and the sections below.
Figure 1-1
| HISTORICAL TAXES | ||
| AD VALOREM REAL PROPERTY TAXES | General tax levy on assessed value (AV) for general purposes, limited to 1% of AV. Generally limited to taxes that existed upon passage of Proposition 13 in 1978.14 May be used as a source of repayment for tax and revenue anticipation notes (TRANs) and leases, including certificates of participation (COPs). See Section 1.4.3, Ad Valorem Real Property Taxes. | |
| TAXES REQUIRING APPROVAL OF VOTERS | ||
| AD VALOREM REAL PROPERTY TAXES SECURING DEBT OBLIGATIONS | Tax levy on AV to repay voter-approved debt above the 1% limit established by Proposition 1315 For public agencies, except school/community college districts (school districts), levies require approval by two-thirds of voters. General obligation debt issued by school districts for facilities may be authorized with 55% voter approval. See Section 1.4.4, Ad Valorem Real Property Taxes Securing Voter-Approved Obligations. | |
| GENERAL TAXES | Tax levy levied by a city or county for a general purpose. New, extended or increased general taxes require approval by a two-thirds vote of the taxing entity’s governing board members and a majority of voters. May be used as a source of repayment for general fund obligations such as TRANs and leases. See Section 1.4.5, General Taxes. | |
| SPECIAL TAXES | Special tax levy (including parcel tax) for a specific purpose or by special districts. Levies generally require approval by a majority of the taxing entity’s governing board and two-thirds of voters. Typically used as a source of repayment for Mello-Roos bonds or sales tax revenue bonds. See Section 1.4.6, Special Taxes. | |
| CHARGES REQUIRING APPROVAL UNDER PROCEDURAL REQUIREMENTS | ||
| ASSESSMENTS | Levy of charges on real property assessed in proportion to a special benefit, with burden of proof on the levying public agency. Procedural requirements for assessments include public hearings and approval by majority vote of governing board members and property owners. Typically used as a source of repayment for assessment bonds. See Section 1.4.7, Assessments. | |
| FEES AND CHARGES | Typically used as a source of repayment for enterprise revenue bonds, including water, wastewater and solid waste utility revenue bonds. Can be a source of general fund revenue. “Property-related fees and charges” are subject to additional requirements. See Section 1.4.8, Fees and Charges. | |