June 21, 2018 -- Client Alert
On June 5, 2018, California voters approved four ballot initiatives impacting public agencies, water and infrastructure, Propositions 68, 69, 71 and 72. California voters approved bonds for water infrastructure (68) and limited the use of certain funds for transportation infrastructure (69). Voters also approved measures addressing the effective date of election results (71), and providing tax incentives for rainwater capture (72).
Proposition 68. The California Drought, Water, Parks, Climate, Coastal Protection, and Outdoor Access For All Act of 2018 allows the state to sell $4.1 billion in general obligation bonds. These funds will be allocated to state and local parks, environmental protection projects, land conservation, water infrastructure projects, and flood protection projects.
Of this, $1.6 billion will fund water-related projects intended to provide safe drinking water to disadvantaged communities, improve water supply reliability, help implement the Sustainable Groundwater Management Act and watershed restoration.
Southern California residents are expected to benefit the most from this proposition because the measure focuses on sites in Southern California such as the Santa Ana River and the San Gabriel and Lower Los Angeles Rivers and Mountains Conservancy. Proponents hope Proposition 68 will save cities millions of dollars over the next decade.
Proposition 68 was endorsed by the League of California Cities and the Association of California Water Agencies and passed with 56% of the vote.
Proposition 69. Proposition 69 requires the California legislature to use revenue from the imposed fees and taxes generated by Senate Bill 1 (the Road Repair and Accountability Act of 2017) on transportation repair projects. SB 1 created a Road Rehabilitation and Maintenance Account in the State Transportation Fund, which includes revenues from a $0.12 per gallon increase in the motor vehicle fuel (gasoline) tax; 50% of a $0.20 per gallon increase in the diesel excise tax; a portion of a $25 to $175 vehicle license fee; and a new $100 annual vehicle registration fee for zero-emissions vehicles. SB 1 requires that much of this funding be allocated 50% for the state highway system and 50% to municipal and county roads.
The passage of Proposition 69 means SB 1 funds must be used on roads, bridges and highways, and may not be diverted to repay general obligation bond debt or reallocated for any other purpose beyond transportation.
The League of California Cities endorsed Proposition 69. It passed with 80.4% of the vote.
Note: Proposition 69 and Senate Bill 1 will likely be challenged in November. The “California Voter Approval for Gas and Vehicle Taxes Initiative” is likely to appear on the November ballot as a constitutional amendment. On April 30, 2018, proponents of the measure submitted 940,000 signatures, more signatures than required to qualify the measure. As of June 20, 2018, the California Secretary of State was still verifying these signatures. The proposed measure would require majority voter approval for the state legislature to impose, increase, or extend a tax on gasoline, diesel fuel, or the operation of a vehicle or trailer coach on public highways beginning January 1, 2017. The January 1, 2017 retroactive effective date was chosen because the bill is aimed at invalidating SB 1, which passed the Senate and was signed by the governor in 2017.
Proposition 71. This proposition was intended to correct an ambiguity in state law, which allows ballot measures, which appear to have won approval, to take effect before all votes have been counted. The measure requires the California Secretary of State to certify passage of a proposition before it takes effect.
Under existing law, the Secretary of State files the statement of the vote no later than 38 days after Election Day, after receiving voting results from each county. Proposition 71 amends the State Constitution so that state initiatives and referenda, as well as legislative ballot measures that change the State Constitution, take effect on the fifth day after the Secretary of State files the statement of the vote. Thus, moving forward, most state ballot measures will take effect about 6 weeks (no later than 43 days) after Election Day.
Proposition 71 passed with 76.8% of the vote.
Proposition 72. Proposition 72 provides that the addition of rainwater capture systems to property will not increase the assessed/taxable value of property.
Rainwater capture systems store and reuse water collected from the roof of a property, which can preserve fresh water for natural habitats and increase water conservation. Supporters believe rainwater capture systems can benefit local governments by conserving rainwater for use, which can decrease financial burdens on cities and local agencies during intense droughts.
Generally, when a property owner adds new construction to their property, the assessed value of the property increases. However, this measure exempts the addition of a rainwater capture system from the definition of “new construction” for tax purposes. Supporters were concerned a tax increase could discourage homeowners from adding these systems to their properties and halt a useful water conservation incentive. Thus, proponents hope Proposition 72 will incentivize homeowners to add rainwater capture systems to their property.
This measure was endorsed by the League of California Cities. It passed with 83.8% of the vote.
An Additional Water Bond Measure Will Appear on the November Ballot
On November 6, 2018, California voters will decide another water bond measure. The measure would approve $8.877 billion in general obligation bonds for water-related infrastructure and environmental projects. $2.355 billion of that would go to conservancies and state parks to restore watershed lands and to nonprofits and local agencies for river parkways. $640 million would be allocated to groundwater sustainability agencies to implement groundwater sustainability plans required by the Sustainable Groundwater Management Act. $500 million would be used for public water system infrastructure improvements to meet safe drinking water standards. $1.398 billion would be spent on projects benefitting disadvantaged communities, with an additional $2.637 billion prioritized for disadvantaged communities.
For further information, please contact Christine Carson from Aleshire & Wynder, LLP’s Water Law Practice Group at (949) 223-1170.
Disclaimer: Aleshire & Wynder, LLP legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Please seek legal advice before acting or relying upon any information in this communication.