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Home My WebLink AboutCap Retirement Property Tax at rate set for Fiscal Year 2012 VNUUF OF PUBLICATION "AN ORDINANCE OF THE PROPERTY TAX LEVY OF. CITY OF HUNTINGTON Z E R 0 A'N D BEACH AMENDING THE 0.015001100TH DOL- STATESTATE OF CALIFORNIA)LIFORNIA) HUNICIPAL N 'BEACH LABS (ASSES E PER 6`� JW 1.7 @�! .MUNICIPAL CODE BY $100 OF ASSESSED VAL- ADDING CHAPTER 3.07 UE TO BE LEVIED FOR SS. THE T0.CAPPING. EMPLOYEE RETIREMENT p� �/ ® p�� THE RETIREMENT PROP- COSTS FOR FISCAL COUNT I OF ORANGE ) ERTY TAX AT FISCAL YEAR 2012/13 WITH'CITY ,YEAR 2012/13 RATES" RECTION TO THE CITY SYNOPSIS- ATTORNEY TO RETURN IN HUNTINGTON BEACH WITH' THIS ORDINANCE THERE IS A CHARTER TO'CAP'THE PROPERTY PROVISION THAT PRO- TAX LEVY AT THE 2012/, 1 am a citizen of the United States and a VIDES FOR A TAX ON 13 RATE. REAL PROPERTY TO PAY PASSED AND ADOPTED resident of the County of Los Angeles; I FOR CERTAIN ,OF THE by the City Council of am over the age of eighteen years, and TIREE COST of RE- the city t Huntington TREE BENEFITS. THE Beach at a regular PROPERTY TAX HAS meeting held not a party to or interested in the notice BEEN LEVIED EACH August 20, 2012 by the YEAR SINCE 1966 AND' following roll call vote: published. I am a principal clerk of the IS COLLECTED ON ALL AYES: Shaw, Carchio, REAL PROPERTY IN THE Bohr,.Boardman HUNTINGTON BEACH CITY OF HUNTINGTON NOES:Harper,Hansen' BEACH TO RECOVER ABSTAIN:None INDEPENDENT, 'which was adjudged a. PCOSTS RE RELATED TO LATE EM- ABSENT:THE Dwyer TEXT OF THE- newspaper of general circulation on PLOYEE RETIREMENT ORDINANCE IS AVAIL- BENEFITS. PURSUANT ABLE IN THE-, CITY September 29, 1961, case A6214, and TO CALIFORNIA LAW,IN- CLERK'S OFFICE. . CLUDING PROPOSITION This ordinance is effec- June 11, 1963, case A24831, for the 62 AND 218, AS WELL rive 30 days after AS':LITIGATION SPECIFI- adoption. City of Huntington Beach County of _ CALLY RELATED TO THIS CITY OF HUNTINGTON' HUNTINGTON 'BEACH BEACH Orange, and the State of California. TAX, THERE IS A MAXI- 2000MAINSTREET g MUM PERCENTAGE HUNTINGTON BEACH, Attached to this Affidavit- is a true and THAT MAY BE TAXED TO CA 92645 PAY FOR RETIREMENT 714-536-5227' complete co as was printed and (ITYOFHUNTINGTON BENEFITS. CURRENTLY; JOANL.LERK CITY p copy p ,THE CITY- ONLY IM- CLERK published on the following date(s): BEA(H. POSES A SMALL PER- Publish:8/30/12H.B.In- LEGAL NOTI(E CENTAGE OF WHAT dependent COULD BE TAXED run- ORDINANCE NO.3954 SUANT TO THE CAP.THE Thursday, August 30, 2012 Adopted by theaty(ouncil COUNCIL PROVED ARECENTLY TIRE AP- on AUGUST 20,20iY_ .-----_-----_--.--;__..'. certify (or declare) under penalty of perjury that the foregoing is true and correct. Executed on September 6, 2012 at Los Angeles, California Signature ��z3 Council/Agency Meeting Held:_4 - to — / Deferred/Continued to: K!-A prove Conditional) Ap ro d De ied ty Cler Sign t re Council Meeting Date: July 16, 2012 Department ID Number: CA 12-012 CITY OF HUNTINGTON BEACH REQUEST FOR CITY COUNCIL ACTION SUBMITTED TO: Honorable Mayor and City Council Members SUBMITTED BY: Jennifer McGrath, City Attorney PREPARED BY: Jennifer McGrath, City Attorney SUBJECT: Approve for introduction an ordinance capping the Retirement Property Tax at rate set for Fiscal Year 2012/13 to Pay for Pre-1978 Employee Retirement Benefits. ORDINANCE NO. 3954 Statement of Issue: In Huntington Beach, there is a charter provision that provides for a tax on real property to pay for certain of the City's cost of retiree benefits. The property tax has been levied each year since 1966 and is collected on all real property in the City of Huntington Beach to recover costs related to pre-1978 public employee retirement benefits. Pursuant to California Law, including Proposition 62 and 218, as well as litigation specifically related to this Huntington Beach tax, there is a maximum percentage that may be taxed to pay for retirement benefits. Currently, the City only imposes a small percentage of what could be taxed pursuant to the cap. The Council recently approved a retirement property tax levy of Zero and 0.015001100th Dollars ($0.01500) per $100 of assessed value to be levied for employee retirement costs for Fiscal Year 2012/13 with direction to the City Attorney to return with an ordinance or resolution "capping" the property tax levy at the 2012/2013 rate. Financial Impact: N/A Recommended Action: Motion to: Approve for introduction an ordinance capping the Retirement Property Tax at rate set for Fiscal Year 2012/13 to pay for Pre-1978 Employee Retirement Benefits. Alternative Action(s):Do not approve for introduction an ordinance capping the Retirement Property Tax at rate set for Fiscal Year 2012/13 to Pay for Pre-1978 Employee Retirement Benefits Analysis: The voters of the City of Huntington Beach ("City") authorized the City Council to pay for the cost of employee pensions through a separate retirement property tax. Section 607(b)(2) of the 1978 Charter provides that the City may impose a retirement tax "sufficient to meet all obligations of the City for the retirement system in which the City participates." However, each year since the tax was approved, the City has approved a resolution that has HB -165- Item 17. - I authorized the imposition of a small percentage of the maximum.allowable.percentage of tax to pay pre-1978 employee retirement costs. Currently, the percentage collected amounts $0.01500 per $100 of assessed property valuation, which represents only 30% of the total costs that could legally be collected. In addition to. authorizing the imposition of the tax, the resolution suspends the collection of the remainder amount authorized under Revenue & Taxation Code Section 96.3 1(a)(4) and retains the authority to levy the tax in future years up to the rate of$0.05002 per $100 of assessed value (maximum). At its last meeting, the City Council approved Resolution 2012-41 setting the 2012/13 tax rate; with direction that the City Attorney draft an ordinance or resolution that caps the tax at the 2012/13 rate. In addition, Council provided direction that any future increases in the tax must be approved by a "supermajority" of council, i.e., 2/3 vote. While a supermajority requirement would make it difficult for future councils to re-impose the tax without the cap, it could not be imposed without a charter amendment. However, as will be discussed, California Constitution Article XIII (C) and (D) (Proposition 218) would likely require 2/3 voter approval to make any changes to the proposed cap (making a change to the cap even more difficult than a supermajority of council). The courts have held that a general or special tax is increased when an agency either (1) increases the applicable rate used to calculate the tax; or (2) revises the methodology by which the tax is calculated if that revision results in an increased amount being levied on any person or parcel. A.B. Cellular v. City of Los Angeles (2007) 150 Cal.AppAth 747. A general tax or special tax is not "increased" if (1) it is imposed at a rate no higher than the maximum rate previously approved, or (2) it is adjusted in accordance with a schedule of adjustments, including a clearly defined formula for inflation. "In the same vein", Cities may temporarily collect a previously approved tax at a rate lower than was authorized by the voters. In doing so, the city must not permanently lower or "cap" the rate. On one hand, if a portion of the rate is being temporarily "suspended" for a certain period of time, courts have held that corresponding increase does not trigger the voter approval requirements of Proposition 218. On the other hand a city that collects a previously approved tax at a rate lower than what was authorized by the voters, without a statement clarifying the intent and purpose of the suspension (capping the lower rate) changes the methodology for calculating the tax when it resumes collecting the tax at the previously approved rate. A.B. Cellular v. City of Los Angeles (2007) 150 Cal.AppAth 747. Currently, the City suspends imposing the full amount of the tax each year and reserves the right to impose the maximum amount in the future. By doing so, the City is not required to gain voter approval each year the tax is imposed. However, if the proposed cap is imposed, as discussed in the A.B. Cellular case, the City would have to gain 2/3 voter approval to increase the rate in the future. Environmental Status: N/A Strategic Plan Goal: Improve the City's Infrastructure Attachment(s): r - 1 An Ordinance Adding Chapter 3.07 - ORDINANCE NO. 3954 Item 17. - 2 xB -166- ATTACHMENT # 1 ORDINANCE NO. 3954 AN ORDINANCE OF THE CITY OF HUNTINGTON BEACH AMENDING THE HUNTINGTON BEACH MUNICIPAL CODE BY ADDING CHAPTER 3.07 RELATING TO CAPPING THE RETIREMENT PROPERTY TAX AT FISCAL YEAR 2012/13 RATES The City Council of the City of Huntington Beach does hereby ordain as follows: SECTION 1. The Huntington Beach Municipal Code is hereby amended by adding new Chapter 3.07 thereto, to read as follows: 3.07 Retirement Tax Can. The tax sufficient to meet all obligations of the City for the retirement system in which the City participates, due and unpaid or to become due during the ensuing fiscal year as provided in Huntington Beach Charter Section 607 (b) 2, shall be set at the rate adopted for Fiscal Year 2012/13, which is$0.01500 per$100 of assessed valuation. SECTION 2. In the event this ordinance is held invalid by a court of competent jurisdiction, the tax shall automatically be reinstated as it existed prior to adoption of this ordinance. SECTION 3. This ordinance shall become effective 30 days after its adoption. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 20th day of q„q„st , 2012. Mayor ATTEST: APPROVED AS TO FORM: City Clerk f--City Attorney My - INITIAT VIEWED AND APPROVED: ty anager 12-3407/81687 Ord. No. 3954 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, JOAN L. FLYNN, the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing ordinance was read to said City Council at a regular meeting thereof held on July 16,2012, and was again read to said City Council at a regular meeting thereof held on August 20, 2012, and was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council. AYES: Shaw, Carchio, Bohr, Boardman NOES: Harper, Hansen ABSENT: Dwyer ABSTAIN: None I,Joan L.Flynn,CITY CLERK of the City of Huntington Beach and ex-officio Clerk of the City Council,do hereby certify that a synopsis of this ordinance has been published in the Huntington Beach Fountain Valley Independent on August 30,2012. p In accordance with the City Charter of said City Joan L. Flynn, City Clerk Ci Jerk and ex-officio rk Senior Deputy City Clerk of the City Council of the City of Huntington Beach, California LEGISLATIVE DRAFT ORDINANCE NO. 3954 Chanter 3.07 Retirement Tax Ca- 3.07 Retirement Tax Can. The tax sufficient to meet all obligations of the Citv for the retirement system in which the Citv participates, due and unpaid or to become due during the ensuing fiscal year as provided in Huntington Beach Charter Section 607 (b),2 shall be set at the rate adopted for Fiscal Year 2012/13, which is $0.01500 per$100 of assessed valuation. ax r - a CITY OF HUNTINGTON BEACH w City Council Interoffice Communication To: Honorable Mayor and City Council ers From: Keith Bohr, City Council Member Date: August 13, 2012 Subject: CITY COUNCIL A#EMEER ITEM FOR THE AUGUST 20, 2012, CITY COUNCIL MEETING-- RECONSIDERATION OF TWO COUNCIL AC77ONS STATEMENT OF ISSUE: On August 6, 2012, 1 voted on the prevailing side of two Council actions and am requesting that City Council reconsider both items to ensure all Council Members are given the opportunity to participate in the final determination of each item. RECOMMENDED ACTION: I am making the following recommended actions: Motion to: 1) dote to reconsider the action to Adopt Clarification to Resolution 2012-41 Regarding the city's Statutory Maximum Tax Override. 2) dote to reconsider the adoption of Ordinance No. 3954, "An Ordinance of the City of Huntington Beach Amending.the Huntington Beach Municipal Code By Adding Chapter 3.07 Relating To Capping The Retirement Property Tax At Fiscal Year 2012/13 Rates" to pay for pre-1978 Employee Retirement Benefits. xc: Fred Wilson, City Manager Paul Emery, Deputy City Manager Bob Hall, Deputy City Manager Joan Flynn, City Clerk Lori Ann Farrell, Director of Finance Jennifer McGrath, City Attorney oo < ��e V ,