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HomeMy WebLinkAboutResolution 2001-43 - Adopt F/Y 2001/02 Tax Rate $0.04930 per 08� 2o-01 = CITY OF HUNTINGTON BE CH �, � CITY COUNCIL COMMUNICATION n Mfil o� - TO: Honorable Mayor and City Council Memberns� C., .: - FROM: Dave Garofalo, City Council Member � r n DATE: August 10, 2001 S SUBJECT: RECONSIDERATION OF SUPPLEMENTAL TAX FOR EMPLOYEE RETIREMENT BENEFITS "H" ITEM FOR 8/20/01 CITY COUNCIL MEETING STATEMENT OF ISSUE: At the July 16, 2001 City Council meeting, the City Council voted 4-3 in favor of adopting Resolution No. 2001-43 fixing the Fiscal Year 2001/02 tax rate for the City of Huntington Beach at $0.04930 per $100 of assessed valuation and impounding the tax revenue. At the August 6, 2001 City Council Meeting, I brought forward an "H" Item requesting the reconsideration of the supplemental tax for employee retirement benefits. The Council approved my recommendation to reconsider the July 16, 2001 supplemental tax for employee retirement benefits. In March of this year the Orange County Superior Court rendered a decision in Howard Jarvis Tama yer Association vs. City of Huntington Beach regarding this tax. The City Council has authorized appeal of the Superior Court's decision in the Jarvis lawsuit. Until this appeal is resolved, it is my current position that the City should reconsider maintaining the tax rate for Fiscal Year 2001/2002 at $0.00000 per $100 of assessed valuation. MOTION: Adopt Resolution No.;X/-S5a resolution of the City Council of the City of Hungtington Beach suspending for Fiscal Year 2001/02 the property tax override to pay for pension programs. This is the same resolution that was presented to the City Council at the June 4, 2001 and July 16, 2001 City Council Meetings. DG: ck XC: Ray Silver Connie Brockway Clay Martin �� RESOLUTION NO. 2001-43 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH FIXING THE FISCAL YEAR 2001/2002 TAX RATE AND IMPOUNDING THE TAX REVENUES WHEREAS,the City of Huntington Beach will be receiving a pro-rata portion of the one dollar($1.00).Basic Property Tax Rate levied by the County Board of Supervisors as a means of providing revenue for the operation and support of various City departments, offices and activities; and In 1966, and again in 1978, the electorate of the City of Huntington Beach approved a City Charter revision authorizing the City to provide retirement benefits to its employees, and further directing the City to levy a property tax in excess of 1%of the full cash value of property "sufficient to meet all obligations of the City for the retirement system in which the City participates"; and In Carman v. Alvord(1982) 31 Ca1.3d 318, the California Supreme Court held that a tax such as that authorized by the City Charter to fund a city's employee retirement obligations is exempt from Proposition 13 (Article XIIIA of the California Constitution) as voter-approved prior indebtedness; and Since 1983-84, Revenue and Taxation Code Section 96.31(b) has limited the City.to levying a maximum property tax override at Zero and 0.04930/1001h Dollars (S0.04930) per S 100 of assessed value to pay for pension programs; and The City currently provides retirement benefits through a contract with the Public Employees Retirement System (PERS). In addition,the City provides a Supplemental Retirement Program offering survivor's benefits that replace certain PERS benefits and a Retiree Medical Plan subsidizing the cost for retirees to participate in the City Health Plan; and Although the City has participated in PERS since 1945, it has modified its retirement programs since July 1, 1978. For example, after July 1, 1978, the City began reimbursing employees for their contribution to PERS, as well as offering the Supplemental Retirement Program and the Medical Insurance Retirement Fund; and In December 1999, the Howard Jarvis Taxpayers Association("HJTA") and a single taxpayer filed suit challenging whether the City's property tax override violates Proposition 13, in a case entitled Howard Jarvis Taxpayers Association, et al., v. County of Orange, and City of Huntington Beach as Real Party in Interest, Orange County Superior Court Case No. 81-87-80 ("Case No. 818780"). At issue was whether the override is limited to only those retirement benefits the City paid for as of July 1, 1978, or for all City-paid retirement benefits, including those benefits authorized after July 1, 1978; and 1 SF-2001 Resolution:Fixing 2001/2002 Tax Rate RLS 2001-0453 6/29/01 s J Case No. 818780 was tried on February 26-27, 2001 in the Orange County Superior Court. On June 4, 2001,the Court issued an Amended Judgment. The Court held that under Proposition 13, the property tax override is unconstitutional "to the extent it exceeds the City's employer contribution for PERS retirement benefits that were in existence prior to July 1, 1978 or amendments thereto mandated by the Legislature, and cannot be levied or collected." Further, the Court held that"for the period up to and including(F.Y.) 1999/2000,the City need not refund any portion of its property tax override in excess of the portion used to pay for the PERS member contribution paid by the City, the Supplemental Retirement Plan and the Medical Insurance Retirement Fund." At a minimum, this means that the property tax override can only be used to pay the employer's contribution to PERS, and cannot be used to fund the City's payment of the employees' member contributions, the Supplemental Retirement Plan or the Medical Insurance Retirement Plan; and The City Council has authorized an appeal in Case No. 818780. It will take approximately three years to complete an appeal and longer still if Supreme Court review is sought; and Absent any appeal, the City would be prohibited from levying a property tax levy for Fiscal Year 2001/2002 because the City's cost to PERS for the employer's contribution is $0 for Fiscal Year 2001/2002; and Pursuant to Resolution No. 2001-19, the City Council declared its intent that should a remittitur by an appellate court either affirm or modify the April 2, 2001 judgment in Case No. 818780, declaring that a portion of the property tax override violates Proposition 13, the City shall refund within a reasonable time all property taxes paid from July 1, 1997 to the present consistent with the remittitur upon presentation of a refund claim in compliance with the California Revenue and Taxation Code. As a result, while the City may levy a property tax- override for Fiscal Year 2001/2002, the City is committed to reimbursing the tax consistent with any final appellate decision. Consequently, the City has three options: (1) collect the tax, and then use the money for employee benefits subject to refunding it pursuant to any remittitur; (2) collect the tax, impound the proceeds, and then spend or reimburse the revenue consistent with the remittitur; or(3) suspend the tax until its constitutionality can be resolved; and The City Council has selected the second option: to collect the tax, impound the proceeds, and then spend or reimburse the revenue consistent with the remittitur; and The tax rate herein is levied pursuant to Section 96.31(a)(4) of the Revenue and Taxation Code for the purpose of paying voter approved prior indebtedness of the City of Huntington Beach; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington Beach that the rate of taxation for said City for Fiscal Year 2001/2002 be fixed at zero and .04930/100ths dollars ($.04930) per$100 of assessed property value in said City. The said rate shall be applied to pension programs. 2 SF-2001 Resolution:Fixing 2001/2002 Tax Rate RLS 2001-0453 6/29/01 s BE IT FURTHER RESOLVED by the City Council of the City of Huntington Beach that the City Treasurer is directed to impound the tax proceeds in an interest-bearing account bearing interest at the greater of three percent (3%)per annum or the"county pool apportioned rate"(as the latter term is defined at Section 5151 of the California Revenue& Taxation Code). PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 16th day of July , 2001. _ T. M Mayor. ATTEST: APPROVED AS TO FORM: City Clerk City Attorney S r t / LI REVIEWED AND P 6UED: INITIATED APPROVE 141 �����-� , City Administrator Director Administrative Services t 3 SF-2001 Resolution:Fixing 2001/2002 Tax Rate RLS 2001-0453 6/29/01 s ATTA .... CHMENT #2 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH SUSPENDING FOR FISCAL YEAR 2001/2002 THE PROPERTY TAX OVERRIDE . TO PAY FOR PENSION PROGRAMS WHEREAS, the City of Huntington Beach will be receiving a pro-rata portion of the one dollar($1.00)Basic Property Tax Rate levied by the County Board of Supervisors as a means of providing revenue for the operation and support of various City departments, offices and activities;.and In 1966, and again in 1978, the electorate of the City of Huntington Beach approved a City Charter revision authorizing the City to provide retirement benefits to its employees, and further directing the City to levy a property tax in excess of 1% of the full cash value of property "sufficient to meet all obligations of the City for the retirement system in which the City participates"; and In Carman.v. Alvord(1982) 31 Cal.3d 318, the California Supreme Court held that a tax such as that authorized by the City Charter to fund a city's employee retirement obligations is exempt from Proposition 13 (Article XIIIA of the California Constitution) as voter-approved prior indebtedness; and Since 1983-84, Revenue and Taxation Code Section 96.31(b)has limited the City to levying a maximum property tax override at Zero and 0.04930/100`h Dollars ($0.04930)per$100 of assessed value to pay for pension programs; and The City currently provides retirement benefits through a contract with the Public Employees Retirement System (PERS). In addition, the City provides a Supplemental Retirement Program offering survivor's benefits that replace certain PERS benefits and a Retiree Medical Plan subsidizing the cost for retirees to participate in the City Health Plan; and Although the City has participated in PERS since 1945, it has modified its retirement programs since July 1, 1978. For example, after July 1, 1978,the City began reimbursing employees for their contribution to PERS, as well as offering the Supplemental Retirement Program and the Medical Insurance Retirement Fund; and In December 1999,the Howard Jarvis Taxpayers Association("HJTA") and a single taxpayer filed suit challenging whether the City's property tax override violates Proposition 13, in a case entitled Howard Jarvis Taxpayers Association, et al., v. County of Orange, and City of Huntington Beach as Real Party in Interest, Orange County Superior Court Case No. 81-87-80 ("Case No. 818780'). At issue was whether the override is limited to only those retirement 1 " SF-2001 Resolution: Suspend 2001/2002 Tax override. RLS 2001-0453 6/28101 s benefits the City paid for as of July 1, 1978, or for all City-paid retirement benefits, including those benefits authorized after July 1, 1978; and Case No. 818780 was tried on February 26-27, 2001 in the Orange County Superior Court. On June 4, 2001, the Court issued an Amended Judgment. The Court held that under Proposition 13,the property tax override is unconstitutional"to the extent it exceeds the City's employer contribution for PERS retirement benefits that were in existence prior to July 1, 1978 or amendments thereto mandated by the Legislature, and cannot be levied or collected." Further, the Court held that"for the period up to and including(F.Y.) 1999/2000, the City need not refund any portion of its property tax override in excess of the portion used to pay for the PERS member contribution paid by the City, the Supplemental Retirement Plan and the Medical Insurance Retirement Fund." At a minimum,this means that the property tax override can only be used to pay the employer's contribution to PERS, and cannot be used to fund the City's payment of the employees' member contributions, the Supplemental Retirement Plan or the Medical Insurance Retirement Plan; and The City Council has authorized an appeal in Case No. 818780. It will take approximately three years to complete an appeal and longer still if Supreme Court review is sought; and Absent any appeal, the City would be prohibited from levying a property tax levy for Fiscal Year 2001/2002 because the City's cost to PERS for the employer's contribution is SO for Fiscal Year 2001/2002; and Pursuant to Resolution No. 2001-19, the City Council declared its intent.that should a remittitur by an appellate court either affirm or modify the April 2, 2001 judgment in Case No. 818780, declaring that a portion of the property tax override violates Proposition 13, the City shall refund within a reasonable time all property taxes paid from July 1, 1997 to the present consistent with the remittitur upon presentation of a refund claim in compliance with the California Revenue and Taxation Code. As a result, while the City may levy a property tax override for Fiscal Year 2001/2002,the City is committed to reimbursing the tax consistent with any final appellate decision. Consequently, the City has three options: (1) collect the tax, and then use the money for employee benefits subject to refunding it pursuant to any remittitur; (2) collect the tax,impound the proceeds, and then spend or reimburse the revenue consistent with the remittitur; or(3) suspend the tax until its constitutionality can be resolved; and While the City is suspending the Property Tax Override for Fiscal Year 2001/2002,the City still retains the right to levy the tax up to the amount of 0.0493%of assessed value. Under the Proposition 218 Omnibus Implementation Act, specifically Government Code Section 53750(h)(2)(B),there is no requirement of further voter approval under Proposition 218 to"implement or collect a previously approved tax, or fee or charge, so long as the rate is not increased beyond the level previously approved by the Agency, and the methodology previously approved by the Agency is not revised so as to result in an increase in the amount being levied on any person or parcel." Consequently, once the suspension ends, the property tax override may be reinstated without a vote of the electorate. 2 SF-2001 Resolution: Suspend 2001/2002 Tax Override l� , RLS 2001-0453 r 6/28/01 s ............ ............ ¢ .. . ......... ............ Yv ..... .. ..... .................. .......... ...... .... ...... i�F J�' k r ...................... ...... ........ ........... ... ............. . ................ ...................... RESOLUTION NO. 2001-55 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH SUSPENDING FOR FISCAL YEAR 2001/2002 THE PROPERTY TAX OVERRIDE TO PAY FOR EMPLOYEE RETIREMENT BENEFITS WHEREAS, the City of Huntington Beach will be receiving a pro-rata portion of the one dollar($1.00) Basic Property Tax Rate levied by the County Board of Supervisors as a means of providing revenue for the operation and support of various City departments, offices and activities; and In 1966, and again in 1978, the electorate of the City of Huntington Beach approved a City Charter revision authorizing the City to provide retirement benefits to its employees, and further directing the City to levy a property tax in excess of 1%of the full cash value of property "sufficient to meet all obligations of the City for the retirement system in which the City participates"; and In Carman v. Alvord(1982) 31 Cal.3d 318, the California Supreme Court held that a tax such as that authorized by the City Charter to fund a city's employee retirement obligations is exempt from Proposition 13 (Article XIIIA of the California Constitution) as voter-approved prior indebtedness; and Since 1983-84, Revenue and Taxation Code Section 96.31(b) has limited the City to levying a maximum property tax override at Zero and 0.04930/1001h Dollars ($0.04930) per$100 of assessed value to pay for pension programs; and The City currently provides retirement benefits through a contract with the Public Employees Retirement System (PERS). In addition, the City provides a Supplemental Retirement Program offering survivor's benefits that replace certain PERS benefits and a Retiree Medical Plan subsidizing the cost for retirees to participate in the City Health Plan; and Although the City has participated in PERS since 1945, it has modified its retirement programs since July 1, 1978. For example, after July 1, 1978, the City began reimbursing employees for their contribution to PERS, as well as offering the Supplemental Retirement Program and the Retiree Medical Plan; and In December 1999, the Howard Jarvis Taxpayers Association ("HJTA") and a single taxpayer filed suit challenging whether the City's property tax override violates Proposition 13, in a case entitled Howard Jarvis Taxpayers Association, et al., v. County of Orange, and City of Huntington Beach as Real Party in Interest, Orange County Superior Court Case No. 81-87-80 ("Case No. 818780"). At issue was whether the override is limited to only those retirement 1 SF-2001 Resolution:2001/2002 Tax Rate Suspending-Mayer RLS 2001-0322 8/14/01 s Res. No. 2001-55 benefits the City paid for as of July 1, 1978, or for all City-paid retirement benefits, including those benefits authorized after July 1, 1978; and Case No. 818780 was tried on February 26-27, 2001 in the Orange County Superior Court. On April 2, 2001, the Court issued a final judgment. The Court held that under Proposition 13, the property tax override is unconstitutional "to the extent it exceeds the City's employer contribution for PERS retirement benefits that were in existence prior to July 1, 1978." At a minimum, this means that the property tax override can only be used to pay the employer's contribution to PERS, and cannot be used to fund the City's payment of the employees' member contributions, the Survivor's Continuance Program or the Retiree Medical Program; and The City Council has authorized an appeal in Case No. 818780. It will take approximately three years to complete an appeal; longer still if Supreme Court review is sought; and Absent any appeal, the City would be prohibited from levying a property tax levy for Fiscal Year 2001/2002 because the City's cost to PERS for the employer's contribution is $0 for Fiscal Year 2001/2002; and Pursuant to Resolution No. 2001-19, the City Council declared its intent that should a remittitur by an appellate court either affirm or modify the April 2, 2001 judgment in Case No. 818780, declaring that a portion of the property tax override violates Proposition 13, the City shall refund within a reasonable time all property taxes paid from July 1, 1997 to the present consistent with the remittitur upon presentation of a refund claim in compliance with the California Revenue and Taxation Code. As a result,while the City may levy a property tax override for Fiscal Year 2001/2002, the City is committed to reimbursing the tax consistent with any final appellate decision. Consequently, the City has three options: (1) collect the tax, and then use the money for employee benefits subject to refunding it pursuant to any remittitur; (2) collect the tax, impound the proceeds, and then spend or reimburse the revenue consistent with the remittitur; or(3) suspend the tax until its constitutionality can be resolved; and While the City is suspending the Property Tax Override for Fiscal Year 2001/2002, the City still retains the right to levy the tax up to the amount of 0.0493% of assessed value. Under the Proposition 218 Omnibus Implementation Act, specifically Government Code Section 53750(h)(2)(B), there is no requirement of further voter approval under Proposition 218 to "implement or collect a previously approved tax, or fee or charge, so long as the rate is not increased beyond the level previously approved by the Agency, and the methodology previously approved by the Agency is not revised so as to result in an increase in the amount being levied on any person or parcel." Consequently, once the suspension ends, the property tax override may be reinstated without a vote of the electorate. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington Beach that the property tax override for employee retirement costs for Fiscal Year 2001/2002 is suspended and that no property tax override shall be levied during said Fiscal Year. 2 SF-2001 Resolution:2001/2002 Tax Rate Suspending-Mayer RLS 2001-0322 8/14/01 s Res. No. 2001-55 BE IT FURTHER RESOLVED that the City Council declares that although it is suspending the Property Tax Override for Fiscal Year 2001/2002, it retains the authority to levy the tax in future years up to the rate of 0.0493% of assessed value. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 20th day of August , 2001. Mayor ATT ST: APPROVED AS TO FORM: .1%. City Clerk ob-Z g,/4-41 City Attorney REVIEWED AND APPROVED: INITIATED APPRO Ci Administrator Director Administrative Services 3 SF-2001 Resolution:2001/2002 Tax Rate Suspending-Mayer RLS 2001-0322 8/14/01 s Res. No. 2001-55 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, CONNIE BROCKWAY, 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 resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held on the 20th day of August, 2001 by the following vote: AYES: Boardman, Cook, Julien Houchen, Garofalo NOES: Green, Dettloff, Bauer ABSENT: None ABSTAIN: None City Clerk and ex-officio Clerk of the City Council of the City of Huntington Beach, California (,3yo-fof It D10 �A V)PJ . CITY OF HUNTINGTON BEACH 8,b—D� cauNOti a CITY COUNCIL COMMUNICATION 0(bo; DtIZAT)oN TO: Honorable Mayor and City Council Members m _ FROM: Dave Garofalo, City Council Member SUBJECT: "H" Item —August 6, 2001 City Council Meeting Reconsideration of Retirement Tax Rate ^' _ w c� DATE: August 2, 2001 -° n pA Issue At the July 16, 2001 City Council meeting, the City Council voted 4-3 in favor of adopting Resolution No. 2001-43 fixing the Fiscal Year 2001/02 tax rate for the City of Huntington Beach at $0.04930 per $100 of assessed valuation and impounding the tax revenue. At this time, I am requesting reconsideration of the collection of this tax. This is primarily based on the fact that the City Administrator was not present and his public input is important. Recommended Action (Motion to:) Request reconsideration of the July 16, 2001 City Council decision regarding the collection of the retirement tax revenue. xc: Ray Silver, City Administrator Connie Brockway, City Clerk I (28) August 6, 2001 - Councilip gency Agenda - Page 28 Ia H-2a. Submitted by Councilmember Dave Garofalo (City Council) Request for Reconsideration of Council Action Taken at the ��11 July 16, 2001 Meeting Re: Adoption of Resolution No. 2001-43 Fixing the Fiscal Year 2001/02 Tax Rate for the City of Huntington Beach at $0.04930 per$100 Assessed Valuation and Impounding the Tax Revenue— Public Employees Retirement (CalPERS)/Howard Jarvis Property Tax Lawsuit (340.90) Communication received from Councilmember Dave Garofalo transmitting the following Statement of Issue: At the July 16, 2001 City Council meeting, the City Council voted 4-3 in favor of adopting Resolution No. 2001-43 fixing the Fiscal Year 2001/02 tax rate for the City of Huntington Beach at$0.04930 per$100 of assessed valuation and impounding the tax revenue. At this time, I am requesting reconsideration of the collection of this tax. This is primarily based on the fact that the City Administrator was not present and his public input is important. `*Attachment# 1 — Resolution No. 2001-43 which was adopted and attachment#2—the alternative resolution suspending the tax override are included in the agenda packet. Recommended Action: Motion to: Request reconsideration of the July 16, 2001 City Council decision regarding the collection of the retirement tax revenue. �rZpN [Approved to reconsider - 5-2 (Dettloff, Bauer No)] [Resolution fixing tax rate to be presented August 20, 2001 with matter of suspending tax override included- 5-2 (Dettloff, Bauer No)] Council Comments - (Not Agendized) At this time Councilmembers may report on items not specifically described on the agenda which are of interest to the community. No action or discussion may be taken except to provide staff direction to report back or to place the item on a future agenda. Council/Agency Council/Agency Ad'ournment to Monday, August 13, 2001, at 4:00 p.m., in the Council Chambers, Civic Center, 2000 Main Street, Huntington Beach, California. Council/Agency Agendas and Minutes are Available at No Charge to the Public at the City Clerk's Office by Mail and through Paid Subscription. Complete Agenda Packets are Available at the Central Library and Library Annexes on Friday Prior to Meetings. Video Tapes of Council Meetings are Available for Checkout at the Central Library at No Charge. CONNIE BROCKWAY, CITY CLERK City of Huntington Beach 2000 Main Street - Second Floor Huntington Beach, California 92648 Internet: http://www.ci.huntington-beach.ca.us ATTACHIM"ENT # 1 . ....... NOW,THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington Beach that the property tax override for employee retirement costs for Fiscal Year 2001/2002 is suspended and that no property tax override shall be levied during said Fiscal Year. BE IT FURTHER RESOLVED that the City Council declares that although it is suspending the Property Tax Override for Fiscal Year 2001/2002, it retains the authority to levy the tax in future years up to the rate of 0.0493%of assessed value. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the day of , 2001. Mayor ATTEST: APPROVED AS TO FORM: City Clerk 6_ �.a City-Attorney REVIEWED AND PROVED. INITIATED APPROVED: City Administrator Director o dministrative Services SF-2001 Resolution: Suspend 2001/2002 Tax Override 3 • RLS 2001-0453 6/28/01 s or, — 5 - Council/Agency Meetinc Id: 0-)-`b""0) Deferred/Continued to: L 'ANpro ed ❑ Conditional) Approved ❑ D nied ►- CI Clerk's ig ature Council Meeting Date: July 16, 2001 Department ID Number: AS !01-021 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL ACTION = N o Z SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS c z �' ._ oy-<C- SUBMITTED BY: RAY SILVER, City Administrator j� � c�Cz PREPARED BY: Clay Martin, Director of Administrative Services c-) SUBJECT: Adoption of Tax Rate for 2001/2002 C, n iP�s No ,2001 -:Y3 Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s) Statement of Issue: Should the City adopt a tax rate consistent with the City Charter and California State Law? Funding Source: Not applicable. Recommended Action: Adopt resolution.200/=:Y_3,_ fixing the Fiscal Year 2001/02 tax rate for the City of Huntington Beach at $0.04930 per $100 of assessed valuation and impounding the tax revenue (Attachment 2). Alternative Action(s): 1. Adopt resolution 'suspending for Fiscal Year 2001/02 the property tax override to pay for pension programs (Attachment 3). This is the same resolution that was presented to City Council at the June 4, 2001 City Council Meeting. 2. Do not adopt a tax rate. Analysis: The City receives a pro-rata portion (16.51%) of the one-percent basic levy collected for all real property. In addition, the California Constitution allows cities to levy additional taxes for voter-approved indebtedness. Since voter approval in 1966, the City has levied an additional tax to pay for a portion of the City's retirement costs. At present, the City's retirement costs consist of contracts with the California Public Retirement System (CaIPERS) and a self-funded supplemental retirement plan administered by the City. The City's estimated retirement costs for fiscal year 2001/2002 are $9,447,662. This amount includes an additional $1,500,000 accelerated payment towards the City's supplemental retirement plan's unfunded liability. Under state law, the levy is limited to the lower of the amount needed to pay the retirement costs, or the amount levied in fiscal year 1984/85. At present, the lower amount is the fiscal year 1984/85 levy of $0.04930 per $100 of assessed valuation. REQUEST FOR COUNCIL At- iON MEETING DATE: July 16, 2001 DEPARTMENT ID NUMBER: AS 01-021 In March of this year the Orange County Superior Court rendered a decision in Howard Jarvis Taxpayer Association vs. City of Huntington Beach regarding this tax. The City Council has authorized appeal of the Superior Court's decision in the Jarvis lawsuit. Until this appeal is resolved, the City should maintain the tax rate for fiscal year 2001/2002 at 0.04930%. Proceeds from this tax rate will continue to be impounded into a separate fund and not expended pending the outcome of the appeal. California State Law (Section 29100, see Attachment 1) requires the City Council to annually adopt the tax rate for the voter-approved indebtedness. The County of Orange incorporates this section of State law in Ordinance Section 1-1-2. Further, Neal Gruber, Property Tax Analyst from the Orange County Treasurer/Tax Collector's Office, stated that without the annual tax rate resolution from the City Council the County Treasurer/Tax Collector will not collect the tax. The Resolution to adopt this tax rate is included in Attachment 2. The City Council considered this tax rate issue at the June 4, 2001 regular meeting. Item H-2a submitted by Mayor Pro Tem Debbie Cook recommended the adoption of a 0.00000% tax rate. The motion to adopt this rate by City Council Resolution failed due to a lack of a majority. This same Resolution is included as Alternative Action 1 (see Attachment 3). Should the Council choose not to adopt the 0.04930% tax rate resolution, then staff recommends that the Council adopt the 0.00000% tax rate resolution. It contains language designed to allow the City Council to return the voter approved indebtedness to the FY 1999/2000 level or lower in a future fiscal year without Proposition 218 regulation. Proposition 218 requires all tax increases to be approved by the voters effected by the tax increase. Any changes to the City's voter approved indebtedness without the language included in the 0.00000% tax rate resolution may come under Proposition 218 regulation. Finally, the City Council's decision to adopt a zero rate for the tax will result in the City not accruing $2,200,000 in revenue in fiscal year 2000/2001. With the City's fiscal year being on the federal cycle (September-October), one-half of the City's first property tax payment is reversed to the previous fiscal year. When a revenue source is ended or zeroed out, the last fiscal year only accrues 75% of its expected revenue. Environmental Status: Not applicable. Attachment(s): City Clerk's • . • . . Description 1. California Government Code 29100 thru 29109 2. Fixing the Fiscal Year 2001/2002 Tax Rate and Impounding the Tax Revenue - f e5o/wf,o-n A10, 200/- 4f,3 3. Suspending for Fiscal Year 2001/2002 the Property Tax Override to Pay for Pension Programs RCA Author: Clay Martin Tax 2002 -2- 7/9/01 1:41 PM (22) July 16, 2001 - Council/Atj-,icy Agenda - Page 22 � IN F-3. (City Council) Adopt Resolution No. 2001-43 Fixing the Fiscal Year 2001/02 Tax Rate for the City of Huntington Beach at $0.04930 per$100 Assessed Valuation and Impounding the Tax Revenue -Public Employees Retirement (CaIPERS)/ Howard Jarvis Property Tax Lawsuit (340.90) Communication received from the Administrative Services Director requesting that the city adopt a tax rate consistent with the City Charter and California State Law. The city receives a pro-rata portion (16.51%) of the one-percent basic levy collected for all real property. In addition, the California Constitution allows cities to levy additional taxes for voter-approved indebtedness. Since voter approval in 1966, the City has levied an additional tax to pay for a portion of the City's retirement costs. In March of this year the Orange County Superior Court rendered a decision in Howard Jarvis Taxpayer Association vs. City of Huntington Beach regarding this tax. The City Council has authorized appeal of the Superior Court's decision in the Jarvis lawsuit. Until this appeal is resolved, the City should maintain the tax rate for fiscal year 2001/2002 at 0.04930%. Proceeds from this tax rate will continue to be impounded into a separate fund and not expended pending the outcome of the appeal. Recommended Action: Motion to: Adopt Resolution No. 2001-43 fixing the Fiscal Year 2001/02 tax rate for the City of Huntington Beach at$0.04930 per$100 of assessed valuation and impounding the tax revenue (Attachment No. 2) - "A Resolution of the City Council of the City of Huntington Beach Fixing the Fiscal Year-2001/2002 Tax Rate and Impounding the Tax Revenues." [Motion to adopt alternative resolution as set forth in RCA - FAILED (Green, Garofalo, Dettloff, Bauer No)] [Motion to adopt Res. No. 2001-43- Approved 4-3 (Boardman, Cook, Julien Houchen No)] ATTACHMENT # 1 CA Codes (gov:29100-29109) Page 1 of 2 GOVERNMENT CODE SECTION 29100-29109 29160. On or before the first business day of September of each year, the board shall adopt by resolution the rates of taxes on the secured roll, not to exceed the 1-percent limitation specified in Article XIIIA of the Constitution and Sections 93 and 100 of the Revenue and Taxation Code; for voter-approved indebtedness, the board shall adopt the rates on the secured roll by determining the percentage of full value of property on the secured roll legally subject to support the annual debt .requirement. Each rate shall be such as will produce the amount determined as necessary to be raised by taxation on the secured roll after due allowance for delinquency, anticipated changes to the roll, disputed tax revenues anticipated to be impounded pursuant to Section 26906.1, amounts subject to Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code, and other available financing sources. The board may adopt a rate for voter-approved indebtedness as will produce an amount determined as appropriate for necessary reserves. For purposes of this section, "an amount appropriate for necessary reserves" shall be limited to an amount sufficient to accommodate the county's anticipated annual cash-flow needs for servicing the county' s voter-approved debt. The reserve may service only the debt for which the extraordinary rate is levied. All interest earned on the amount deposited in the necessary reserve shall accrue to the necessary reserve. The board may, by resolution, extend on a permanent basis or for a limited period the date specified by this section from the first business day of each September to each October 3. 29100. 6. On or before November 1 of each year each county auditor shall file with the Controller in such form as the Controller directs, a statement of the amounts of exempt values granted for the homeowners' property tax exemption under subdivision (k) of Section 3 and Section 25 of Article XIII of the Constitution for the county, each city. and school district or portion thereof within the county, each special district or subdivision or zone thereof or portion thereof within the county, for which a tax levy is carried on the county assessment roll. The auditor shall therein compute and show the total amount of ad valorem tax loss to the county and the cities and districts resulting from the exemption and the statement shall claim such amount against the state for payment of reimbursement. . The board may, by resolution, extend on a permanent basis or for a limited period the date specified by this section from November 1 to December 1. 29101. After adopting the rates, the board shall levy the taxes upon the taxable property of the county in specific sums in terms of the rates so adopted. Each rate is upon the full assessed valuation of property and only upon property which is legally subject to such tax. 29102. Unless otherwise provided by law, the authority and duties of the county board of supervisors with respect to adopting tax rates and levying of taxes prescribed in this article shall have application to school districts and to special districts, or zones or file://A:\CA Codes (gov29100-29109).htm 7/9/01 CA Codes (gov:29100-291091 Page 2 of 2 improvement districts thereof, whose affairs and finances are not under the supervision and control of the county board of supervisors but for which a tax levy is carried on the regular county assessment roll. If the assessed value of the taxable property in a special district on the unsecured roll exceeds the assessed value of the taxable property on the secured roll, the special district tax rate which is adopted by the board for the secured roll shall be adjusted to an amount which the board determines will meet the estimated annual revenue requirements of the district for both the current and the next succeeding year. 29103. It shall be the responsibility of the auditor to calculate the several tax rates for the board's action thereon. 29104 . The board may adopt a rate ending in the next highest fraction of a percent for a fund, or for a group of funds having the same tax base. Any cash collections resulting from this rate or from an excess resulting from any other cause shall not invalidate the levies. 29106. In the resolution adopting tax rates, the entity or fund with its corresponding rate shall be designated in any manner sufficient to identify it. 29107. The tax rates for property not sufficiently secured as provided in Section 12 of Article XIII of the Constitution are levied in the amounts therein provided and need not be formally levied by the board. 29109. On or before November 1 of each year, the auditor shall forward to the Controller, in such form as the Controller directs, a statement of the rates of taxation, the assessed valuation as shown on the current equalized assessment roll, the amount of taxes to be levied and allocated pursuant to the Revenue and Taxation Code. If the auditor, after receipt of written notice from the Controller fails to transmit the statements within 20 days, he or she shall forfeit to the state, one thousand dollars ($1,000) to be recovered in an action brought by the Attorney General, in the name of the Controller. The board may, by resolution, extend on a permanent basis or for a limited period the date specified in this section from November 1 to December 1. file://A:\CA Codes (gov29100-29109).htm 7/9/01 ATTACHMENT #2 RESOLUTION NO. 2001-43 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH FIXING THE FISCAL YEAR 2001/2002 TAX RATE AND IMPOUNDING THE TAX REVENUES WHEREAS, the City of Huntington Beach will be receiving a pro-rata portion of the one dollar($1.00) Basic Property Tax Rate levied by the County Board of Supervisors as a means of providing revenue for the operation and support of various City departments, offices and activities; and In 1966, and again in 1978, the electorate of the City of Huntington Beach approved a City Charter revision authorizing the City to provide retirement benefits to its employees, and further directing the City to levy a property tax in excess of 1% of the full cash value of property "sufficient to meet all obligations of the City for the retirement system in which the City participates"; and In Carman: v. Alvord(1982) 31 Cal.3d 318, the California Supreme Court held that a tax such as that authorized by the City Charter to fund a city's employee retirement obligations is exempt from Proposition 13 (Article XIIIA of the California Constitution) as voter-approved prior indebtedness; and Since 1983-84, Revenue and Taxation Code Section 96.31(b)has limited the City to levying a maximum property tax override at Zero and 0.04930/1001h Dollars (S0.04930)per 5100 of assessed value to pay for pension programs; and The City currently provides retirement benefits through a contract with the Public Employees Retirement System (PERS). In addition, the City provides a Supplemental Retirement Program offering survivor's benefits that replace certain PERS benefits and a Retiree Medical Plan subsidizing the cost for retirees to participate in the City Health Plan; and Although the City has participated in PERS since 1945, it has modified its retirement programs since July 1, 1978. For example, after July 1, 1978, the City began reimbursing employees for their contribution to PERS, as well as offering the Supplemental Retirement Program and the Medical Insurance Retirement Fund; and In December 1999, the Howard Jarvis Taxpayers Association ("HJTA") and a single taxpayer filed suit challenging whether the City's property tax override violates Proposition 13, in a case entitled Howard Jarvis Taxpayers Association, et al., v. County of Orange, and City of Huntington Beach as Real Party in Interest, Orange County Superior Court Case No. 81-87-80 ("Case No. 818780"). At issue was whether the override is limited to only those retirement benefits the City paid for as of July 1, 1978, or for all City-paid retirement benefits, including those benefits authorized after July 1, 1978; and 1 SF-2001 Resolution:Fixing 2001/2002 Tax Rate RLS 2001-0453 6/29/01 s Case No. 818780 was tried on February 26-27, 2001 in the Orange County Superior Court. On June 4, 2001,the Court issued an Amended Judgment. The Court held that under Proposition 13, the property tax override is unconstitutional "to the extent it exceeds the City's employer contribution for PERS retirement benefits that were in existence prior to July 1, 1978 or amendments thereto mandated by the Legislature, and cannot be levied or collected." Further, the Court held that"for the period up to and including(F.Y.) 1999/2000, the City need not refund any portion of its property tax override in excess of the portion used to pay for the PERS member contribution paid by the City, the Supplemental Retirement Plan and the Medical Insurance Retirement Fund." At a minimum, this means that the property tax override can only be used to pay the employer's contribution to PERS, and cannot be used to fund the City's payment of the employees' member contributions, the Supplemental Retirement Plan or the Medical Insurance Retirement Plan; and The City Council has authorized an appeal in Case No. 818780. It will take approximately three years to complete an appeal and longer still if Supreme Court review is sought; and Absent any appeal, the City would be prohibited from levying a property tax levy for Fiscal Year 2001/2002 because the City's cost to PERS for the employer's contribution is $0 for Fiscal Year 2001/2002; and Pursuant to Resolution No. 2001-19, the City Council declared its intent that should a remittitur by an appellate court either affirm or modify the April 2, 2001 judgment in Case No. 818780, declaring that a portion of the property tax override violates Proposition 13, the City shall refund within a reasonable time all property taxes paid from July 1, 1997 to the present consistent with the remittitur upon presentation of a refund claim in compliance with the California Revenue and Taxation Code. As a result, while the City may levy a property tax- override for Fiscal Year 2001/2002, the City is committed to reimbursing the tax consistent with any final appellate decision. Consequently,the City has three options: (1) collect the tax, and then use the money for employee benefits subject to refunding it pursuant to any remittitur; (2) collect the tax, impound the proceeds, and then spend or reimburse the revenue consistent with the remittitur; or(3) suspend the tax until its constitutionality can be resolved; and The City Council has selected the second option: to collect the tax, impound the proceeds, and then spend or reimburse the revenue consistent with the remittitur; and The tax rate herein is levied pursuant to Section 96.31(a)(4) of the Revenue and Taxation Code for the purpose of paying voter approved prior indebtedness of the City of Huntington Beach; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington Beach that the rate of taxation for said City for Fiscal Year 2001/2002 be fixed at zero and .04930/100ths dollars ($.04930) per$100 of assessed property value in said City. The said rate shall be applied to pension programs. 2 SF-2001 Resolution:Fixing 2001/2002 Tax Rate RLS 2001-0453 6/29/01 s BE IT FURTHER RESOLVED by the City Council of the City of Huntington Beach that the City Treasurer is directed to impound the tax proceeds in an interest-bearing account bearing interest at the greater of three percent (3%)per annum or the"county pool apportioned rate"(as the latter term is defined at Section 5151 of the California Revenue& Taxation Code). PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 16th day of July , 2001. Mayor ATTEST: APPROVED AS TO FORM: dmw,� City Clerk 01— — City Attorney 5� iZyl� REVIEWED AND P 6VED: INITIATED APPROVE 14�«��� City Administrator Director Administrative Services 3 SF-2001 Resolution:Fixing 2001/2002 Tax Rate RLS 2001-0453 6/29/01 s Res. No. 2001-43 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, CONNIE BROCKWAY, 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 resolution was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council at a regular meeting thereof held on the 16th day of July, 2001 by the following vote: AYES: Green, Garofalo, Dettloff, Bauer NOES: Boardman, Cook, Julien Houchen ABSENT: None ABSTAIN: None City Clerk and ex-officio C rk of the City Council of the City of Huntington Beach, California ATTACHMENT #3 RESOLUTION NO. , A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HUNTINGTON BEACH SUSPENDING FOR FISCAL YEAR 2001/2002 THE PROPERTY TAX OVERRIDE TO PAY FOR PENSION PROGRAMS WHEREAS, the City of Huntington Beach will be receiving a pro-rata portion of the one dollar($1.00)Basic Property Tax Rate levied by the County Board of Supervisors as a means of providing revenue for the operation and support of various City departments, offices and activities; and In 1966, and again in 1978,the electorate of the City of Huntington Beach approved a City Charter revision authorizing the City to provide retirement benefits to its employees, and further directing the City to levy a property tax in excess of 1% of the full cash value of property "sufficient to meet all obligations of the City for the retirement system in which the City participates"; and In Carman v. Alvord(1982) 31 Cal.3d , the California Supreme Court held that a tax such as that authorized by the City Charter to fund°a\city's employee retirement obligations is exempt from Proposition 13 (Article XIIIA of the California Constitution) as voter-approved prior indebtedness; and Since 1983-84, Revenue and Taxation Code Section 96.31(b)has limited the City to levying a maximum property tax override at Zero and 0.04930/100th Dollars ($0.04930)per$100 of assessed value to pay for pension programs; and The City currently provides retirement benefits through a c\ract with the Public Employees Retirement System (PERS). In addition, the City provides a,Supplemental Retirement Program offering survivor's benefits that replace certain PERSbenefits and a Retiree Medical Plan subsidizing the cost for retirees to participate in the City Health Plan; and Although the City has participated in PERS since 1945, it has modified its retirement programs since July 1, 1978. For example, after July 1, 1978, the City began reimbursing employees for their contribution to PERS, as well as offering the Supplemental Retirement Program and the Medical Insurance Retirement Fund; and In December 1999, the Howard Jarvis Taxpayers Association("HJTA") and a single taxpayer filed suit challenging whether the City's property tax override violates Proposition 13., in a case entitled Howard Jarvis Taxpayers Association, et al., v. County of Orange, and City of Huntington Beach as Real Party in Interest, Orange County Superior Court Case No. 81-87-80 ("Case No. 818780"). At issue was whether the override is limited to only those retirement 1 SF-2001 Resolution: Suspend 2001/2002 Tax Override RLS 2001-0453 6/28/01 s benefits the City paid for as of July 1, 1978, or for all City-paid retirement benefits, including those benefits authorized after July 1, 1978; and Case No. 818780 was tried on February 26-27, 2001 in the Orange County Superior Court. On June 4, 2001, the Court issued an Amended Judgment. The Court held that under Proposition 13, the property tax override is unconstitutional "to the extent it exceeds the City's emplol�r contribution for PERS retirement benefits that were in existence prior to July 1, 1978 or amendments thereto mandated by the Legislature, and cannot be levied or collected." Further, the Court held that"for the period up to and including(F.Y.) 1999/2000, the City need not refund any portion of its property tax override in excess of the portion used to pay for the PERS member contribution paid by the City, the Supplemental Retirement Plan and the Medical Insurance Retirement Fund." At a minimum, this means that the property tax override can only be used to pay the employer's contribution to PERS, and cannot be used to fund the City's payment of the employees' member contributions, the Supplemental Retirement Plan or the Medical Insurance Ret ement Plan; and The City Council has authorized an appeal in Case No. 818780. It will take approximately three years to complete an appeal and longer still if Supreme Court review is sought; and Absent any appeal, the City\would be prohibited from levying a property tax levy for Fiscal Year 2001/2002 because the City's cost to PERS for the employer's contribution is $0 for Fiscal Year 2001/2002; and Pursuant to Resolution No. 2001-19,,\the City Council declared its intent that should a remittitur by an appellate court either affirm or modify the April 2, 2001 judgment in Case No. 818780, declaring that a portion of the property tax override violates Proposition 13, the City shall.refund within a reasonable time all property taxes paid from July 1, 1997 to the present consistent with the remittitur upon presentation of a refund claim in compliance with the California Revenue and Taxation Code. As a result,while the City may levy a property tax override for Fiscal Year 2001/2002, the City is committed to reimbursing the tax consistent with any final appellate decision. Consequently, the City has three options: (1) collect the tax, and then use the money for employee benefits subject to refunding it pursuant to any remittitur; (2) collect the tax, impound the proceeds, and then spend or reimburse the revenue consistent with the remittitur; or(3) suspend the tax until its constitutionality can b\resolved; and While the City is suspending the Property Tax Override for Fiscal Year 2001/2002, the City still retains the right to levy the tax up to the amount of 0.0493%ofassessed value. Under the Proposition 218 Omnibus Implementation Act, specifically Government Code Section 53750(h)(2)(B), there is no requirement of further voter approval under Proposition 218 to "implement or collect a previously approved tax, or fee or charge, so long as the rate is not increased beyond the level previously approved by the Agency, and the methodology previously approved by the Agency is not revised so as to result in an increase in the amount being levied on any person or parcel." Consequently, once the suspension ends, the property tax override may be reinstated without a vote of the electorate. 2 SF-2001 Resolution: Suspend 2001/2002 Tax Override RLS 2001-0453 6/28/01 s \NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Huntington Beach that the property tax override for employee retirement costs for Fiscal Year 2001/2002 is suspended and that no property tax override shall be levied during said Fiscal Year. BE IT FURTHER RESOLVED that the City Council declares that although it is suspending the Property Tax Override for Fiscal Year 2001/2002, it retains the authority to levy the tax in future years up to the rate of 0.0493% of assessed value. PASSED AND�ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the day of , 2001. Mayor ATTEST: APPROVED AS TO FORM: City Clerk 6, 7.61 City Attorney I REVIEWED AND PRO ED: INITIATED APPROVED: City Administrat r Director o dministrattve Services 3 SF-2001 Resolution: Suspend 2001/2002 Tax Ovemde RLS 2001-0453 6/28/01 s RCA!ROUTING 9HEET INITIATING DEPARTMENT: Administrative Services SUBJECT: Adoption of Tax Rate for 2001/2002 COUNCIL MEETING DATE: July 16, 2001 RCA.ATTACHMENTS STATUS: Ordinance (w/exhibits & legislative draft if applicable) Not Applicable Resolution (w/exhibits & legislative draft if applicable) Attached Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (w/exhibits if applicable) (Signed in full by the City Attorne ) Not Applicable Subleases, Third Party Agreements, etc. (Approved as to form by City Attorne ) Not Applicable Certificates of Insurance (Approved by the City Attorney) Not Applicable Financial Impact Statement (Unbudget, over $5,000) Not Applicable Bonds (If applicable) Not Applicable Staff Report (If applicable) Not Applicable Commission, Board or Committee Report (If applicable) Not Applicable Findings/Conditions for Approval and/or Denial Not Applicable EXPLANATION FOR MISSING ATTACHMENTS REVIEWED RETURNED FORWARDED, Administrative Staff ) Assistant City Administrator Initial City Administrator (Initial) ( ) ( ) City Clerk ) EXPLANATION FOR RETURN OF ITEM:. (BelowOnly) RCA Author: Clay Martin � Fixing the Fiscal Year 2001/2002 Tax Rate � 5e. for the City of Huntington Beach KIM z Administrative Services Department ti o = Agenda Item # F-3Cr cxl z July 16, 2001 =�r� �^n � �"Ac w n W Fixing the Fiscal Year 2001/2002 Tax �.� Rate for the City of Huntington Beach . California State Law (Section 29100 of the Government Code) requires resolution fixing rate . Confirmed by County Ordinance and County Staff . Recommended action adopt resolution 2001- 43, fixing rate at $0 .04930 per $ 100 of assessed value . Alternative action adopt a resolution suspending for Fiscal Year 2001/2002 property tax override.