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government, exclusive of certain State subventions, refunds of taxes, benefit payments from retirement,
<br />unemployment insurance, and disability insurance funds. Appropriations subject to limitation pursuant to Article
<br />XIIIB do not include debt service on indebtedness existing or legally authorized as of January 1, 1979, on bonded
<br />indebtedness thereafter approved according to law by a vote of the electors of the issuing entity voting in an
<br />election for such purpose, appropriations required to comply with mandates of courts or the federal government,
<br />appropriations for qualified capital outlay projects, and appropriations by the State of revenues derived from any
<br />increase in gasoline taxes and motor vehicle weight fees above January 1, 1990 levels. "Proceeds of taxes"
<br />include, but are not limited to, all tax revenues and the proceeds to any entity of government from (i) regulatory
<br />licenses, user charges, and user fees to the extent such proceeds exceed the cost of providing the service or
<br />regulation, (ii) the investment of tax revenues, and (iii) certain State subventions received by local governments.
<br />Article XIIIB includes a requirement that if an entity's revenues in any year exceed the amount permitted to be
<br />spent, the excess must be returned by revising tax rates or fee schedules over the subsequent two fiscal years.
<br />Article XIIIB allows voters to approve a temporary waiver of a government's Article XIIIB limit. Such a
<br />waiver is often referred to as a "Gann limit waiver." The length of any such waiver is limited to four years. The
<br />Gann limit waiver does not provide any additional revenues to the City or allow the City to finance additional
<br />services.
<br />The debt service payments on the Bonds are subject to the Article XIIIB appropriations limitations. For
<br />fiscal year 2018-19, the City calculated its appropriations limit at $ . For fiscal year 2019-20, the City
<br />has budgeted its appropriations limit at $ . The City has never made appropriations that exceeded the
<br />limitation on appropriations under Article XIIIB. The impact of the appropriations limit on the City's financial
<br />needs in the future is unknown.
<br />Article XIIIC and XIIID of the California Constitution — The Right to Vote on Taxes
<br />On November 5, 1996, State voters approved Proposition 218, entitled the "Right to Vote on Taxes Act"
<br />("Proposition 218'). Proposition 218 added Article XIIIC ("Article XIIIC") and Article XIIID ("Article XIIID')
<br />to the California Constitution, which contain a number of provisions affecting the ability of local agencies to levy
<br />and collect both existing and future taxes, assessments, fees, and charges. The interpretation and application of
<br />certain provisions of Proposition 218 will ultimately be determined by the courts with respect to some of the
<br />matters discussed below. It is not possible at this time to predict with certainty the future impact of such
<br />interpretations. The provisions of Proposition 218, as so interpreted and applied, may affect the ability of the City
<br />to meet certain obligations, as applicable.
<br />Article XIIIC requires that all new local taxes be submitted to the electorate before they become effective.
<br />Taxes for general governmental purposes require a majority vote and taxes for specific purposes, even if deposited
<br />in a general fund such as a general fund of the City, require a two-thirds vote. Article XIIIC further provides that
<br />any general purpose tax imposed, extended, or increased, without voter approval, after December 31, 1994, may
<br />continue to be imposed only if approved by a majority vote in an election, which must be held within two years
<br />of November 5, 1996. The City has not imposed, extended, or increased any such taxes which are currently in
<br />effect.
<br />Article XIIIC also expressly extends the initiative power to give voters the power to reduce or repeal local
<br />taxes, assessments, fees, and charges, regardless of the date such taxes, assessments, fees, and charges were
<br />imposed. Article XIIIC expands the initiative power to include reducing or repealing assessments, fees, and
<br />charges, which had previously been considered administrative rather than legislative matters and therefore beyond
<br />the initiative power. This extension of the initiative power is not limited by the terms of Article XIIIC to fees
<br />imposed after November 6, 1996, and absent other legal authority could result in the retroactive reduction in any
<br />existing taxes, assessments, fees, or charges. No assurance can be given that the voters within the jurisdiction of
<br />the City will not, in the future, approve initiatives which reduce or repeal, or prohibit the future imposition or
<br />increase of, local taxes, assessments, fees or charges currently comprising a substantial part of the City's general
<br />fund. "Assessments," "fees," and "charges" are not defined in Article XIIIC, and it is unclear whether these terms
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