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Pg. 07 CHAPTER I – THE NEED FOR USER FEES <br /> <br />City of Santa Ana Rent Stabilization Program Fee – March 2023 <br />CHAPTER I – THE NEED FOR USER FEES <br />Impact of Propositions 13, 4, 218 and 26 <br />Proposition 13 was passed by California voters in 1978, forever changing city budgets. Prior to <br />1978, cities and counties balanced their budgets with a property tax formula. The property tax <br />which property owners paid could increase dramatically year over year, creating hardship for <br />those with fixed incomes. Proposition 13 capped property tax rates at 1%, with annual inflation <br />increase of no more than 2%. The passage of Proposition 13 immediately reduced property tax <br />payments from homes, businesses and farms by 57%. <br /> <br /> <br /> <br />The following year, Proposition 4 was passed primarily to clean up language related to taxes and <br />appropriations limits after the wake of Proposition 13. However, there is one phrase in section <br />8(c) of the proposition text which better defines user charges and user fees: <br /> <br />“Proceeds of taxes” shall include, but not be restricted to, all tax revenues and the <br />proceeds to an entity of government, from (1) regulatory licenses, user charges, and <br />user fees to the extent that those proceeds exceed the costs reasonably borne by that <br />entity in providing the regulation, product, or service…” <br /> <br />Restated, any proceeds from user charges and user fees which exceed the “costs reasonably borne” <br />are considered taxes. The legal ability for government agencies to charge fees in California in the