Laserfiche WebLink
<br />54 <br />4826-7904-2280v7/200434-0005 <br />restricting the State’s ability to use motor vehicle fuel tax revenues to pay debt service on voter-approved <br />transportation bonds. Proposition 22 superseded certain provisions of Proposition 1A. See the captions “— <br />Proposition 1A” and “CITY FINANCIAL INFORMATION—Property Taxes.” <br />Proposition 26 <br />On November 2, 2010, State voters approved Proposition 26. Proposition 26 amended Article XIIIC of <br />the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind <br />imposed by a local government” except the following: (a) a charge imposed for a specific benefit conferred or <br />privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the <br />reasonable costs to the local government of conferring the benefit or granting the privilege; (b) a charge imposed <br />for a specific government service or product provided directly to the payor that is not provided to those not <br />charged, and which does not exceed the reasonable costs to the local government of providing the service or <br />product; (c) a charge imposed for the reasonable regulatory costs of a local government for issuing licenses and <br />permits, performing investigations, inspections and audits, enforcing agricultural marketing orders and the <br />administrative enforcement and adjudication thereof; (d) a charge imposed for entrance to or use of local <br />government property, or the purchase, rental or lease of local government property; (e) a fine, penalty or other <br />monetary charge imposed by the judicial branch of government or a local government as a result of a violation <br />of law; (f) a charge imposed as a condition of property development; and (g) assessments and property-related <br />fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that the local <br />government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction <br />is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, <br />and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the <br />payor’s burdens on, or benefits received from, the governmental activity. The City does not believe that <br />Proposition 26 will adversely affect its General Fund revenues. <br />Future Initiatives <br />Articles XIIIA and XIIIB and Propositions 62, 218, 1A, 22 and 26 were each adopted as measures that <br />qualified for the ballot pursuant to the State’s initiative process. The limitations imposed upon the City by these <br />provisions hinder the City’s ability to raise revenues through taxes or otherwise and may therefore prevent the <br />City from meeting increased expenditure requirements. From time to time other initiative measures could be <br />adopted, further affecting the City’s current revenues or its ability to raise and expend revenues. Any such future <br />initiatives could have a material adverse effect on the City’s financial condition. <br />TAX MATTERS <br />In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, <br />California (“Bond Counsel”), under existing statutes, regulations, rulings and judicial decisions, and assuming <br />the accuracy of certain representations and compliance with certain covenants and requirements described <br />herein, interest on the Bonds is not excluded from gross income for federal income tax purposes under Section <br />103 of the Internal Revenue Code of 1986, as amended (the “Code”), but is exempt from State of California <br />personal income tax. <br />With certain exceptions, the difference between the issue price of a Bond (the first price at which a <br />substantial amount of the Bonds of the same maturity is to be sold to the public) and the stated redemption price <br />at maturity with respect to such Bond (to the extent the redemption price at maturity is greater than the issue <br />price) constitutes original issue discount. Original issue discount accrues under a constant yield method. The <br />amount of original issue discount deemed received by the Beneficial Owner of a Bond will increase the <br />Beneficial Owner’s basis in the Bond. Beneficial Owners of the Bonds should consult their own tax advisors <br />with respect to taking into account any original issue discount on the Bonds.