By Loretta Kalb
Published: Monday, Nov. 22, 2010 – 12:00 am | Page 1B

Since voters approved Proposition 26 in November, local agencies and governments have wondered whether it will jeopardize fees used to deliver public services.

Now the early analyses are starting to roll in on the measure, which converts some local fees to taxes requiring two-thirds voter approval.

Initial word is that many fees won’t be affected.

But veteran municipal lawyer Michael G. Colantuono said the proposition is likely to bring significant change in a handful of cases.

Colantuono, part of a League of California Cities task force analyzing Proposition 26, said the measure could affect fees charged by public power utilities, park districts and business improvement districts, to name a few.

Most at risk: fees collected and spent in a way that does not directly benefit only those who pay.

In the case of public power utilities, for example, discounts granted to low-income customers at the expense of other payers could be at risk, Colantuono said in an interview Sunday.

For-profit, investor-owned utilities don’t have that restriction on subsidies, he said, “So we’ve now created an unlevel playing field in the power market.”

The first draft of the analysis – 29 pages – was shared with a committee of the League of California Cities on Saturday.

Proposition 26 “has a lot of unknowns,” said Patrick Whitnell, general counsel for the League. “But we’re looking at it and trying to get a good analysis to our members as quickly as we can because we’re getting a lot of questions.”

Counties and special districts are looking for answers too.

“We’re continuing to evaluate the proposition, as are all affected agencies,” said Lori Kobza, spokeswoman for the Sacramento Metropolitan Air Quality Management District.

But, she said, “Proposition 26 could affect the district’s future ability to implement air quality improvement programs and programs necessary to reach state and federal air quality health standards.”

The reason: Fees collected from pollution sources are now used to offset effects of pollution areawide. And Kobza said if that fee is deemed a tax, a two-thirds vote of the electorate could be required.

“That’s really where the evaluation is still continuing,” she said.

The measure’s effects are less restrictive locally than at the state level. The proposition provides that any affected state fee passed after Jan. 1, 2010, will be void on Nov. 3, 2011, unless reinstated by a two-thirds vote of the Legislature.

“We don’t have the retroactive provisions like the state,” said Jean Hurst of the California State Association of Counties.

Current fees at the local level are not affected. So even if voters were to reject a fee-turned-tax, the existing fee could remain in place, provided it is not increased or extended.

Still, there are local concerns. And Hurst believes that many questions won’t be resolved without going to court.

A regulatory fee paid by a liquor store owner where the money is used to offset increased costs for public safety could be an example, she said.

“I think those are the kinds of things that are going to be litigated,” she said.

The upshot, she said, is that “nobody knows what it means. Nobody can agree on what it means. And that means we’ll be in court on everything.”

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