Property Tax Opponents Face Uphill Battle

Organizers trying to slash public employee pension costs by abolishing Monrovia's 60-year-old property tax were stymied last month when the city rejected their petition for a ballot initiative, and they now face a series of procedural and legal hurdles if they ever hope to revive the measure.

The three residents pushing the initiative obtained 561 signatures for a petition to introduce a ballot initiative that would abolish the city's property tax, which funds the city's employee pension plans by assessing homeowners about one eighth of 1 percent of their property value.

The initiative's organizers were hoping to capitalize on public outcry over the salaries and benefits of public employees that came in the wake of the scandal in Bell, where city council members and staff face criminal charges for allegedly giving themselves lavish compensation packages.

Doug Johnson, a research fellow with Claremont McKenna College's Rose Institute of State and Local Government, said the proposed initiative in Monrovia was the first he'd heard of that tried to eliminate funding for pension costs via ballot measure.

"I would say this is more of an indirect approach--you're trying to cut off a revenue source," Johnson said. "Obviously the issue of pensions and benefits for council members and staff is a hot issue up and down the state. … This is a unique approach to the widespread debate, and I'm sure lots of cities will be watching."

But that approach may never reach the electorate: The petition circulated by residents John Jogminas, Cyrus Kemp and Kathy Reece-McNeil was rejected as invalid by the city last month.

The City Council first announced its opposition to the proposed initiative on Sept. 28 in a city news release that declared the measure unconstitutional. City leaders also warned that the initiative would blow a $4.2 million hole in the city's budget.

Just two days after insisting the initiative was unlawful, the point became moot when the city clerk determined that the petition itself was invalid because it did not include the proper legal language.

Jogminas, one of the initiative's proponents, said he tried repeatedly to get the city to review his petition before gathering signatures but was rebuffed.

"It's kind of like telling someone, 'Go ahead and build your house; we'll go ahead and inspect it afterwards,'" Jogminas said. "We're not going to tell you the codes, but if you build it wrong, we're going to tear it down anyway."

City Manager Scott Ochoa said Jogminas and his fellow organizers were expressly notified that the city's policy is never to intervene in the petition process beforehand.

"If you want to go make public policy and do it by initiative, then you have to play by the rules," Ochoa said, noting that the procedures in the election code are spelled out "extraordinarily clearly."

Ochoa and Mayor Mary Ann Lutz were quick to point out that even if the measure eventually succeeds, the city will still be on the hook for its pension obligations.

"Tearing something apart just for the sake of tearing it apart to see what happens is not good public policy, in my opinion," Ochoa said.

Thanks largely to the $4.2 million in revenue from the city's property tax, the city's pension plan for public safety employees is 85 percent funded and miscellaneous employee pensions are 95 percent funded, Ochoa said.

If the property tax funds were eliminated, the money would have to come from somewhere else to pay for pension costs, Lutz said. That would mean either cuts to staff or programs or new taxes, she said.

"We're already running on fumes," Lutz said of the city's budget, which has been cut by about $4 million over the last two years. "To cut another amount as great as that would literally cripple us."

But Jogminas insisted that the city could make up the difference at the negotiating table with the city's employee union.

"The point is, we shouldn't have to pay for this," Jogminas said. "There's plenty of room to discuss what benefits are being paid to them."

Niles Boyer, President of the Monrovia Municipal Employees Association union, said he did not want to comment on the initiative but noted that he believes public employees benefits packages are fair.

"I think us as public employess at the city of Monrovia are fairly compensated, and we do endeavor to provide the best service for that compensation," Boyer said.

To revive the anti-tax initiative, organizers will have to draft another petition and go door-to-door again collecting signatures. Jogminas said he's wary of doing that again because he believes the city will just find another "technicality" to invalidate the petition again.

But if the initiative's proponents do succeed in putting together a valid petition, they will still likely wind up in court debating the constitutionality of the measure.

If the city accepts the petition, the City Council would then decide whether or not to place the initiative on next April's ballot. Ochoa said they likely would not.

"If they want to move forward with this, we'd have to consider whether or not we'd form the legal challenge," Ochoa said. "My guess is that we would."

Ochoa said that the city sold $13.5 million in pension obligation bonds in 2008 in a plan to save money on pension costs. When those bonds were sold, the city represented its finances to include the $4.2 million property tax revenue.

If that revenue source were eliminated, the city would be violating its bond contracts, Ochoa said. And cities cannot make laws that violate existing contracts because doing so would violate the federal constitution's contract clause, Ochoa said.

"Basically the constitution prohibits any law that somehow impairs the ability of parties to transact business," Ochoa said. "The government cannot say, 'OK, we're just not going to honor that anymore.'"

Johnson called the Monrovia's constitutional position "unusual" but noted it could set a statewide precedent if the city were to succeed in court.

"It's definitely an unusual argument but I think it's an interesting question that clearly the courts would have to resolve," Johnson said. "The city's view is that this makes this unconstitutional. The alternate option would be that the judge decides this simply puts them in default of the bonds."

Whatever the fate of the initiative, the Lutz acknowledes that pension costs are too high and said that the city will continue to search for ways to limit the costs going forward.

"We are one of the few cities that have been addressing this each and every time we've been to the table with the unions," Lutz said.