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NEWS ANALYSIS : O.C. Debacle Spurs Debate on New Taxes : Bankruptcy: Some state officials say supervisors could hike the levy on sales with a majority vote. But political realities make such a move doubtful.


SACRAMENTO — Could Orange County pass a tax increase tomorrow?

As the county grapples with its bankruptcy woes, local politicians say a tax hike--a prospect that prompts ire in most of the county--would require a vote of the electorate. But some officials in the state Capitol are raising the prospect that the troubled county could impose a tax hike a lot more easily than most people believe.

Citing a precedent-setting 1991 state appellate court ruling, these local government experts in Sacramento contend that the Board of Supervisors could raise the county's sales tax by a simple majority vote of its five members.

It's an argument that some Democrats in the Capitol--most notably Assembly Speaker Willie Brown--have eyed as the Legislature begins digging into ways to help Orange County recover from its gnawing financial debacle. Brown has already talked of a tax hike as a litmus test for Orange County in regard to subsequent state help.

A one-cent boost in Orange County's sales tax--from 7.75% to 8.75%--would raise $275 million in additional revenue each year, state tax officials say. That's the sort of injection of cash that many Democrats in Sacramento--as well as Wall Street investment bankers--say could be an antidote to the county's ills.

"I think the feeling of many members in this house is that the first issue Orange County needs to explore is exercising its ability to raise revenues," said Leslie Medina, Brown's policy chief.

But even as a few state officials argue that Orange County leaders could swiftly raise taxes, some practical realities loom as obstacles: whether the Board of Supervisors could ever muster the will to pass a tax increase, for example, and the murkiness of state law governing how taxes are raised.

"In reality, it's not a possibility," Supervisor Marian Bergeson said.

Assemblyman Curt Pringle (R-Garden Grove) underlined that notion.

"Hurdle No. 1 is a vote of the Board of Supervisors," said Pringle, who thinks Brown has been posturing to tweak conservatives in Orange County. "You do not have one vote on the board to pass a sales tax (increase)."

Added Reed Royalty, executive vice president of the business-oriented Orange County Taxpayers Assn.: "Willie Brown has never met a tax he didn't like.

"We would oppose a tax increase," Royalty said. "That doesn't mean our minds can't be changed if someone shows us information that demonstrates we couldn't bail ourselves out without it. But we would have to see lots of (money-saving) reforms before we got to that point."

Beyond political realities, there remain numerous differences of opinion among tax experts on the topic. While some steadfastly insist a vote of the electorate is needed, others contend that no such approval is necessary.

"This area is like theology," observed one Capitol insider, noting how almost every tax expert seems to have a varying view.

Even if the Board of Supervisors unilaterally approved a tax increase without the acquiescence of the voters, the action would almost certainly prompt a lawsuit.

"I'm sure the environment down there would lead to that," said Betty Yee, a consultant to the Assembly Local Government Committee.

And at best, Yee and other experts agree, the chances that a court would let stand a tax increase approved by the supervisors are iffy. Yee said the courts seem these days to be looking at tax challenges on a case-by-case basis.

Supporters of a tax increase have embraced a 1991 decision by the state Court of Appeals they say opened the door for local governments to avoid going to the voters for a levy intended for general operating purposes. In a case involving a utility tax imposed by the city of Woodlake, the appeals court ruled that Proposition 62--a 1986 initiative requiring majority voter approval for general-use taxes--clashed with the California Constitution's provision that taxes are not subject to initiative or referendum.

But there are several problems in applying that decision to Orange County, some Capitol tax experts say. First, a utility tax is decidedly different than a sales tax. In addition, the Woodlake case applied to a city, which has broader taxing authority than a county under the vagaries of state law.

Tax opponents could also argue that Orange County leaders were simply playing a shell game, raising revenue with a general-use tax and then using it for the specific purpose of bailing the county out of bankruptcy. If so, opponents could suggest that a sales tax hike was a "special tax" that falls under the provisions of Proposition 13, which requires a two-thirds vote of the people for any levy intended for a specific purpose.

In Orange County, trying to get a two-thirds vote on a tax would be tantamount to skiing up Mt. Everest. The only time county voters approved a tax increase in recent memory was the 1990 victory of Measure M, a half-cent sales tax for a variety of highway and rail projects.

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