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O.C. Told It Can Raise Tax Without Election : Bankruptcy: Legislative counsel says state law gives supervisors power to increase levies. But other experts say the legal opinion is flawed.

March 23, 1995|MATT LAIT and ERIC BAILEY | TIMES STAFF WRITERS

SACRAMENTO — Eager to pressure Orange County into addressing its fiscal woes with a local tax increase, Democratic legislators unveiled a legal opinion Wednesday asserting that the Board of Supervisors has the power to raise the sales tax by up to 1 cent without voters' approval.

The surprising legal view--which was quickly contradicted by state tax authorities--was expressed one day after the board tentatively approved putting a half-cent sales tax increase on a special June ballot.

Democrats portrayed the opinion from the legislative counsel, which provides legal advice to state legislators, as providing an opportunity for Orange County to quickly get the upper hand on its financial problems.

"Of course, they should raise taxes if they can; it's the responsible thing for Orange County to do," said Assemblywoman Marguerite Archie-Hudson (D-Los Angeles), chairwoman of a special Assembly panel looking into the Orange County bankruptcy. "It's their call whether they do it on their own or go to the voters."

How a tax increase would be imposed in some ways may be less critical than the timing. The soonest that a special election could be called is June 27, and added revenues from any sales tax increase would not begin to flow for months afterward. But the county has bond debts totaling more than $1 billion due in late June, July and August.

Orange County officials were taken aback by the new legal opinion, which was presented at the start of a hearing of Archie-Hudson's committee.

"I haven't had a chance to look at it yet," said Board Chairman Gaddi Vasquez, who was in Sacramento for the hearing. "It's never been on the table before."

Officials at the State Board of Equalization, which collects sales taxes in California, immediately questioned the Legislative Counsel's opinion, saying the agency almost certainly would refuse to collect a new tax imposed by Orange County without voters' approval.

John Waid, a board lawyer, said a 1993 legal opinion by the state attorney general's office directly contradicts the position taken by the Legislative Counsel. The attorney general's opinion held that the Board of Equalization was legally restricted from collecting taxes in such cases.

Barbara Stocker, an Orange County deputy county counsel, said the Board of Equalization's position loomed as a large obstacle to any unilateral move by county supervisors to impose a tax.

"Regardless of what the legal merits are, you have a practical issue here if you can't collect the tax," Stocker said. "You're also just inviting litigation."

Republicans and a variety of anti-tax groups also quickly attacked the Legislative Counsel's opinion, calling it a misreading of state law.

"It's just politics," said Joel Fox, president of the Howard Jarvis Taxpayers Assn., which would probably sue if the supervisors imposed a tax without going to the voters. "The politics of reality is that the supervisors would have problems if they failed to submit it to a vote of the people."

Although sales tax increases have traditionally been put to a ballot test, the Legislative Counsel opinion says the board could immediately adopt a tax increase by two-thirds vote of the five supervisors. The opinion further states that a voter-approved sales tax increase might violate a provision of the state Constitution prohibiting tax decisions from being subject to referendums.

But a variety of tax experts drew a starkly different conclusion.

"I think the Legislative Counsel is just wrong on this," said Roy Ulrich, legal counsel for the California Tax Reform Assn. The opinion, he said, confuses constitutional prohibitions against referendums on tax decisions with existing state law that calls for voters' approval of sales tax increases.

"The Democrats are fearful of going to the voters on tax issues," Ulrich said. "I don't think they should be so frightened. There will be a good debate in Orange County on this tax."

John Coupal, legal affairs director for the Howard Jarvis Tax Assn., said the only way the supervisors could get around going to the voters is with special legislation from the state permitting unilateral approval by the supervisors.

"That opinion is pretty bogus," Coupal said.

Still, the notion of direct action by the supervisors drew a favorable response from Orange County labor leaders, who suggested that the board might be able to speed the process along and avert possible defaults if it boosted the tax rate.

"Who knows how it will turn out if it went to a vote of the people?" said John H. Sawyer Sr., general manager of the 11,000-member Orange County Employees Assn. "The county needs to raise taxes, and I think they should really do whatever is the easiest, quickest and the least expensive way. The board should do it even if it is a political liability."

Others, however, said the board should let the voters decide, regardless of whether it has the authority to impose the tax.

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