Anaheim ‘Taxpayer Protection’ Act Council Transcript, Part 4: ‘Measure N Was Not a Tax.’ Huh?

Not a Photoshop, but a frame with a fade from the Counci’s own video. Not much conflict between these two that night.  Elsewhere?  Yes.

[Editor’s Note: This is the 4th and final part of the preface to our series begins where the Voice of OC’s article on Tuesday night’s Anaheim Council meeting left off on the proposed “Anaheim Taxpayers Protection Act,” also known here as the “Protecting Anaheim Taxpayers from Their Own Opinions (“PATTOO”) Act.  The first section, on five relevant public comments, can be seen here.  The second, covering the beginnings of deliberations, is here. Discussion heats up a bit in part three, where we introduce Finance Director Debbie Moreno into the discussion.  In this part, we enjoy some hysteria, some absurdism, and a cliffhanger ending! The transcripts are just here to make it easy for us to refer to what was actually said when we start discussing all of this in earnest on Monday morning.]

TAIT (1:59:56):  Councilmember Vanderbilt.

VANDERBILT (1:59:57): Just a quick technical question, in regards to the question you raised, Mr. Mayor, in terms of the bonds. So, if I understand correctly, your question, I think, was centered around the notion that if a new bond were proposed, or passed, and the process of determining what the interest rate would be on that, the bond underwriters would take exception with the higher taxing standard, is that right?

TAIT (2:00:32): Essentially. One thing: when a bond rating agency looks at a City, one of the things they look at is what happens if they don’t have the funds to pay off their debt, if they run short. So they look at their ability to pay. Part of their looking at the ability to pay is their ability to tax.  If this makes it tougher for their ability to tax, to pay off existing bonds — assuming the city doesn’t file bankruptcy — that’s something that bond ratings, I believe, look at.  Anyway, I know the question was asked earlier, of Ms. Moreno, the answer was — is — that you’re not certain. So that’s a big question.  Imagine if we do this, and two months later the rating agencies drop us a level. That costs us real money, for something that isn’t, that may not be, necessary. So that’s the reason for the question: it touches on the ability to pay. And if it’s requiring a supermajority we’ve never had before, when no other charter cities do it, I think we will stand out, possibly.  Maybe we will, but I’d like to know those answers.

VANDERBILT (2:01:54): Well, maybe if I could paraphrase, I think the answer was, is that a more relevant issue, to the bond underwriters would be votes, so if the voters approved the tax, I’m sorry, can you remind me what you thought was the more pressing —

MORENO (2:02:20): I believe that the bond rating agencies look at the higher hurdle to be the citizen vote rather than the council vote. That’s my belief; I could be mistaken on that. And so our current bond rating is predicated on the current tax base that we have.  We have not anticipated any additional taxes and so our current bond ratings are based on the current conditions.

VANDERBILT (2:02:52): Ok, so I guess I was thinking of another scenario; maybe I could just ask you this succinctly. It has to do with refinancing the bonds.  So I guess there are two possible scenarios here, you have the current condition, where the City Council needs a simple majority to get a tax increase that they can put before the voters, versus a supermajority, which could be the case if the voters enact this action tonight, in November. So I guess my question is: if there is a refinancing of bonds today, versus a refinancing of bonds in December 2016, do you think that the underwriters would look at us differently, and say, “oh, now the standard for the Anaheim City Council approving a new tax would be much higher.” So I guess that’s my —

MORENO (2:03:52): Again, without talking to them directly, I can’t say for certain, but it’s my belief that they only are going to count the revenue that we are entitled to today, which is the current tax rates. They are not looking to our future ability to tax because that requires the vote of the people. Without being able to determine that, that’s a fairly high hurdle, so they would only be ;looking at our ability to tax today and that revenue stream it provides. And so that would not change from today, until we refinance, because there’s no change in the tax rates. We’re not looking to increase taxes, to be able to pay those bills.

MURRAY (2:04:41): I have a question, too.

TAIT (2:04:42): I’d like to ask a question, just hypothetically, to prove a point, If we said that no Council could ever put an item on agenda, I mean, on the ballot, for any tax increase, would that affect it?

MORENO (2:04:57): That could.

TAIT (2:04:59): So, then, the point I’m making is that the harder it is to put something on the ballot, could affect it. The fact is, we don’t know — again, you said, “I could be mistaken.” There is no rush to this.  Last election we had something on the ballot — that was a 3-2 vote, as a simple majority. I voted against it; I didn’t want to see it go on the ballot; I disagreed with the tax.  Three members – [interruption] Measure N was a tax — that’s why we had to vote on it, correct?

HOUSTON (2:05:44): Measure N was put on the Ballot as a result of settlement, but there were other matters covered in Measure N.  One of the components was an affirmation or validation of the transfer that was occurring.

TAIT (2:05:58): So we had to go to the vote of the people to …

HOUSTON (2:06:01): … to validate that.

TAIT (2:06:01): To validate that, yes. So if, as we open up, if this was passed a year ago, we could not — that would not have got on the ballot. Now I disagree with it — I disagree with that tax, a majority put it on the ballot, I think a majority should put it on the ballot, and it was rejected by the people. I think that system works fine.  That’s worked fine in Anaheim —

MURRAY (2:06:28): Mr. Mayor I have a question —

HOUSTON (2:06:30): So, anyway, I could see the interest in doing this, but I guess at the least I don’t think it’s right. There’s a year and a half, there’s a lot of questions I have, whether this is a wise thing to do, and whether it’s a fiscally responsible thing to do. Council Member Kring..

KRING (2:06:51): Thank you. As the Mayor, and also Council Member Vanderbilt both mentioned bonds, we are kind of getting lost in the weeds here. There are two different kinds of bonds: a General Obligation bond, which must go to a vote of the people, and a revenue sharing bond, which does not go to a vote of the people because there is a funding source to pay off those bonds. For example, the Convention Center: we refinanced the bonds, replaced them with new bonds, we had a specific revenue source to pay them back. If you go, I don’t know, you want to buy a building somewhere, that would be a General Obligation bond, and that would have to go to a vote of the people. So when we’re talking about bonds, we have to be very clear which type of bond we are discussing. And, I don’t remember the vote last year, to put measure N, Nancy, on the Ballot – was that a 4-1, or a 3-2, does anybody remember?

MURRAY (2:07:45): 3-2

TAIT (2:07:45): 3-2

KRING (2:07:48): 3-2.  OK.

MURRAY (2:07:49): Mr. Mayor, I just have a question—

KRING (2:07:50): So those bonds need to be specific in what type of bond you are talking about.

TAIT (2:07:57): Council Member Murray.

MURRAY (2:07:58): Thank you. It’s been an interesting discussion about bonds, since this doesn’t involve bonds. But, you know, I think we have gotten into the weeds and diverted form the issue at hand, which is about a voter threshold of the Council, not of the people. The General Law cities already have this in place, and have had it in place for some time, but following the line of logic that we have been discussing here tonight, all general law cities would have terrible bond ratings, and all charter cities would be, you know, beating ‘em up and down the street in Wall Street. So I don’t think that that has borne itself out; I think empirically it’s not proven to be true, unless they have other economic factors that are leading to lower ratings.

The issue here tonight, is an up-or-down vote on whether we should increase the threshold to 2/3 to put tax measures before the voters. Tax measures, again, increase the cost of living on our residents, increase and are regressive in nature, by and large. And it is an issue that was discussed in the last election, which is why it was brought to my attention, and why I don’t want to wait 10 years for another Charter Review. I want our voters to be able to have a say, now, in the next General, and so I’m asking for the support of the Council to move forward and again, allow us to move forward conforming with General Law cities across the State, which, by and large, exempting them from other economic issues, district cities actually are the ones having the harder economic time across the State right now.  I would ask that we please move forward and provide these protections for taxpayers. Thank you.

TAIT (2:09:32): Again, I’m concerned about this being the fiscally responsible thing to do — and whether it’s right. I think if, if your proposal has something to consider, but I think if we are going to consider it, we should consider it along with other measures. For example: limiting the revenue side, the taxation side, the ability to go to the people and decide whether they want to tax themselves or not.  I think we should also, as was brought up by one of the speakers, limit how much, whether we should go to the people to make large borrowings, like our charter actually says, and not allow us to get around our charter with a Joint Powers Authority,  So, you know, if the Council can vote in massive borrowings, without going to a vote of the people, but limiting the vote of the people for them to vote on a tax, I think we’re out of balance. We don’t have a taxation problem, we have a spending problem and a borrowing problem, the way I see it, and those should be addressed.  And I think that would make sense to address those issues, along with this issue, so if we are going to limit future ability to go to the people on taxation issues, we should actually look at the borrowing issue.

Councilmember Brandman.

BRANDMAN (2:11:14): I would like to reiterate, I am voting NO tonight.  Also like to make it very clear that Council Member Kring, Council Member Eastman, and myself did NOT vote for a tax to be placed on the Ballot.  Measure N was NOT a Tax, and to classify it as a tax is just not truthful.  And with that, I call the question. I’m ready to vote. Call the question.

TAIT (2:11:48): Okay, I’m going to respond to that, I’m going to say that it was a tax.

BRANDMAN (2:11:51) (interrupting): I called the question. I called the question.

TAIT (2:11:55): That doesn’t — Okay, you called the question.

BRANDMAN (2:11:58) (interrupting): I’ve called the question.  Mr. City Attorney, I’ve called the question.

TAIT (2:12:00): That doesn’t mean we have to vote…. No, it does not.

BRANDMAN (2:12:02): I called the question.

TAIT (2:12:05): Okay, you called the question; that doesn’t mean you end debate.  The reason we had a vote on Measure N —

BRANDMAN (2:12:12) (interrupting): I called the question.

TAIT (2:12:13): The reason we had a vote on Measure N, was — because it was a tax.

BRANDMAN (2:12:15) (interrupting): Called the question

TAIT (2:12:16): Doesn’t matter.

HOUSTON (2:12:18): Would you like me to weigh –

MURRAY (2:12:21):  Yes.

HOUSTON (2:12:21): — in on the procedure?

TAIT (2:12:22): Yes.

HOUSTON (2:12:22): Under our rules, a council member may move to immediately bring a question being debated to a vote, suspending further debate. The motion must be made and seconded, without interrupting one who already has the floor. A 2/3 vote is required for passage. So a motion must be made and seconded, and a second is required, and a 2/3 vote is. OK. So then we would make a vote on calling the question.

TAIT (2:12:44): OK, I said what I had to say anyway.  So, all right. We have a motion, a second. Jordan, Council Member Brandman, moved to call the question, to end debate, second by Council Member Kring, to end debate on putting this on the ballot that will change our Charter, for a good long time. All right, please vote.

CLERK: (2:13:11): The vote is 3 Ayes, two Noes, by Council Member Vanderbilt, and Mayor Tait. The motion fails. [N.B. The screen said that it “passed,” given the majority vote, but it failed because it needed 2/3.]

TAIT (2:13:19): Okay.

MURRAY (2:13:20): Mr. Mayor, I wanted to say something, if we’re going to resume.

TAIT (2:12:22): Sure. Council Member Murray

MURRAY (2:13:24): I think it’s important — clearly, we’re having a disagreement on whether to impose a 2/3 vote via the charter on future Councils as they consider potential proposed tax increases.  But what’s very very important for our residents to know and to underscore here tonight is: Anaheim is one of the most fiscally sound cities in the state of California.  We have a restored reserve. We have our health care, lifetime medical benefits that were already eliminated for future employees, but we have a trust in place to cover those costs. We have in the position of restoring Police and Fire, and we’re reinvesting hundreds of millions of dollars in our neighborhoods, because the city has an economic model that’s working. We are moving to a new paradigm, we are moving to a larger Council, and we are asking for this additional taxpayer protection to be in place.

But nothing we do here tonight is going to impact our current ratings or, based on current revenue models, and that’s what our bonding was set up.  And nothing we do here tonight is going to limit the economic growth, which we just had a massive workshop on — talking about how our economy is coming back and coming back strong. So I want our residents to be sure and know that they are in good hands, that this is a fiscally responsible City Council that has made very good decisions over the last four years, in conjunction with private investment, which has helped us recover, faster than most cities, and we are very fortunate in that way. This is about simply instituting something that already happens across the state of California if you happen to reside in a general law city and that is a 2/3 vote before you as a resident, as a voter, are asked to consider a tax increase. So with that, I do hope we can move forward and vote tonight we’ve had extensive debate, and I appreciate that debate, and I would again ask that we move forward. Thank you. (02:15:26)

TAIT (2:15:29): Council Member Vanderbilt.

VANDERBILT (2:15:30): Thank you. Well I appreciate that we’re having extensive debate. I think it’s important to do so. I think it’s a major decision that the City Council’s making — and I think having a thorough debate, which I appreciated, and had a chance to weigh in on — has been helpful.  I appreciate the major tenets that the author, Councilmember Murray, has put forward, for I think they in themselves present a strong case, which, in themselves, represent a good perspective to take into account. All I think that I’m interested in doing is asking the right questions, to be thorough, in an environment where we can just be sure that we’ve covered all of our bases.

So, going back to the question about the bonds, and I’m sorry if it seems like it’s in the weeds, my point was just to determine if there was a way to say: we have bonds that are sold, they are refinanced, they are scrutinized — bond ratings have very complicated ratings, with A’s and B’s and minuses and pluses — and so each of those differences between the two are considerable when it comes to what the ultimate interest rate will be. So, I don’t think the question that I am asking is out of line for this topic, and I think we are in a position to have a conversation now, or in the future. Part of the question that I was going to ask, when we were in a position to stop debate, was this question of continuance and whether there was an allowance for a specific date of return, which I didn’t get to ask, so maybe I could ask that question at this opportunity. If a Council Member made a motion for a continuance, they would have to have it, I understand, a specific date, correct?

HOUSTON (2:17:48): It would be a motion to postpone to a date certain, you could pick that date among…in a motion, requires a second, it’s debatable, and then there’s a vote. That is a motion that takes precedence over the main motion, and it, once made and seconded, the main motion does not continue until that motion is resolved.

VANDERBILT (2:18:09): Well, I’d like to make a motion to continue until March 17th, 2015.

MURRAY (2:18:21):  Council Member Vanderbilt, I’m comfortable with continuing this item.  If you are asking to amend the motion on the floor to include a continuance to a future date, I would like to ask that we give a little bit more time, so that there is no uncertanity at the next one, and schedule for April 7th if we’re going to have a reconsideration at a future date.  Which would be our second meeting out from this one.

VANDERBILT (2:18:59): Sure, I’ll amend the motion then, to postpone until April 7th meeting.

MURRAY (2:19:11): I’ll second that motion for future for purpose of discussion. Thank you.

TAIT (2:19:18): Yeah, I think debate is good.  This is a big issue.  I think the more we talk about it, the more answers we get. I see our City Manager, signaling —

CITY MANAGER EMERY (2:19:33): No, sir, I’m sorry to interrupt. I was just looking for clarification in terms of what you wanted Staff to return with, prior to voting on the motion on the table.

MURRAY (2:19:42): I’d like to bring — if we’re going to do this, Council Member Vanderbilt, I would ask that it be the item that is before us, the term limit that is before us, giving the Council time to meet with Staff, and ask any questions that are giving you any pause.

HOUSTON (2:19:56): If I may add, I think that what staff may have heard was that that the purpose of the continuance — although this doesn’t limit the discussion that would occur at that meeting, specifically among anything else you might ask to insure — to have a report provided that discusses the effect on creditworthiness, on credit ratings, with respect to borrowing transactions the City might be engaged in, I gather from Council Member Vanderbilt’s question.  Is that correct?

TAIT (2:20:31): Yes. Specifically, ideally, I’d like a letter from a rating agency, for some opinion from a rating agency, that it has no effect.

MURRAY (2:20:42): I would have concern with that, just because, if I may — and our Finance Director says its not a concern — but the question I would have is if we’re asking questions, if it would potentially lead them to question where we are at.  Or if we can find that out legally, without reaching out to rating agencies specifically, and having them question our review? If it’s not going to cause a concern, but if it could lead to a concern, then I would be concerned about it.

MORENO (2:21:10): I don’t know that I’ll be able to get a specific letter addressing this issue from a rating agency.  But I will do my best to see what we can find out — between financial advisors, bankers, and discussions with ratings agencies — what concerns they may have.  As Council Member Murray pointed out earlier, you know, this is already the case for General Law cities, so it may be something that they’re ready to answer fairly quickly.

TAIT (2:21:44): So I’ll also ask that there be some continuation.  Maybe jointly, I’d like to have Staff prepare an item that limits – that basically reaffirms our City Charter, that takes away the loophole about Joint Powers Authority, on major borrowings, that we reaffirm the intent of our City Charter, and that the City no longer be able to enter any Joint Powers Authority to borrow a massive amount of money.

HOUSTON (2:22:26): And that is something that can be brought back as a separate item at a later date. Let me ask, just for purposes of clarification, that issue becomes — and I haven’t conducted research on that issue — but it becomes somewhat tricky in that JPA’s are separate entities, our Charter doesn’t control them.  Would it be your desire that we could bring that back, commensurate with the research needed, in terms of the timing for that, to make sure that we have the adequate time to address that issue?

TAIT (2:22:55): I’d like to bring it up at the same time, because I think they are tied together —

MURRAY (2:22:59) (interrupting): — Mr. City Attorney, I have a question —

TAIT (2:23:03): — with the adequate research involved.  If you can’t, you can’t.  Council Member Vanderbilt.

VANDERBILT (2:23:09): I don’t want to give ambiguous instructions to the staff.  Just I want to make sure there’s a clear delineation, between two requests.

HOUSTON (2:23:21): My understanding is the motion that is on the table presently is a motion to postpone to a date certain, being April 7th, the consideration of this particular resolution, subject to the information being provided. The Mayor’s comment I am interpreting as a request to return with a separate item, which he’s entitled to do at the end of the meeting, anyway — and Mr. Mayor, correct me if I am gathering this wrong — to return with a separate item for consideration that, and I going to paraphrase, would require a public vote for significant bond issuances to be considered.  The caveat I have with that, is that may be an issue requiring research that is much different than the research that was conducted for this, because of other issues, and I can dialogue with you on that offline.

TAIT (2:24:19): OK.

TAIT (2:24:19): Council Member Kring.

KRING (2:24:22): I would also like to see, of the hundred charter cities in the state, if any of those Charter Cities, has gone to this 2/3 vote.

HOUSTON (2:24:29): I think I wrote that down anyway, and I was just conferring with the City Clerk. In the brief research I did prior to this we did not locate any, but we will give it some time to do it additional.  We can at least report to you on our findings are; there are a couple of mechanisms that would allow us to inquire on that topic.

KRING (2:24:46): Thank you.

TAIT (2:24:46): Good job for an intern.

MURRAY (2:24:52): Just in closing, I just want to clarify that the item is going to come back, with the additional information requested by Councilman Vanderbilt, on April 7th, and that any items that the Mayor may want to address separately, he has the authority to ask for during Council Comments, as a separate and individual matter.

HOUSTON (2:25:05): That is, in fact correct, that will be a separate and individual matter, not linked, if you will, to this particular item.

MURRAY (2:25:13): OK. Thank you.

TAIT (2:25:19): Anything else?  OK.  I have a motion and second, please vote.

CLERK: (2:25:28): The vote is four Ayes, one NO vote, recorded by Council Member Brandman, to postpone the item until April 7, 2015.

TAIT (2:25:40): OK.  Let’s see … Mr.City Attorney, any reports from closed session?

HOUSTON (2:25:42): There was no closed session. Nothing to report, Mr. Mayor.

TAIT (2:25:46): Time for Council Communications. I’ll start to my right, Mr. Brandman?

[TEN MINUTES OF COMMUNICATIONS ON OTHER TOPICS]

TAIT (2:36:31): We mentioned earlier during the comment period: I wanted to put on that same date the putting to the Ballot basically closing the loophole of allowing the City to borrow through Joint Powers Authority to get around, I believe, the intent of our Charter requiring a vote of the people when we have these massive borrowings. So I’d like that on the agenda. And also, a couple years ago, there was 15,000 signatures for an initiative to go on the ballot that Council didn’t vote for at that time — a different Council — that if there is going to be a TOT subsidy for hoteliers, that that be decided by the people, rather than the Council.  Basically there’s an initiative drawn up and ready to review, Mr. City Attorney.  All right, I’d like to see those both on the same day, because I think they are all related. So, with no other business before the Council, we’ll stand adjourned.