27.) All customer rate payments are deposited in the enterprise fund. An enterprise fund is a budgetary device “used to track monies received and expended for municipal services where fees or charges to the users of those services pay wholly or in part for such services.” (Multari et al., Guide to Local Government Finance in California (2d ed.
To cover the costs, the city council adopted a practice common among municipalities that operate utilities: an annual budgetary transfer from the utility’s enterprise fund to the city’s general fund. These include general services, like police and fire protection, along with services provided to REU as a city department, including billing, finance, and fleet maintenance.
The PILOT Other city departments provide a variety of services to REU. 2 costs of providing electricity and could not be increased without voter approval.3 Some background is needed to understand this claim. As a result, REU’s rates exceeded the reasonable 2 Plaintiffs are Citizens for Fair REU Rates, Michael Schmitz, Shirlyn Pappas, and Fee Fighter LLC. The gravamen of plaintiffs’ claim was that the city had embedded in REU’s rates an excessive charge designed to compensate the city for services its other departments provided to REU. (e)(2).) As discussed below, this definition was added to the constitutional scheme in November 2010. (e).) The definition excludes a charge imposed for a specific government service or product if: (1) the service or product is provided directly and exclusively to those who pay the charge and (2) the charge does not exceed the reasonable costs to the local government of providing the service or product. Subject to certain exceptions, the term “ ‘tax’ ” is now defined as “any levy, charge, or exaction of any kind imposed by a local government.” (Art. Plaintiffs2 filed a writ petition and complaint alleging the city’s action violated article XIII C because it imposed or increased a tax without voter approval. In December 2010, the council increased REU’s rates. The Rate Increase Operating as a city department, Redding Electric Utility (REU) provides electricity to local residents and charges rates established by the city council. Because the challenged rates were not taxes, voter approval was not required. The undisputed evidence here shows that the challenged rates did not exceed the reasonable costs of providing electric service. The rate the city charges its utility customers is not a tax because it falls under the exception 1 Unspecified references to “article” are to the California Constitution. That is, it is not the type of exaction that is subject to article XIII C. We conclude that the budgetary transfer itself is not a tax. The question here is whether article XIII C applies to this interfund transfer and, if so, how. The transfer is designed to compensate the general fund for the costs of services that other city departments provide to the utility. Each year, the city’s budget includes a transfer from the utility’s enterprise fund to the city’s general fund. The City of Redding operates an electric utility as a department of its city government. Excepted from the definition of tax is any charge imposed for a service or product that does not exceed the reasonable costs of providing it. 171377, 172960 Article XIII C of the California Constitution1 prohibits local governments from imposing, increasing, or extending any tax without voter approval.
) ) CITY OF REDDING et al., ) ) Defendants and Respondents. Filed 8/27/18 IN THE SUPREME COURT OF CALIFORNIA CITIZENS FOR FAIR REU RATES et al., ) ) Plaintiffs and Appellants, ) ) v.